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 811-22106
Tortoise Power and Energy Infrastructure 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.
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
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)
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)
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)
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)
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.
| 1 | Electronic Municipal Market Access https://emma.msrb.org/ &
MuniOS https://www.munios.com/ |
| 2 | Refinitiv Lipper US Fund Flows https://www.lipperusfundflows.com/ |
| 4 | https://data.publiccharters.org/digest/charter-school-data-digest/how-many-charter-schools-and-students-are-there/ |
| 5 | https://www.usnews.com/education/best-high-schools/national-rankings |
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
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)
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
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)
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)
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. |
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
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)
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
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)
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)
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. |
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
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)
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. |
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)
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)
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)
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.
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)
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. |
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.
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.
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.
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.
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.
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.
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.
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) | |
| 1,705,311 | | |
| 1,660,244 | |
JW
Living Smithville Urban Ren Sub Global 144A 27
11.750%, 06/01/2027(5) | |
| 3,890,000 | | |
| 3,808,002 | |
Realco
Perry Hall MD LLC/OPCO Sub 144A NT
10.000%, 10/01/2024(5) | |
| 2,198,000 | | |
| 2,167,850 | |
| |
| | | |
| 15,592,904 | |
Total
Corporate Bonds
(Cost $33,855,307) | |
| | | |
| 31,415,455 | |
| |
Principal
Amount | |
Fair
Value |
| |
| |
|
Municipal
Bonds — 9.0%(1) | |
| | | |
| | |
| |
| | | |
| | |
Arizona
— 0.1%(1) | |
| | | |
| | |
Maricopa
County Industrial Development Authority
11.000%, 07/01/2033 | |
$ | 138,000 | | |
$ | 128,254 | |
| |
| | | |
| | |
Florida
— 0.3%(1) | |
| | | |
| | |
Florida Development Finance
Corp.
5.720%, 07/01/2025(7) | |
| 445,000 | | |
| 422,750 | |
Florida
Development Finance Corp.
11.000%, 08/01/2032 | |
| 320,000 | | |
| 304,037 | |
| |
| | | |
| 726,787 | |
| |
| | | |
| | |
Pennsylvania
— 0.2%(1) | |
| | | |
| | |
Pennsylvania
Economic Development Financing Authority
14.000%, 12/01/2027 | |
| 405,000 | | |
| 403,276 | |
| |
| | | |
| | |
South
Carolina — 3.0%(1) | |
| | | |
| | |
South
Carolina Jobs-Economic Development Authority
7.500%, 03/15/2030 | |
| 3,850,000 | | |
| 3,657,662 | |
South
Carolina Jobs-Economic Development Authority
11.000%, 03/15/2030 | |
| 575,000 | | |
| 563,639 | |
South
Carolina Jobs-Economic Development Authority
7.600%, 03/15/2033 | |
| 1,505,000 | | |
| 1,400,743 | |
South
Carolina Jobs-Economic Development Authority
11.000%, 03/15/2033 | |
| 375,000 | | |
| 352,056 | |
| |
| | | |
| 5,974,100 | |
| |
| | | |
| | |
Wisconsin
— 5.4%(1) | |
| | | |
| | |
Public
Finance Authority
7.500%, 06/01/2029 | |
| 8,925,000 | | |
| 8,631,247 | |
Public
Finance Authority
10.000%, 09/01/2031 | |
| 525,000 | | |
| 430,908 | |
Public
Finance Authority
10.000%, 09/01/2031 | |
| 145,000 | | |
| 132,036 | |
Public
Finance Authority
11.000%, 01/15/2033 | |
| 405,000 | | |
| 399,244 | |
Public
Finance Authority
11.000%, 02/01/2033 | |
| 936,000 | | |
| 921,426 | |
Public
Finance Authority
11.000%, 06/30/2034 | |
| 330,000 | | |
| 318,119 | |
| |
| | | |
| 10,832,980 | |
Total
Municipal Bonds
(Cost $18,615,764) | |
| | | |
| 18,065,397 | |
See
accompanying Notes to Financial Statements.
TEAF
Consolidated Schedule of Investments (continued)
November
30, 2023
| |
Principal
Amount/
Shares/Units | |
Fair
Value |
| |
| |
|
Master
Limited Partnerships — 7.1%(1) | |
| | | |
| | |
| |
| | | |
| | |
United
States Natural Gas/Natural Gas Liquids Pipelines — 4.4%(1) | |
| | | |
| | |
Energy
Transfer LP(2) | |
| 380,800 | | |
$ | 5,289,312 | |
Enterprise
Products Partners LP(2) | |
| 128,400 | | |
| 3,438,552 | |
| |
| | | |
| 8,727,864 | |
| |
| | | |
| | |
United
States Refined Product Pipelines — 2.7%(1) | |
| | | |
| | |
MPLX LP(2) | |
| 148,624 | | |
| 5,418,831 | |
Total
Master Limited Partnerships
(Cost $9,403,686) | |
| | | |
| 14,146,695 | |
| |
| | | |
| | |
Private
Notes — 6.7%(1) | |
| | | |
| | |
| |
| | | |
| | |
Bermuda
Renewables — 1.8%(1) | |
| | | |
| | |
Saturn
Solar Bermuda 1 Ltd.
10.000%, 12/31/2023(4)(5) | |
| 3,510,000 | | |
| 3,649,698 | |
United
States Water Equipment & Services — 4.9%(1) | |
| | | |
| | |
EF
WWW HOLDINGS LLC
10.500%, 09/30/2026(4)(5) | |
| 9,600,000 | | |
| 9,792,000 | |
Total
Private Notes
(Cost $13,378,904) | |
| | | |
| 13,441,698 | |
| |
| | | |
| | |
Preferred
Stock — 2.4%(1) | |
| | | |
| | |
| |
| | | |
| | |
United
States Natural Gas/Natural Gas Liquids Pipelines — 2.4%(1) | |
| | | |
| | |
Enterprise
Products Partners LP 7.250%, 09/30/2025(4)(5)
(Cost $5,642,901) | |
| 5,000 | | |
| 4,769,400 | |
| |
| | | |
| | |
Bank
Loan — 0.2%(1) | |
| | | |
| | |
| |
| | | |
| | |
United
States Education — 0.2%(1) | |
| | | |
| | |
Village
Charter School, Inc. 0.000%, 12/15/2023(4)(7)
(Cost $800,000) | |
| 800,000 | | |
| 503,725 | |
| |
| | | |
| | |
Special
Purpose Acquisition Company Warrant — 0.0%(1) | |
| | | |
| | |
| |
| | | |
| | |
France
Renewables — 0.0%(1) | |
| | | |
| | |
Arverne
Group SA Warrant Total Warrants
(Cost $–) | |
| 250,000 | | |
| 10,885 | |
| |
Shares | |
Fair
Value |
| |
| |
|
Money Market
Fund — 0.2%(1) | |
| | | |
| | |
| |
| | | |
| | |
United
States Investment Company — 0.2%(1) | |
| | | |
| | |
First American
Government Obligations Fund, Class X,
5.285%(9) (Cost $433,797) | |
| 433,797 | | |
$ | 433,797 | |
| |
| | | |
| | |
Total Investments
— 111.5%(1)
(Cost $229,688,696) | |
| | | |
| 223,222,343 | |
Liabilities
in Excess of Other Assets — 0.5%(1) | |
| | | |
| 1,035,270 | |
Credit
Facility Borrowings — (12.0)%(1) | |
| | | |
| (24,000,000 | ) |
| |
| | | |
| | |
Total
Net Assets Applicable to
Common Stockholders — 100.0%(1) | |
| | | |
$ | 200,257,613 | |
| (1) | Calculated
as a percentage of net assets applicable to common stockholders. |
| (2) | All
or a portion of the security is segregated as collateral for the margin borrowing facility. |
| (3) | Non-income
producing security. |
| (4) | Securities
have been valued by using significant unobservable inputs in accordance with fair value procedures
and are categorized as level 3 investments. |
| (5) | Restricted
securities have a total fair value of $87,705,001 which represents 43.8% of net assets. See
Note 6 to financial statements for further disclosure. |
| (6) | Deemed
to be an affiliate of the fund. See Note 7 to financial statements for further disclosure. |
| (7) | Security
in forbearance at November 30, 2023. |
| (8) | Security in default at November 30, 2023. |
| (9) | Rate
indicated is the current yield as of November 30, 2023. |
See accompanying
Notes to Financial Statements.
2023
Annual Report | November 30, 2023
Schedule
of Options Written
November
30, 2023
TEAF
Call Options
Written | |
Expiration
Date | |
Strike
Price | |
Contracts | |
Notional
Value | |
Fair
Value |
Enel SpA | |
Dec 2023 | |
$ | 7.06 | | |
| 1,000 | | |
$ | 3,532,165 | | |
$ | (46,805 | ) |
Total
Value of Call Options Written (Premiums received $34,025) | |
| | | |
| | | |
$ | 3,532,165 | | |
$ | (46,805 | ) |
Statements
of Assets & Liabilities
November 30, 2023
| |
Tortoise
Energy Infrastructure Corp.(1) | |
Tortoise Midstream Energy Fund, Inc. |
Assets | |
| | | |
| | |
Investments in unaffiliated securities at fair value(2) | |
$ | 476,806,333 | | |
$ | 271,935,440 | |
Investments in affiliated securities at fair value(3) | |
| 14,550,615 | | |
| — | |
Cash at broker | |
| — | | |
| — | |
Cash | |
| — | | |
| — | |
Receivable for investments sold | |
| — | | |
| — | |
Receivable for insurance claim | |
| — | | |
| 27,365 | |
Dividends, distributions and interest receivable from investments | |
| 985,833 | | |
| 696,601 | |
Expense Reimbursement Receivable | |
| — | | |
| — | |
Prepaid expenses and other assets | |
| 308,324 | | |
| 159,026 | |
Total assets | |
| 492,651,105 | | |
| 272,818,432 | |
Liabilities | |
| | | |
| | |
Call options written, at fair value(4) | |
| — | | |
| — | |
Payable to Adviser | |
| 774,503 | | |
| 428,080 | |
Payable for investments purchased | |
| — | | |
| — | |
Accrued expenses and other liabilities | |
| 1,545,391 | | |
| 602,731 | |
Current tax liability | |
| 2,129,680 | | |
| 1,259,442 | |
Credit facility borrowings | |
| 7,300,000 | | |
| 10,600,000 | |
Senior notes, net(5) | |
| 64,795,979 | | |
| 29,128,327 | |
Mandatory redeemable preferred stock, net(6) | |
| 35,609,040 | | |
| 13,733,520 | |
Total liabilities | |
| 112,154,593 | | |
| 55,752,100 | |
Net assets applicable to common stockholders | |
$ | 380,496,512 | | |
$ | 217,066,332 | |
| |
| | | |
| | |
Net Assets Applicable to Common Stockholders Consist of: | |
| | | |
| | |
Capital stock, $0.001 par value per share | |
$ | 10,765 | | |
$ | 5,093 | |
Additional paid-in capital | |
| 598,943,065 | | |
| 653,597,167 | |
Total distributable accumulated losses | |
| (218,457,318 | ) | |
| (436,535,928 | ) |
Net assets applicable to common stockholders | |
$ | 380,496,512 | | |
$ | 217,066,332 | |
| |
| | | |
| | |
Capital shares: | |
| | | |
| | |
Authorized | |
| 100,000,000 | | |
| 100,000,000 | |
Outstanding | |
| 10,764,933 | | |
| 5,092,810 | |
Net Asset Value per common share outstanding (net assets applicable to common stock, divided by common shares outstanding) | |
$ | 35.35 | | |
$ | 42.62 | |
| |
| | | |
| | |
(1) Consolidated Statement of Assets and Liabilities
(See Note 13 to the financial statements for further disclosure). | |
| | | |
| | |
(2) Investments in unaffiliated securities at cost | |
$ | 499,724,832 | | |
$ | 266,923,046 | |
(3) Investments in affiliated securities at cost | |
$ | 50,141,470 | | |
$ | — | |
(4) Call options written, premiums received | |
$ | — | | |
$ | — | |
(5) Deferred debt issuance and offering costs | |
$ | 57,354 | | |
$ | 42,350 | |
(6) Deferred offering costs | |
$ | 51,570 | | |
$ | 20,255 | |
See
accompanying Notes to Financial Statements.
2023
Annual Report | November 30, 2023
Tortoise
Pipeline
& Energy
Fund, Inc. | |
Tortoise
Energy
Independence
Fund, Inc. | |
Tortoise
Power
and Energy
Infrastructure
Fund, Inc. | |
Ecofin
Sustainable
and Social Impact
Term Fund(1) |
| |
| |
| |
|
$ | 85,649,229 | | |
$ | 67,926,396 | | |
$ | 119,555,853 | | |
$ | 185,720,074 | |
| — | | |
| — | | |
| — | | |
| 37,502,269 | |
| — | | |
| — | | |
| — | | |
| 110,010 | |
| — | | |
| — | | |
| — | | |
| 40,208 | |
| 281,533 | | |
| — | | |
| — | | |
| — | |
| — | | |
| — | | |
| — | | |
| — | |
| 106,999 | | |
| 172,982 | | |
| 1,229,459 | | |
| 1,695,047 | |
| 50,607 | | |
| 50,467 | | |
| — | | |
| — | |
| 78,978 | | |
| 6,498 | | |
| 17,066 | | |
| 4,087 | |
| 86,167,346 | | |
| 68,156,343 | | |
| 120,802,378 | | |
| 225,071,695 | |
| | | |
| | | |
| | | |
| | |
| — | | |
| — | | |
| — | | |
| 46,805 | |
| 154,891 | | |
| 129,519 | | |
| 189,896 | | |
| 510,125 | |
| 279,580 | | |
| — | | |
| — | | |
| — | |
| 277,093 | | |
| 173,715 | | |
| 288,079 | | |
| 257,152 | |
| — | | |
| — | | |
| — | | |
| — | |
| 5,900,000 | | |
| 8,800,000 | | |
| 24,600,000 | | |
| 24,000,000 | |
| 3,937,212 | | |
| — | | |
| — | | |
| — | |
| 6,093,870 | | |
| — | | |
| — | | |
| — | |
| 16,642,646 | | |
| 9,103,234 | | |
| 25,077,975 | | |
| 24,814,082 | |
$ | 69,524,700 | | |
$ | 59,053,109 | | |
$ | 95,724,403 | | |
$ | 200,257,613 | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | |
$ | 2,011 | | |
$ | 1,666 | | |
$ | 5,890 | | |
$ | 13,491 | |
| 165,365,776 | | |
| 209,410,767 | | |
| 99,215,704 | | |
| 233,987,000 | |
| (95,843,087 | ) | |
| (150,359,324 | ) | |
| (3,497,191 | ) | |
| (33,742,878 | ) |
$ | 69,524,700 | | |
$ | 59,053,109 | | |
$ | 95,724,403 | | |
$ | 200,257,613 | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | |
| 100,000,000 | | |
| 100,000,000 | | |
| 100,000,000 | | |
| 100,000,000 | |
| | | |
| | | |
| | | |
| | |
| 2,010,566 | | |
| 1,666,014 | | |
| 5,890,167 | | |
| 13,491,127 | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | |
$ | 34.58 | | |
$ | 35.45 | | |
$ | 16.25 | | |
$ | 14.84 | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | |
$ | 67,869,954 | | |
$ | 43,315,204 | | |
$ | 104,692,787 | | |
$ | 188,925,161 | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 40,763,535 | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 34,025 | |
$ | 5,645 | | |
$ | — | | |
$ | — | | |
$ | — | |
$ | 6,130 | | |
$ | — | | |
$ | — | | |
$ | — | |
See
accompanying Notes to Financial Statements.
Statements
of Operations
For the
year ended November 30, 2023
| |
Tortoise Energy | | |
Tortoise | |
| |
Infrastructure | | |
Midstream Energy | |
| |
Corp.(1) | | |
Fund, Inc. | |
Investment Income | |
| | | |
| | |
Distributions from master limited partnerships | |
$ | 9,434,072 | | |
$ | 4,701,809 | |
Dividends and distributions from common stock | |
| 17,070,728 | | |
| 11,647,012 | |
Dividends and distributions from preferred stock | |
| — | | |
| — | |
Dividends and distributions from affiliated investments | |
| — | | |
| — | |
Less return of capital on distributions(2) | |
| (11,311,480 | ) | |
| (8,057,534 | ) |
Less foreign taxes withheld | |
| — | | |
| (275,739 | ) |
Net dividends and distributions from investments | |
| 15,193,320 | | |
| 8,015,548 | |
Interest income | |
| 524,846 | | |
| 354,093 | |
Other income | |
| 41,390 | | |
| 72,247 | |
Total Investment Income | |
| 15,759,556 | | |
| 8,441,888 | |
Operating Expenses | |
| | | |
| | |
Advisory fees | |
| 5,074,627 | | |
| 2,665,183 | |
Administrator fees | |
| 229,645 | | |
| 127,024 | |
Professional fees | |
| 1,354,700 | | |
| 1,247,469 | |
Directors fees | |
| 88,556 | | |
| 47,209 | |
Stockholder communication expenses | |
| 95,018 | | |
| 83,703 | |
Custodian fees and expenses | |
| 25,134 | | |
| 14,406 | |
Fund accounting fees | |
| 62,248 | | |
| 46,454 | |
Registration fees | |
| 27,008 | | |
| 25,755 | |
Stock transfer agent fees | |
| 86,646 | | |
| 67,552 | |
Other operating expense | |
| 140,714 | | |
| 27,074 | |
Total Operating Expenses | |
| 7,184,296 | | |
| 4,351,829 | |
Leverage Expenses | |
| | | |
| | |
Interest expense | |
| 3,737,413 | | |
| 1,829,380 | |
Distributions to mandatory redeemable preferred stockholders | |
| 1,224,551 | | |
| 545,914 | |
Amortization of debt issuance costs | |
| 46,107 | | |
| 17,218 | |
Other leverage expenses | |
| 234,469 | | |
| 149,916 | |
Total Leverage Expenses | |
| 5,242,540 | | |
| 2,542,428 | |
Total Expenses | |
| 12,426,836 | | |
| 6,894,257 | |
Less expense reimbursement by Adviser (Note 4) | |
| — | | |
| — | |
Net Expenses | |
| 12,426,836 | | |
| 6,894,257 | |
Net Investment Income (Loss), before Income Taxes | |
| 3,332,720 | | |
| 1,547,631 | |
Deferred tax benefit (expense) | |
| — | | |
| — | |
Net Investment Income (Loss) | |
$ | 3,332,720 | | |
$ | 1,547,631 | |
(1) |
Consolidated Statement of Operations (See Note 13 to the financial statements for further disclosure). |
(2) |
Return of Capital may be in excess of current year distributions due to prior year adjustments. See Note 2 to the financial statements for further disclosure. |
See accompanying
Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| | |
| | |
Tortoise Power | | |
Ecofin | |
Tortoise Pipeline | | |
Tortoise Energy | | |
and Energy | | |
Sustainable | |
& Energy | | |
Independence | | |
Infrastructure | | |
and Social Impact | |
Fund, Inc. | | |
Fund, Inc. | | |
Fund, Inc. | | |
Term Fund(1) | |
| | |
| | |
| | |
| |
$ | 1,622,657 | | |
$ | 980,509 | | |
$ | 2,350,240 | | |
$ | 1,462,355 | |
| 3,873,507 | | |
| 2,168,875 | | |
| 1,947,962 | | |
| 4,755,246 | |
| — | | |
| — | | |
| — | | |
| 489,877 | |
| — | | |
| — | | |
| — | | |
| 1,156,570 | |
| (2,792,164 | ) | |
| (966,317 | ) | |
| (2,999,027 | ) | |
| (2,734,884 | ) |
| (167,267 | ) | |
| (29,251 | ) | |
| (39,589 | ) | |
| (389,546 | ) |
| 2,536,733 | | |
| 2,153,816 | | |
| 1,259,586 | | |
| 4,739,618 | |
| 18,870 | | |
| 20,354 | | |
| 3,313,813 | | |
| 6,003,567 | |
| — | | |
| — | | |
| — | | |
| — | |
| 2,555,603 | | |
| 2,174,170 | | |
| 4,573,399 | | |
| 10,743,185 | |
| | | |
| | | |
| | | |
| | |
| 955,512 | | |
| 752,024 | | |
| 1,150,124 | | |
| 3,249,209 | |
| 49,218 | | |
| 44,553 | | |
| 65,389 | | |
| 109,147 | |
| 126,910 | | |
| 162,874 | | |
| 140,750 | | |
| 173,920 | |
| 52,839 | | |
| 52,764 | | |
| 45,582 | | |
| 46,077 | |
| 18,868 | | |
| 23,940 | | |
| 46,666 | | |
| 31,592 | |
| 6,843 | | |
| 5,702 | | |
| 6,452 | | |
| 33,263 | |
| 27,318 | | |
| 26,518 | | |
| 27,831 | | |
| 31,626 | |
| 24,604 | | |
| 24,554 | | |
| 24,777 | | |
| 23,925 | |
| 57,242 | | |
| 64,091 | | |
| 61,789 | | |
| 18,711 | |
| 55,344 | | |
| 22,158 | | |
| 18,838 | | |
| 163,327 | |
| 1,374,698 | | |
| 1,179,178 | | |
| 1,588,198 | | |
| 3,880,797 | |
| | | |
| | | |
| | | |
| | |
| 682,403 | | |
| 481,412 | | |
| 1,004,886 | | |
| 1,766,870 | |
| 290,100 | | |
| — | | |
| — | | |
| — | |
| 11,373 | | |
| — | | |
| — | | |
| — | |
| 71,600 | | |
| — | | |
| — | | |
| — | |
| 1,055,476 | | |
| 481,412 | | |
| 1,004,886 | | |
| 1,766,870 | |
| 2,430,174 | | |
| 1,660,590 | | |
| 2,593,084 | | |
| 5,647,667 | |
| (202,024 | ) | |
| (256,239 | ) | |
| — | | |
| — | |
| 2,228,150 | | |
| 1,404,351 | | |
| 2,593,084 | | |
| 5,647,667 | |
| 327,453 | | |
| 769,819 | | |
| 1,980,315 | | |
| 5,095,518 | |
| — | | |
| — | | |
| — | | |
| 51,306 | |
$ | 327,453 | | |
$ | 769,819 | | |
$ | 1,980,315 | | |
$ | 5,146,824 | |
See accompanying Notes to Financial Statements.
Statements of
Operations (continued)
For the year ended November 30, 2023
| |
Tortoise
Energy Infrastructure Corp.(1) | |
Tortoise
Midstream Energy Fund, Inc. |
Realized and Unrealized Loss on Investments and Foreign Currency | |
| | | |
| | |
Net realized gain (loss) on investments in unaffiliated securities | |
$ | 35,417,842 | | |
$ | 22,986,581 | |
Net realized gain on written options | |
| — | | |
| — | |
Net realized gain (loss) on foreign currency and translation of other assets and liabilities denominated in foreign currency | |
| — | | |
| (2,128 | ) |
Net realized gain (loss), before income taxes | |
| 35,417,842 | | |
| 22,984,453 | |
Current tax benefit | |
| 13,467,645 | | |
| 5,026,388 | |
Net realized gain (loss) | |
| 48,885,487 | | |
| 28,010,841 | |
Net change in unrealized appreciation (depreciation) of investments in unaffiliated securities | |
| (67,366,509 | ) | |
| (22,608,984 | ) |
Net change in unrealized appreciation (depreciation) of investments in affiliated securities | |
| (474,126 | ) | |
| — | |
Net change in unrealized appreciation (depreciation) of options | |
| — | | |
| — | |
Net change in unrealized appreciation (depreciation) of other assets and liabilities due to foreign currency translation | |
| (185 | ) | |
| 896 | |
Net unrealized appreciation (depreciation), before income taxes | |
| (67,840,820 | ) | |
| (22,608,088 | ) |
Net unrealized appreciation (depreciation) | |
| (67,840,820 | ) | |
| (22,608,088 | ) |
Net Realized and Unrealized Gain (Loss) | |
| (18,955,333 | ) | |
| 5,402,753 | |
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders Resulting from Operations | |
$ | (15,622,613 | ) | |
$ | 6,950,384 | |
| |
| | | |
| | |
(1) | Consolidated Statement of Operations (See Note 13 to the financial statements for further disclosure). |
(2) | Return of Capital may be in excess of current year distributions due to prior year adjustments. See Note 2 to the financial statements
for further disclosure. |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
Tortoise
Pipeline & Energy Fund, Inc. | | |
Tortoise
Energy Independence Fund, Inc. | | |
Tortoise
Power and Energy Infrastructure Fund, Inc. | | |
Ecofin
Sustainable and Social Impact Term Fund(1) | |
| | |
| | |
| | |
| |
$ | 5,348,292 | | |
$ | 4,831,262 | | |
$ | 5,973,685 | | |
$ | (4,180,068 | ) |
| — | | |
| — | | |
| — | | |
| 50,978 | |
| | | |
| | | |
| | | |
| | |
| 908 | | |
| (114 | ) | |
| 98 | | |
| (13,276 | ) |
| 5,349,200 | | |
| 4,831,148 | | |
| 5,973,783 | | |
| (4,142,366 | ) |
| — | | |
| — | | |
| — | | |
| — | |
| 5,349,200 | | |
| 4,831,148 | | |
| 5,973,783 | | |
| (4,142,366 | ) |
| (1,339,449 | ) | |
| (6,195,006 | ) | |
| 1,988,929 | | |
| (2,133,536 | ) |
| — | | |
| — | | |
| — | | |
| (4,834,439 | ) |
| — | | |
| — | | |
| — | | |
| (12,781 | ) |
| | | |
| | | |
| | | |
| | |
| 1,440 | | |
| 186 | | |
| 457 | | |
| 6,373 | |
| (1,338,009 | ) | |
| (6,194,820 | ) | |
| 1,989,386 | | |
| (6,974,383 | ) |
| (1,338,009 | ) | |
| (6,194,820 | ) | |
| 1,989,386 | | |
| (6,974,383 | ) |
| 4,011,191 | | |
| (1,363,672 | ) | |
| 7,963,169 | | |
| (11,116,749 | ) |
| | | |
| | | |
| | | |
| | |
$ | 4,338,644 | | |
$ | (593,853 | ) | |
$ | 9,943,484 | | |
$ | (5,969,925 | ) |
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
| |
Tortoise
Energy Infrastructure Corp.(1) | |
| |
Year Ended
November 30, 2023 | | |
Year Ended
November 30, 2022 | |
|
Operations | |
| | | |
| | |
Net investment income (loss) | |
$ | 3,332,720 | | |
$ | 1,391,127 | |
Net realized gain (loss) | |
| 48,885,487 | | |
| 112,955,888 | |
Net unrealized appreciation (depreciation) | |
| (67,840,820 | ) | |
| (11,085,418 | ) |
Net increase (decrease) in net assets applicable to common stockholders resulting from operations | |
| (15,622,613 | ) | |
| 103,261,597 | |
Distributions to Common Stockholders | |
| | | |
| | |
From distributable earnings | |
| (18,410,881 | ) | |
| — | |
From return of capital | |
| (13,368,334 | ) | |
| (33,451,804 | ) |
Total distributions to common stockholders | |
| (31,779,215 | ) | |
| (33,451,804 | ) |
Capital Stock Transactions | |
| | | |
| | |
Cost of shares repurchased and retired through tender offer | |
| (18,719,638 | ) | |
| (23,235,549 | ) |
Net increase (decrease) in net assets applicable to common stockholders from capital stock transactions | |
| (18,719,638 | ) | |
| (23,235,549 | ) |
Total increase (decrease) in net assets applicable to common stockholders | |
| (66,121,466 | ) | |
| 46,574,244 | |
Net Assets | |
| | | |
| | |
Beginning of period | |
| 446,617,978 | | |
| 400,043,734 | |
End of period | |
$ | 380,496,512 | | |
$ | 446,617,978 | |
Transactions in common shares | |
| | | |
| | |
Shares outstanding at beginning of period | |
| 11,331,508 | | |
| 11,927,903 | |
Shares repurchased (See Note 14) | |
| (566,575 | ) | |
| (596,395 | ) |
Shares outstanding at end of period | |
| 10,764,933 | | |
| 11,331,508 | |
| |
| | | |
| | |
(1) | Consolidated Statement
of Changes in Net Assets (See Note 13 to the financial statements for further disclosure). |
See accompanying Notes to Financial Statements.
2023 Annual Report | November 30, 2023
Tortoise Midstream Energy Fund, Inc. | |
Tortoise Pipeline & Energy Fund, Inc. |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 |
|
$ | 1,547,631 | | |
$ | 1,017,339 | | |
$ | 327,453 | | |
$ | 170,573 | |
| 28,010,841 | | |
| 76,637,335 | | |
| 5,349,200 | | |
| 1,792,955 | |
| (22,608,088 | ) | |
| (11,930,583 | ) | |
| (1,338,009 | ) | |
| 18,113,795 | |
| | | |
| | | |
| | | |
| | |
| 6,950,384 | | |
| 65,724,091 | | |
| 4,338,644 | | |
| 20,077,323 | |
| | | |
| | | |
| | | |
| | |
| (8,701,938 | ) | |
| — | | |
| (1,109,052 | ) | |
| (1,083,713 | ) |
| (7,603,071 | ) | |
| (17,163,158 | ) | |
| (3,823,183 | ) | |
| (4,108,112 | ) |
| (16,305,009 | ) | |
| (17,163,158 | ) | |
| (4,932,235 | ) | |
| (5,191,825 | ) |
| | | |
| | | |
| | | |
| | |
| (10,600,666 | ) | |
| (12,380,698 | ) | |
| (3,390,441 | ) | |
| (3,665,779 | ) |
| | | |
| | | |
| | | |
| | |
| (10,600,666 | ) | |
| (12,380,698 | ) | |
| (3,390,441 | ) | |
| (3,665,779 | ) |
| (19,955,291 | ) | |
| 36,180,235 | | |
| (3,984,032 | ) | |
| 11,219,719 | |
| | | |
| | | |
| | | |
| | |
| 237,021,623 | | |
| 200,841,388 | | |
| 73,508,732 | | |
| 62,289,013 | |
$ | 217,066,332 | | |
$ | 237,021,623 | | |
$ | 69,524,700 | | |
$ | 73,508,732 | |
| | | |
| | | |
| | | |
| | |
| 5,360,842 | | |
| 5,642,991 | | |
| 2,116,385 | | |
| 2,227,773 | |
| (268,032 | ) | |
| (282,149 | ) | |
| (105,819 | ) | |
| (111,388 | ) |
| 5,092,810 | | |
| 5,360,842 | | |
| 2,010,566 | | |
| 2,116,385 | |
See accompanying Notes to Financial Statements.
Statements of
Changes in Net Assets (continued)
| |
Tortoise
Energy Independence Fund, Inc. |
| |
Year Ended
November 30, 2023 | |
Year Ended
November 30, 2022 |
Operations | |
| | | |
| | |
Net investment income (loss) | |
$ | 769,819 | | |
$ | 1,470,020 | |
Net realized gain (loss) | |
| 4,831,148 | | |
| 5,081,718 | |
Net unrealized appreciation (depreciation) | |
| (6,194,820 | ) | |
| 21,478,683 | |
Net increase (decrease) in net assets applicable to common stockholders resulting from operations | |
| (593,853 | ) | |
| 28,030,421 | |
Distributions to Common Stockholders | |
| | | |
| | |
From distributable earnings | |
| (1,293,398 | ) | |
| (1,496,794 | ) |
From return of capital | |
| (3,070,680 | ) | |
| (2,291,192 | ) |
Total distributions to common stockholders | |
| (4,364,078 | ) | |
| (3,787,986 | ) |
Capital Stock Transactions | |
| | | |
| | |
Cost of shares repurchased and retired through tender offer | |
| (3,055,787 | ) | |
| (3,573,817 | ) |
Net increase (decrease) in net assets applicable to common stockholders from capital stock transactions | |
| (3,055,787 | ) | |
| (3,573,817 | ) |
Total increase (decrease) in net assets applicable to common stockholders | |
| (8,013,718 | ) | |
| 20,668,618 | |
Net Assets | |
| | | |
| | |
Beginning of period | |
| 67,066,827 | | |
| 46,398,209 | |
End of period | |
$ | 59,053,109 | | |
$ | 67,066,827 | |
Transactions in common shares | |
| | | |
| | |
Shares outstanding at beginning of period | |
| 1,753,698 | | |
| 1,845,997 | |
Shares repurchased (See Note 14) | |
| (87,684 | ) | |
| (92,299 | ) |
Shares outstanding at end of period | |
| 1,666,014 | | |
| 1,753,698 | |
| |
| | | |
| | |
(1) | Consolidated Statement of Changes in Net Assets (See Note 13 to the financial statements for further disclosure). |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
Tortoise
Power and Energy Infrastructure Fund, Inc. | |
Ecofin
Sustainable and Social Impact Term Fund(1) |
Year Ended
November 30, 2023 | |
Year Ended
November 30, 2022 | |
Year Ended
November 30, 2023 | |
Year Ended
November 30, 2022 |
| |
| |
| |
|
$ | 1,980,315 | | |
$ | 1,553,435 | | |
$ | 5,146,824 | | |
$ | 5,921,913 | |
| 5,973,783 | | |
| 282,059 | | |
| (4,142,366 | ) | |
| 9,000,317 | |
| 1,989,386 | | |
| 10,522,210 | | |
| (6,974,383 | ) | |
| (11,340,608 | ) |
| | | |
| | | |
| | | |
| | |
| 9,943,484 | | |
| 12,357,704 | | |
| (5,969,925 | ) | |
| 3,581,622 | |
| | | |
| | | |
| | | |
| | |
| (3,812,109 | ) | |
| (1,907,796 | ) | |
| (4,770,361 | ) | |
| (6,211,270 | ) |
| (3,967,561 | ) | |
| (5,693,483 | ) | |
| (9,800,056 | ) | |
| (7,954,413 | ) |
| (7,779,670 | ) | |
| (7,601,279 | ) | |
| (14,570,417 | ) | |
| (14,165,683 | ) |
| | | |
| | | |
| | | |
| | |
| (4,684,221 | ) | |
| (4,973,178 | ) | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | |
| (4,684,221 | ) | |
| (4,973,178 | ) | |
| — | | |
| — | |
| (2,520,407 | ) | |
| (216,753 | ) | |
| (20,540,342 | ) | |
| (10,584,061 | ) |
| | | |
| | | |
| | | |
| | |
| 98,244,810 | | |
| 98,461,563 | | |
| 220,797,955 | | |
| 231,382,016 | |
$ | 95,724,403 | | |
$ | 98,244,810 | | |
$ | 200,257,613 | | |
$ | 220,797,955 | |
| | | |
| | | |
| | | |
| | |
| 6,200,175 | | |
| 6,526,499 | | |
| 13,491,127 | | |
| 13,491,127 | |
| (310,008 | ) | |
| (326,324 | ) | |
| — | | |
| — | |
| 5,890,167 | | |
| 6,200,175 | | |
| 13,491,127 | | |
| 13,491,127 | |
See accompanying Notes to Financial Statements.
Statements of Cash Flows
For year ended November 30, 2023
| |
| |
|
| |
Tortoise
Energy Infrastructure Corp.(1) | |
Tortoise
Midstream Energy Fund, Inc. |
Cash Flows From Operating Activities | |
| | | |
| | |
Dividends, distributions and interest received from investments | |
$ | 27,224,185 | | |
$ | 16,498,461 | |
Purchases of long-term investments | |
| (228,838,197 | ) | |
| (170,942,345 | ) |
Proceeds from sales of long-term investments | |
| 314,048,552 | | |
| 205,084,165 | |
Sales (purchases) of short-term investments, net | |
| (106,415 | ) | |
| (3,662,766 | ) |
Call options written, net | |
| — | | |
| — | |
Interest received on securities sold, net | |
| — | | |
| — | |
Interest expense paid | |
| (3,987,722 | ) | |
| (1,803,440 | ) |
Distributions to mandatory redeemable preferred stockholders | |
| (1,223,067 | ) | |
| (594,103 | ) |
Other leverage expenses paid | |
| (220,577 | ) | |
| (193,924 | ) |
Net income tax refunds received (income taxes paid) | |
| (8,884,140 | ) | |
| (4,145,626 | ) |
Operating expenses paid | |
| (7,335,099 | ) | |
| (4,490,542 | ) |
Net cash provided by (used in) operating activities | |
| 90,677,520 | | |
| 35,749,880 | |
Cash Flows From Financing Activities | |
| | | |
| | |
Advances (payments) on credit facilities, net | |
| (23,400,000 | ) | |
| 100,000 | |
Redemption of mandatory redeemable preferred stock | |
| — | | |
| (5,965,150 | ) |
Repayment of senior notes | |
| (16,778,667 | ) | |
| (2,979,055 | ) |
Cost of shares repurchased and retired through tender offer | |
| (18,719,638 | ) | |
| (10,600,666 | ) |
Distributions paid to common stockholders | |
| (31,779,215 | ) | |
| (16,305,009 | ) |
Net cash provided by (used in) financing activities | |
| (90,677,520 | ) | |
| (35,749,880 | ) |
Net change in cash | |
| — | | |
| — | |
Cash — beginning of period | |
| — | | |
| — | |
Cash — end of period | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
(1) | Consolidated Statement
of Cash Flows (See Note 13 to the financial statements for further disclosure). |
See accompanying Notes
to Financial Statements.
2023 Annual Report | November
30, 2023
Tortoise Pipeline & Energy Fund, Inc. | |
Tortoise Energy Independence Fund, Inc. | |
Tortoise Power and Energy Infrastructure Fund, Inc. | |
Ecofin Sustainable and Social Impact Term Fund(1) |
| |
| |
| |
|
$ | 5,378,370 | | |
$ | 3,203,374 | | |
$ | 7,606,993 | | |
$ | 13,917,392 | |
| (6,375,352 | ) | |
| (9,839,835 | ) | |
| (11,714,952 | ) | |
| (55,348,522 | ) |
| 15,646,287 | | |
| 10,128,838 | | |
| 20,493,974 | | |
| 66,831,270 | |
| (162,904 | ) | |
| 219,259 | | |
| (34,465 | ) | |
| (23,658 | ) |
| — | | |
| — | | |
| — | | |
| 85,003 | |
| — | | |
| — | | |
| 111,347 | | |
| 308,516 | |
| (696,660 | ) | |
| (418,088 | ) | |
| (961,066 | ) | |
| (1,753,073 | ) |
| (316,533 | ) | |
| — | | |
| — | | |
| — | |
| (50,000 | ) | |
| — | | |
| — | | |
| — | |
| — | | |
| — | | |
| — | | |
| — | |
| (1,200,532 | ) | |
| (973,683 | ) | |
| (1,737,940 | ) | |
| (3,940,317 | ) |
| 12,222,676 | | |
| 2,319,865 | | |
| 13,763,891 | | |
| 20,076,611 | |
| | | |
| | | |
| | | |
| | |
| (3,900,000 | ) | |
| 5,100,000 | | |
| (1,300,000 | ) | |
| (5,500,000 | ) |
| — | | |
| — | | |
| — | | |
| — | |
| — | | |
| — | | |
| — | | |
| — | |
| (3,390,441 | ) | |
| (3,055,787 | ) | |
| (4,684,221 | ) | |
| — | |
| (4,932,235 | ) | |
| (4,364,078 | ) | |
| (7,779,670 | ) | |
| (14,570,417 | ) |
| (12,222,676 | ) | |
| (2,319,865 | ) | |
| (13,763,891 | ) | |
| (20,070,417 | ) |
| — | | |
| — | | |
| — | | |
| 6,194 | |
| — | | |
| — | | |
| — | | |
| 144,024 | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 150,218 | |
See accompanying Notes to Financial Statements.
Statements of Cash Flows (continued)
For year ended November 30, 2023
| |
Tortoise Energy Infrastructure Corp.(1) | |
Tortoise Midstream Energy Fund, Inc. |
Reconciliation of net increase (decrease) in net assets applicable to common stockholders resulting from operations to net cash provided by (used in) operating activities | |
| | | |
| | |
Net increase (decrease) in net assets applicable to common stockholders resulting from operations | |
$ | (15,622,613 | ) | |
$ | 6,950,384 | |
Adjustments to reconcile net increase (decrease) in net assets applicable to common stockholders resulting from operations to net cash provided by (used in) operating activities: | |
| | | |
| | |
Purchases of long-term investments | |
| (227,177,802 | ) | |
| (158,815,124 | ) |
Proceeds from sales of long-term investments | |
| 312,392,560 | | |
| 192,965,023 | |
Sales (purchases) of short-term investments, net | |
| (106,415 | ) | |
| (3,662,766 | ) |
Call options written, net | |
| — | | |
| — | |
Return of capital on distributions received | |
| 11,311,480 | | |
| 8,057,534 | |
Deferred tax expense (benefit) | |
| — | | |
| — | |
Net unrealized (appreciation) depreciation | |
| 67,840,820 | | |
| 22,608,088 | |
Amortization (accretion) of market premium (discount), net | |
| (25,785 | ) | |
| (17,248 | ) |
Net realized gain (loss) | |
| (35,417,842 | ) | |
| (22,984,453 | ) |
Amortization of debt issuance costs | |
| 46,107 | | |
| 17,218 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
(Increase) decrease in dividends, distributions and interest receivable from investments | |
| 182,507 | | |
| 33,002 | |
(Increase) decrease in receivable for investments sold | |
| 1,655,992 | | |
| 12,119,142 | |
(Increase) decrease in prepaid expenses and other assets | |
| 12,040 | | |
| (11 | ) |
Increase (decrease) in payable for investments purchased | |
| (1,660,395 | ) | |
| (12,127,221 | ) |
Increase (decrease) in payable to Adviser, net of fees waived | |
| 39,783 | | |
| 44,681 | |
Decrease in current tax liability | |
| (22,355,357 | ) | |
| (9,188,730 | ) |
Increase (decrease) in accrued expenses and other liabilities | |
| (437,560 | ) | |
| (249,639 | ) |
Total adjustments | |
| 106,300,133 | | |
| 28,799,496 | |
Net cash provided by (used in) operating activities | |
$ | 90,677,520 | | |
$ | 35,749,880 | |
(1) Consolidated
Statement of Cash Flows (See Note 13 to the financial statements for further disclosure).
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
Tortoise Pipeline & Energy Fund, Inc. | |
Tortoise Energy Independence Fund, Inc. | |
Tortoise Power and Energy Infrastructure Fund, Inc. | |
Ecofin Sustainable and Social Impact Term Fund(1) |
| |
| |
| |
|
$ | 4,338,644 | | |
$ | (593,853 | ) | |
$ | 9,943,484 | | |
$ | (5,969,925 | ) |
| | | |
| | | |
| | | |
| | |
| (6,654,932 | ) | |
| (9,839,835 | ) | |
| (11,714,952 | ) | |
| (55,348,522 | ) |
| 15,927,820 | | |
| 10,128,838 | | |
| 20,493,974 | | |
| 66,831,270 | |
| (162,904 | ) | |
| 219,259 | | |
| (34,465 | ) | |
| (23,658 | ) |
| — | | |
| — | | |
| — | | |
| 85,003 | |
| 2,792,164 | | |
| 966,317 | | |
| 2,999,027 | | |
| 2,734,884 | |
| — | | |
| — | | |
| — | | |
| (51,306 | ) |
| 1,338,009 | | |
| 6,194,820 | | |
| (1,989,386 | ) | |
| 6,974,383 | |
| — | | |
| — | | |
| 112,937 | | |
| 337,618 | |
| (5,349,200 | ) | |
| (4,831,148 | ) | |
| (5,973,783 | ) | |
| 4,142,366 | |
| 11,373 | | |
| — | | |
| — | | |
| — | |
| | | |
| | | |
| | | |
| | |
| 30,603 | | |
| 62,887 | | |
| 32,977 | | |
| 410,221 | |
| (281,533 | ) | |
| — | | |
| — | | |
| — | |
| 28,601 | | |
| 1,166 | | |
| (13,376 | ) | |
| 1,318 | |
| 279,580 | | |
| — | | |
| — | | |
| — | |
| 57,907 | | |
| (4,457 | ) | |
| (6,273 | ) | |
| (33,301 | ) |
| — | | |
| — | | |
| — | | |
| — | |
| (133,456 | ) | |
| 15,871 | | |
| (86,273 | ) | |
| (13,740 | ) |
| 7,884,032 | | |
| 2,913,718 | | |
| 3,820,407 | | |
| 26,046,536 | |
$ | 12,222,676 | | |
$ | 2,319,865 | | |
$ | 13,763,891 | | |
$ | 20,076,611 | |
See accompanying Notes to Financial Statements.
TYG Financial Highlights
| |
Year
Ended November 30, 2023 | |
Year
Ended November 30, 2022 | |
Year
Ended November 30, 2021 | |
Year
Ended November 30, 2020 | |
Year
Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Per
Common Share Data(1)(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
Asset Value, beginning of year | |
$ | 39.41 | | |
$ | 33.54 | | |
$ | 25.42 | | |
$ | 69.24 | | |
$ | 94.00 | |
Income (Loss)
from Investment Operations | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment
income (loss)(3) | |
| 0.30 | | |
| 0.12 | | |
| (0.45 | ) | |
| (0.44 | ) | |
| (1.20 | ) |
Net
realized and unrealized gain (loss)(1) | |
| (1.52 | ) | |
| 8.59 | | |
| 10.04 | | |
| (41.20 | ) | |
| (13.08 | ) |
Total
income (loss) from investment operations | |
| (1.22 | ) | |
| 8.71 | | |
| 9.59 | | |
| (41.64 | ) | |
| (14.28 | ) |
Distributions
to Common Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment
income | |
| (1.65 | ) | |
| — | | |
| — | | |
| — | | |
| — | |
From
return of capital | |
| (1.19 | ) | |
| (2.84 | ) | |
| (1.47 | ) | |
| (2.18 | ) | |
| (10.48 | ) |
Total
distributions to common stockholders | |
| (2.84 | ) | |
| (2.84 | ) | |
| (1.47 | ) | |
| (2.18 | ) | |
| (10.48 | ) |
Capital Stock
Transactions | |
| | | |
| | | |
| | | |
| | | |
| | |
Premiums
less underwriting discounts and offering costs on issuance of common stock(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (0.00 | ) |
Total
capital stock transactions | |
| — | | |
| — | | |
| — | | |
| — | | |
| (0.00 | ) |
Net
Asset Value, end of year | |
$ | 35.35 | | |
$ | 39.41 | | |
$ | 33.54 | | |
$ | 25.42 | | |
$ | 69.24 | |
Per common share market
value, end of year | |
$ | 28.11 | | |
$ | 33.54 | | |
$ | 27.27 | | |
$ | 19.16 | | |
$ | 67.28 | |
Total
investment return based on market value(5) | |
| (7.77 | )% | |
| 33.82 | % | |
| 50.27 | % | |
| (69.69 | )% | |
| (15.46 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Supplemental
Data and Ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
assets applicable to common stockholders, end of year (000's) | |
$ | 380,497 | | |
$ | 446,618 | | |
$ | 400,044 | | |
$ | 311,398 | | |
$ | 930,286 | |
Average net assets (000's) | |
$ | 407,705 | | |
$ | 438,035 | | |
$ | 403,236 | | |
$ | 473,041 | | |
$ | 1,203,943 | |
Ratio of
Expenses to Average Net Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Advisory
fees | |
| 1.24 | % | |
| 1.25 | % | |
| 1.18 | % | |
| 1.54 | % | |
| 1.62 | % |
Other
operating expenses | |
| 0.51 | | |
| 0.25 | | |
| 0.29 | | |
| 0.27 | | |
| 0.14 | |
Total operating
expenses, before fee waiver | |
| 1.75 | | |
| 1.50 | | |
| 1.47 | | |
| 1.81 | | |
| 1.76 | |
Fee
waiver(6) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (0.00 | ) |
Total
operating expenses | |
| 1.75 | | |
| 1.50 | | |
| 1.47 | | |
| 1.81 | | |
| 1.76 | |
Leverage
expenses | |
| 1.29 | | |
| 1.18 | | |
| 1.32 | | |
| 3.48 | | |
| 2.15 | |
Income
tax expense (benefit)(7) | |
| (3.30 | ) | |
| 2.02 | | |
| 9.06 | | |
| (22.97 | ) | |
| (5.49 | ) |
Total
expenses | |
| (0.26 | )% | |
| 4.70 | % | |
| 11.85 | % | |
| (17.68 | )% | |
| (1.58 | )% |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
Ratio of net investment loss to average net assets before fee waiver | |
| 0.82 | % | |
| 0.32 | % | |
| (1.35 | )% | |
| (2.80 | )% | |
| (1.33 | )% |
Ratio of net investment loss to average net assets after fee waiver | |
| 0.82 | % | |
| 0.32 | % | |
| (1.35 | )% | |
| (2.80 | )% | |
| (1.33 | )% |
Portfolio turnover rate | |
| 41.98 | % | |
| 73.84 | % | |
| 65.30 | % | |
| 36.79 | % | |
| 26.35 | % |
Credit facility borrowings, end of year (000's) | |
$ | 7,300 | | |
$ | 30,700 | | |
$ | 19,200 | | |
$ | 13,200 | | |
$ | 93,900 | |
Senior notes, end of year (000's) | |
$ | 64,853 | | |
$ | 81,632 | | |
$ | 83,893 | | |
$ | 87,927 | | |
$ | 365,000 | |
Preferred stock, end of year (000's) | |
$ | 35,661 | | |
$ | 35,661 | | |
$ | 32,300 | | |
$ | 32,300 | | |
$ | 165,000 | |
Per common share amount of senior notes outstanding, end of year | |
$ | 6.02 | | |
$ | 7.20 | | |
$ | 7.03 | | |
$ | 7.18 | | |
$ | 27.17 | |
Per common share amount of net assets, excluding senior notes, end of year | |
$ | 41.37 | | |
$ | 46.61 | | |
$ | 40.57 | | |
$ | 32.60 | | |
$ | 96.41 | |
Asset coverage, per $1,000 of principal amount of senior notes and credit facility borrowings(8) | |
$ | 6,768 | | |
$ | 5,293 | | |
$ | 5,194 | | |
$ | 4,399 | | |
$ | 3,387 | |
Asset coverage ratio of senior notes and credit facility borrowings(8) | |
| 677 | % | |
| 529 | % | |
| 519 | % | |
| 440 | % | |
| 339 | % |
Asset coverage, per $10 liquidation value per share of mandatory redeemable preferred stock(9) | |
$ | 45 | | |
$ | 40 | | |
$ | 40 | | |
$ | 33 | | |
$ | 25 | |
Asset coverage ratio of preferred stock(9) | |
| 453 | % | |
| 402 | % | |
| 395 | % | |
| 333 | % | |
| 249 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| (1) | Information
presented relates to a share of common stock outstanding for the entire year. |
| (2) | During
the year ended November 30, 2020, the Fund effected the following reverse stock split: May
1, 2020, 1 for 4. All historical per share information has been retroactively adjusted to
reflect this reverse stock split. |
| (3) | The
per common share data for the years ended November 30, 2022, 2021, 2020, and 2019 do not
reflect the change in estimate of investment income and return of capital, for the respective
year. See Note 2C to the financial statements for further disclosure. |
| (4) | Represents
underwriting and offering costs of less than $0.01 for the year ended November 30, 2019.
Represents premium on shelf offerings of $0.40 per share, less the underwriting and offering
costs of $0.04 per share, for the year ended November 30, 2018. |
| (5) | Total
investment return is calculated assuming a purchase of common stock at the beginning of the
period and a sale at the closing price on the last day of the period reported (excluding
brokerage commissions). The calculation also assumes reinvestment of distributions at actual
prices pursuant to TYG’s dividend reinvestment plan. |
| (6) | Less
than 0.01% for the years ended November 30, 2019. |
| (7) | For
the year ended November 30, 2023, TYG accrued $13,467,645 for current tax benefit. For the
year ended November 30, 2022, TYG accrued $8,864,115 for current tax expense. For the year
ended November 30, 2021, TYG accrued $36,546,777 for current income tax expense. For the
year ended November 30, 2020, TYG accrued $116,472,157 for net deferred income tax benefit
and $7,747,729 for current income tax expense. For the year ended November 30, 2019, TYG
accrued $73,090,370 for net deferred income tax benefit and $7,034,755 for current income
tax expense. |
| (8) | Represents
value of total assets less all liabilities and indebtedness not represented by senior notes,
credit facility borrowings and preferred stock at the end of the year divided by senior notes
and credit facility borrowings outstanding at the end of the year. |
| (9) | Represents
value of total assets less all liabilities and indebtedness not represented by senior notes,
credit facility borrowings and preferred stock at the end of the year divided by senior notes,
credit facility borrowings and preferred stock outstanding at the end of the year. |
See accompanying Notes
to Financial Statements.
NTG Financial Highlights
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Per Common Share Data(1)(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Asset Value, beginning of year | |
$ | 44.21 | | |
$ | 35.59 | | |
$ | 25.56 | | |
$ | 105.60 | | |
$ | 144.80 | |
Income (Loss) from Investment Operations | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income (loss)(3) | |
| 0.29 | | |
| 0.18 | | |
| (0.41 | ) | |
| (0.30 | ) | |
| (2.80 | ) |
Net realized and unrealized gain (loss)(3) | |
| 1.20 | | |
| 11.52 | | |
| 12.09 | | |
| (76.77 | ) | |
| (19.50 | ) |
Total income (loss) from investment operations | |
| 1.49 | | |
| 11.70 | | |
| 11.68 | | |
| (77.07 | ) | |
| (22.30 | ) |
Distributions to Common Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income | |
| (1.64 | ) | |
| — | | |
| — | | |
| — | | |
| — | |
From return of capital | |
| (1.44 | ) | |
| (3.08 | ) | |
| (1.65 | ) | |
| (2.97 | ) | |
| (16.90 | ) |
Total distributions to common stockholders | |
| (3.08 | ) | |
| (3.08 | ) | |
| (1.65 | ) | |
| (2.97 | ) | |
| (16.90 | ) |
Capital stock transactions | |
| | | |
| | | |
| | | |
| | | |
| | |
Premiums less underwriting discounts and offering costs on issuance of common stock(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (0.00 | ) |
Net Asset Value, end of year | |
$ | 42.62 | | |
$ | 44.21 | | |
$ | 35.59 | | |
$ | 25.56 | | |
$ | 105.60 | |
Per common share market value, end of year | |
$ | 34.22 | | |
$ | 37.69 | | |
$ | 30.31 | | |
$ | 19.46 | | |
$ | 98.80 | |
Total investment return based on market value(5) | |
| (0.83 | )% | |
| 34.99 | % | |
| 64.86 | % | |
| (78.77 | )% | |
| (17.63 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Supplemental Data and Ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets applicable to common stockholders, end of year (000's) | |
$ | 217,066 | | |
$ | 237,022 | | |
$ | 200,841 | | |
$ | 149,407 | | |
$ | 667,708 | |
Average net assets (000's) | |
$ | 219,839 | | |
$ | 229,874 | | |
$ | 200,484 | | |
$ | 289,147 | | |
$ | 871,496 | |
Ratio of Expenses to Average Net Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Advisory fees | |
| 1.21 | % | |
| 1.21 | % | |
| 1.28 | % | |
| 1.61 | % | |
| 1.59 | % |
Other operating expenses | |
| 0.77 | | |
| 0.33 | | |
| 0.37 | | |
| 0.33 | | |
| 0.14 | |
Total operating expenses, before fee waiver | |
| 1.98 | | |
| 1.54 | | |
| 1.65 | | |
| 1.94 | | |
| 1.73 | |
Fee waiver | |
| — | | |
| — | | |
| — | | |
| — | | |
| (0.03 | ) |
Total operating expenses | |
| 1.98 | | |
| 1.54 | | |
| 1.65 | | |
| 1.94 | | |
| 1.70 | |
Leverage expenses | |
| 1.16 | | |
| 0.98 | | |
| 0.84 | | |
| 4.43 | | |
| 2.34 | |
Income tax expense (benefit)(6) | |
| (2.29 | ) | |
| 2.04 | | |
| 8.82 | | |
| 2.19 | | |
| (4.80 | ) |
Total expenses | |
| 0.85 | % | |
| 4.56 | % | |
| 11.31 | % | |
| 8.56 | % | |
| (0.76 | )% |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Ratio of net investment loss to average net assets before fee waiver | |
| 0.70 | % | |
| 0.44 | % | |
| (1.17 | )% | |
| (3.11 | )% | |
| (2.05 | )% |
Ratio of net investment loss to average net assets after fee waiver | |
| 0.70 | % | |
| 0.44 | % | |
| (1.17 | )% | |
| (3.11 | )% | |
| (2.02 | )% |
Portfolio turnover rate | |
| 56.07 | % | |
| 72.67 | % | |
| 58.40 | % | |
| 38.08 | % | |
| 29.21 | % |
Credit facility borrowings, end of year (000's) | |
$ | 10,600 | | |
$ | 10,500 | | |
$ | 40,900 | | |
$ | 40,000 | | |
$ | 53,600 | |
Senior notes, end of year (000's) | |
$ | 29,171 | | |
$ | 32,150 | | |
$ | 7,150 | | |
$ | 15,321 | | |
$ | 277,000 | |
Preferred stock, end of year (000's) | |
$ | 13,754 | | |
$ | 19,719 | | |
$ | 12,219 | | |
$ | 12,700 | | |
$ | 132,000 | |
Per common share amount of senior notes outstanding, end of year | |
$ | 5.73 | | |
$ | 6.00 | | |
$ | 1.27 | | |
$ | 2.62 | | |
$ | 43.82 | |
Per common share amount of net assets, excluding senior notes, end of year | |
$ | 48.35 | | |
$ | 50.21 | | |
$ | 36.86 | | |
$ | 28.18 | | |
$ | 149.42 | |
Asset coverage, per $1,000 of principal amount of senior notes and credit facility borrowings(7) | |
$ | 6,804 | | |
$ | 7,020 | | |
$ | 5,434 | | |
$ | 3,930 | | |
$ | 3,419 | |
Asset coverage ratio of senior notes and credit facility borrowings(7) | |
| 680 | % | |
| 702 | % | |
| 543 | % | |
| 393 | % | |
| 342 | % |
Asset coverage, per $25 liquidation value per share of mandatory redeemable preferred stock(8) | |
$ | 126 | | |
$ | 120 | | |
$ | 108 | | |
$ | 80 | | |
$ | 61 | |
Asset coverage ratio of preferred stock(8) | |
| 506 | % | |
| 480 | % | |
| 433 | % | |
| 320 | % | |
| 244 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(1) | Information presented relates to a share of common stock outstanding for the entire year. |
(2) | During the year ended November 30, 2020, the Fund effected the following reverse stock split: May 1, 2020, 1 for 10. All historical
per share information has been retroactively adjusted to reflect this reverse stock split. |
(3) | The per common share data for the years ended November 30, 2022, 2021, 2020, and 2019 do not reflect the change in estimate of investment
income and return of capital, for the respective year. See Note 2C to the financial statements for further disclosure. |
(4) | Represents underwriting and offering costs of less than $0.01 for the year ending November 30, 2019. Represents the discounts on shares
issued through rights offerings of $5.50, plus the underwriting and offering costs of $1.69 per share for the year ended November 30,
2018. |
(5) | Total investment return is calculated assuming a purchase of common stock at the beginning of the year and a sale at the closing price
on the last day of the year reported (excluding brokerage commissions). This calculation also assumes reinvestment of distributions at
actual prices pursuant to NTG’s dividend reinvestment plan. |
(6) | For the year ended November 30, 2023, NTG accrued $5,026,388 for current tax benefit. For the year ended November 30, 2022, NTG accrued
$4,679,689 for current tax expense. For the year ended November 30, 2021, NTG accrued $17,691,276 for current income tax expense. For
the year ended November 30, 2020, NTG accrued $27,892,485 for net deferred income tax benefit and $34,222,098 for current tax expense.
For the year ended November 30, 2019, NTG accrued $40,282,948 for net deferred income tax benefit and $1,510,530 for current tax benefit. |
(7) | Represents value of total assets less all liabilities and indebtedness not represented by senior notes, credit facility borrowings
and preferred stock at the end of the year divided by senior notes and credit facility borrowings outstanding at the end of the year. |
(8) | Represents value of total assets less all liabilities and indebtedness not represented by senior notes, credit facility borrowings
and preferred stock at the end of the year divided by senior notes, credit facility borrowings and preferred stock outstanding at the
end of the year. |
See accompanying Notes to Financial Statements.
TTP Financial Highlights
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Per Common Share Data(1)(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Asset Value, beginning of year | |
$ | 34.73 | | |
$ | 27.96 | | |
$ | 19.97 | | |
$ | 51.88 | | |
$ | 65.16 | |
Income (Loss) from Investment Operations | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income (loss)(3) | |
| 0.16 | | |
| 0.08 | | |
| (0.23 | ) | |
| (0.12 | ) | |
| (0.48 | ) |
Net realized and unrealized gain (loss)(3) | |
| 2.05 | | |
| 9.05 | | |
| 9.28 | | |
| (30.17 | ) | |
| (7.24 | ) |
Total income (loss) from investment operations | |
| 2.21 | | |
| 9.13 | | |
| 9.05 | | |
| (30.29 | ) | |
| (7.72 | ) |
Distributions to Common Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
From net investment income | |
| (0.53 | ) | |
| (0.49 | ) | |
| — | | |
| — | | |
| — | |
From return of capital | |
| (1.83 | ) | |
| (1.87 | ) | |
| (1.06 | ) | |
| (1.62 | ) | |
| (5.56 | ) |
Total distributions to common stockholders | |
| (2.36 | ) | |
| (2.36 | ) | |
| (1.06 | ) | |
| (1.62 | ) | |
| (5.56 | ) |
Net Asset Value, end of year | |
$ | 34.58 | | |
$ | 34.73 | | |
$ | 27.96 | | |
$ | 19.97 | | |
$ | 51.88 | |
Per common share market value, end of year | |
$ | 28.02 | | |
$ | 28.58 | | |
$ | 23.16 | | |
$ | 15.15 | | |
$ | 46.08 | |
Total investment return based on market value(4) | |
| 6.72 | % | |
| 33.85 | % | |
| 60.09 | % | |
| (64.69 | )% | |
| (11.10 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Supplemental Data and Ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets applicable to common stockholders, end of year (000's) | |
$ | 69,525 | | |
$ | 73,509 | | |
$ | 62,289 | | |
$ | 48,108 | | |
$ | 129,887 | |
Average net assets (000's) | |
$ | 68,797 | | |
$ | 72,122 | | |
$ | 61,943 | | |
$ | 70,052 | | |
$ | 157,017 | |
Ratio of Expenses to Average Net Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Advisory fees | |
| 1.39 | % | |
| 1.41 | % | |
| 1.46 | % | |
| 1.67 | % | |
| 1.54 | % |
Other operating expenses | |
| 0.61 | | |
| 0.60 | | |
| 0.74 | | |
| 0.75 | | |
| 0.35 | |
Total operating expenses, before fee waiver | |
| 2.00 | | |
| 2.01 | | |
| 2.20 | | |
| 2.42 | | |
| 1.89 | |
Fee waiver | |
| (0.29 | ) | |
| (0.28 | ) | |
| (0.21 | ) | |
| — | | |
| — | |
Total operating expenses | |
| 1.71 | | |
| 1.73 | | |
| 1.99 | | |
| 2.42 | | |
| 1.89 | |
Leverage expenses | |
| 1.53 | | |
| 1.19 | | |
| 1.67 | | |
| 2.66 | | |
| 1.62 | |
Total expenses | |
| 3.24 | % | |
| 2.92 | % | |
| 3.66 | % | |
| 5.08 | % | |
| 3.51 | % |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
|
Ratio of net investment income (loss) to average net assets before fee waiver | |
| 0.18 | % | |
| (0.05 | )% | |
| (1.04 | )% | |
| (0.97 | )% | |
| (0.79 | )% |
Ratio of net investment income (loss) to average net assets after fee waiver | |
| 0.48 | % | |
| 0.24 | % | |
| (0.83 | )% | |
| (0.97 | )% | |
| (0.79 | )% |
Portfolio turnover rate | |
| 7.66 | % | |
| 8.18 | % | |
| 14.77 | % | |
| 35.61 | % | |
| 21.31 | % |
Credit facility borrowings, end of year (000's) | |
$ | 5,900 | | |
$ | 9,800 | | |
$ | 8,100 | | |
$ | — | | |
$ | 11,800 | |
Senior notes, end of year (000's) | |
$ | 3,943 | | |
$ | 3,943 | | |
$ | 3,943 | | |
$ | 14,457 | | |
$ | 34,000 | |
Preferred stock, end of year (000's) | |
$ | 6,100 | | |
$ | 6,100 | | |
$ | 6,100 | | |
$ | 6,100 | | |
$ | 16,000 | |
Per common share amount of senior notes outstanding, end of year | |
$ | 1.96 | | |
$ | 1.86 | | |
$ | 1.77 | | |
$ | 6.00 | | |
$ | 13.58 | |
Per common share amount of net assets, excluding senior notes, end of year | |
$ | 36.54 | | |
$ | 36.59 | | |
$ | 29.73 | | |
$ | 25.97 | | |
$ | 65.46 | |
Asset coverage, per $1,000 of principal amount of senior notes and credit facility borrowings(5) | |
$ | 8,683 | | |
$ | 6,793 | | |
$ | 6,679 | | |
$ | 4,750 | | |
$ | 4,185 | |
Asset coverage ratio of senior notes and credit facility borrowings(5) | |
| 868 | % | |
| 679 | % | |
| 668 | % | |
| 475 | % | |
| 419 | % |
Asset coverage, per $25 liquidation value per share of mandatory redeemable preferred stock(6) | |
$ | 134 | | |
$ | 118 | | |
$ | 111 | | |
$ | 84 | | |
$ | 78 | |
Asset coverage ratio of preferred stock(6) | |
| 536 | % | |
| 470 | % | |
| 443 | % | |
| 334 | % | |
| 310 | % |
(1) | Information
presented relates to a share of common stock outstanding for the entire year. |
(2) | During
the year ended November 30, 2020, the Fund effected the following reverse stock split: May
1, 2020, 1 for 4. All historical per share information has been retroactively adjusted to
reflect this reverse stock split. |
(3) | The
per common share data for the years ended November 30, 2022, 2021, 2020, and 2019 do not
reflect the change in estimate of investment income and return of capital, for the respective
year. See Note 2C to the financial statements for further disclosure. |
(4) | Total
investment return is calculated assuming a purchase of common stock at the beginning of the
year and a sale at the closing price on the last day of the year reported (excluding brokerage
commissions). The calculation also assumes reinvestment of distributions at actual prices
pursuant to TTP’s dividend reinvestment plan. |
(5) | Represents
value of total assets less all liabilities and indebtedness not represented by senior notes,
credit facility borrowings and preferred stock at the end of the year divided by senior notes
and credit facility borrowings outstanding at the end of the year. |
(6) | Represents
value of total assets less all liabilities and indebtedness not represented by senior notes,
credit facility borrowings and preferred stock at the end of the year divided by senior notes,
credit facility borrowings and preferred stock outstanding at the end of the year. |
See accompanying
Notes to Financial Statements.
NDP Financial Highlights
| |
Year
Ended November 30, 2023 | |
Year
Ended November 30, 2022 | |
Year
Ended November 30, 2021 | |
Year
Ended November 30, 2020 | |
Year
Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Per Common
Share Data(1)(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
Asset Value, beginning of year | |
$ | 38.24 | | |
$ | 25.13 | | |
$ | 16.42 | | |
$ | 33.36 | | |
$ | 72.16 | |
Income (Loss)
from Investment Operations | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment
income (loss)(3) | |
| 0.44 | | |
| 0.80 | | |
| 0.13 | | |
| — | | |
| (0.80 | ) |
Net realized
and unrealized gain (loss)(3) | |
| (0.71 | ) | |
| 14.39 | | |
| 9.20 | | |
| (16.14 | ) | |
| (29.36 | ) |
Total income
(loss) from investment operations | |
| (0.27 | ) | |
| 15.19 | | |
| 9.33 | | |
| (16.14 | ) | |
| (30.16 | ) |
Distributions
to Common Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
From net
investment income | |
| (0.75 | ) | |
| (0.82 | ) | |
| (0.05 | ) | |
| — | | |
| — | |
From return
of capital | |
| (1.77 | ) | |
| (1.26 | ) | |
| (0.57 | ) | |
| (0.80 | ) | |
| (8.64 | ) |
Total distributions
to common stockholders | |
| (2.52 | ) | |
| (2.08 | ) | |
| (0.62 | ) | |
| (0.80 | ) | |
| (8.64 | ) |
Net Asset
Value, end of year | |
$ | 35.45 | | |
$ | 38.24 | | |
$ | 25.13 | | |
$ | 16.42 | | |
$ | 33.36 | |
Per common
share market value, end of year | |
$ | 28.95 | | |
$ | 32.41 | | |
$ | 22.24 | | |
$ | 12.63 | | |
$ | 29.04 | |
Total investment
return based on market value(4) | |
| (2.80 | )% | |
| 55.70 | % | |
| 81.36 | % | |
| (54.88 | )% | |
| (52.35 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Supplemental
Data and Ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
assets applicable to common stockholders, end of year (000's) | |
$ | 59,053 | | |
$ | 67,067 | | |
$ | 46,398 | | |
$ | 30,307 | | |
$ | 61,550 | |
Average net
assets (000's) | |
$ | 61,082 | | |
$ | 61,932 | | |
$ | 41,323 | | |
$ | 37,057 | | |
$ | 94,144 | |
Ratio of
Expenses to Average Net Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Advisory
fees | |
| 1.23 | % | |
| 1.16 | % | |
| 1.20 | % | |
| 1.40 | % | |
| 1.52 | % |
Other
operating expenses | |
| 0.70 | | |
| 0.54 | | |
| 1.04 | | |
| 1.18 | | |
| 0.51 | |
Total operating
expenses, before fee waiver | |
| 1.93 | | |
| 1.70 | | |
| 2.24 | | |
| 2.58 | | |
| 2.03 | |
Fee waiver | |
| (0.42 | ) | |
| (0.28 | ) | |
| (0.22 | ) | |
| — | | |
| — | |
Total operating
expenses | |
| 1.51 | | |
| 1.42 | | |
| 2.02 | | |
| 2.58 | | |
| 2.03 | |
Leverage
expenses | |
| 0.79 | | |
| 0.18 | | |
| 0.16 | | |
| 0.66 | | |
| 1.30 | |
Total expenses | |
| 2.30 | % | |
| 1.60 | % | |
| 2.18 | % | |
| 3.24 | % | |
| 3.33 | % |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| |
Year
Ended November 30, 2023 | |
Year
Ended November 30, 2022 | |
Year
Ended November 30, 2021 | |
Year
Ended November 30, 2020 | |
Year
Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Ratio of net investment income (loss) to average net assets before fee waiver | |
| 0.84 | % | |
| 2.09 | % | |
| 0.36 | % | |
| 0.03 | % | |
| (1.58 | )% |
Ratio of net investment income (loss) to average net assets after fee waiver | |
| 1.26 | % | |
| 2.37 | % | |
| 0.58 | % | |
| 0.03 | % | |
| (1.58 | )% |
Portfolio turnover rate | |
| 14.33 | % | |
| 13.67 | % | |
| 53.15 | % | |
| 72.19 | % | |
| 182.52 | % |
Credit facility borrowings, end of year (000's) | |
$ | 8,800 | | |
$ | 3,700 | | |
$ | 2,700 | | |
$ | 5,000 | | |
$ | 26,500 | |
Asset coverage, per $1,000 of principal amount of credit facility borrowings(5) | |
$ | 7,711 | | |
$ | 19,126 | | |
$ | 18,185 | | |
$ | 7,061 | | |
$ | 3,323 | |
Asset coverage ratio of credit facility borrowings(5) | |
| 771 | % | |
| 1,913 | % | |
| 1,818 | % | |
| 706 | % | |
| 332 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(1) | Information presented
relates to a share of common stock outstanding for the entire year. |
(2) | During the year
ended November 30, 2020, the Fund effected the following reverse stock split: May 1, 2020,
1 for 8. All historical per share information has been retroactively adjusted to reflect
this reverse stock split. |
(3) | The per common
share data for the years ended November 30, 2022, 2021, 2020, and 2019 do not reflect the
change in estimate of investment income and return of capital, for the respective year. See
Note 2C to the financial statements for further disclosure. |
(4) | Total investment
return is calculated assuming a purchase of common stock at the beginning of the year and
a sale at the closing price on the last day of the year reported (excluding brokerage commissions).
The calculation also assumes reinvestment of distributions at actual prices pursuant to NDP’s
dividend reinvestment plan. |
(5) | Represents value
of total assets less all liabilities and indebtedness not represented by credit facility
borrowings at the end of the year divided by credit facility borrowings outstanding at the
end of the year. |
See accompanying
Notes to Financial Statements.
TPZ Financial Highlights
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Per Common Share Data(1) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Asset Value, beginning of year | |
$ | 15.85 | | |
$ | 15.09 | | |
$ | 13.01 | | |
$ | 17.70 | | |
$ | 19.76 | |
Income (loss) from Investment Operations | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income(2) | |
| 0.32 | | |
| 0.24 | | |
| 0.23 | | |
| 0.35 | | |
| 0.39 | |
Net realized and unrealized gain (loss)(2) | |
| 1.34 | | |
| 1.69 | | |
| 2.49 | | |
| (3.99 | ) | |
| (0.95 | ) |
Total income (loss) from investment operations | |
| 1.66 | | |
| 1.93 | | |
| 2.72 | | |
| (3.64 | ) | |
| (0.56 | ) |
Distributions to Common Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
From net investment income | |
| (0.62 | ) | |
| (0.29 | ) | |
| (0.28 | ) | |
| (0.60 | ) | |
| (1.12 | ) |
From net realized gains from investment transactions | |
| — | | |
| — | | |
| — | | |
| — | | |
| (0.28 | ) |
From return of capital | |
| (0.64 | ) | |
| (0.88 | ) | |
| (0.36 | ) | |
| (0.45 | ) | |
| (0.10 | ) |
Total distributions to common stockholders | |
| (1.26 | ) | |
| (1.17 | ) | |
| (0.64 | ) | |
| (1.05 | ) | |
| (1.50 | ) |
Net Asset Value, end of year | |
$ | 16.25 | | |
$ | 15.85 | | |
$ | 15.09 | | |
$ | 13.01 | | |
$ | 17.70 | |
Per common share market value, end of year | |
$ | 13.57 | | |
$ | 13.63 | | |
$ | 12.92 | | |
$ | 9.99 | | |
$ | 15.57 | |
Total investment return based on market value(3) | |
| 9.43 | % | |
| 14.87 | % | |
| 35.99 | % | |
| (29.23 | )% | |
| (1.38 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Supplemental Data and Ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Net assets applicable to common stockholders, end of year (000's) | |
$ | 95,724 | | |
$ | 98,245 | | |
$ | 98,462 | | |
$ | 89,426 | | |
$ | 123,015 | |
Average net assets (000's) | |
$ | 96,134 | | |
$ | 101,421 | | |
$ | 100,853 | | |
$ | 93,027 | | |
$ | 137,701 | |
Ratio of Expenses to Average Net Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Advisory fees | |
| 1.20 | % | |
| 1.18 | % | |
| 1.18 | % | |
| 1.28 | % | |
| 1.32 | % |
Other operating expenses | |
| 0.45 | | |
| 0.56 | | |
| 0.47 | | |
| 0.94 | | |
| 0.38 | |
Total operating expenses, before fee waiver | |
| 1.65 | | |
| 1.74 | | |
| 1.65 | | |
| 2.22 | | |
| 1.70 | |
Fee waiver | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total operating expenses | |
| 1.65 | | |
| 1.74 | | |
| 1.65 | | |
| 2.22 | | |
| 1.70 | |
Leverage expenses | |
| 1.05 | | |
| 0.85 | | |
| 0.82 | | |
| 1.04 | | |
| 1.25 | |
Total expenses | |
| 2.70 | % | |
| 2.59 | % | |
| 2.47 | % | |
| 3.26 | % | |
| 2.95 | % |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Year Ended November 30, 2019 |
| |
| |
| |
| |
| |
|
Ratio of net investment income to average net assets before fee waiver | |
| 2.06 | % | |
| 1.53 | % | |
| 1.48 | % | |
| 2.61 | % | |
| 1.98 | % |
Ratio of net investment income to average net assets after fee waiver | |
| 2.06 | % | |
| 1.53 | % | |
| 1.48 | % | |
| 2.61 | % | |
| 1.98 | % |
Portfolio turnover rate | |
| 9.72 | % | |
| 4.85 | % | |
| 26.70 | % | |
| 29.95 | % | |
| 25.27 | % |
Credit facility borrowings, end of year (000's) | |
$ | 24,600 | | |
$ | 25,900 | | |
$ | 24,000 | | |
$ | 26,200 | | |
$ | 54,100 | |
Asset coverage, per $1,000 of principal amount of senior notes and credit facility borrowings(4) | |
$ | 4,891 | | |
$ | 4,793 | | |
$ | 5,103 | | |
$ | 4,413 | | |
$ | 3,274 | |
Asset coverage ratio of senior notes and credit facility borrowings(4) | |
| 489 | % | |
| 479 | % | |
| 510 | % | |
| 441 | % | |
| 327 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(1) | Information presented
relates to a share of common stock outstanding for the entire year. |
(2) | The per common
share data for the years ended November 30, 2022, 2021, 2020, and 2019 do not reflect the
change in estimate of investment income and return of capital, for the respective year. See
Note 2C to the financial statements for further disclosure. |
(3) | Total investment
return is calculated assuming a purchase of common stock at the beginning of the year and
a sale at the closing price on the last day of the year reported (excluding brokerage commissions).
The calculation also assumes reinvestment of distributions at actual prices pursuant to TPZ’s
dividend reinvestment plan. |
(4) | Represents value
of total assets less all liabilities and indebtedness not represented by credit facility
borrowings at the end of the preiod divided by credit facility borrowings outstanding at
the end of the year. |
See accompanying
Notes to Financial Statements.
TEAF Financial Highlights
| |
Year
Ended November 30, 2023 | |
Year
Ended November 30, 2022 | |
Year
Ended November 30, 2021 | |
Year
Ended November 30, 2020 | |
Period
From March 29, 2019(1) through November 30, 2019 |
| |
| |
| |
| |
| |
|
Per Common Share Data(2) | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Asset Value,
beginning of period | |
$ | 16.37 | | |
$ | 17.15 | | |
$ | 15.85 | | |
$ | 17.60 | | |
$ | 20.00 | |
Income (loss)
from Investment Operations | |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment
income | |
| 0.38 | | |
| 0.44 | | |
| 0.54 | | |
| 0.51 | | |
| 0.31 | |
Net
realized and unrealized gain (loss) | |
| (0.83 | ) | |
| (0.17 | ) | |
| 1.66 | | |
| (1.16 | ) | |
| (1.95 | ) |
Total
income (loss) from investment operations | |
| (0.45 | ) | |
| 0.27 | | |
| 2.20 | | |
| (0.65 | ) | |
| (1.64 | ) |
Distributions
to Common Stockholders | |
| | | |
| | | |
| | | |
| | | |
| | |
From net
investment income | |
| (0.35 | ) | |
| (0.46 | ) | |
| (0.64 | ) | |
| (0.46 | ) | |
| (0.34 | ) |
From
return of capital | |
| (0.73 | ) | |
| (0.59 | ) | |
| (0.26 | ) | |
| (0.64 | ) | |
| (0.42 | ) |
Total
distributions to common stockholders | |
| (1.08 | ) | |
| (1.05 | ) | |
| (0.90 | ) | |
| (1.10 | ) | |
| (0.76 | ) |
Net
Asset Value, end of period | |
$ | 14.84 | | |
$ | 16.37 | | |
$ | 17.15 | | |
$ | 15.85 | | |
$ | 17.60 | |
Per common share market value,
end of period | |
$ | 12.01 | | |
$ | 13.85 | | |
$ | 14.64 | | |
$ | 13.04 | | |
$ | 15.60 | |
Total investment
return based on market value(3)(4) | |
| (5.48 | )% | |
| 1.74 | % | |
| 19.50 | % | |
| (8.66 | )% | |
| (18.45 | )% |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Supplemental
Data and Ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
assets applicable to common stockholders, end of period (000's) | |
$ | 200,258 | | |
$ | 220,798 | | |
$ | 231,382 | | |
$ | 213,825 | | |
$ | 237,461 | |
Average net assets (000's) | |
$ | 211,331 | | |
$ | 225,912 | | |
$ | 228,533 | | |
$ | 210,055 | | |
$ | 252,217 | |
Ratio of
Expenses to Average Net Assets(5) | |
| | | |
| | | |
| | | |
| | | |
| | |
Advisory
fees | |
| 1.54 | % | |
| 1.51 | % | |
| 1.53 | % | |
| 1.55 | % | |
| 1.51 | % |
Other
operating expenses | |
| 0.29 | | |
| 0.38 | | |
| 0.33 | | |
| 0.37 | | |
| 0.81 | |
Total operating
expenses, before fee waiver | |
| 1.83 | | |
| 1.89 | | |
| 1.86 | | |
| 1.92 | | |
| 2.32 | |
Fee waiver | |
| — | | |
| — | | |
| — | | |
| (0.10 | ) | |
| (0.28 | ) |
Total operating
expenses | |
| 1.83 | | |
| 1.89 | | |
| 1.86 | | |
| 1.82 | | |
| 2.04 | |
Leverage
expenses | |
| 0.84 | | |
| 0.31 | | |
| 0.13 | | |
| 0.23 | | |
| 0.36 | |
Income
tax expense (benefit)(6) | |
| (0.02 | ) | |
| (0.03 | ) | |
| (0.03 | ) | |
| 0.28 | | |
| (0.24 | ) |
Total expenses | |
| 2.65 | % | |
| 2.17 | % | |
| 1.96 | % | |
| 2.33 | % | |
| 2.16 | % |
See accompanying Notes to Financial Statements.
2023 Annual Report | November
30, 2023
| |
Year Ended November 30, 2023 | |
Year Ended November 30, 2022 | |
Year Ended November 30, 2021 | |
Year Ended November 30, 2020 | |
Period From March 29, 2019(1) through November 30, 2019 |
| |
| |
| |
| |
| |
|
Ratio of net investment income to average net assets before fee waiver(5) | |
| 2.44 | % | |
| 2.62 | % | |
| 3.20 | % | |
| 3.16 | % | |
| 2.15 | % |
Ratio of net investment income to average net assets after fee waiver(5) | |
| 2.44 | % | |
| 2.62 | % | |
| 3.20 | % | |
| 3.26 | % | |
| 2.43 | % |
Portfolio turnover rate | |
| 23.23 | % | |
| 18.08 | % | |
| 68.31 | % | |
| 73.22 | % | |
| 50.44 | % |
Credit facility borrowings, end of period (000's) | |
$ | 24,000 | | |
$ | 29,500 | | |
$ | 21,600 | | |
$ | 31,100 | | |
$ | 32,000 | |
Asset coverage, per $1,000 of principal amount of senior notes and credit facility borrowings(7) | |
$ | 9,344 | | |
$ | 8,490 | | |
$ | 11,712 | | |
$ | 7,875 | | |
$ | 8,421 | |
Asset coverage ratio of senior notes and credit facility borrowings(7) | |
| 934 | % | |
| 849 | % | |
| 1,171 | % | |
| 788 | % | |
| 842 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(1) | Commencement of
operations. |
(2) | Information presented
relates to a share of common stock outstanding for the entire period. |
(3) | Not annualized
for period less than one year. |
(4) | Total investment
return is calculated assuming a purchase of common stock at the beginning of the period and
a sale at the closing price on the last day of the period reported (excluding brokerage commissions).
The calculation also assumes reinvestment of distributions at actual prices pursuant to TEAF’s
dividend reinvestment plan. |
(5) | Annualized for
period less than one year. |
(6) | For the year ended
November 30, 2023 TEAF accrued $51,306 for net deferred income tax benefit. For the year
ended November 30, 2022 TEAF accrued $57,377 for net deferred income tax benefit. For the
year ended November 31, 2021, TEAF accrued $67,015 for net deferred income tax expense. For
the year ended November 30, 2020, TEAF accrued $594,668 for net deferred income tax expense.
For the period ended November 30, 2019, TEAF accrued $418,970 for net deferred income tax
benefit. |
(7) | Represents value
of total assets less all liabilities and indebtedness not represented by margin facility
borrowings at the end of the period divided by margin facility borrowings outstanding at
the end of the period. |
See accompanying
Notes to Financial Statements.
Notes to Financial
Statements
November 30, 2023
1. General Organization
This report covers the following companies, each of
which is listed on the New York Stock Exchange (“NYSE”): Tortoise Energy Infrastructure Corp. (“TYG”), Tortoise
Midstream Energy Fund, Inc. (“NTG”), Tortoise Pipeline & Energy Fund, Inc. (“TTP”), Tortoise Energy Independence
Fund, Inc. (“NDP”), Tortoise Power and Energy Infrastructure Fund, Inc. (“TPZ”), and Ecofin Sustainable and Social
Impact Term Fund (“TEAF”). These companies are individually referred to as a “Fund” or by their respective NYSE
symbols, or collectively as the “Funds”, and each is a non-diversified, closed-end management investment company under the
Investment Company Act of 1940, as amended (the “1940 Act”). Each of TYG, NTG, TTP, NDP and TEAF has a primary investment
objective to seek a high level of total return with an emphasis on current distributions. TPZ has a primary investment objective to provide
a high level of current income, with a secondary objective of capital appreciation.
2. Significant Accounting Policies
The Funds are investment companies and follows accounting
and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 946, “Financial
Services-Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of
its financial statements. These policies are in conformity with generally accepted accounting principles in the United States of America
(“GAAP”).
A. Use of Estimates
The preparation of financial statements in conformity
with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements,
and the amount of income and expenses during the period reported. Actual results could differ from those estimates.
B. Security Valuation
In general, and where applicable, the Funds use readily
available market quotations based upon the last updated sales price from the principal market to determine fair value. The Funds primarily
own securities that are listed on a securities exchange or are traded in the over-the-counter market. The Funds value those securities
at their last sale price on that exchange or over-the-counter market on the valuation date. If the security is listed on more than one
exchange, the Funds use the price from the exchange that it considers to be the principal exchange on which the security is traded. If
there has been no sale on such exchange or over-the-counter market on such day, the security is valued at the mean between the last bid
price and last ask price on such day. Securities listed on the NASDAQ are valued at the NASDAQ Official Closing Price, which may not necessarily
represent the last sale price. These securities are categorized as Level 1 in the fair value hierarchy.
Restricted securities are subject to statutory or contractual
restrictions on their public resale, which may make it more difficult to obtain a valuation and may limit a Fund’s ability to dispose
of them. Investments in private placement securities and other securities for which market quotations are not readily available are valued
in good faith by using fair value procedures. Such fair value procedures consider factors such as discounts to publicly traded issues,
time until conversion date, securities with similar yields, quality, type of issue, coupon, duration and rating. If events occur that
affect the value of a Fund’s portfolio securities before the net asset value has been calculated (a “significant event”),
the portfolio securities so affected are generally priced using fair value procedures.
An equity security of a publicly traded company acquired
in a private placement transaction without registration under the Securities Act of 1933, as amended (the “1933 Act”), is
subject to restrictions on resale that can affect the security’s liquidity and fair value. If such a security is convertible into
publicly traded common shares, the security generally will be valued at the common share market price adjusted by a percentage discount
due to the restrictions and categorized as Level 2 in the fair value hierarchy. To the extent that such securities are convertible or
otherwise become freely tradable within a time frame that may be reasonably determined, an amortization schedule may be used to determine
the discount. If the security has characteristics that are dissimilar to the class of security that trades on the open market, the security
will generally be valued and categorized as Level 3 in the fair value hierarchy.
Unobservable inputs are used to measure fair value
to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity.
Unobservable inputs reflect the Funds’ own beliefs about the assumptions that market participants would use in pricing the asset
or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances,
which might include the Fund’s own data. The Fund’s own data are adjusted if information is reasonably available without undue
cost and effort that indicates that market participants would use different assumptions. Due to the inherent uncertainty of valuations
of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Options (including options on futures contracts) and
futures contracts are valued using readily available market quotations. Exchange-traded options are valued at the last reported sale price
on any exchange on which they trade. If there are no sales reported on any exchange, exchange-traded options shall be valued at the mean
between the last highest bid and last lowest asked prices obtained as of the closing of the exchanges on which the option is traded. Exchange-traded
domestic futures contracts are valued at the last reported sale price on the Chicago Mercantile Exchange. Exchange-traded foreign futures
contracts are valued at the last reported sale price on the primary foreign exchange on which they principally trade. The value of Flexible
Exchange Options (FLEX Options) are determined (i) by an evaluated price as determined by a third-party valuation service; or (ii) by
using a quotation provided by a broker-dealer.
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
The Funds generally value debt securities at evaluated
prices obtained from an independent third-party valuation service that utilizes a pricing matrix based upon yield data for securities
with similar characteristics, or based on a direct written broker-dealer quotation from a dealer who has made a market in the security.
Debt securities with 60 days or less to maturity at time of purchase are valued on the basis of amortized cost, which approximates fair
value. The securities are categorized as level 2 in the fair value hierarchy.
Interest rate swap contracts are valued by using industry-accepted
models, which discount the estimated future cash flows based on a forward rate curve and the stated terms of the interest rate swap agreement
by using interest rates currently available in the market, or based on dealer quotations, if available, and are categorized as Level 2
in the fair value hierarchy.
Various inputs are used in determining the fair value
of the Funds’ investments and financial instruments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical investments
Level 2 — other significant observable inputs (including quoted prices
for similar investments, market corroborated inputs, etc.)
Level 3 — significant unobservable inputs (including a Fund’s
own assumptions in determining the fair value of investments)
The inputs or methodologies used for valuing securities
are not necessarily an indication of the risk associated with investing in those securities. The following tables provide the fair value
measurements of applicable assets and liabilities by level within the fair value hierarchy as of November 30, 2023. These assets and liabilities
are measured on a recurring basis.
TYG: | |
| | |
| | |
| | |
| |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | |
| | |
| | |
| |
Investments: | |
| | |
| | |
| | |
| |
Common Stock(a) | |
$ | 384,648,720 | | |
$ | — | | |
$ | — | | |
$ | 384,648,720 | |
Master Limited Partnerships(a) | |
| 87,161,066 | | |
| — | | |
| — | | |
| 87,161,066 | |
Private Investment(a) | |
| — | | |
| — | | |
| 14,550,615 | | |
| 14,550,615 | |
Preferred Stock(a) | |
| — | | |
| 4,588,448 | | |
| — | | |
| 4,588,448 | |
Short-Term Investment(b) | |
| 408,099 | | |
| — | | |
| — | | |
| 408,099 | |
Total Assets | |
$ | 472,217,885 | | |
$ | 4,588,448 | | |
$ | 14,550,615 | | |
$ | 491,356,948 | |
| |
| | | |
| | | |
| | | |
| | |
NTG: | |
| | | |
| | | |
| | | |
| | |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments: | |
| | | |
| | | |
| | | |
| | |
Common Stock(a) | |
$ | 218,012,380 | | |
$ | — | | |
$ | — | | |
$ | 218,012,380 | |
Master Limited Partnerships(a) | |
| 46,965,287 | | |
| — | | |
| — | | |
| 46,965,287 | |
Preferred Stock(a) | |
| — | | |
| 3,058,966 | | |
| — | | |
| 3,058,966 | |
Short-Term Investment(b) | |
| 3,898,807 | | |
| — | | |
| — | | |
| 3,898,807 | |
Total Assets | |
$ | 268,876,474 | | |
$ | 3,058,966 | | |
$ | — | | |
$ | 271,935,440 | |
| |
| | | |
| | | |
| | | |
| | |
TTP: | |
| | | |
| | | |
| | | |
| | |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments: | |
| | | |
| | | |
| | | |
| | |
Common Stock(a) | |
$ | 69,623,996 | | |
$ | — | | |
$ | — | | |
$ | 69,623,996 | |
Master Limited Partnerships(a) | |
| 15,567,684 | | |
| — | | |
| — | | |
| 15,567,684 | |
Short-Term Investment(b) | |
| 457,549 | | |
| — | | |
| — | | |
| 457,549 | |
Total Assets | |
$ | 85,649,229 | | |
$ | — | | |
$ | — | | |
$ | 85,649,229 | |
| |
| | | |
| | | |
| | | |
| | |
NDP: | |
| | | |
| | | |
| | | |
| | |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments: | |
| | | |
| | | |
| | | |
| | |
Common Stock(a) | |
$ | 55,160,663 | | |
$ | — | | |
$ | — | | |
$ | 55,160,663 | |
Master Limited Partnerships(a) | |
| 12,428,781 | | |
| — | | |
| — | | |
| 12,428,781 | |
Short-Term Investment(b) | |
| 336,952 | | |
| — | | |
| — | | |
| 336,952 | |
Total Assets | |
$ | 67,926,396 | | |
$ | — | | |
$ | — | | |
$ | 67,926,396 | |
Notes
to Financial Statements (continued)
TPZ: | |
| | |
| | |
| | |
| |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments: | |
| | | |
| | | |
| | | |
| | |
Corporate Bonds(a) | |
$ | — | | |
$ | 59,180,777 | | |
$ | — | | |
$ | 59,180,777 | |
Common Stock(a) | |
| 37,428,869 | | |
| — | | |
| — | | |
| 37,428,869 | |
Master Limited Partnerships(a) | |
| 22,605,643 | | |
| — | | |
| — | | |
| 22,605,643 | |
Short-Term Investment(b) | |
| 340,564 | | |
| — | | |
| — | | |
| 340,564 | |
Total Assets | |
$ | 60,375,076 | | |
$ | 59,180,777 | | |
$ | — | | |
$ | 119,555,853 | |
| |
| | | |
| | | |
| | | |
| | |
TEAF: | |
| | | |
| | | |
| | | |
| | |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments: | |
| | | |
| | | |
| | | |
| | |
Common Stock(a) | |
$ | 90,031,833 | | |
$ | — | | |
$ | — | | |
$ | 90,031,833 | |
Private Investments(a) | |
| — | | |
| — | | |
| 50,403,458 | | |
| 50,403,458 | |
Corporate Bonds(a) | |
| — | | |
| 27,439,349 | | |
| 3,976,106 | | |
| 31,415,455 | |
Municipal Bonds(a) | |
| — | | |
| 18,065,397 | | |
| — | | |
| 18,065,397 | |
Master Limited Partnerships(a) | |
| 14,146,695 | | |
| — | | |
| — | | |
| 14,146,695 | |
Private Notes(a) | |
| — | | |
| — | | |
| 13,441,698 | | |
| 13,441,698 | |
Preferred Stock(a) | |
| — | | |
| — | | |
| 4,769,400 | | |
| 4,769,400 | |
Bank Loan(a) | |
| — | | |
| — | | |
| 503,725 | | |
| 503,725 | |
Special Purpose Acquisition Company Warrant(a) | |
| 10,885 | | |
| — | | |
| — | | |
| 10,885 | |
Short-Term Investment(b) | |
| 433,797 | | |
| — | | |
| — | | |
| 433,797 | |
Total Assets | |
$ | 104,623,210 | | |
$ | 45,504,746 | | |
$ | 73,094,387 | | |
$ | 223,222,343 | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Written Call Options | |
$ | 46,805 | | |
$ | — | | |
$ | — | | |
$ | 46,805 | |
(a) |
All other industry classifications are identified in the Schedule of Investments. |
(b) |
Short-term investment is a sweep investment for cash balances. |
The Funds utilize the beginning of reporting period
method for determining transfers between levels. During the year ended November 30, 2023, Contour Propco (corporate bond) and Village
Charter School, Inc. (bank loan) in TEAF, with principal values of $5,715,000 and $800,000, respectively, were transferred from Level
2 to Level 3 due to the change in liquidity status of the debtor and a coinciding change in fair valuation inputs and methodology for
the securities. There were no other transfers between levels for the Funds during the year ended November 30, 2023.
The following tables present each Fund’s assets
measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended November 30, 2023:
Preferred Stock | |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Balance — beginning of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 4,582,050 | |
Purchases | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Return of capital | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Sales | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total realized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Change in unrealized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 187,350 | |
Balance — end of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 4,769,400 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private Investments | |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Balance — beginning of period | |
$ | 15,024,741 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 45,276,563 | |
Purchases | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 9,449,068 | |
Return of capital | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,156,570 | ) |
Sales | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total realized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Change in unrealized gain/loss | |
| (474,126 | ) | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,165,603 | ) |
Balance — end of period | |
$ | 14,550,615 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 50,403,458 | |
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
Bank Loans | |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Balance — beginning of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Transfers into level 3 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 522,880 | |
Purchases | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Return of capital | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Sales | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total realized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Change in unrealized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (19,155 | ) |
Balance — end of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 503,725 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Corporate Bonds | |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Balance — beginning of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Transfers into level 3 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 5,588,036 | |
Purchases | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Return of capital | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Sales | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total realized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Change in unrealized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,611,930 | ) |
Balance — end of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 3,976,106 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Private Notes | |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Balance — beginning of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 11,143,672 | |
Purchases | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,331,112 | |
Return of capital | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Sales | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total realized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Change in unrealized gain/loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (33,086 | ) |
Balance — end of period | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 13,441,698 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Change in unrealized gain/loss on investments still held at November 30, 2023 | |
$ | (474,126 | ) | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | (4,642,424 | ) |
TEAF owns units of preferred stock of Enterprise Products
Partners L.P. (“EPD Pfd”) that were issued in a transaction that closed on September 30, 2020. The preferred stock carries
a conversion option into common stock after the 5th anniversary of the Closing Date (September 30, 2025) with a conversion rate determined
as the quotient equal to 100% of the Stated Series A Liquidation Preference plus accrued and unpaid distributions up to the applicable
conversion date, divided by a 7.50% discount to the prior 5-Day VWAP of EPD’s common unit price. The issuer has an option to force
conversion before the 2nd anniversary at 110%, after the 2nd anniversary and prior to the 4th anniversary at 107%, thereafter, prior to
the 5th anniversary at 103%, thereafter, prior to the 6th anniversary at 101% and any time on or after the 6th anniversary at par. A discounted
cash flow model prepared by an independent third party is being used to determine fair value of the EPD Pfd security. Unobservable inputs
used to determine the discount rate include a debt discount rate that generally reflects the credit worthiness of the company. An increase
(decrease) in the debt discount rate would lead to a corresponding decrease (increase) in fair value of the preferred stock.
TEAF owns units of preferred stock of One Energy Enterprises
Inc. (“One Energy Pfd”) that were issued in a transaction that closed on April 12, 2023. One Energy Enterprises Inc. is a
private company. The preferred stock carries a conversion option into common stock on and after the earlier to occur of (i) the closing
of a DeSPAC, (ii) the consummation of an IPO or (iii) the effectiveness of a direct listing in which the Common Stock becomes listed on
a national securities exchange (such date the “Initial Liquidity Date”). A discounted cash flow model prepared by an independent
third party is being used to determine fair value of the One Energy Pfd security. Unobservable inputs used to determine the discount rate
include a debt discount rate that generally reflects the credit worthiness of the company. An increase (decrease) in the debt discount
rate would lead to a corresponding decrease (increase) in fair value of the preferred stock.
TEAF owns units of Mexico Pacific Limited LLC (“MPL”),
which was issued in a private transaction that closed on October 23, 2019. As of November 30, 2023, the investment in MPL was valued at
the most recent transaction price, which was a capital raise that closed on September 30, 2021, as the company is still in development
with no day-to-day operations.
TEAF owns a private note in Saturn Solar Bermuda 1,
Ltd (“Saturn”). Under the terms of the note, Saturn pays interest monthly at an annual rate of 10%. A discounted cash flows
model is being utilized to determine fair value of the private note. Unobservable inputs used to determine
Notes
to Financial Statements (continued)
the discount rate include a risk spread based on similar
projects and an illiquidity spread due to the note being issued in the private market. An increase (decrease) in the risk spread or illiquidity
spread would lead to a corresponding decrease (increase) in fair value of the note.
TEAF owns a note in EF WWW Holdings, LLC, for debt
funding of World Water Works Holdings, Inc. Under the terms of the note, EF WWW Holdings pays interest monthly at an annual rate of 10.50%.
A discounted cash flows model is being utilized to determine fair value of the private note. Unobservable inputs used to determine the
discount rate include a risk spread based on similar projects and an illiquidity spread due to the note being issued in the private market.
An increase (decrease) in the risk spread or illiquidity spread would lead to a corresponding decrease (increase) in fair value of the
note.
TEAF owns a private corporate bond in Contour Propco.
A discounted cash flows model is utilized to determine fair value of the private bond. Unobservable inputs used to determine the discount
rate include a risk spread based on similar projects and an illiquidity spread due to the bond being issued in the private market. An
increase (decrease) in the risk spread or illiquidity spread would lead to a corresponding decrease (increase) in fair value of the bond.
TEAF owns a private bank loan in Village Charter School,
Inc. A discounted cash flows model is utilized to determine fair value of the private bank loan. Unobservable inputs used to determine
the discount rate include a risk spread based on similar projects and an illiquidity spread due to the bank loan being issued in the private
market. An increase (decrease) in the risk spread or illiquidity spread would lead to a corresponding decrease (increase) in fair value
of the bank loan.
TYG wholly-owns private investments in TK NYS Solar
Holdco, LLC and TEAF wholly-owns private investments in Renewable Holdco, LLC, Renewable Holdco I, LLC, and Renewable Holdco II, LLC.
Discounted cash flow models are being utilized to determine the fair value of these holdings. Unobservable inputs used within the discounted
cash flow models include weighted average cost of capital. An increase (decrease) in the weighted average cost of capital would lead to
a corresponding decrease (increase) in the fair value of the private investment.
The following tables summarize the fair value and significant
unobservable inputs that each Fund used to value its portfolio investments categorized as Level 3 as of November 30, 2023:
Assets at Fair Value | |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Private Notes | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 13,441,698 | |
Corporate Bonds | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 3,976,106 | |
Preferred Stock | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 4,769,400 | |
Bank Loan | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 503,725 | |
Private Investments | |
$ | 14,550,615 | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 50,403,458 | |
Assets at Fair Value | |
Valuation Technique | |
Unobservable
Inputs | |
Input | |
Preferred Stock (EPD Pfd) | |
Lattice model | |
Debt discount rate | |
| 6.69 | % |
Private Investment (One Energy Pfd) | |
Lattice model | |
Debt discount rate | |
| 27.8 | % |
Private Investment (TK NYS Solar Holdco, LLC) | |
Discounted cash flow model | |
Post-contracted weighted average cost of capital | |
| 8.05 | % |
Private Investment (TK NYS Solar Holdco, LLC) | |
Discounted cash flow model | |
Contracted weighted average cost of capital | |
| 7.70% - 7.80 | % |
Private Investment (Mexico Pacific Limited) | |
Recent transaction | |
Purchase price | |
$ | 21.94 | |
Private Investment (Renewable Holdco, LLC) | |
Recent transaction | |
Purchase price | |
$ | 6,892,925 | |
Private Investment (Renewable Holdco I, LLC) | |
Discounted cash flow model | |
Contracted weighted average cost of capital | |
| 7.60% - 7.90 | % |
Private Investment (Renewable Holdco I, LLC) | |
Discounted cash flow model | |
Post-contracted weighted average cost of capital | |
| 8.05 | % |
Private Investment (Renewable Holdco II, LLC) | |
Discounted cash flow model | |
Contracted weighted average cost of capital | |
| 7.70 | % |
Private Investment (Renewable Holdco II, LLC) | |
Discounted cash flow model | |
Post-contracted weighted average cost of capital | |
| 8.05 | % |
Private Note (Saturn Bermuda) | |
Discounted cash flow model | |
Risk spread | |
| 1.7500 | % |
Private Note Saturn Bermuda) | |
Discounted cash flow model | |
Illiquidity spread | |
| 1.7255 | % |
Private Note (EF WWW Holdings, LLC) | |
Discounted cash flow model | |
Risk spread | |
| 3.0000 | % |
Private Note (EF WWW Holdings, LLC) | |
Discounted cash flow model | |
Illiquidity spread | |
| 2.6482 | % |
Corporate Bond (Contour Propco) | |
Discounted cash flow model | |
Discount Rate | |
| 17.00 | % |
Corporate Bond (Contour Propco) | |
Discounted cash flow model | |
$ per Square Foot | |
$ | 324 - $405 | |
Corporate Bond (Village Charter School, Inc.) | |
Discounted cash flow model | |
Discount Rate | |
| 11.00 | % |
Corporate Bond (Village Charter School, Inc.) | |
Discounted cash flow model | |
$ per Square Foot | |
$ | 90 | |
C. Securities Transactions and Investment Income
Securities transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Interest income
is recognized on the accrual basis, including amortization of premiums and accretion of discounts. As of November 30, 2023, TYG, NTG,
TTP, NDP, TPZ and TEAF had accrued interest amounts of $109,407, $73,572, $1,772, $2,152, $1,187,777, and $1,256,717 respectively, which
is included in Dividend, distributions and interest receivable from investments on the statement of Assets and Liabilities. Discounts
and premiums on fixed income securities are amortized or accreted over the life of the respective securities using the effective interest
method. Dividend income and distributions are recorded on the ex-dividend date. Distributions received from investments
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
generally are comprised of ordinary income and return
of capital. The Funds estimate the allocation of distributions between investment income and return of capital at the time such distributions
are received based on historical information or regulatory filings. These estimates may subsequently be revised based on actual allocations
received from the portfolio companies after their tax reporting periods are concluded, as the actual character of these distributions
is not known until after the fiscal year-end of the Funds.
Subsequent to November 30, 2022, the Funds reallocated
the amount of return of capital recognized for the period from December 1, 2021 through November 30, 2022 based on the 2022 tax reporting
information received. The impact of this reclass is as follows:
| |
Estimated Return | |
Revised Return | |
Increase/(Decrease) | |
| |
of Capital % | |
of Capital % | |
in Return of Capital | |
TYG | |
61% | |
61% | |
$ | 24,899 | |
NTG | |
62% | |
64% | |
$ | 174,107 | |
TTP | |
59% | |
57% | |
$ | (102,509 | ) |
NDP | |
24% | |
23% | |
$ | (38,098 | ) |
TPZ | |
79% | |
77% | |
$ | (103,984 | ) |
TEAF | |
41% | |
39% | |
$ | (149,179 | ) |
In addition, the Funds may be subject to withholding
taxes on foreign-sourced income. The Funds accrue such taxes when the related income is earned in accordance with the Funds’ understanding
of the applicable country’s tax rules and rates.
D. Foreign Currency Translation
For foreign currency, investments in foreign securities,
and other assets and liabilities denominated in a foreign currency, the Funds translate these amounts into U.S. dollars on the following
basis: (i) market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date, and (ii)
purchases and sales of investment securities, income and expenses at the relevant rates of exchange on the respective dates of such transactions.
The Funds do not isolate the portion of gains and losses on investments that is due to changes in the foreign exchange rates from that
which is due to changes in market prices of securities.
E. Federal and State Income Taxation
Each of TYG and NTG, was previously taxed as a C corporation
and, as such, was obligated to pay federal and state income tax on its taxable income. Beginning with the fiscal year ending November
30, 2023, TYG and NTG each qualified for special tax treatment afforded to a regulated investment company (“RIC”) under Subchapter
M of the Internal Revenue Code (“IRC”). As RICs, TYG and NTG must satisfy income, asset diversification and minimum distribution
requirements. As long as each so qualifies, TYG and NTG will not be subject to U.S. federal income tax. TYG and NTG intend to distribute
at least annually substantially all of its income and gains. Undistributed income and gains are subject to a 4% U.S. federal excise tax
unless sufficient distributions have been made to satisfy the excise tax avoidance requirement.
TTP, NDP, TPZ and TEAF each qualify as a regulated
investment company (“RIC”) under the Internal Revenue Code (“IRC”). As a result, TTP, NDP, TPZ and TEAF generally
will not be subject to U.S. federal income tax on income and gains that they distribute each taxable year to stockholders if they meet
certain minimum distribution requirements. However, TEAF’s taxable subsidiary, created to hold certain investments is generally
subject to federal and state income taxes on its income. RICs are required to distribute substantially all of their income, in addition
to meeting certain asset diversification requirements, and are subject to a 4% non-deductible U.S. federal excise tax on certain undistributed
income unless the fund makes sufficient distributions to satisfy the excise tax avoidance requirement.
The Funds recognize the tax benefits of uncertain tax
positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on
the technical merits of the tax position. The Funds’ policy is to record interest and penalties on uncertain tax positions as part
of tax expense.
As of November 30, 2023, TYG and NTG had no uncertain
tax positions and no accrued penalties or interest. As a result of each Fund’s intention to not complete the conversion from a corporation
to a RIC for the fiscal year ending November 30, 2022, each Fund’s previously recognized liability for uncertain tax positions was
derecognized in February 2023. The Statement of Operations includes the reversal of the liability for the period. Consistent with the
Fund’s policy, TYG and NTG recognize accrued penalties and interest related to uncertain tax positions as part of current tax expense.
Penalties and interest for TYG and NTG accrued and subsequently derecognized during the period were $529,931 and $227,909, respectively.
| |
TYG | | |
NTG | |
Balance at December 1, 2022 | |
$ | 24,561,306 | | |
$ | 10,563,189 | |
Additions based on tax positions related to FYE 11/30/2021 | |
$ | 529,931 | | |
$ | 227,909 | |
Decrease based on tax positions related to FYE 11/30/2021 | |
$ | (25,091,237 | ) | |
$ | (10,791,098 | ) |
Balance at November 30, 2023 | |
$ | — | | |
$ | — | |
As of November 30, 2023, TTP, NDP, TPZ and TEAF had
no uncertain tax positions, and no penalties or interest was accrued. The Funds do not expect any change in their unrecognized tax positions
in the next twelve months. The tax years ended on the following dates remain open to examination by federal and state tax authorities:
TYG, NTG, TTP, NDP, TPZ and TEAF – November 30,
2020 through 2023
Notes
to Financial Statements (continued)
F.
Distributions to Stockholders
Distributions to common
stockholders are recorded on the ex-dividend date. The Funds may not declare or pay distributions to its common stockholders if it does
not meet asset coverage ratios required under the 1940 Act or the rating agency guidelines for its debt and preferred stock following
such distribution. The amount of any distributions will be determined by the Board of Directors. The character of distributions to common
stockholders made during the year may differ from their ultimate characterization for federal income tax purposes.
With the intent to
qualify as a RIC, TYG and NTG each intend to make cash distributions of its investment company taxable income and capital gains to common
shareholders. As RICs, TTP, NDP, TPZ and TEAF each intend to make cash distributions of its investment company taxable income and capital
gains to common stockholders. In addition, on an annual basis, TYG, NTG, TTP, NDP, TPZ and TEAF each may distribute additional capital
gains in the last calendar quarter if necessary to meet minimum distribution requirements and thus avoid being subject to excise taxes.
Distributions paid to stockholders in excess of investment company taxable income and net realized gains will be treated as return of
capital to stockholders.
Distributions to mandatory
redeemable preferred (“MRP”) stockholders are accrued daily based on applicable distribution rates for each series and paid
periodically according to the terms of the agreements. The Funds may not declare or pay distributions to its preferred stockholders if
it does not meet a 200% asset coverage ratio for its debt or the rating agency basic maintenance amount for the debt following such distribution.
The character of distributions to preferred stockholders made during the year may differ from their ultimate characterization for federal
income tax purposes.
Distributions to stockholders
for the year ended November 30, 2023 were characterized as follows:
| |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
| |
Common | | |
Preferred | | |
Common | | |
Preferred | | |
Common | | |
Preferred | | |
Common | | |
Common | | |
Common | |
Qualified dividend income | |
| 40 | % | |
| 70 | % | |
| 46 | % | |
| 86 | % | |
| 22 | % | |
| 100 | % | |
| 30 | % | |
| 16 | % | |
| 31 | % |
Ordinary dividend income | |
| 18 | % | |
| 30 | % | |
| 7 | % | |
| 14 | % | |
| — | | |
| — | | |
| — | | |
| 33 | % | |
| 2 | % |
Return of capital | |
| 42 | % | |
| — | | |
| 47 | % | |
| — | | |
| 78 | % | |
| 0 | % | |
| 70 | % | |
| 51 | % | |
| 67 | % |
Long-term capital gain | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
* |
For Federal income tax purposes, distributions of short-term capital gains are included in qualified dividend income. |
G. Offering and Debt Issuance Costs
Offering costs related to the issuance of common stock
are charged to additional paid-in capital when the stock is issued. Debt issuance costs related to senior notes and MRP Stock are deferred
and amortized over the period the debt or MRP Stock is outstanding.
There were no offering or debt issuance costs recorded
during the period December 1, 2022 through November 30, 2023 for TYG, NTG, TTP, NDP, TPZ or TEAF.
H. Derivative Financial Instruments
The Funds have established policies and procedures
for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Funds do not hold or
issue derivative financial instruments for speculative purposes. All derivative financial instruments are recorded at fair value with
changes in fair value during the reporting period, and amounts accrued under the agreements, included as unrealized gains or losses in
the accompanying Statements of Operations. Derivative instruments that are subject to an enforceable master netting arrangement allow
a Fund and the counterparty to the instrument to offset any exposure to the other party with amounts owed to the other party. The fair
value of derivative financial instruments in a loss position are offset against the fair value of derivative financial instruments in
a gain position, with the net fair value appropriately reflected as an asset or liability within the accompanying Statements of Assets
& Liabilities.
TYG, NTG, TTP, NDP and TEAF may seek to provide current
income from gains earned through an option strategy that normally consists of writing (selling) call options on selected equity securities
held in the portfolio (“covered calls”). The premium received on a written call option is initially recorded as a liability
and subsequently adjusted to the then current fair value of the option written. Premiums received from writing call options that expire
unexercised are recorded as a realized gain on the expiration date. Premiums received from writing call options that are exercised are
added to the proceeds from the sale of the underlying security to calculate the realized gain (loss). If a written call option is repurchased
prior to its exercise, the realized gain (loss) is the difference between the premium received and the amount paid to repurchase the option.
TEAF may enter into forward currency contracts, which
represent agreements to exchange currencies on specific future dates at predetermined rates. TEAF uses forward currency contracts to manage
exposure to changes in exchange rates. On a daily basis, TEAF’s investment adviser values forward currency contracts and records
unrealized appreciation or depreciation for open forward currency contracts in the Statements of Assets & Liabilities. Realized gains
or losses are recorded at the time the forward currency contracts are closed. TEAF did not enter into any forward currency contracts during
the year ended November 30, 2023.
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
I. Indemnifications
Under each of the Funds’ organizational documents,
its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In
addition, in the normal course of business, the Funds may enter into contracts that provide general indemnification to other parties.
A Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the
Funds that have not yet occurred, and may not occur. However, the Funds have not had prior claims or losses pursuant to these contracts
and expect the risk of loss to be remote.
J. Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid
investments with an original maturity of three months or less and money market fund accounts.
K. Recent Accounting and Regulatory Updates
In March 2020, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04 Reference Rate Reform (Topic 848); Facilitation
of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease
the potential burden in accounting for (or recognizing the effects of) reference rate reform. The guidance is applicable to contracts
referencing London Interbank Offered Rate (“LIBOR”) or another reference rate that is expected to be discontinued due to reference
rate reform. The original guidance and the scope clarification become effective upon issuance in March 2020 and January 2021, respectively.
However, the guidance in ASC 848 is temporary in nature and generally cannot be applied to contract modifications that occur after December
31, 2022 or hedging relationships entered into or evaluated after that date. In December 2022, FASB deferred ASU 2022-04 and issued ASU
2022-06, Reference Rate Reform: Deferral of the Sunset Date of Topic 848, which extends the application of the amendments through December
31, 2024. Management is evaluating and believes it is unlikely the ASU’s adoption will have a significant impact on the Fund’s
financial statements.
The FASB issued final guidance (ASU No. 2022-08) to
clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security
and, therefore, is not considered when measuring fair value. Recognizing a contractual restriction on the sale of an equity security as
a separate unit of account is not permitted. The guidance applies to all entities that have investments in equity securities measured
at fair value that are subject to contractual sale restrictions. Entities that hold equity securities subject to contractual sale restrictions
are required to make additional disclosures. The guidance will be applied prospectively, with special transition provisions for entities
that qualify as investment companies under ASC 946. For public business entities, the guidance is effective for fiscal years beginning
after 15 December 2023, and interim periods within those fiscal years. Management is currently assessing the potential impact of the new
guidance on the Funds’ financial statements.
3. Risks and Uncertainties
TYG, NTG, TTP, NDP and TPZ concentrate their investments
in the energy sector. TEAF concentrates its investments in issuers operating in essential asset sectors. Funds that primarily invest in
a particular sector may experience greater volatility than companies investing in a broad range of industry sectors. A Fund may, for defensive
purposes, temporarily invest all or a significant portion of its assets in investment grade securities, short-term debt securities and
cash or cash equivalents. To the extent a Fund uses this strategy, it may not achieve its investment objective.
Market risks such as political, regulatory, economic
and social developments, can affect the value of the Funds’ investments. Natural disasters, public health emergencies, war, terrorism
and other unforeseeable events may lead to increased market volatility and may have adverse long-term effects on world economies and markets
generally.
4. Agreements
The Funds have each entered into an Investment Advisory
Agreement with Tortoise Capital Advisors, L.L.C. (the “Adviser”). The Funds each pay the Adviser a fee based on the Fund’s
average monthly total assets (including any assets attributable to leverage and excluding any net deferred tax asset) minus accrued liabilities
(other than net deferred tax liability, debt entered into for purposes of leverage and the aggregate liquidation preference of outstanding
preferred stock) (“Managed Assets”), in exchange for the investment advisory services provided. Average monthly Managed Assets
is the sum of the daily Managed Assets for the month divided by the number of days in the month. Accrued liabilities are expenses incurred
in the normal course of each Fund’s operations. Waived fees are not subject to recapture by the Adviser. The annual fee rates paid
to the Adviser as of November 30, 2023 are as follows:
TYG — 0.95% up to $2,500,000,000, 0.90% between $2,500,000,000 and $3,500,000,000,
and 0.85% above $3,500,000,000.
NTG — 0.95%.
TTP — 1.10%.
NDP — 1.10%.
TPZ — 0.95%.
TEAF — 1.35%.
Notes
to Financial Statements (continued)
On August 9, 2021, the Adviser voluntarily agreed to
reimburse TTP and NDP for their Operating Expenses in order to ensure that Operating Expenses do not exceed 1.35% of average daily managed
assets, effective September 1, 2021. In its sole discretion and at any time, the Adviser may elect to extend, terminate or modify the
temporary expense reimbursement upon written notice.
U.S. Bancorp Fund Services, LLC d/b/a U.S. Bank Global
Fund Services serves as each Fund’s administrator. Each Fund pays the administrator a monthly fee computed at an annual rate of
0.04% of the first $1,000,000,000 of the Fund’s Managed Assets, 0.01% on the next $500,000,000 of Managed Assets and 0.005% on the
balance of the Fund’s Managed Assets.
U.S. Bank, N.A. serves as the Funds’ custodian.
Each Fund pays the custodian a monthly fee computed at an annual rate of 0.004% of the Fund’s U.S. Dollar-denominated assets and
0.015% of the Fund’s Canadian Dollar-denominated assets, plus portfolio transaction fees.
5. Income Taxes
TYG and NTG:
TYG and NTG each intend to elect to be subject to tax
as a RIC in connection with the filing of their taxable year ending November 30, 2023 federal income tax returns (the conversion transaction).
If TYG and NTG satisfy the required qualification tests and each timely elects to be subject to tax as a RIC, they generally will not
be subject to federal income or excise taxes on any income and gains timely distributed to their shareholders, except as discussed below.
Management has determined that it is more likely than not TYG and NTG will be able to qualify and elect to be subject to tax as a RIC,
effective as of its fiscal year ending November 30, 2023.
For the period ending November 30, 2023, TYG and NTG
have a net tax benefit of $13,467,645 and $5,026,388 respectively, relating to prior periods in which they were C Corporations (TYG: $7,328,013;
NTG: $3,671,569), changes in the uncertain tax position for the period (TYG: ($24,561,306); NTG: ($10,563,189)) and built-in gains taxes
related to the conversion transaction (TYG: $3,765,648; NTG: $1,865,232). TYG and NTG are expected to be subject to federal income tax
on any built-in gains recognized related to the conversion transaction (as described below) during its fiscal year ending November 30,
2023, but do not expect to be subject to excise tax during calendar year ending December 31, 2023.
Income taxes relating to prior periods in which TYG
and NTG were subject to tax as C Corporations are being calculated by applying the federal rate plus a blended state income tax rate of
approximately 23%.
As part of the conversion transaction, TYG and NTG
may be subject to corporate level-tax on the net unrecognized built-in gains inherent on the conversion date recognized during the subsequent
5-year period which ends November 30, 2027 (“the recognition period”). The conversion transaction requires TYG and NTG to
track built-in gains throughout the recognition period and potentially pay a corporate-level tax on any built-in gains recognized. During
the recognition period, tax is imposed on the lesser of the net built-in gain recognized, the taxable income as if the Fund were a corporation
or the net unrealized built-in gain at the conversion date. If the unrecognized built-in gains are recognized in the recognition period,
the Funds calculate tax based on the lesser of these three calculations and utilize pre-conversion capital loss carryforwards, it is possible
that the sale of the conversion property will not result in a current tax liability. Therefore, each year during the recognition period,
TYG and NTG will determine if any of these built-in gains have been recognized, such gain is not offset by the capital loss carryforwards
and calculate tax accordingly. If a tax liability is generated, TYG and NTG will record the current tax liability and current tax expense
in the period in which it is incurred. After the recognition period has ended, any built-in gains recognized will no longer be subject
to corporate-level tax.
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. The difference between
the financial reporting basis and the tax basis of the investment in the MLP investments (i.e., the outside basis difference) may create
a taxable temporary difference or a deductible temporary difference. In measuring and determining the character of the tax consequences
of the outside basis differences in its MLP investments, TYG and NTG consider the expected types of taxable or deductible amounts in future
years and have concluded that the nature of the outside basis differences are capital in character because TYG nor NTG have the ability
to control the MLPs’ investment, distribution, or allocation decisions and, therefore, expect to recover the outside basis differences
upon disposal of the interests in the MLPs, which are considered capital assets in accordance with the tax law. The conversion transaction
does not impose or trigger a sale of securities held by TYG or NTG as of the conversion date. TYG and NTG do not estimate or forecast
future events, including the potential recharacterization of capital gains as ordinary income associated with selling MLP investments
when evaluating their deferred income taxes. The sale of a MLP unit typically results in the recognition of a capital gain or loss. In
accordance with the tax law, a portion of any gain or loss recognized by TYG and NTG may be recharacterized as ordinary income (“recapture”)
to the extent attributable to assets of the MLP that give rise to depreciation recapture in the recognition period. Any such gain may
exceed the net taxable gain realized on the sale and will be recognized regardless of whether there is a net taxable gain or loss on the
sale of such unit. TYG and NTG will record any current and deferred taxes as appropriate.
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
Components of TYG’s and NTG’s deferred
tax assets and liabilities as of November 30, 2023 are as follows:
| |
TYG | | |
NTG | |
Deferred tax assets: | |
| | | |
| | |
Capital loss carryforwards. | |
$ | 17,764,327 | | |
$ | 6,899,349 | |
| |
| 17,764,327 | | |
| 6,899,349 | |
Deferred tax liabilities: | |
| | | |
| | |
Net unrealized gain on investment securities | |
| 17,764,327 | | |
| 6,899,349 | |
| |
| 17,764,327 | | |
| 6,899,349 | |
Total net deferred tax liability (asset) | |
$ | — | | |
$ | — | |
The amount and character of income and capital gain
distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. These differences are primarily due to return of capital distributions, book/tax differences from underlying
investments and the timing of recognition of gains or losses on investments. Where such differences are permanent in nature, GAAP requires
that they be reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any
such reclassifications will have no effect on net assets, results of operations or net asset values per share of the Funds. These differences
are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain
for federal income tax purposes. Permanent book and tax basis differences resulted in the reclassifications of $(20,213,504) and $1,775,631
from accumulated losses and $20,213,504 and $(1,775,631) to additional paid-in capital for TYG and NTG respectively.
The tax character of distributions paid to stockholders
for the years ending November 30, 2023 and November 30, 2022 was as follows:
Year Ended November 30, 2023 | |
TYG | | |
NTG | |
| |
Common | | |
Preferred | | |
Common | | |
Preferred | |
Ordinary income | |
$ | 18,410,881 | | |
$ | 1,224,551 | | |
$ | 8,701,938 | | |
$ | 545,914 | |
Return of capital | |
| 13,368,334 | | |
| — | | |
| 7,603,071 | | |
| — | |
Total distributions | |
$ | 31,779,215 | | |
$ | 1,224,551 | | |
$ | 16,305,009 | | |
$ | 545,914 | |
| |
| | | |
| | | |
| | | |
| | |
Year Ended November 30, 2022 | |
TYG | | |
NTG | |
| |
Common
(1) | | |
| Preferred (1) |
| | |
Common (1) |
| | |
Preferred
(1) |
|
Ordinary income | |
$ | — | | |
$ | 209,571 | | |
$ | — | | |
$ | 156,458 | |
Return of capital | |
| 33,451,804 | | |
| 1,058,517 | | |
| 17,163,158 | | |
| 441,375 | |
Total distributions | |
$ | 33,451,804 | | |
$ | 1,268,088 | | |
$ | 17,163,158 | | |
$ | 597,833 | |
(1) |
For federal income tax purposes, the amount and character of distribution are reported on a calendar year basis and will differ from amount presented above. Shareholders should use federal Form 1099 in computing their income tax liabilities and filing their tax returns. |
As of November 30, 2023, the components of accumulated
earnings (deficit) on a tax basis were as follows:
| |
TYG | | |
NTG | |
Unrealized appreciation (depreciation) | |
$ | 39,123,613 | | |
$ | 24,096,912 | |
Capital loss carryforwards | |
| (257,000,023 | ) | |
| (460,471,361 | ) |
Undistributed ordinary income | |
| — | | |
| — | |
Other temporary differences | |
| (580,908 | ) | |
| (161,479 | ) |
Accumulated earnings (deficit) | |
$ | (218,457,318 | ) | |
$ | (436,535,928 | ) |
As of November 30, 2023, for federal income tax purposes,
TYG and NTG had capital loss carryforwards of approximately $257,000,000 and $461,000,000 respectively, which may be carried forward for
5 years. If not utilized, these capital losses will expire in the year ending November 30, 2025. Because of TYG and NTG’s intent
to be subject to tax as a RIC, any temporary differences such as capital loss carryforwards from periods in which each fund was a C-Corporation
must be further evaluated to determine what the expected future tax rate would be upon reversal. As such, TYG and NTG expect capital loss
carryforwards of $84,592,032 and $32,854,042 respectively, to reverse at 21%, the tax rate applicable to built-in gains that were generated
when the funds were C-Corporations. The remaining capital loss carryforwards are expected to reverse at 0%, the tax rate applicable to
RICs.
Notes
to Financial Statements (continued)
As of November 30, 2023, TYG and NTG utilized approximately
$37,383,000 and $20,171,000 of capital loss carryforwards in the current year.
In order to meet certain excise tax distribution requirements,
TYG and NTG, are required to measure and distribute annually net capital gains realized during a twelve month period ending October 31
and net investment income earned during a twelve month period ending December 31. In connection with this, TYG and NTG are permitted for
tax purposes to defer into their next fiscal year, qualified late year losses. Qualified late year ordinary losses are any net ordinary
losses incurred between January 1 and the end of their fiscal year, November 30, 2023. For the taxable year ended November 30, 2023, TYG
and NTG do not plan to defer any losses.
As of November 30, 2023, the aggregate cost of investments,
aggregate gross unrealized appreciation and aggregate gross unrealized depreciation on a federal income tax basis were as follows:
| |
TYG | | |
NTG | |
Tax cost of investments | |
$ | 451,893,694 | | |
$ | 246,402,766 | |
Gross unrealized appreciation of investments | |
$ | 105,903,795 | | |
$ | 43,450,749 | |
Gross unrealized depreciation of investments | |
| (66,440,541 | ) | |
| (17,918,075 | ) |
Net unrealized appreciation (depreciation) of investments | |
$ | 39,463,254 | | |
$ | 25,532,674 | |
TTP, NDP, TPZ and TEAF:
It is the intention of TTP, NDP, TPZ and TEAF to qualify
as RICs under Subchapter M of the IRC and distribute all of their taxable income. Accordingly, no provision for federal income taxes is
required in the financial statements. However, TEAF’s taxable subsidiary created to make and hold certain investments is generally
subject to federal and state income taxes on its income.
As of November 30, 2023, TEAF consolidated the balance
of a deferred tax benefit of $51,306 related to the investment activities of its taxable subsidiary. Total income taxes are computed by
applying the federal statutory rate plus a blended state income tax rate totaling 25.62%.
At November 30, 2023, a valuation allowance on deferred
tax assets was necessary because TEAF believes it is not more likely than not that its able to realize its deferred tax assets through
future taxable income. TEAF has recorded a valuation allowance of $1,262,355. Any adjustments to TEAF’s estimates of future taxable
income will be made in the period such determination is made.
Total income tax expense for TEAF’s taxable subsidiary
differs from the amount computed by applying the federal statutory income tax rate of 21% to net income for the year ended November 30,
2023, as follows:
Application of Statutory Income tax rate | |
$ | (1,069,864 | ) |
State Income taxes, net of federal tax effect | |
| (235,240 | ) |
Permanent differences | |
| 9,194 | |
Other | |
| (17,751 | ) |
Change in valuation allowance | |
| 1,262,355 | |
Total income tax benefit | |
$ | (51,306 | ) |
The amount and character of income and capital gain
distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. The sale of a MLP unit results in the recognition of a capital gain or loss with a portion of any gain
or loss recognized by the Funds subject to being treated as ordinary income to the extent attributable to assets of the MLP that give
rise to depreciation recapture. Any such gain may exceed the net taxable gain realized on the sale and will be recognized regardless of
whether there is a net taxable gain or loss on the sale of such unit. As such, net, ordinary gains recognized upon the sale of MLP units
may change the character of distributions to shareholders. These differences are primarily due to return of capital distributions and
book/tax differences from underlying investments. Where such differences are permanent in nature, GAAP requires that they be reclassified
in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will
have no effect on net assets, result of operations or net asset values per share of the Funds. These differences are caused primarily
by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax
purposes.
| |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Distributable earnings (loss) | |
$ | (259,049 | ) | |
$ | (40,178 | ) | |
$ | (272,010 | ) | |
$ | (1,106,715 | ) |
Additional paid-in capital | |
$ | 259,049 | | |
$ | 40,178 | | |
$ | 272,010 | | |
$ | 1,106,715 | ) |
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
The tax character of distributions paid to stockholders
for the years ending November 30, 2023 and November 30, 2022 was as follows:
Year Ended November 30, 2023 | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
| |
Common | | |
Preferred | | |
Common | | |
Common | | |
Common | |
Ordinary income | |
$ | 1,109,052 | | |
$ | 290,100 | | |
$ | 1,293,398 | | |
$ | 3,812,109 | | |
$ | 4,770,361 | |
Return of capital | |
| 3,823,183 | | |
| — | | |
| 3,070,680 | | |
| 3,967,561 | | |
| 9,800,056 | |
Total distributions | |
$ | 4,932,235 | | |
$ | 290,100 | | |
$ | 4,364,078 | | |
$ | 7,779,670 | | |
$ | 14,570,417 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Year Ended November 30, 2022 | |
TTP | | |
| NDP | | |
| TPZ | | |
| TEAF | |
| |
Common | | |
| Preferred | | |
| Common | | |
| Common | | |
| Common | |
Ordinary income | |
$ | 1,083,713 | | |
$ | 400,770 | | |
$ | 1,496,794 | | |
$ | 1,907,796 | | |
$ | 6,211,270 | |
Return of capital | |
| 4,108,112 | | |
| — | | |
| 2,291,192 | | |
| 5,693,483 | | |
| 7,954,413 | |
Total distributions | |
$ | 5,191,825 | | |
$ | 400,770 | | |
$ | 3,787,986 | | |
$ | 7,601,279 | | |
$ | 14,165,683 | |
As of November 30, 2023, the components of accumulated
earnings (deficit) on a tax basis were as follows:
| |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Unrealized appreciation (depreciation) | |
$ | (42,908 | ) | |
$ | 19,617,973 | | |
$ | 6,402,962 | | |
$ | (6,607,080 | ) |
Capital loss carryforwards | |
| (95,739,349 | ) | |
| (169,977,297 | ) | |
| (9,898,554 | ) | |
| (26,808,574 | ) |
Undistributed ordinary income | |
| — | | |
| — | | |
| — | | |
| — | |
Other temporary differences | |
| (60,830 | ) | |
| — | | |
| (1,599 | ) | |
| (327,224 | )(1) |
Accumulated earnings (deficit) | |
$ | (95,843,087 | ) | |
$ | (150,359,324 | ) | |
$ | (3,497,191 | ) | |
$ | (33,742,878 | ) |
(1) |
Primarily related to losses deferred under straddle regulations per IRC 1092. |
As of November 30, 2023, TTP, NDP, TPZ and TEAF had
short-term capital loss carryforwards of $16,580,238, $69,928,235, $202,707, and $22,613,457 respectively, and TTP, NDP, TPZ and TEAF
had long-term capital loss carryforwards of $79,159,111, $100,049,062, $9,695,844, and $4,195,117 respectively, which may be carried forward
for an unlimited period under the Regulated Investment Company Modernization Act of 2010. To the extent future net capital gains are realized,
those gains will be offset by any unused capital loss carryforwards. Capital loss carryforwards will retain their character as either
short-term or long-term capital losses. Thus, such losses must be used first to offset gains of the same character; for example, long-term
loss carryforwards will first offset long-term gains, before they can be used to offset short-term gains.
As of November 30, 2023 TTP, NDP, TPZ and TEAF utilized
(generated) approximately $3,004,000, $3,985,000, $4,422,000 and ($3,443,000) of capital loss carryforwards in the current year.
In order to meet certain excise tax distribution requirements,
TTP, NDP, TPZ and TEAF are required to measure and distribute annually net capital gains realized during a twelve-month period ending
October 31 and net investment income earned during a twelve-month period ending December 31. In connection with this, TTP, NDP, TPZ and
TEAF are permitted for tax purposes to defer into their next fiscal year, qualified late year losses. Qualified late year ordinary losses
are any net ordinary losses incurred between January 1 and the end of their fiscal year, November 30, 2023. For the taxable year ended
November 30, 2023, TTP, NDP, TPZ and TEAF do not plan to defer any losses.
As of November 30, 2023, the aggregate cost of investments,
aggregate gross unrealized appreciation and aggregate gross unrealized depreciation on a federal income tax basis were as follows:
| |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Tax cost of investments | |
$ | 67,109,278 | | |
$ | 45,810,027 | | |
$ | 99,801,977 | | |
$ | 226,566,085 | |
Gross unrealized appreciation of investments | |
$ | 23,109,853 | | |
$ | 22,306,974 | | |
$ | 25,166,032 | | |
$ | 17,926,290 | |
Gross unrealized depreciation of investments | |
| (4,569,902 | ) | |
| (190,605 | ) | |
| (5,412,156 | ) | |
| (21,282,812 | ) |
Net unrealized appreciation (depreciation) of investments | |
$ | 18,539,951 | | |
$ | 22,116,369 | | |
$ | 19,753,876 | | |
$ | (3,356,522 | ) |
Notes
to Financial Statements (continued)
6. Restricted Securities
Certain of the Funds’ investments are restricted
and are valued as determined in accordance with fair value procedures, as more fully described in Note 2. The following table shows the
principal amount or shares, acquisition date(s), acquisition cost, fair value and the percent of net assets which the securities comprise
at November 30, 2023.
TYG:
| |
| |
| |
| |
| | |
| | |
Fair Value |
| |
| |
| |
| |
| | |
| | |
as Percent |
Investment Security | |
Investment Type | |
Shares | |
Acquisition Date(s) | |
Acquisition Cost | | |
Fair Value | | |
of Net Assets |
TK NYS Solar Holdco, LLC | |
Private Investment | |
N/A | |
08/18/17-08/19/19 | |
$ | 50,141,470 | | |
$ | 14,550,615 | | |
3.8% |
| |
| |
| |
| |
$ | 50,141,470 | | |
$ | 14,550,615 | | |
3.8% |
TPZ:
| |
| |
| |
| |
| | |
| | |
Fair Value |
| |
| |
Principal | |
| |
| | |
| | |
as Percent |
Investment Security | |
Investment Type | |
Amount | |
Acquisition Date(s) | |
Acquisition Cost | | |
Fair Value | | |
of Net Assets |
Antero Midstream Partners LP, 5.750%, 03/01/2027* | |
Corporate Bond | |
$ |
3,800,000 | |
04/03/19-09/07/21 | |
$ | 3,890,000 | | |
$ | 3,715,144 | | |
3.9% |
Blue Racer Midstream, LLC, 6.625%, 07/15/2026* | |
Corporate Bond | |
$ |
5,900,000 | |
06/14/18-02/01/19 | |
| 5,936,250 | | |
| 5,808,848 | | |
6.1 |
DT Midstream, Inc., 4.375%, 06/15/2031* | |
Corporate Bond | |
$ |
2,000,000 | |
09/03/21-09/07/21 | |
| 2,085,000 | | |
| 1,756,175 | | |
1.8 |
Hess Corporation, 5.625%, 02/15/2026* | |
Corporate Bond | |
$ |
4,160,000 | |
07/17/18-08/02/18 | |
| 4,196,600 | | |
| 4,108,000 | | |
4.3 |
New Fortress Energy, Inc., 6.500%, 09/30/2026* | |
Corporate Bond | |
$ |
5,000,000 | |
03/26/21-10/07/21 | |
| 4,999,844 | | |
| 4,751,877 | | |
5.0 |
NGPL Pipe Co, 3.250%, 07/15/2031* | |
Corporate Bond | |
$ |
3,500,000 | |
11/09/21-07/10/23 | |
| 3,182,015 | | |
| 2,889,469 | | |
3.0 |
Rockies Express Pipeline LLC, 4.950%, 07/15/2029* | |
Corporate Bond | |
$ |
3,000,000 | |
04/04/19 | |
| 3,002,670 | | |
| 2,767,489 | | |
2.9 |
Tallgrass Energy LP, 5.500%, 01/15/2028* | |
Corporate Bond | |
$ |
3,250,000 | |
09/24/18-02/04/19 | |
| 3,261,250 | | |
| 2,998,275 | | |
3.1 |
| |
| |
| |
| |
$ | 30,553,629 | | |
$ | 28,795,277 | | |
30.1% |
TEAF:
| |
| |
| |
| |
| | |
| | |
Fair Value |
| |
| |
Principal | |
| |
| | |
| | |
as Percent |
Investment Security | |
Investment Type | |
Amount/Shares | |
Acquisition Date(s) | |
Acquisition Cost | | |
Fair Value | | |
of Net Assets |
315/333 West Dawson Associates, 11.000%, 01/31/26* | |
Corporate Bond | |
$ |
3,770,000 | |
03/30/21 | |
$ | 3,590,476 | | |
$ | 3,497,541 | | |
1.7% |
Ativo Albuquerque LLC, 12.000%, 01/01/2028* | |
Corporate Bond | |
$ |
2,032,000 | |
12/28/22 | |
| 2,032,000 | | |
| 2,054,962 | | |
1.0 |
Contour Propco, 11.000%, 10/01/25 | |
Corporate Bond | |
$ |
5,715,000 | |
09/30/21 | |
| 5,715,000 | | |
| 3,976,106 | | |
2.0 |
Dove Mountain Residences, LLC 11.000%, 02/01/2026* | |
Corporate Bond | |
$ |
1,050,000 | |
12/02/21 | |
| 1,050,000 | | |
| 975,064 | | |
0.5 |
Dove Mountain Residences, LLC 16.000%, 02/01/2026* | |
Corporate Bond | |
$ |
1,033,748 | |
12/02/21-08/01/23 | |
| 1,033,748 | | |
| 950,676 | | |
0.5 |
Drumlin Reserve Property LLC, 10.000%, 10/02/2025* | |
Corporate Bond | |
$ |
1,705,311 | |
09/30/20 | |
| 1,705,311 | | |
| 1,660,244 | | |
0.8 |
JW Living Smithville Urban Ren Sub Global 144A 27
11.750%, 06/01/2027 | |
Corporate Bond | |
$ |
3,890,000 | |
05/24/22 | |
| 3,890,000 | | |
| 3,808,002 | | |
1.9 |
Realco Perry Hall MD LLC/OPCO, 10.000%, 10/01/2024* | |
Corporate Bond | |
$ |
2,198,000 | |
09/30/19 | |
| 2,198,000 | | |
| 2,167,850 | | |
1.1 |
Enterprise Products Partners LP, 7.250%, 09/30/2025 | |
Preferred Stock | |
5,000 | |
09/30/20 | |
| 6,986,282 | | |
| 4,769,400 | | |
2.4 |
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
TEAF: (continued)
| |
| |
| |
| |
| | |
| | |
Fair Value |
| |
| |
Principal | |
| |
| | |
| | |
as Percent |
Investment Security | |
Investment Type | |
Amount/Shares | |
Acquisition Date(s) | |
Acquisition Cost | | |
Fair Value | | |
of Net Assets |
Mexico Pacific Limited LLC (MPL) Series A | |
Private Investment | |
| 135,180 | |
10/23/19-05/10/23 | |
$ | 2,028,200 | | |
$ | 2,966,390 | | |
1.5 |
One Energy | |
Private Investment | |
| 20,685 | |
04/12/23-11/30/23 | |
| 9,050,000 | | |
| 9,934,799 | | |
5.0 |
Renewable Holdco, LLC | |
Private Investment | |
| N/A | |
07/25/19-3/23/23 | |
| 6,439,248 | | |
| 6,907,194 | | |
3.4 |
Renewable Holdco I, LLC | |
Private Investment | |
| N/A | |
09/09/19 | |
| 22,010,876 | | |
| 17,995,373 | | |
9.0 |
Renewable Holdco II, LLC | |
Private Investment | |
| N/A | |
11/15/16-12/22/21 | |
| 12,313,411 | | |
| 12,599,702 | | |
6.3 |
Saturn Solar Bermuda 1 Ltd., 10.000%, 12/31/2023 | |
Private Note | |
$ | 3,510,000 | |
05/24/19-07/03/19 | |
| 3,778,904 | | |
| 3,649,698 | | |
1.8 |
EF WWW Holdings, LLC, 10.500%, 09/30/2026 | |
Private Note | |
$ | 9,600,000 | |
12/06/21-04/06/23 | |
| 9,600,000 | | |
| 9,792,000 | | |
4.9 |
| |
| |
| | |
| |
$ | 93,421,456 | | |
$ | 87,705,001 | | |
43.8% |
* | Security
is eligible for resale under Rule 144A under the 1933 Act. |
7. Affiliated Company Transactions
A summary of the transactions in affiliated companies
during the year ended November 30, 2023 is as follows:
TYG:
| |
11/30/22 | | |
| | |
| | |
| | |
| | |
11/30/23 | | |
| | |
Net Change |
|
| |
Share | | |
Gross | | |
Gross | | |
Realized | | |
Distributions | | |
Share | | |
11/30/23 | | |
in Unrealized |
|
Investment Security | |
Balance | | |
Additions | | |
Reductions | | |
Gain/(Loss) | | |
Received | | |
Balance | | |
Value | | |
Appreciation |
|
TK NYS Solar Holdco, LLC | |
| N/A | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
| N/A | | |
$ | 14,550,615 | | |
$ |
(474,126) |
|
TEAF:
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Net Change in | |
| |
11/30/22 | | |
| | |
| | |
| | |
| | |
11/30/23 | | |
| | |
Unrealized | |
| |
Share | | |
Gross | | |
Gross | | |
Realized | | |
Distributions | | |
Share | | |
11/30/23 | | |
Appreciation | |
Investment Security | |
Balance | | |
Additions | | |
Reductions | | |
Gain/(Loss) | | |
Received | | |
Balance | | |
Value | | |
(Depreciation) | |
Renewable Holdco, LLC | |
| N/A | | |
$ | 399,068 | | |
$ | — | | |
$ | — | | |
$ | — | | |
| N/A | | |
$ | 6,907,194 | | |
$ | (20,185 | ) |
Renewable Holdco I, LLC | |
| N/A | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 750,000 | | |
| N/A | | |
$ | 17,995,373 | | |
$ | (5,032,008 | ) |
Renewable Holdco II, LLC | |
| N/A | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 406,570 | | |
| N/A | | |
$ | 12,599,702 | | |
$ | 217,754 | |
Total | |
| N/A | | |
$ | 399,068 | | |
$ | — | | |
$ | — | | |
$ | 1,156,570 | | |
| N/A | | |
$ | 37,502,269 | | |
$ | (4,834,439 | ) |
8. Investment Transactions
For the year ended November 30, 2023, the amount of
security transactions (other than U.S. government securities and short-term investments), is as follows:
| |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Purchases | |
$ | 227,177,802 | | |
$ | 158,815,124 | | |
$ | 6,654,932 | | |
$ | 9,839,835 | | |
$ | 11,714,952 | | |
$ | 55,348,522 | |
Sales | |
$ | 312,392,560 | | |
$ | 192,965,023 | | |
$ | 15,927,820 | | |
$ | 10,128,838 | | |
$ | 20,493,974 | | |
$ | 66,831,270 | |
9. Senior Notes
TYG, NTG and TTP each have issued private senior notes
(collectively, the “Notes”), which are unsecured obligations and, upon liquidation, dissolution or winding up of a Fund, will
rank: (1) senior to all of the Fund’s outstanding preferred shares, if any; (2) senior to all of the Fund’s outstanding common
shares; (3) on parity with any unsecured creditors of the Fund and any unsecured senior securities representing indebtedness of the Fund
and (4) junior to any secured creditors of the Fund. Holders of the Notes are entitled to receive periodic cash interest payments until
maturity. The Notes are not listed on any exchange or automated quotation system.
The Notes are redeemable in certain circumstances at
the option of a Fund, subject to payment of any applicable make-whole amounts or early redemption premiums. The Notes for a Fund are also
subject to a mandatory redemption if the Fund fails to meet asset coverage ratios required under the 1940 Act or the rating agency guidelines
if such failure is not waived or cured. At November 30, 2023, each of TYG, NTG and TTP were in compliance with asset coverage covenants
and basic maintenance covenants for its senior notes.
Notes
to Financial Statements (continued)
Details of each Fund’s outstanding Notes, including
estimated fair value, as of November 30, 2023 are included below. The estimated fair value of each series of fixed-rate Notes was calculated,
for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity
date, plus either 1) the spread between the interest rate on recently issued debt and the U.S. Treasury rate with a similar maturity date
or 2) if there has not been a recent debt issuance, the spread between the AAA corporate finance debt rate and the U.S. Treasury rate
with an equivalent maturity date plus the spread between the fixed rates of the Notes and the AAA corporate finance debt rate. The estimated
fair value of floating rate Notes approximates the carrying amount because the interest rate fluctuates with changes in interest rates
available in the current market. The estimated fair values in the following tables are Level 2 valuations within the fair value hierarchy.
TYG:
| |
| |
| |
| |
| | |
Estimated | |
Series | |
Maturity Date | |
Interest Rate | |
Payment Frequency | |
Notional Amount | | |
Fair Value | |
Series JJ | |
December 18, 2023 | |
3.34% | |
Semi-Annual | |
$ | 6,453,333 | | |
$ | 6,540,438 | |
Series T | |
January 22, 2024 | |
4.16% | |
Semi-Annual | |
| 8,066,667 | | |
| 8,158,363 | |
Series L | |
December 19, 2024 | |
3.99% | |
Semi-Annual | |
| 6,453,333 | | |
| 6,432,826 | |
Series AA | |
June 14, 2025 | |
3.48% | |
Semi-Annual | |
| 3,226,667 | | |
| 3,166,388 | |
Series NN | |
June 14, 2025 | |
3.20% | |
Semi-Annual | |
| 9,680,000 | | |
| 9,449,306 | |
Series KK | |
December 18, 2025 | |
3.53% | |
Semi-Annual | |
| 3,226,667 | | |
| 3,146,311 | |
Series OO | |
April 9, 2026 | |
3.27% | |
Semi-Annual | |
| 9,680,000 | | |
| 9,231,827 | |
Series PP | |
September 25, 2027 | |
3.33% | |
Semi-Annual | |
| 8,066,666 | | |
| 7,551,128 | |
Series QQ | |
December 17, 2028 | |
2.50% | |
Semi-Annual | |
| 10,000,000 | | |
| 9,529,429 | |
| |
| |
| |
| |
$ | 64,853,333 | | |
$ | 63,206,016 | |
On December 19, 2022, TYG’s Series II Notes,
with a notional amount of $3,226,667 and a fixed interest rate of 3.22% were paid in full at maturity.
On December 19, 2022, TYG’s Series K Notes, with
a notional amount of $3,226,667 and a fixed interest rate of 3.87% were paid in full at maturity.
On January 23, 2023, TYG’s Series S Notes, with
a notional amount of $3,226,667 and a fixed interest rate of 3.99% were paid in full at maturity.
On September 27, 2023, TYG’s Series P Notes,
with a notional amount of $3,872,000 and a fixed interest rate of 4.39% were paid in full at maturity.
On November 20, 2023, TYG’s Series FF Notes,
with a notional amount of $3,226,666 and a fixed interest rate of 4.16% were paid in full at maturity.
NTG:
| |
| |
| |
| |
| | |
Estimated | |
Series | |
Maturity Date | |
Interest Rate | |
Payment Frequency | |
Notional Amount | | |
Fair Value | |
Series Q | |
October 16, 2025 | |
3.97% | |
Semi-Annual | |
$ | 2,234,291 | | |
$ | 2,175,283 | |
Series R | |
October 16, 2026 | |
4.02% | |
Semi-Annual | |
| 1,936,386 | | |
| 1,871,524 | |
Series S | |
December 17, 2028 | |
2.50% | |
Semi-Annual | |
| 25,000,000 | | |
| 22,247,982 | |
| |
| |
| |
| |
$ | 29,170,677 | | |
$ | 26,294,789 | |
On October 16, 2023, NTG’s Series P Notes,
with a notional amount of $2,979,055 and a fixed interest rate of 3.79% were paid in full at maturity.
TTP:
| |
| |
| |
| |
| | |
Estimated | |
Series | |
Maturity Date | |
Interest Rate | |
Payment Frequency | |
Notional Amount | | |
Fair Value | |
Series H | |
December 13, 2024 | |
3.97% | |
Semi-Annual | |
$ | 3,942,857 | | |
$ | 3,932,839 | |
10. Mandatory Redeemable Preferred Stock
TYG, NTG and TTP each have issued and outstanding MRP
Stock at November 30, 2023. The MRP Stock has rights determined by the Board of Directors. Except as otherwise indicated in the Funds’
Charter or Bylaws, or as otherwise required by law, the holders of MRP Stock have voting rights equal to the holders of common stock (one
vote per MRP share) and will vote together with the holders of shares of common stock as a single class except on matters affecting only
the holders of preferred stock or the holders of common stock. The 1940 Act requires that the holders of any preferred stock (including
MRP Stock), voting separately as a single class, have the right to elect at least two directors at all times.
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
Under the 1940 Act, a Fund may not declare dividends
or make other distributions on shares of common stock or purchases of such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding MRP Stock would be less than 200%. The MRP Stock is also subject to a mandatory
redemption if a Fund fails to meet an asset coverage ratio of at least 225% as determined in accordance with the 1940 Act or a rating
agency basic maintenance amount if such failure is not waived or cured. At November 30, 2023, each of TYG, NTG and TTP were in compliance
with asset coverage covenants and basic maintenance covenants for its MRP Stock.
Details of each Fund’s outstanding MRP Stock,
including estimated fair value, as of November 30, 2023 is included below. The estimated fair value of each series of TYG, NTG and TTP
MRP Stock was calculated for disclosure purposes by discounting future cash flows at a rate equal to the current U.S. Treasury rate with
an equivalent maturity date, plus either 1) the spread between the interest rate on recently issued preferred stock and the U.S. Treasury
rate with a similar maturity date or 2) if there has not been a recent preferred stock issuance, the spread between the AA corporate finance
debt rate and the U.S. Treasury rate with an equivalent maturity date plus the spread between the fixed rates of the MRP Stock and the
AA corporate finance debt rate. The estimated fair values of each series of the TYG, NTG and TTP MRP Stock are Level 2 valuations within
the fair value hierarchy.
TYG:
TYG has 65,000,000 shares of preferred stock authorized
and 3,566,061 shares of MRP Stock outstanding at November 30, 2023. TYG’s MRP Stock has a liquidation value of $10.00 per share
plus any accumulated but unpaid distributions, whether or not declared. Holders of the MRP E Stock and MRP F Stock are entitled to receive
cash interest payments semi-annually at a fixed rate until maturity. The TYG MRP Stock is not listed on any exchange or automated quotation
system.
| |
Mandatory | |
| |
| | |
Aggregate Liquidation | | |
Estimated | |
Series | |
Redemption Date | |
Fixed Rate | |
Shares Outstanding | | |
Preference | | |
Fair Value | |
Series E | |
December 17, 2024 | |
4.34% | |
| 1,566,061 | | |
$ | 15,660,610 | | |
$ | 15,628,946 | |
Series F | |
December 17, 2026 | |
2.67% | |
| 2,000,000 | | |
| 20,000,000 | | |
| 18,269,563 | |
| |
| |
| |
| 3,566,061 | | |
$ | 35,660,610 | | |
$ | 33,898,509 | |
TYG’s MRP Stock is redeemable in certain circumstances
at the option of TYG, subject to payment of any applicable make-whole amounts.
NTG:
NTG has 10,000,000 shares of preferred stock authorized
and 550,151 shares of MRP Stock outstanding at November 30, 2023. NTG’s MRP Stock has a liquidation value of $25.00 per share plus
any accumulated but unpaid distributions, whether or not declared. Holders of NTG MRP Stock are entitled to receive cash interest payments
each quarter at a fixed rate until maturity. The NTG MRP Stock is not listed on any exchange or automated quotation system.
| |
Mandatory | |
| |
| | |
Aggregate Liquidation | | |
Estimated | |
Series | |
Redemption Date | |
Fixed Rate | |
Shares Outstanding | | |
Preference | | |
Fair Value | |
Series E | |
December 13, 2024 | |
3.78% | |
| 153,939 | | |
$ | 3,848,475 | | |
$ | 3,761,355 | |
Series F | |
December 13, 2027 | |
4.07% | |
| 96,212 | | |
| 2,405,300 | | |
| 2,271,422 | |
Series H | |
December 17, 2027 | |
2.90% | |
| 300,000 | | |
| 7,500,000 | | |
| 6,763,234 | |
| |
| |
| |
| 550,151 | | |
$ | 13,753,775 | | |
$ | 12,796,011 | |
NTG’s MRP Stock is redeemable in certain circumstances
at the option of NTG, subject to payment of any applicable make-whole amounts.
On December 8, 2022, NTG’s Series D MRP Stock,
with a notional amount of $3,848,475 and a fixed interest rate of 4.19% were paid in full at maturity.
On October 16, 2023, NTG’s Series G MRP Stock,
with a notional amount of $2,116,675 and a fixed interest rate of 4.39% were paid in full at maturity.
TTP:
TTP has 10,000,000 shares of preferred stock authorized
and 244,000 shares of MRP Stock outstanding at November 30, 2023. TTP’s MRP Stock has a liquidation value of $25.00 per share plus
any accumulated but unpaid distributions, whether or not declared. Holders of TTP MRP Stock are entitled to receive cash interest payments
each quarter at a fixed rate until maturity. The TTP MRP Stock is not listed on any exchange or automated quotation system.
| |
Mandatory | |
| |
| | |
Aggregate Liquidation | | |
Estimated | |
Series | |
Redemption Date | |
Fixed Rate | |
Shares Outstanding | | |
Preference | | |
Fair Value | |
Series B | |
December 13, 2024 | |
4.57% | |
| 244,000 | | |
$ | 6,100,000 | | |
$ | 6,166,565 | |
TTP’s MRP Stock is redeemable in certain circumstances
at the option of TTP, subject to payment of any applicable make-whole amounts.
Notes
to Financial Statements (continued)
11. Credit Facilities
The following table shows key terms, average borrowing
activity and interest rates for the period during which the facility was utilized during the period from December 1, 2022 through November
30, 2023 as well as the principal balance and interest rate in effect at November 30, 2023 for each of the Funds’ credit facilities:
| |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Lending syndicate agent | |
| U.S. Bank, N.A. | | |
| Bank of America, N.A. | | |
| The Bank of Nova Scotia | | |
| The Bank of Nova Scotia | | |
| The Bank of Nova Scotia | | |
| The Bank of Nova Scotia | |
Type of facility | |
| Unsecured, revolving credit facility | | |
| Unsecured, revolving credit facility | | |
| Unsecured, revolving credit facility | | |
| Secured, revolving credit facility | | |
| Secured, revolving credit facility | | |
| Margin loan facility | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Borrowing capacity | |
$ | 45,000,000 | | |
$ | 35,000,000 | | |
$ | 15,000,000 | | |
$ | 12,000,000 | | |
$ | 30,000,000 | | |
$ | 45,000,000 | |
Maturity date | |
| June 12, 2025 | | |
| June 12, 2025 | | |
| December 27, 2023 | | |
| December 27, 2023 | | |
| December 27, 2023 | | |
| 179-day rolling evergreen | |
Interest rate | |
| 1-month Term SOFR plus 1.35% | | |
| 1-month Term SOFR plus 1.35% | | |
| Simple SOFR plus 0.10% plus 1.30% | | |
| Simple SOFR plus 0.10% plus 1.35% | | |
| Simple SOFR plus 0.10% plus 1.25% | | |
| 1-month Term SOFR plus 0.1148% | |
Non-usage fee | |
| 0.15%-0.25% | (1) | |
| 0.15%-0.25% | (2) | |
| 0.00%-0.30% | (3) | |
| 0.15%-0.25% | (4) | |
| 0.15%-0.25% | (5) | |
| 0.20% | (7) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For the year ended November 30, 2023: | | |
| | | |
| | | |
| | | |
| | |
Average principal balance | |
$ | 18,692,000 | | |
$ | 13,229,000 | | |
$ | 8,015,000 | | |
$ | 7,298,000 | | |
$ | 24,931,000 | | |
$ | 29,282,000 | |
Average interest rate | |
| 6.21 | % | |
| 6.21 | % | |
| 6.30 | % | |
| 6.25 | % | |
| 6.25 | % | |
| 5.86 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
As of November 30, 2023: | | |
| | | |
| | | |
| | | |
| | |
Principal balance outstanding | |
$ | 7,300,000 | | |
$ | 10,600,000 | | |
$ | 5,900,000 | | |
$ | 8,800,000 | | |
$ | 24,600,000 | (6) | |
$ | 24,000,000 | |
Interest rate | |
| 6.69 | % | |
| 6.69 | % | |
| 6.71 | % | |
| 6.66 | % | |
| 6.66 | % | |
| 6.26 | % |
(1) |
Non-use fees are tiered with a rate of 0.25% when the
outstanding balance is below $22,500,000 and 0.15% when the outstanding balance is at least $22,500,000, but below $31,500,000. The
outstanding balance will not be subject to the non-use fee when the amount outstanding is at least $31,500,000. |
(2) |
Non-use fees are tiered with a rate of 0.25% when the
outstanding balance is below $17,500,000 and 0.15% when the outstanding balance is at least $17,500,000, but below $24,500,000. The
outstanding balance will not be subject to the non-use fee when the amount outstanding is at least $24,500,000. |
(3) |
Non-use fee is 0.00% when the amount outstanding is at
least $13,500,000, and 0.15% when the amount outstanding is less than $13,500,000 and greater than or equal to $10,500,000, and 0.20%
when the amount outstanding is less than $10,500,000 and greater than or equal to $7,500,000, and 0.30% when the amount outstanding
is less than $7,500,000. |
(4) |
Non-use fees are 0.15% when amount outstanding is at
least $9,000,000, but 0.25% when the amount outstanding is below $9,000,000. (5) Non-use fee is 0.15% when the amount outstanding
is at least $22,500,000 and 0.25% when the amount outstanding is below $22,500,000. |
(6) |
TPZ’s credit facility allows for interest rates
to be fixed on all or a portion of the outstanding balance. Amounts reflect activity on the credit facility for the period from December
1, 2022 through November 30, 2023 and include $15,000,000 of the outstanding principal balance that has a fixed rate of 3.34% through
June 30, 2024. |
(7) |
Non-use fees are waived when amount outstanding is at
least $31,500,000. |
On
June 12, 2023, TYG executed an amendment to its credit facility. The Seconded Amended and Restated Credit Agreement extends the termination
date to June 12, 2025, decreased the facility borrowing capacity to $45,000,000, and changed the reference rate to the 1-month term SOFR
plus 135 basis points (1.35%).
On June 12, 2023, NTG
allowed its existing $80,000,000 credit agreement to terminate and executed a new credit agreement. The termination date of the newly
executed Credit agreement is June 12, 2025, decreased the facility borrowing capacity to $35,000,000, and the reference rate is the 1-month
term SOFR plus 135 basis points (1.35%).
Under the terms of the
credit and margin facilities, the Funds must maintain asset coverage required under the 1940 Act. If a Fund fails to maintain the required
coverage, it may be required to repay a portion of an outstanding balance until the coverage requirement has been met. At November 30,
2023, each Fund was in compliance with facility terms.
12. Derivative Financial
Instruments
The Funds have adopted
the disclosure provisions of FASB Accounting Standard Codification 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires
enhanced disclosures about the Funds’ use of and accounting for derivative instruments and the effect of derivative instruments
on the Funds’ results of operations and financial position. Tabular disclosure regarding derivative fair value and gain/loss by
contract type (e.g.,
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
interest rate contracts, foreign exchange contracts,
credit contracts, etc.) is required and derivatives accounted for as hedging instruments under ASC 815 must be disclosed separately from
those that do not qualify for hedge accounting. Even though the Funds may use derivatives in an attempt to achieve an economic hedge,
the Funds’ derivatives are not accounted for as hedging instruments under ASC 815 because investment companies account for their
derivatives at fair value and record any changes in fair value in current period earnings.
Forward Currency Contracts
TEAF may invest in derivative instruments for hedging
or risk management purposes, and for short-term purposes such as maintaining market exposure pending investment of the proceeds of an
offering or transitioning its portfolio between different asset classes. The Fund’s use of derivatives could enhance or decrease
the cash available to the Fund for payment of distributions or interest, as the case may be. Derivatives can be illiquid, may disproportionately
increase losses and have a potentially large negative impact on the Fund’s performance. Derivative transactions, including options
on securities and securities indices and other transactions in which the Fund may engage (such as forward currency transactions, futures
contracts and options thereon and total return swaps), may subject the Fund to increased risk of principal loss due to unexpected movements
in stock prices, changes in stock volatility levels, interest rates and foreign currency exchange rates and imperfect correlations between
the Fund’s securities holdings and indices upon which derivative transactions are based. The Fund also will be subject to credit
risk with respect to the counterparties to any OTC derivatives contracts the Fund enters into.
As of November 30, 2023, TEAF held no forward currency
contracts.
Interest Rate Swap Contracts
TYG may enter into interest rate swap contracts in
an attempt to protect it from increasing interest expense on its leverage resulting from increasing interest rates. A decline in interest
rates may result in a decline in the value of the swap contracts, which may result in a decline in the net assets of TYG. At the time
the interest rate swap contracts reach their scheduled termination, there is a risk that TYG will not be able to obtain a replacement
transaction, or that the terms of the replacement would not be as favorable as on the expiring transaction. In addition, if TYG is required
to terminate any swap contract early due to a decline in net assets below a threshold amount or failing to maintain a required 300% asset
coverage of the liquidation value of the outstanding debt, then TYG could be required to make a payment to the extent of any net unrealized
depreciation of the terminated swaps, in addition to redeeming all or some of its outstanding debt. TYG segregates a portion of its assets
as collateral for the amount of any net liability of its interest rate swap contracts.
TYG may be subject to credit risk on the interest rate
swap contracts if the counterparty should fail to perform under the terms of the interest rate swap contracts. The amount of credit risk
is limited to the net appreciation of the interest rate swap contracts, if any, as no collateral is pledged by the counterparty. In addition,
if the counterparty to the interest rate swap contracts defaults, the Fund would incur a loss in the amount of the receivable and would
not receive amounts due from the counterparty to offset the interest payments on the Fund’s leverage.
As of November 30, 2023, TYG
held no interest rate swap contracts.
Written Call Options
Transactions in written option contracts for TEAF for
the period from December 1, 2022 through November 30, 2023 are as follows:
| |
TEAF | |
| |
Number of | | |
| |
| |
Contracts | | |
Premium | |
Options outstanding at November 30, 2022 | |
| — | | |
$ | — | |
Options written | |
| 18,057 | | |
| 337,356 | |
Options closed* | |
| (3,700 | ) | |
| (23,075 | ) |
Options exercised | |
| (4,817 | ) | |
| (117,160 | ) |
Options expired | |
| (8,540 | ) | |
| (163,096 | ) |
Options outstanding at November 30, 2023 | |
| 1,000 | | |
$ | 34,025 | |
* | The aggregate cost of closing written option contracts for TEAF
was $135,193, resulting in net realized loss of $112,118. |
There were no written option contracts in TYG, NTG,
TTP and NDP during the period December 1, 2022 through November 30, 2023. As of November 30, 2023, TEAF held 1,000 written options contracts.
The following table presents the effect of derivatives
on the Statements of Operations for the year ended November 30, 2023:
| |
| |
| | |
Net Change | |
| |
| |
| | |
in Unrealized | |
| |
| |
Net Realized | | |
Appreciation | |
Derivatives not accounted for | |
Location of Gains (Losses) | |
Gain (Loss) on | | |
(Depreciation) | |
as hedging instruments under ASC 815 | |
on Derivatives | |
Derivatives | | |
of Derivatives | |
TEAF: Written equity call options | |
Options | |
$ | 50,978 | | |
$ | (12,781 | ) |
Notes
to Financial Statements (continued)
13. Basis For Consolidation
As of November 30, 2023, TYG has committed a total
of $55,256,470 of equity funding to Tortoise Holdco II, LLC, a wholly-owned investment of TYG. Tortoise Holdco II, LLC wholly owns TK
NYS Solar Holdco, LLC, which owns and operates renewable energy assets. TK NYS Solar Holdco, LLC acquired the commercial and industrial
solar portfolio between August 2017 and November 2019. Fair value of TK NYS Solar Holdco, LLC is net of tax benefits.
TYG’s consolidated schedule of investments includes
the portfolio holdings of the Fund and its subsidiary, Tortoise Holdco II, LLC. All inter-company transactions and balances have been
eliminated.
As of November 30, 2023, TEAF has committed $63,839,819
to TEAF Solar Holdco, LLC, a wholly-owned investment of TEAF. TEAF Solar Holdco, LLC wholly owns each of Renewable Holdco, LLC and Renewable
Holdco I, LLC, which owns and operates renewable energy assets. TEAF Solar Holdco, LLC owns a majority partnership interest in Renewable
Holdco II, LLC. Renewable Holdco, LLC and Renewable Holdco II, LLC’s acquisition of the commercial and industrial solar portfolio
is ongoing. Renewable Holdco I, LLC acquired the commercial and industrial solar portfolio in September 2019.
As of November 30, 2023, TEAF has provided $3,770,670
to TEAF Solar Holdco I, LLC, a wholly-owned investment of TEAF. TEAF Solar Holdco I, LLC has committed to $6,667,100 of debt funding to
Saturn Solar Bermuda 1, Ltd. through a private note. Under the terms of the note Tortoise Solar Holdco I, LLC receives cash payments monthly
at an annual rate of 10%. As of November 30, 2023, $3,510,000 of the private note had been funded.
As of November 30, 2023, TEAF has provided $9,600,000
to EF WWW Holdings, LLC., a wholly-owned investment of TEAF. EF WWW Holdings, LLC has committed to $15,000,000 of debt funding to World
Water Works, Inc. through a senior secured convertible note. All of the committed debt funding has been drawn today. Under the terms of
the note TEAF receives cash payments monthly at an annual rate of 10.50%.
TEAF’s consolidated schedule of investments includes
the portfolio holdings of the Fund and its subsidiaries, TEAF Solar Holdco, LLC and TEAF Solar Holdco I, LLC. All inter-company transactions
and balances have been eliminated.
14. Fund Shares
Tender Offer
During the fiscal year ended November 30, 2023, Tortoise
and the closed-end fund Board authorized conditional tender offers for TYG, NTG, TTP, NDP, and TPZ, pursuant to which the Funds would
offer to purchase up to 5% of the Fund’s outstanding shares of common stock for cash at a price equal to 98% of net asset value
(NAV), as determined on expiration date of the tender offer, if its shares traded at an average discount to NAV of more than 10% during
the designated measurement periods. The measurement period for 2023 ended on July 31, 2023 and it was determined that a tender offer would
be executed in each fund.
The tender offer amounts for the 2023 measurement period
are as shown below.
Fund |
Tender Offer Amount |
TYG |
Up to 5% or 566,575 of its outstanding common shares |
NTG |
Up to 5% or 268,042 of its outstanding common shares |
TTP |
Up to 5% or 105,819 of its outstanding common shares |
NDP |
Up to 5% or 87,684 of its outstanding common shares |
TPZ |
Up to 5% or 310,008 of its outstanding common shares |
On November 7, 2023, Tortoise announced the final results
of the cash tender offer, which commenced on October 2, 2023 and expired on November 1, 2023. Final results of the tender offer(s) are
as shown in the accompanying table.
| |
| | |
| | |
| | |
| | |
Outstanding Shares | |
| |
Shares Properly | | |
Shares | | |
Pro-Ration | | |
Purchase | | |
After Giving Effect | |
Fund | |
Tendered | | |
Purchased | | |
Factor* | | |
Price** | | |
to Tender Offer | |
TYG | |
| 5,300,271 | | |
| 566,575 | | |
| 0.1070650 | | |
$ | 33.04 | | |
| 10,764,933 | |
NTG | |
| 2,873,273 | | |
| 268,032 | (1) | |
| 0.0934999 | | |
$ | 39.55 | | |
| 5,092,810 | |
TTP | |
| 1,074,230 | | |
| 105,819 | | |
| 0.0985840 | | |
$ | 32.04 | | |
| 2,010,566 | |
NDP | |
| 1,012,489 | | |
| 87,684 | | |
| 0.0868390 | | |
$ | 34.85 | | |
| 1,666,014 | |
TPZ | |
| 3,297,052 | | |
| 310,008 | | |
| 0.0941553 | | |
$ | 15.11 | | |
| 5,890,167 | |
* |
The number of shares to be purchased divided by the number
of shares properly tendered. The factor is subject to rounding adjustment to avoid the purchase of fractional shares. |
** |
Equal to 98% of the relevant Fund’s net asset value
per share as of the close of regular trading on the New York Stock Exchange (NYSE) on November 1, 2023 (the date the Tender Offer
expired). |
(1) |
NTG purchased 268,032 shares, the maximum quantity of
shares to purchase after pro-ration without exceeding 5% of its outstanding common shares. |
2023 Annual Report | November
30, 2023
Notes
to Financial Statements (continued)
15. Subsequent Events
TYG:
On December 18, 2023, TYG’s Series JJ Notes,
with a notional amount of $6,453,333 and a fixed interest rate of 3.34% were paid in full at maturity.
On January 22, 2024, TYG’s Series T Notes, with
a notional amount of $8,066,667 and a fixed interest rate of 4.16% were paid in full at maturity.
TYG has performed an evaluation of subsequent events
through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.
NTG:
NTG has performed an evaluation of subsequent events
through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.
TTP:
On December 27, 2023, TTP executed an amendment to
its existing credit agreement to extend the termination date to December 23, 2024. The facility borrowing capacity remains $15,000,000,
and the reference rate continues to be the Simple SOFR plus 130 basis points (1.30%).
TTP has performed an evaluation of subsequent events
through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.
NDP:
On December 27, 2023, NDP allowed its existing $12,000,000
credit agreement to terminate and executed a new margin loan agreement. The term of the newly executed margin loan agreement is 179-day
rolling evergreen, the facility borrowing capacity to $12,000,000, and the reference rate is the 1-month term SOFR plus 100 basis points
(1.00%).
NDP has performed an evaluation of subsequent events
through the date the financial statements were issued and has determined that no items require recognition or disclosure.
TPZ:
On December 27, 2023, TPZ allowed its existing $30,000,000
credit agreement to terminate and executed a new margin loan agreement. The term of the newly executed margin loan agreement is 179-day
rolling evergreen, the facility borrowing capacity to $30,000,000, and the reference rate is the 1-month term SOFR plus 100 basis points
(1.00%).
On December 29, 2023, TPZ paid a distribution in the
amount of $0.105 per common share, for a total of $618,468. Of this total the dividend reinvestment amounted to $8,007.
TPZ has performed an evaluation of subsequent events
through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.
TEAF:
On December 29, 2023, TEAF paid a distribution in the
amount of $0.09 per common share, for a total of $1,214,201. Of this total the dividend reinvestment amounted to $24,317.
TEAF has performed an evaluation of subsequent events
through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.
Report of Independent Registered
Public Accounting Firm
To the Shareholders and the Board of Directors
of
Tortoise Energy Infrastructure Corp.
Tortoise Midstream Energy Fund, Inc.
Tortoise Pipeline & Energy Fund, Inc.
Tortoise Energy Independence Fund, Inc.
Tortoise Power and Energy Infrastructure Fund, Inc.
Ecofin Sustainable and Social Impact Term
Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statements
of assets and liabilities of Tortoise Energy Infrastructure Corp. and Ecofin Sustainable and Social Impact Term Fund, including the consolidated
schedules of investments, as of November 30, 2023, and the related consolidated statements of operations, cash flows and changes in net
assets, and the consolidated financial highlights for each of the periods indicated in the table below and the related notes (collectively
referred to as the “consolidated financial statements”). We have also audited the accompanying statements of assets and liabilities
of Tortoise Midstream Energy Fund, Inc, Tortoise Pipeline & Energy Fund, Inc., Tortoise Energy Independence Fund, Inc., and Tortoise
Power and Energy Infrastructure Fund, Inc. (collectively, together with Tortoise Energy Infrastructure Corp. and Ecofin Sustainable and
Social Impact Term Fund, referred to as the “Funds”), including the schedules of investments, as of November 30, 2023, and
the related statements of operations, cash flows, and changes in net assets, and the financial highlights for each of the periods indicated
in the table below and the related notes (collectively, together with the consolidated financial statements, referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position, or the
consolidated financial position, of each of the Funds at November 30, 2023, and the results, or the consolidated results, of their operations,
cash flows, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S.
generally accepted accounting principles.
| |
Statements of operations | |
Statements of changes | |
|
Funds | |
and cash flows | |
in net assets | |
Financial highlights |
Tortoise Energy Infrastructure Corp.
Tortoise Midstream Energy Fund, Inc.
Tortoise Pipeline & Energy Fund, Inc.
Tortoise Energy Independence Fund, Inc.
Tortoise Power and Energy Infrastructure Fund, Inc. | |
For the year ended
November 30, 2023 | |
For each of the two years in the period ended November 30, 2023 | |
For each of the five years in the period ended November 30, 2023 |
Ecofin Sustainable and Social Impact Term Fund | |
For the year ended
November 30, 2023 | |
For each of the two years in the period ended November 30, 2023 | |
For each of four years in the period ended November 30, 2023 and the period from March 29, 2019 (commencement of operations) to November 30, 2019 |
Basis for Opinion
These financial statements are the responsibility of
the Funds’ management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform,
an audit of the Funds’ internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of November 30, 2023, by correspondence with the custodians, brokers and others;
when replies were not received from others, we performed other auditing procedures. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Tortoise
investment companies since 2004.
Minneapolis, Minnesota
January 29, 2024
2023 Annual Report | November
30, 2023
Company
Officers and Directors (unaudited)
November 30, 2023
|
Position(s)
Held
With
Company, Term |
|
Number
of
Portfolios
in
Fund
Complex |
Other
Company Public |
|
of
Office and Length |
|
Overseen |
Directorships |
Name
and Age(1) |
of
Time Served(2) |
Principal
Occupation During Past Five Years |
by
Director(3) |
Held |
Independent Directors |
|
|
|
|
Conrad
S. Ciccotello
(Born 1960) |
Class
I Director of TYG since 2003 and of NTG since 2010; Class II Director of NDP since 2012 and of TPZ since 2007; Class III Director
of TTP since 2011; Class I Director of TEAF since 2019. |
Professor
and Director, Reiman School of Finance, University of Denver (faculty member since 2017); Senior Consultant to the finance practice
of Charles River Associates, which provides economic, financial, and management consulting services (since May 2020); Associate Professor
and Chairman of the Department of Risk Management and Insurance, Director of the Asset and Wealth Management Program, Robinson College
of Business, Georgia State University (faculty member from 1999-2017); Investment Consultant to the University System of Georgia
for its defined contribution retirement plan (2008-2017); Formerly Faculty Member, Pennsylvania State University (1997-1999); Published
a number of academic and professional journal articles on investment company performance and structure, with a focus on MLPs. |
7 |
CorEnergy
Infrastructure Trust, Inc.; Peachtree Alternative Strategies Fund |
Rand
C. Berney
(Born 1955) |
Class
I Director of TTP since 2014; Class II Director of each of TYG and NTG since 2014; Class III Director of each of NDP and TPZ since
2014; Class II Director of TEAF since 2019. |
Formerly
Executive-in-Residence, College of Business Administration, Kansas State University from 2012-2022; Formerly Senior Vice President
of Corporate Shared Services of ConocoPhillips from April 2009 to 2012, Vice President and Controller of ConocoPhillips from 2002
to April 2009, and Vice President and Controller of Phillips Petroleum Company from 1997 to 2002; Member of the Oklahoma Society
of CPAs, the Financial Executive Institute, American Institute of Certified Public Accountants, the Institute of Internal Auditors
and the Institute of Management Accountants. |
6 |
None |
Jennifer
Paquette
(Born 1962) |
Class
I Director of TTP since 2018; Class II Director of each of TYG and NTG since 2018; Class III Director of each of NDP and TPZ since
2018; Class II Director of TEAF since 2019. |
Retired
in 2017; Previously Chief Investment Officer of the Public Employees’ Retirement Association of Colorado (“Colorado PERA”)
from 2003 to 2017; Held various positions within Colorado PERA from 1999 to 2003 and 1995 to 1996; Formerly Vice-President Institutional
Account Executive at Merrill Lynch, Pierce, Fenner & Smith from 1991 to 1994; Vice-President, Portfolio Manager and Analyst at
Alliance Capital Management from 1987 to 1991; Portfolio Assistant and Assistant at Mitchell Hutchins Asset Management from 1985
to 1987. Chartered Financial Analyst (“CFA”) charterholder. |
6 |
None |
Alexandra
Herger
(Born 1957) |
Class
I Director of each of NDP and TPZ since 2015; Class II Director of TTP since 2015; Class III Director of each of TYG and NTG since
2015; Class III Director of TEAF since 2019. |
Retired
in 2014; Previously interim vice president of exploration for Marathon Oil in 2014 prior to her retirement; Director of international
exploration and new ventures for Marathon Oil from 2008 to 2014; Held various positions with Shell Exploration and Production Co.
between 2002 and 2008; Member of the Society of Exploration Geophysicists, the American Association of Petroleum Geologists, the
Houston Geological Society and the Southeast Asia Petroleum Exploration Society; Member of the 2010 Leadership Texas/ Foundation
for Women’s Resources since 2010; Director of Panoro Energy ASA, an international independent oil and gas company listed on
the Oslo Stock Exchange; Director of Tethys Oil (Stockholm) and member of PGS (Oslo) nomination committee. |
6 |
None |
Interested
Directors (4) |
|
|
|
|
H.
Kevin Birzer
(Born 1959) |
Class
I Director and Chairman of the Board of NDP since 2012 and of TPZ since 2007; Class II Director and Chairman of the Board of TTP
since 2011; Class III Director and Chairman of the Board of TYG since 2003 and of NTG since 2010; Class III Director and Chairman
of the Board of TEAF since 2019. |
Chief
Executive Officer of the Adviser; Managing Director of the Adviser and member of the Investment Committee of the Adviser since 2002.
CFA designation since 1988. |
6 |
None |
(1) |
The address of each director and officer is 6363 College Boulevard, Suite 100A, Overland Park, Kansas 66211. |
(2) |
Ending year of Director terms by Class are as follows: |
| |
TYG | |
NTG | |
TTP | |
NDP | |
TPZ | |
TEAF |
Class I | |
2023 | |
2023 | |
2024 | |
2025 | |
2025 | |
2023 |
Class II | |
2024 | |
2024 | |
2025 | |
2023 | |
2023 | |
2024 |
Class III | |
2025 | |
2025 | |
2023 | |
2024 | |
2024 | |
2025 |
(3) |
This number includes TYG, NTG, TTP, NDP, TPZ and TEAF. For Mr. Ciccotello, this number also includes the Ecofin Tax-Advantaged Social Impact Fund, Inc. (”TSIFX”). The Adviser serves as the investment adviser to TYG, NTG, TTP, NDP, TPZ, TEAF and TSIFX. |
(4) |
As a result of their respective positions held with the Adviser or its affiliates, these individuals are considered “interested persons” within the meaning of the 1940 Act. |
Company Officers
and Directors (unaudited) (continued)
November 30, 2023
|
Position(s) Held
With Company, Term |
|
Number of
Portfolios
in
Fund Complex |
Other Public
Company
Directorships |
|
of Office and Length |
|
Overseen |
Held by |
Name and Age(1) |
of Time Served(2) |
Principal Occupation
During Past Five Years |
by Director |
Officer |
Interested Officers(3) |
|
|
|
|
P. Bradley Adams
(Born 1960) |
Chief Executive Officer
of TYG, NTG, TPZ, TTP and NDP since June 30, 2015; Principal Financial Officer and Treasurer of each of TYG, NTG, TPZ, TTP and NDP
from May 18, 2017 to July 14, 2021; Chief Financial Officer of NTG from 2010 to June 30, 2015, of each of TYG and TPZ from 2011 to
June 30, 2015 and of each of TTP and NDP from its inception to June 30, 2015; Chief Executive Officer of TEAF since November 5, 2018,
Principal Financial Officer and Treasurer of TEAF from November 5, 2018 to July 14, 2021. |
Managing Director of the
Adviser since January 2013; Chief Executive Officer of Ecofin Tax-Exempt Private Credit Fund, Inc. (formerly Ecofin Tax-Advantaged
Social Impact Fund, Inc. (“TSIFX “)) since February 2018; Principal Financial Officer of TSIFX from February 2018 to
May 2021. |
N/A |
None |
Matthew G.P. Sallee
(Born
1978) |
President of TYG and NTG
since June 30, 2015. |
Managing Director of the
Adviser since January 2014 and a member of the Investment Committee of the Adviser since June 30, 2015; Senior Portfolio Manager
of the Adviser since February 2019; Portfolio Manager of the Adviser from July 2013 to January 2019; CFA designation since 2009. |
N/A |
None |
Brian A. Kessens
(Born 1975) |
President of TTP and TPZ
since June 30, 2015. |
Managing Director of the
Adviser since January 2015 and a member of the Investment Committee of the Adviser since June 30, 2015; Senior Portfolio Manager
of the Adviser since February 2019; Portfolio Manager of the Adviser from July 2013 to January 2019; CFA designation since 2006. |
N/A |
None |
Robert J. Thummel, Jr. (Born
1972) |
President of NDP since June
30, 2015. |
Managing Director of the
Adviser since January 2014 and a member of the Investment Committee of the Adviser since June 30, 2015; Senior Portfolio Manager
of the Adviser since February 2019; Portfolio Manager of the Adviser from July 2013 to January 2019. |
N/A |
None |
Kate Moore
(Born 1987) |
President of TEAF since
August 9, 2022; President of TSIFX since April 2021. |
Managing Director of TortoiseEcoin
since March 29, 2021; Chief Operations Officer of TortoiseEcoin since March 1, 2023; Chief Development Officer of TortoiseEcofin
from March 29, 2021 to March 1, 2023; Director – Head of Product Development of the Adviser from September 2020 to March 2021;
Director – Strategic Investment Group of the Adviser from July 2019 to August 2020; Vice President –Strategic Investment
Group of the Adviser from June 2018 to June 2019; previously served in various roles at Tradebot Systems, Inc. from July 2009 to
June 2018, including most recently as Senior Equity Trader and Director at Tradebot Ventures. |
N/A |
None |
Shobana Gopal
(Born 1962) |
Vice President of TYG, NTG,
TPZ, TTP and NDP since June 30, 2015, and of TEAF since November 5, 2018. |
Managing Director –
Tax of the Adviser since July 2021; Director, Tax of the Adviser from January 2013 to July 2021; Tax Analyst of the Adviser from
September 2006 through December 2012; Vice President of TSIFX since February 2018. |
N/A |
None |
Courtney Gengler
(Born 1986) |
Principal Financial Officer and Treasurer of each of TYG, NTG, TPZ, TTP, NDP and TEAF since July 14, 2021; Vice President of each of TYG, NTG, TPZ, TTP, NDP and TEAF from June 16, 2020 to July 14, 2021; Assistant Treasurer of each of TYG, NTG, TPZ, TTP and NDP since May 18, 2017 and of TEAF since its inception. |
Managing Director – Financial Operations of the Adviser since July 2021; Director – Financial Operations of the Adviser from January 2020 to July 2021; Vice President – Accounting and Financial Reporting from 2017 to 2020; Principal Financial Officer and Treasurer of TSIFX since May 2021; previously served in various roles at Adknowledge from May 2015 to March 2017 including most recently as Manager of Accounting and Financial Reporting. |
N/A |
None |
Sean Wickliffe
(Born 1989) |
Vice President and Assistant Treasurer of each of TYG, NTG, TPZ, TTP, NDP and TEAF since July 14, 2021; |
Vice President – Financial Operations of the Adviser since January 2021; Senior Financial Operations Analyst of the Adviser from January 2020 to January 2021; Financial Operations Analyst of the Adviser from December 2016 to January 2020; Junior Financial Operations Analyst of the Adviser from November 2015 to December 2016. |
N/A |
None |
Diane Bono
(Born 1958) |
Chief Compliance Officer of TYG since 2006 and of each of NTG, TPZ, TTP and NDP and TEAF since its inception; Secretary of TYG, NTG, TPZ, TTP and NDP since May 2013 and of TEAF since November 5, 2018. |
Managing Director of the Adviser since January 2018; Chief Compliance Officer of the Adviser since June 2006; Chief Compliance Officer and Secretary of TSIFX since February 2018. |
N/A |
None |
(1) |
The address of each director and officer is 6363 College
Boulevard, Suite 100A, Overland Park, Kansas 66211. |
(2) |
Officers are elected annually. |
(3) |
As a result of their respective positions held with the
Adviser or its affiliates, these individuals are considered “interested persons” within the meaning of the 1940 Act. |
2023 Annual Report | November
30, 2023
Additional
Information (unaudited)
Notice to Shareholders
For stockholders that do not have a November 30, 2023
tax year end, this notice is for information purposes only. For stockholders with a November 30, 2023 tax year end, please consult your
tax advisor as to the pertinence of this notice. For the fiscal year ended November 30, 2023, each Fund is designating the following items
with regard to distributions paid during the year.
Common Distributions | | |
| | |
| | |
| | |
| |
| |
Return Of Capital
Distributions | | |
Long-Term Capital Gain
Distributions (1) | | |
Ordinary Income
Distributions | | |
Total
Distributions | | |
Qualifying
Dividends(2) | | |
Qualifying For Corporate
Dividends Rec. Deduction (3) | |
TYG | |
| 42.07 | % | |
| 0.00 | % | |
| 57.93 | % | |
| 100.00 | % | |
| 69.58 | % | |
| 69.58 | % |
NTG | |
| 46.63 | % | |
| 0.00 | % | |
| 53.37 | % | |
| 100.00 | % | |
| 86.15 | % | |
| 66.05 | % |
TTP | |
| 77.51 | % | |
| 0.00 | % | |
| 22.49 | % | |
| 100.00 | % | |
| 100.00 | % | |
| 82.04 | % |
NDP | |
| 70.36 | % | |
| 0.00 | % | |
| 29.64 | % | |
| 100.00 | % | |
| 100.00 | % | |
| 100.00 | % |
TPZ | |
| 51.00 | % | |
| 0.00 | % | |
| 49.00 | % | |
| 100.00 | % | |
| 31.96 | % | |
| 25.06 | % |
TEAF | |
| 67.26 | % | |
| 0.00 | % | |
| 32.74 | % | |
| 100.00 | % | |
| 95.70 | % | |
| 33.24 | % |
Preferred Distributions | | |
| | |
| | |
| | |
| |
| |
Return Of Capital
Distributions | | |
Long-Term Capital Gain
Distributions (1) | | |
Ordinary Income
Distributions | | |
Total
Distributions | | |
Qualifying
Dividends(2) | | |
Qualifying For Corporate
Dividends Rec. Deduction (3) | |
TYG | |
| 0.00 | % | |
| 0.00 | % | |
| 100.00 | % | |
| 100.00 | % | |
| 69.58 | % | |
| 69.58 | % |
NTG | |
| 0.00 | % | |
| 0.00 | % | |
| 100.00 | % | |
| 100.00 | % | |
| 86.15 | % | |
| 66.05 | % |
TTP | |
| 0.00 | % | |
| 0.00 | % | |
| 100.00 | % | |
| 100.00 | % | |
| 100.00 | % | |
| 82.04 | % |
(1) |
The Fund designates long-term capital gain distributions per IRC Code Sec. 852(b)(3)(C). The long-term capital gain tax rate is variable based on the taxpayer’s taxable income. |
(2) |
Represents the portion of Ordinary Income Distributions taxable at the capital gain tax rates if the stockholder meets holding period requirements. |
(3) |
Represents the portion of Ordinary Income Distributions which qualify for the “Corporate Dividends Received Deduction.” |
Stockholder Proxy Voting Results
The annual meeting of stockholders for each Fund was
held on July 11, 2023. The matters considered at the meeting by each fund, together with the actual vote tabulations relating to such
matters are as follows:
1. | For all Companies: To elect the following individual as director
of the Fund, to hold office for a term of three years and until their successors are duly elected and qualified. |
| |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Conrad SCiccotello | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Affirmative | |
| 8,880,588 | | |
| 4,308,279 | | |
| 1,624,068 | | |
| 1,064,674 | | |
| 4,295,824 | | |
| 11,133,346 | |
Withheld | |
| 202,694 | | |
| 145,501 | | |
| 61,016 | | |
| 500,942 | | |
| 373,443 | | |
| 396,239 | |
TOTAL | |
| 9,083,282 | | |
| 4,453,780 | | |
| 1,685,084 | | |
| 1,565,616 | | |
| 4,669,267 | | |
| 11,529,585 | |
Rand C. Berney and Jennifer Paquette continue as a
director with terms expiring on the date of the 2024 annual meeting of stockholders. H. Kevin Birzer and Alexandra A. Herger continue
as a director with terms expiring on the date of the 2025 annual meeting of stockholders.
2. |
For all companies: To ratify the selection of Ernst &
Young LLP as the independent registered public accounting firm for the fiscal year ending November 30, 2023. |
| |
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
Affirmative | |
| 8,978,224 | | |
| 4,389,018 | | |
| 1,630,856 | | |
| 1,304,774 | | |
| 4,375,846 | | |
| 11,430,404 | |
Against | |
| 56,565 | | |
| 41,893 | | |
| 43,943 | | |
| 257,126 | | |
| 222,682 | | |
| 28,783 | |
Abstain | |
| 48,493 | | |
| 22,869 | | |
| 10,285 | | |
| 3,716 | | |
| 70,739 | | |
| 70,398 | |
TOTAL | |
| 9,083,282 | | |
| 4,453,780 | | |
| 1,685,084 | | |
| 1,565,616 | | |
| 4,669,267 | | |
| 11,529,585 | |
Director and Officer Compensation
The Funds do not compensate any of its directors who
are “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, nor any of its officers. For the period from December
1, 2022 through November 30, 2023, the aggregate compensation paid by the Funds to the independent directors was as follows:
TYG | | |
NTG | | |
TTP | | |
NDP | | |
TPZ | | |
TEAF | |
$ | 86,000 | | |
$ | 86,000 | | |
$ | 66,000 | | |
$ | 66,000 | | |
$ | 86,000 | | |
$ | 86,000 | |
The Funds did not pay any special compensation to any
of its directors or officers.
Additional
Information (unaudited) (continued)
Forward-Looking Statements
This report contains “forward-looking statements”
within the meaning of the 1933 Act and the Securities Exchange Act of 1934, as amended. By their nature, all forward-looking statements
involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements.
Several factors that could materially affect each Fund’s actual results are the performance of the portfolio of investments held
by it, the conditions in the U.S. and international financial, petroleum and other markets, the price at which shares of each Fund will
trade in the public markets and other factors discussed in filings with the Securities and Exchange Commission (SEC).
Proxy Voting Policies
A description of the policies and procedures that each
Fund uses to determine how to vote proxies relating to portfolio securities owned by the Fund and information regarding how each Fund
voted proxies relating to the portfolio of securities during the 12-month period ended June 30, 2023 are available to stockholders (i)
without charge, upon request by calling the Adviser at (913) 981-1020 or toll-free at (866) 362-9331 and on or through the Adviser’s
Web site at www.tortoiseecofin.com; and (ii) on the SEC’s Web site at www.sec.gov.
Form N-PORT
Each Fund files its complete schedule of portfolio
holdings for the first and third quarters of each fiscal year with the SEC on Part F of Form N-PORT. Each Fund’s Form Part F of
Form N-PORT are available without charge upon request by calling the Adviser at (866) 362-9331 or by visiting the SEC’s Web site
at www.sec.gov.
Each Fund’s N-PORTs are also available through
the Adviser’s Web site at www.tortoiseecofin.com.
Statement of Additional Information
The Statement of Additional Information (“SAI”)
includes additional information about each Fund’s directors and is available upon request without charge by calling the Adviser
at (866) 362-9331 or by visiting the SEC’s Web site at www.sec.gov.
Certifications
Each Fund’s Chief Executive Officer has submitted
to the New York Stock Exchange the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.
Each Fund has filed with the SEC, as an exhibit to
its most recently filed Form N-CSR, the certification of its Chief Executive Officer and Principal Financial Officer required by Section
302 of the Sarbanes-Oxley Act.
Privacy Policy
In order to conduct its business, each Fund collects
and maintains certain nonpublic personal information about its stockholders of record with respect to their transactions in shares of
each Fund’s securities. This information includes the stockholder’s address, tax identification or Social Security number,
share balances, and distribution elections. We do not collect or maintain personal information about stockholders whose share balances
of our securities are held in “street name” by a financial institution such as a bank or broker.
We do not disclose any nonpublic personal information
about you, the Funds’ other stockholders or the Funds’ former stockholders to third parties unless necessary to process a
transaction, service an account, or as otherwise permitted by law.
To protect your personal information internally, we
restrict access to nonpublic personal information about the Funds’ stockholders to those employees who need to know that information
to provide services to our stockholders. We also maintain certain other safeguards to protect your nonpublic personal information.
Repurchase Disclosure
Notice is hereby given in accordance with Section 23(c)
of the 1940 Act, that each Fund may from time to time purchase shares of its common stock in the open market.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Automatic Dividend Reinvestment
Each of NTG, TTP, NDP and TPZ have an Automatic Dividend Reinvestment Plan
and TYG has an Automatic Dividend Reinvestment and Cash Purchase Plan (each, a “Plan”). Each Plan allows participating common
stockholders to reinvest distributions, including dividends, capital gains and return of capital in additional shares of the Fund’s
common stock and TYG’s Plan also allows registered holders of the TYG’s common stock to make optional cash investments, in
accordance with TYG’s Plan, on a monthly basis.
If a stockholder’s shares are registered directly with the Fund or
with a brokerage firm that participates in the Fund’s Plan, all distributions are automatically reinvested for stockholders by the
Agent in additional shares of common stock of the Fund (unless a stockholder is ineligible or elects otherwise). Stockholders holding
shares that participate in the Plan in a brokerage account may not be able to transfer the shares to another broker and continue to participate
in the Plan. Stockholders who elect not to participate in the Plan will receive all distributions payable in cash paid by check mailed
directly to the stockholder of record (or, if the shares are held in street or other nominee name, then to such nominee) by Computershare,
as dividend paying agent. Distributions subject to tax (if any) are taxable whether or not shares are reinvested.
Any single investment pursuant to the cash purchase option under TYG’s
Plan must be in an amount of at least $100 and may not exceed $5,000 per month unless a request for waiver has been granted. A request
for waiver should be directed to TYG at 1-866-362-9331 and TYG has the sole discretion to grant any requested waiver. Optional cash investments
may be delivered to the Agent by personal check, by automatic or electronic bank account transfer or by online access at www.computershare.com.
TYG reserves the right to reject any purchase order. Stockholders who hold shares in street or other nominee name who want to participate
in optional cash investments should contact their broker, bank or other nominee and follow their instructions. There is no obligation
to make an optional cash investment at any time, and the amount of such investments may vary from time to time. Optional cash investments
must be received by the Agent no later than two business days prior to the monthly investment date (the “payment date”) for
purchase of common shares on the next succeeding purchase date under TYG’s Plan. Scheduled optional cash purchases may be cancelled
or refunded upon a participant’s written request received by the Agent at least two business days prior to the purchase date. Participants
will not be able to instruct the Agent to purchase common shares at a specific time or at a specific price.
If on the distribution payment date or, for TYG, the purchase date for optional
cash investments, the net asset value per share of the common stock is equal to or less than the market price per share of common stock
plus estimated brokerage commissions, the Fund will issue additional shares of common stock to participants. The number of shares will
be determined by the greater of the net asset value per share or 95 percent of the market price. Otherwise, shares generally will be purchased
on the open market by the Agent as soon as possible following the payment date or purchase date, but in no event later than 30 days after
such date except as necessary to comply with applicable law. There are no brokerage charges with respect to shares issued directly by
the Fund as a result of distributions payable either in shares or in cash or, for TYG, as a result of optional cash investments. However,
each participant will pay a pro rata share of brokerage commissions incurred with respect to the Agent’s open-market purchases in
connection with the reinvestment of distributions or optional cash investments. If a participant elects to have the Agent sell part or
all of his or her common stock and remit the proceeds, such participant will be charged a transaction fee of $15.00 plus his or her pro
rata share of brokerage commissions on the shares sold.
Participation is completely voluntary. Stockholders may elect not to participate
in the Plan, and participation may be terminated or resumed at any time without penalty, by giving notice in writing, by telephone or
Internet to Computershare, the Plan Agent, at the address set forth below. Such termination will be effective with respect to a particular
distribution if notice is received prior to such record date.
Additional information about the Plan may be obtained by writing to Computershare
Trust Company, N.A, P.O. Box 30170, College Station, TX 77842-3170. You may also contact Computershare by phone at (800) 426-5523 or visit
their Web site at www.computershare.com.
Additional Information
(unaudited) (continued)
Approval of the Investment Advisory Agreements for all Funds and the Sub-Advisory
Agreement for TEAF
In approving the renewal of the respective Investment Advisory Agreement
of each of TYG, NTG, TPZ, TTP, NDP and TEAF in 2023, and the investment sub-advisory agreement between the Adviser and Ecofin Advisors
Limited (the “Sub-Adviser”) with respect to TEAF (the “TEAF Investment Sub-Advisory Agreement”), the directors
who are not “interested persons” (as defined in the Investment Company Act of 1940) of the fund (“Independent Directors”)
requested and received extensive data and information from the Adviser concerning the fund and the services provided to it by the Adviser
under the Investment Advisory Agreement, including information from independent, third-party sources, regarding the factors considered
in their evaluation, and with respect to TEAF, information concerning the services provided by the Sub-Adviser under the TEAF Investment
Sub-Advisory Agreement. Before the Independent Directors voted on approval of the Investment Advisory Agreement and the TEAF Investment
Sub-Advisory Agreement, the Independent Directors met with independent legal counsel during an executive session and discussed the agreements
and related information.
Factors Considered for Each Fund
The Board, including the Independent Directors, considered and evaluated
all the information provided by the Adviser. The Board, including the Independent Directors, did not identify any single factor as being
all-important or controlling, and individual directors may have attributed different levels of importance to different factors. In deciding
to renew the fund’s agreement, the decision of the Board, including the Independent Directors, was based on the following factors.
Nature, Extent and Quality of Services Provided. The Board
considered information regarding the history, qualification and background of the Adviser, the Sub-Adviser, and the individuals primarily
responsible for the portfolio management of the fund. Additionally, the Board considered the quality and extent of the resources devoted
to research and analysis of the fund’s actual and potential investments, including the research and decision-making processes utilized
by the Adviser and Sub-Adviser, as well as risk oversight and the methods adopted to seek to achieve compliance with the investment objectives,
policies and restrictions of the fund, and meeting regulatory requirements. Further, the Board considered the quality and depth of the
Adviser and Sub-Adviser personnel (including the number and caliber of portfolio managers and research analysts involved and the size
and experience of the investment, accounting, trading, client service and compliance teams dedicated to the fund), and other Adviser and
Sub-Adviser resources, use of affiliates of the Adviser, and the particular expertise with respect to energy companies, MLP markets and
financing (including private financing).
In addition to advisory services, the Board considered the quality of the
administrative and other non-investment advisory services provided to the fund. The Adviser provides the fund with certain services (in
addition to any such services provided to the fund by third parties) and officers and other personnel as are necessary for the operations
of the fund. In particular, the Adviser provides the fund with the following administrative services including, among others: (i) preparing
disclosure documents, such as periodic stockholder reports and the prospectus and the statement of additional information in connection
with public offerings; (ii) communicating with analysts to support secondary market analysis of the fund; (iii) oversight of daily accounting
and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other
service providers, including with respect to TEAF, the affiliated Sub-Adviser; (vi) organizing Board meetings and preparing the materials
for such Board meetings; (vii) providing compliance support; (viii) furnishing analytical and other support to assist the Board in its
consideration of strategic issues; (ix) the responsible handling of the leverage target; and (x) performing other administrative services
for the operation of the fund, such as press releases, fact sheets, quarterly energy market updates and podcasts, and educational materials,
leverage financing, tax reporting, tax management, fulfilling regulatory filing requirements and investor relations services.
The Board also reviewed information received from the Adviser and the fund’s
Chief Compliance Officer (the “CCO”) regarding the compliance policies and procedures established pursuant to the 1940 Act
and their applicability to the fund, including the fund’s Code of Ethics.
The Board, including the Independent Directors, concluded that the nature
of the fund and the specialized expertise of the Adviser in energy infrastructure, including in the niche market of MLPs for each of TYG
and NTG, the energy market for each of TTP, NDP and TPZ, and essential asset sectors with respect to TEAF, as well as the nature, extent
and quality of services provided by the Adviser, and in addition with respect to TEAF the Sub-Adviser, to the fund, made the Adviser qualified
to serve as the adviser, and with respect to TEAF, the Sub-Adviser qualified to serve as the sub-adviser. The Independent Directors recognized
that the Adviser’s commitment to a long-term investment horizon correlated well to the investment strategy of the fund.
Investment Performance of the Fund and the Adviser, Costs of the Services
To Be Provided and Profits To Be Realized by the Adviser and its Affiliates from the Relationship, and Fee Comparisons. The Board
reviewed and evaluated information regarding the fund’s performance and the performance of other Adviser accounts (including other
investment companies), and information regarding the nature of the markets during the performance period, with a particular focus on energy
infrastructure equities including midstream, utilities and renewables for TYG, on midstream equity for each of NTG and TTP, on the energy
companies for NDP, on power and energy infrastructure for TPZ, and on the essential asset sectors with respect to TEAF. The Board considered
the fund’s investment performance against peer funds for the following periods: one year, three year, five year, ten year and since
inception for each of TYG, NTG, TTP, NDP and TPZ, for one year, three year and since inception for TEAF, and for each of 2021, 2022 and
fiscal year-to-date 2023 for each of TYG, NTG, TTP, NDP, TPZ and TEAF, as well as against specialized sector (including a custom composite
of sector indices (“custom composite”) for TPZ) and more general market indices for the same periods for the fund. The Board
also considered senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance
against its peers and/or sector market indices, as applicable. The Board noted that for the relevant periods, based on NAV: TYG outperformed
the median for its peers in the three year
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
period, 2021 and 2022, and underperformed the median of its peers in the
other periods. TYG underperformed two of the specialized sector market indices except for 2021, and one of the specialized indices except
for the one year period where it performed in line and the three year period and 2022 where it outperformed the index, and underperformed
the general market index except for the three year period, 2021 and 2022, where it outperformed this index. NTG and TTP underperformed
the median for their peers in all periods. NTG and TTP underperformed the specialized sector market indices and the general market index
in all periods except the one year period and 2021, and with respect to one specialized index and the generalized market index in the
three year period and 2022 where they outperformed these indices. NDP outperformed its peer for the one year and three year periods, 2021
and 2022 and underperformed its peer for the five year, 10 year and since inception periods and for the fiscal year to date 2023 period.
NDP underperformed the specialized sector market index and the general market index except for the one year period and 2021, and for the
general market index the three year period and 2022, where it outperformed those indices, and performed in line with the specialized sector
market index for the fiscal year to date 2023 period. TPZ performed in line with the median for its peers in 2021 and outperformed the
median for its peers in the one year and three year periods, 2022, and fiscal year-to-date 2023 period, and underperformed in the other
periods. TPZ outperformed the custom composite for the one year and three year periods, 2021 and 2022, and underperformed the custom composite
in the five year, 10 year, since inception and fiscal year-to-date 2023 periods, and underperformed the general market index in all periods
except the one year and three year periods and 2022 where it outperformed the index. TEAF outperformed the median of its peers in the
one year and three year periods and 2022 and underperformed the median in the since inception, 2021 and fiscal year-to-date 2023 periods.
TEAF outperformed the specialized sector market index in the one year period and 2021, underperformed the specialized sector market index
in the since inception period and 2022, and performed in line with the index in the three year and fiscal year to date 2023 periods, and
underperformed the general market index in all applicable periods except for the one year and 2022 periods where it outperformed the index.
The Board noted that for the relevant periods, based on market price, TYG underperformed the median of its peers except for the three
year period, 2021 and 2022, where it outperformed the median of its peers. NTG and TTP underperformed the median for their peers in all
periods. NDP outperformed its peer for the one and three year periods, 2021 and 2022 and underperformed for the remaining periods. TPZ
outperformed the median for its peers for the one and three year periods, 2021, 2022 and the fiscal year-to-date 2023 period, and underperformed
the median for its peers in the remaining periods. TEAF underperformed the median for its peers for the since inception period, 2021,
and the fiscal year-to-date 2023 period, and outperformed the median for its peers for the one year and three year periods, and 2022.
For TPZ, the Board noted the lack of peers and sector market indices with similar strategies to the fund and also took into account the
custom composite to better reflect the strategy of the fund. The Adviser believes that performance relative to the applicable custom composite
for TPZ is an appropriate performance metric for the fund. The Board also noted that the custom composite for TPZ and the sector market
indices are pre-expenses, in contrast to the fund and its peers, and the sector market indices are pre-tax accrual similar to TYG and
NTG but in contrast with their MLP peers. The Board also noted differences across the peer universe in distribution and leverage strategies,
including the fund’s focus on sustainable distributions and leverage strategy, and took into account that stockholders, in pursuing
their investment goals and objectives, may have purchased their shares based upon the reputation and the investment style, long-term philosophy
and strategy of the Adviser. The Board also considered discussions with the Adviser regarding a variety of initiatives for the fund, including
the Adviser’s plans to continue aftermarket support and investor communications regarding recent market price performance. Based
upon their review and also considering market conditions and volatility in 2023, the Board, including the Independent Directors, concluded
that the fund’s performance has been reasonable based on the fund’s strategy and compared to other closed-end funds that focus
on the applicable sectors discussed above.
The Adviser provided detailed information concerning its cost of providing
services to the fund, its profitability in managing the fund, its overall profitability, and its financial condition. The Board reviewed
the methodology used to prepare this financial information. This financial information regarding the Adviser is considered in order to
evaluate the Adviser’s financial condition, its ability to continue to provide services under the Investment Advisory Agreement,
and the reasonableness of the current management fee, and was, to the extent possible, evaluated in comparison to other more specialized
investment advisers.
The Board considered and evaluated information regarding fees charged to,
and services provided to, other investment companies advised by the Adviser (including the impact of any fee waiver or reimbursement arrangements
and any expense reimbursement arrangements), and fees charged to separate institutional accounts and other accounts managed by the Adviser.
The information provided to the Board discussed the significant differences in scope of services provided to the fund and to the Adviser’s
other non-closed-end fund clients. The Board considered the fee comparisons in light of the different services provided in managing these
other types of clients. The Board considered and evaluated the information comparing the fund’s contractual annual management fee
and overall expenses with a peer group of comparable closed-end funds with similar investment objectives and strategies, including other
MLP or energy investment companies, as applicable depending on the fund, and with respect to TEAF with a group of comparable funds that
are multi strategy including significant allocations to private investments as well as funds structured as a term fund, in each case as
determined by the Adviser. The Board also considered the management fee (based on total managed assets) charged by the Adviser to other
Tortoise funds compared to the management fee of TEAF. The Board noted that the management fee paid by TEAF is higher than the management
fees paid by the other Tortoise funds, but were advised by the Adviser that there are additional portfolio management challenges in managing
a multi-strategy defined term fund such as TEAF. The Board considered the affiliated relationship of the Adviser to the Sub-Adviser for
TEAF, and the in-depth knowledge of the Adviser of the Sub-Adviser’s operations, and the oversight of the Sub-Adviser by the Adviser.
The Board also considered that the sub-advisory fee to Sub-Adviser is paid by the Adviser and TEAF incurs no additional expense for the
Sub-Adviser’s services. Given the specialized universe of managers and funds fitting within the criteria for the peer group as well
as a lack of reliable, consistent third party data, the Adviser did not believe that it would be beneficial to engage the services of
an independent third-party to prepare the peer group analysis, and the Board, including the Independent Directors, concurred with this
approach. The Adviser provided information on the methodology used for determining the peer group.
Additional Information
(unaudited) (continued)
The Board, including the Independent Directors, concluded that the fees (including
the management fee) and expenses that the fund is paying under the Investment Advisory Agreement, as well as the operating expense ratios
of the fund, are reasonable given the nature, extent and quality of services provided under the Investment Advisory Agreement and that
such fees and expenses are reasonable compared to the fees charged by advisers to comparable funds. The Board, including the Independent
Directors, concluded that the fees payable by the Adviser to the Sub-Adviser under the TEAF Sub-Advisory Agreement are reasonable given
the nature, extent and quality of services provided under the TEAF Sub-Advisory Agreement.
Economies of Scale. The Board considered information from the
Adviser concerning whether economies of scale would be realized as the fund grows, and whether fee levels reflect any economies of scale
for the benefit of the fund’s stockholders. The Board, including the Independent Directors, concluded that economies of scale are
difficult to measure and predict overall. Accordingly, the Board reviewed other information, such as year-over-year profitability of the
Adviser generally, the profitability of its management of the fund, and the fees of competitive funds not managed by the Adviser over
a range of asset sizes. The Board, including the Independent Directors, concluded the Adviser is appropriately sharing any economies of
scale through its fee structure and through reinvestment in its business resources to provide stockholders additional content and services.
Collateral Benefits Derived by the Adviser. The Board reviewed
information from the Adviser concerning collateral benefits it receives as a result of its relationship with the fund. The Board, including
the Independent Directors, concluded that the Adviser generally does not directly use the fund’s or stockholder information to generate
profits in other lines of business, and therefore does not derive any significant collateral benefits from them.
The Board did not, with respect to their deliberations concerning their approval
of the continuation of the Investment Advisory Agreement, consider the benefits the Adviser may derive from relationships the Adviser
may have with brokers through soft dollar arrangements because the Adviser does not employ any third party soft dollar arrangements in
rendering its advisory services to the fund. The Adviser receives unsolicited research from some of the brokers with whom it places trades
on behalf of clients, however, the Adviser has no arrangements or understandings with such brokers regarding receipt of research in return
for commissions. The Adviser does not consider this research when selecting brokers to execute fund transactions and does not put a specific
value on unsolicited research, nor attempt to estimate and allocate the relative costs or benefits among clients.
Conclusions of the Directors
The Board, including the Independent Directors, concluded that no single
factor reviewed was determinative as the principal factor in whether to approve the Investment Advisory Agreement and, with respect to
TEAF, the TEAF Sub-Advisory Agreement. The process, as discussed above, describes only the most important factors, but not all of the
matters, considered by the Board. On the basis of such information as the Board considered necessary to the exercise of its reasonable
business judgment and its evaluation of all of the factors described above, and after discussion and as assisted by the advice of legal
counsel that is independent of the Adviser, the Independent Directors determined that each factor, in the context of all of the other
factors they considered, favored approval of the Investment Advisory Agreement and with respect to TEAF, the TEAF Sub-Advisory Agreement.
It was noted that it was the judgment of the Board, including the Independent Directors, that approval of the Investment Advisory Agreement
and, with respect to TEAF, the TEAF Sub-Advisory Agreement, was in the best interests of the fund and its stockholders. The Board, and
separately, all of the Independent Directors, therefore unanimously concluded that the Investment Advisory Agreement between the fund
and the Adviser and, with respect to TEAF, the TEAF Sub-Advisory Agreement between the Adviser and Sub-Adviser, is fair and reasonable
in light of the services provided and should be renewed.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Fund Investment Objectives, Policies and Risks
Changes in the Last Fiscal Year
During each Fund’s most recent fiscal year, there were no material
changes in the Fund’s investment objectives or policies that have not been approved by shareholders or in the principal risk factors
associated with investment in the Fund.
Investment Objectives and Policies
Tortoise Energy Infrastructure Corporation (TYG)
TYG’s investment objective is to seek a high level of total return
with an emphasis on current distributions paid to stockholders. Under normal circumstances, TYG invests at least 90% of its total investments,
defined as the value of all investments reported as total investments in its schedule of investments, in securities of energy infrastructure
companies. Energy infrastructure companies engage in the business of transporting, processing, storing, distributing or marketing natural
gas, natural gas liquids, coal, crude oil or refined petroleum products, or exploring, developing, managing or producing such commodities.
Additionally energy infrastructure includes renewables and power infrastructure companies that generate, transport and distribute electricity.
As a regulated investment company, TYG may invest up to 25% of its total
assets in MLPs. TYG may invest up to 30% of its total investments in restricted securities, primarily through direct placements. Subject
to this policy, TYG may invest without limitation in illiquid securities. The types of restricted securities that TYG may purchase include
securities of private energy infrastructure companies and privately issued securities of publicly traded energy infrastructure companies.
Restricted securities, whether issued by public companies or private companies, are generally considered illiquid. The aggregate of all
of TYG’s investments in private companies that do not have any publicly traded shares or units are limited to 5% of its total investments.
TYG may invest up to 25% of its total investments in debt securities of energy
infrastructure companies, including certain securities rated below investment grade (“junk bonds”). Below investment grade
debt securities will be rated at least B3 by Moody’s and at least B- by S&P at the time of purchase, or comparably rated by
another statistical rating organization or if unrated, determined to be of comparable quality by the Adviser.
TYG will not invest more than 10% of its total investments in a single issuer
or engage in short sales. TYG may write covered call options, up to 10% of its total investments. These investment restrictions described
above apply at the time of purchase, and TYG will not be required to reduce a position due solely to market value fluctuations.
TYG may change these non-fundamental investment policies without stockholder
approval and will provide notice to stockholders of material changes (including notice through stockholder reports); provided, however,
that a change in the policy of investing at least 90% of TYG’s total investments in energy infrastructure companies requires at
least 60 days’ prior written notice to stockholders.
TYG may write covered call options, up to 10% of its total investments.
Under adverse market or economic conditions, TYG may invest up to 100% of
its total investments in securities issued or guaranteed by the U.S. Government or its instrumentalities or agencies, short-term debt
securities, certificates of deposit, bankers’ acceptances and other bank obligations, commercial paper rated in the highest category
by a rating agency or other liquid fixed income securities deemed by the Adviser to be consistent with a defensive posture (collectively,
“short-term securities”), or may hold cash. To the extent TYG invests in short-term securities or cash for defensive purposes,
such investments are inconsistent with, and may result in TYG not achieving, its investment objective.
TYG also may invest in short-term securities or cash pending investment of
any offering proceeds to meet working capital needs including, but not limited to, for collateral in connection with certain investment
techniques, to hold a reserve pending payment of distributions, and to facilitate the payment of expenses and settlement of trades. The
yield on such securities may be lower than the returns on energy infrastructure companies or yields on lower rated fixed income securities.
Leverage. TYG’s policy is to utilize leverage in an amount that
on average represents approximately 25% of its total assets. TYG considers market conditions at the time leverage is incurred and monitors
for asset coverage ratios relative to 1940 Act requirements and financial covenants on an ongoing basis. Leverage as a percent of total
assets will vary depending on market conditions, but will normally range between 20% - 30%.
TYG may use interest rate transactions for hedging purposes only, in an attempt
to reduce the interest rate risk arising from its leveraged capital structure. TYG does not intend to hedge the interest rate risk of
its portfolio holdings. Accordingly, if no leverage is outstanding, TYG currently does not expect to engage in interest rate transactions.
Interest rate transactions that TYG may use for hedging purposes may expose it to certain risks that differ from the risks associated
with its portfolio holdings.
Additional Information
(unaudited) (continued)
Tortoise Midstream Energy Fund, Inc. (“NTG”)
NTG’s investment objective is to provide stockholders a high level
of total return with an emphasis on current distributions paid to stockholders. NTG invests primarily in midstream energy entities 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 entities, including master limited partnerships
(MLPs) benefiting from U.S. natural gas production and global consumption expansion with limited direct commodity exposure. Under normal
circumstances, NTG invests at least 80% of its total investments in equity securities of midstream energy entities in the energy infrastructure
sector, including MLPs, with at least 50% of its total investments in equity securities of natural gas infrastructure entities.
As a regulated investment company, NTG may invest up to 25% of its total
assets in MLPs. NTG may also invest up to 50% of its total investments in restricted securities, primarily through direct investments.
Restricted securities, whether issued by public companies or private companies, are generally considered illiquid. The aggregate of all
NTG’s investments in private companies that do not have any publicly traded shares or units is limited to 5% of its total investments.
NTG may invest up to 20% of its total investments in debt securities of midstream
energy companies, including securities rated below investment grade (commonly referred to as “junk bonds”). Below investment
grade debt securities will be rated at least B3 by Moody’s Investors Service, Inc. (“Moody’s”) and at least B-
by Standard & Poor’s Ratings Group (“S&P”) at the time of purchase, or comparably rated by another statistical
rating organization or if unrated, determined to be of comparable quality by the Adviser. NTG currently has no specific maturity policy
with respect to debt securities.
NTG will not invest more than 10% of its total investments in any single
issuer.
NTG may write covered call options, up to 10% of its total investments.
NTG may change its investment objective and other non-fundamental investment
policies without stockholder approval and will provide written notice to stockholders of material changes (including notice through stockholder
reports), although a change in the policy of investing at least 80% of NTG’s total investments in equity securities of midstream
energy entities in the energy infrastructure sector, including MLPs, requires at least 60 days’ prior written notice to stockholders.
Unless otherwise stated, these investment restrictions apply at the time of purchase. Furthermore, NTG is not required to reduce a position
due solely to market value fluctuations.
Although inconsistent with NTG’s investment objective, under (i) adverse
market or economic conditions which results in NTG taking a temporary defensive position or (ii) pending investment of offering or leverage
proceeds, NTG may invest 100% of its total investments in mutual funds, cash, cash equivalents, securities issued or guaranteed by the
U.S. Government or its instrumentalities or agencies, high quality, short-term money market instruments, short-term debt securities, certificates
of deposit, bankers’ acceptances and other bank obligations, commercial paper or other liquid fixed income securities. The yield
on these securities may be lower than the returns on the securities in which NTG will otherwise invest or yields on lower-rated, fixed
income securities. NTG currently does not have a specific maturity policy. To the extent NTG invests in these securities on a temporary
basis or for defensive purposes, NTG may not achieve its investment objectives.
Leverage. NTG’s policy is to utilize leverage in an amount that
on average represents approximately 25% of its total assets. NTG considers market conditions at the time leverage is incurred and monitors
for asset coverage ratios relative to 1940 Act requirements and financial covenants on an ongoing basis. Leverage as a percent of total
assets will vary depending on market conditions, but will normally range between 20% - 30%.
NTG may use interest rate transactions for economic hedging purposes only,
in an attempt to reduce the interest rate risk arising from its leveraged capital structure. NTG does not intend to hedge the interest
rate risk of its portfolio holdings. Interest rate transactions that NTG may use for hedging purposes may expose it to certain risks that
differ from the risks associated with its portfolio holdings.
Tortoise Power and Energy Infrastructure Fund, Inc. (“TPZ”)
TPZ’s primary investment objective is to provide a high level of current
income, with a secondary objective of capital appreciation. TPZ invests primarily in power and energy infrastructure companies. TPZ seeks
to invest in fixed income and dividend-paying equity securities of power and energy infrastructure companies that provide stable and defensive
characteristics throughout economic cycles.
TPZ’s investment approach emphasizes current income, low volatility
and minimization of downside risk. Under normal circumstances, the fund invests at least 80% of its total assets (including assets obtained
through leverage) in securities of power and energy infrastructure companies. Power infrastructure companies use asset systems to provide
electric power generation (including renewable energy), transmission and distribution. Energy infrastructure companies use a network of
pipeline assets to transport, store, gather and/or process crude oil, refined petroleum products (including biodiesel and ethanol), natural
gas or natural gas liquids.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Under normal circumstances, the fund will invest a minimum of 51% of its
total assets in fixed income securities.
The fund will not invest more than 25% of its total assets in non-investment
grade rated fixed income securities or more than 15% of its total assets in restricted securities that are ineligible for resale under
Rule 144A, all of which may be illiquid securities. The fund may invest up to 10% of its total assets in securities issued by non-U.S.
issuers (including Canadian issuers). The fund will not engage in short sales. These investment restrictions described above apply at
the time of purchase, and the fund will not be required to reduce a position due solely to market value fluctuations.
As used for the purpose of each non-fundamental investment policy above,
the term “total assets” includes any assets obtained through leverage. TPZ’s Board of Directors may change its non-fundamental
investment policies without stockholder approval and will provide notice to stockholders of material changes in such policies (including
notice through stockholder reports). Any change in the policy of investing under normal circumstances at least 80% of TPZ’s total
assets (including assets obtained through leverage) in the securities of companies that derive more than 50% of their revenue from power
or energy infrastructure operations requires at least 60 days’ prior written notice to stockholders. Unless otherwise stated, the
investment restrictions described above apply at the time of purchase, and TPZ will not be required to reduce a position due solely to
market value fluctuations.
In addition, to comply with federal tax requirements for qualification as
a RIC, TPZ’s investments will be limited so that at the close of each quarter of each taxable year (i) at least 50% of the value
of its total assets is represented by cash and cash items, U.S. Government securities, the securities of other RICs and other securities,
with such other securities limited for purposes of such calculation, in respect of any one issuer, to an amount not greater than 5% of
the value of its total assets and not more than 10% outstanding voting securities of such issuer, and (ii) not more than 25% of the value
of TPZ’s total assets is invested in the securities of any one issuer (other than U.S. Government securities or the securities of
other RICs), the securities (other than the securities of other RICs) of any two or more issuers that TPZ controls and that are determined
to be engaged in the same business or similar or related trades or businesses, or the securities of one or more qualified publicly traded
partnerships (which includes MLPs). These tax-related limitations may be changed by the Board of Directors to the extent appropriate in
light of changes to applicable tax requirements.
Although inconsistent with its investment objectives, under adverse market
or economic conditions or pending investment of offering or leverage proceeds, TPZ may invest 100% of its total assets in cash, cash equivalents,
securities issued or guaranteed by the U.S. government or its instrumentalities or agencies, short-term money market instruments, short-term
fixed income securities, certificates of deposit, bankers’ acceptances and other bank obligations, commercial paper or other liquid
fixed income securities. The yield on these securities may be lower than the returns on the securities in which TPZ will otherwise invest
or yields on lower-rated, fixed income securities. To the extent TPZ invests in these securities on a temporary basis or for defensive
purposes, it may not achieve its investment objectives.
Leverage. TPZ’s policy is to utilize leverage in an amount that
on average represents approximately 20% of its total assets. TPZ considers market conditions at the time leverage is incurred and monitors
for asset coverage ratios relative to 1940 Act requirements and financial covenants on an ongoing basis. Leverage as a percent of total
assets will vary depending on market conditions, but will normally range between 15% - 25%.
TPZ may use interest rate transactions, for hedging purposes only, in an
attempt to reduce the interest rate risk arising from its leveraged capital structure. Interest rate transactions that TPZ may use for
hedging purposes may expose it to certain risks that differ from the risks associated with its portfolio holdings.
Tortoise Pipeline & Energy Fund, Inc. (“TTP”)
TTP has an investment objective of providing stockholders a high level of
total return with an emphasis on current distributions. TTP invests primarily in equity securities of 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.
TTP’s investment approach emphasizes total return potential through
current income and growth, low volatility and downside risk minimization. Under normal circumstances, TTP invests at least 80% of its
total assets (including assets obtained through leverage) in equity securities of pipeline and other energy infrastructure companies.
More than 75% of these companies will generally be structured as corporations or limited liability companies domiciled in the U.S. or
Canada.
As a regulated investment company, TTP may invest up to 25% of its total
assets in MLPs. TTP may invest up to 30% of its total assets in unregistered or otherwise restricted securities, primarily through direct
investments, and will not invest in private companies. TTP may invest up to 30% of its total assets in non-U.S. issuers (including Canadian
issuers). TTP may invest up to 20% of its total assets in debt securities, including those rated below investment grade. TTP will not
invest more than 10% of its total assets in any single issuer and will not engage in short sales. These investment restrictions described
above apply at the time of purchase, and TTP will not be required to reduce a position due solely to market value fluctuations.
Additional Information
(unaudited) (continued)
TTP may also write (sell) covered call options to seek to enhance long-term
return potential across economic environments, increase current income and mitigate portfolio risk through option income. TTP’s
covered call strategy focuses on other energy companies that the Adviser believes are integral links in the value chain for pipeline companies.
The fund typically aims to write call options that are approximately 5% - 15% out-of-the-money on approximately 20% of the portfolio,
although it may adjust these targets depending on market volatility and other market conditions.
Leverage. TTP’s policy is to utilize leverage in an amount that
on average represents approximately 25% of its total assets. TTP considers market conditions at the time leverage is incurred and monitors
for asset coverage ratios relative to 1940 Act requirements and financial covenants on an ongoing basis. Leverage as a percent of total
assets will vary depending on market conditions, but will normally range between 20% - 30%.
Tortoise Energy Independence Fund, Inc. (“NDP”)
NDP has an investment objective of providing stockholders a high level of
total return with an emphasis on current distributions. 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.
Under normal circumstances, NDP will invest at least 80% of its total assets
in equity securities of North American energy companies, including at least 50% of its total assets in equity securities of upstream energy
companies. “Total assets” are defined as the value of securities, cash or other assets held, including securities or assets
obtained through leverage, and interest accrued but not yet received. NDP will invest in equity securities that are publicly traded on
an exchange or in the over-the-counter (“OTC”) market, primarily consisting of common stock, but also including, among others,
master limited partnerships (“MLPs”) and limited liability company (“LLC”) common units
NDP may invest up to 35%
of its total assets in securities of non-U.S. issuers (including Canadian issuers). An issuer of a security will generally be considered
to be a non-U.S. issuer if it is organized under the laws of, or maintains its principal place of business in, a country other than the
United States.
NDP may invest up to 30% of its total assets in restricted securities that
are ineligible for resale under Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “1933 Act”),
all of which may be illiquid securities, primarily through direct investments in securities of listed companies, but will not invest in
private companies. NDP will not invest more than 10% of its total assets in a single issuer or engage in short sales. As a registered
investment company (“RIC”), NDP may invest up to 25% of its total assets in securities of MLPs.
NDP may also seek to provide current income from gains earned through an
option strategy. NDP may also write (sell) call options on selected equity securities in its portfolio (“covered calls”).
As a writer of such call options, in effect, during the term of the option, in exchange for the premium NDP receives, it sells the potential
appreciation above the exercise price in the value of the security or securities covered by the options. Therefore, NDP may forego part
of the potential appreciation for part of its equity portfolio in exchange for the call premium received.
Leverage. NDP’s policy is to utilize leverage in an amount that
on average represents approximately 15% of its total assets. NDP considers market conditions at the time leverage is incurred and monitors
for asset coverage ratios relative to 1940 Act requirements and financial covenants on an ongoing basis. Leverage as a percent of total
assets will vary depending on market conditions, but will normally range between 10% - 20%.
Ecofin Sustainable and Social Impact Term Fund (TEAF)
The Fund’s investment objective is to provide its common shareholders
with a high level of total return with an emphasis on current distributions.
Under normal market conditions, the Fund will invest at least 80% of its
total assets (including assets obtained through leverage) in issuers operating in essential asset sectors. The Fund considers essential
assets to be assets and services that are indispensable to the economy and society. Essential asset sectors include the education, housing,
healthcare, social and human services, power, water, energy, infrastructure, basic materials, industrial, transportation and telecommunications
sectors. The Fund may invest across all levels of an issuer’s capital structure and emphasize income-generating investments, particularly
in social infrastructure, sustainable infrastructure and energy infrastructure.
The Fund has adopted the following additional non-fundamental investment
policies:
| • | Under normal conditions, the Fund may invest up to 40% of its total assets in directly originated loans; |
| • | Under normal conditions, the Fund may invest up to 25% of its total assets in direct placements in restricted equity securities in
listed companies; |
| • | Under normal conditions, the Fund may invest up to 25% of its total assets in direct equity investments in unlisted companies; |
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
| • | Under normal conditions, the Fund may invest up to 30% of its total assets in securities of non-U.S. issuers, including Canadian issuers.
An issuer of a security generally will be considered to be a non-U.S. issuer if it is organized under the laws of, or maintains its principal
place of business in, a country other than the United States; |
| • | As a RIC, the Fund may invest up to 25% of its total assets in securities of entities treated as qualified publicly traded partnerships
for federal income tax purposes, which generally includes MLPs; |
| • | the Fund will not engage in short sales of securities; |
| • | Under normal conditions, the Fund may invest up to 10% of its total assets in securities of emerging market issuers; and |
| • | Under normal conditions, the Fund may invest up to 10% of its total assets in non-directly originated corporate debt securities that
are, at the time of purchase, rated CCC+ or lower by S&P and Fitch and Caa1 or lower by Moody’s. |
| • | Under adverse market or economic conditions, the Fund may invest up to 100% of its total assets in money market mutual funds, cash,
cash equivalents, securities issued or guaranteed by the U.S. government or its instrumentalities or agencies, high quality, short-term
money market instruments, short-term debt securities, certificates of deposit, bankers’ acceptances and other bank obligations,
commercial paper or other liquid debt securities. |
Leverage. Leverage as a percent of total assets will vary depending
on market conditions, but will normally range between 10% - 15%.
Principal Risk Factors
Each fund’s NAV, ability to make distributions, ability to service
debt securities and preferred stock, and ability to meet asset coverage requirements depends on the performance of its investment portfolio.
The performance of each fund’s investment portfolio is subject to a number of risks. For each of TYG, NTG, TPZ, TTP and NDP, there
is a cybersecurity risk as follows:
Cybersecurity Risk. Investment advisers, including the Adviser, must rely in part on digital
and network technologies (collectively “cyber networks”) to conduct their businesses. Such cyber networks might in some circumstances
be at risk of cyberattacks that could potentially seek unauthorized access to digital systems for purposes such as misappropriating sensitive
information, corrupting data, or causing operational disruption. Cyberattacks might potentially be carried out by persons using techniques
that could range from efforts to electronically circumvent network security or overwhelm websites to intelligence gathering and social
engineering functions aimed at obtaining information necessary to gain access. Nevertheless, cyber incidents could potentially occur,
and might in some circumstances result in unauthorized access to sensitive information about the Adviser or its clients.
For each of the funds there is an epidemic risk as follows:
Epidemic Risk. Widespread disease, including pandemics and epidemics
have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets,
currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund’s
investments. Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are
increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries, including the U.S. These disruptions
could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact its ability to achieve
its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The remaining risks are set out separately for each fund below.
Tortoise Energy Infrastructure Corporation
Capital Markets Volatility Risk. Our capital structure and performance
may be adversely impacted by weakness in the credit markets and stock market if such weakness results in declines in the value of energy
infrastructure entities in which we invest. If the value of our investments decline or remain volatile, there is a risk that we may be
required to reduce outstanding leverage, which could adversely affect our stock price and ability to pay distributions at historical levels.
A sustained economic slowdown may adversely affect the ability of energy infrastructure entities to sustain their historical distribution
levels, which in turn, may adversely affect our ability to sustain distributions at historical levels. Energy infrastructure entities
that have historically relied heavily on outside capital to fund their growth may be impacted by a slowdown in the capital markets. The
performance of the energy infrastructure sector is dependent on several factors including the condition of the financial sector, the general
economy and the commodity markets.
Concentration Risk. Under normal circumstances, we concentrate our
investments in the energy infrastructure sector. The primary risks inherent in investments in entities in the energy infrastructure sector
include the following: (1) the performance and level of distributions of energy infrastructure entities can be affected by direct and
indirect commodity price exposure, (2) a decrease in market demand for natural gas or other energy commodities could adversely affect
energy infrastructure entities’ revenues or cash flows, (3) energy infrastructure assets deplete over time and must be replaced
and (4) a rising interest rate environment could increase the cost of capital for energy infrastructure entities.
Additional Information
(unaudited) (continued)
Industry Specific Risk. Energy infrastructure companies also are subject
to risks specific to the industry they serve.
MLP Risks. An investment in MLP securities involves some risks that
differ from the risks involved in an investment in the common stock of a corporation, including governance risk, tax risk, and cash flow
risk. Governance risk involves the risks associated with the ownership structure of MLPs. MLPs are also subject to tax risk, which is
the risk that MLPs might lose their partnership status for tax purposes. Cash flow risk is the risk that MLPs will not make distributions
to holders (including us) at anticipated levels or that such distributions will not have the expected tax character. As a result, there
could be a material reduction in our cash flow and there could be a material decrease in the value of our common shares.
Equity Securities Risk. Equity securities, including MLP common units,
can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment
toward the energy infrastructure sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor
performance of a particular issuer (in the case of MLPs, generally measured in terms of DCF). Prices of common units of individual MLPs
and other equity securities also can be affected by fundamentals unique to the partnership or company, including size, earnings power,
coverage ratios and characteristics and features of different classes of securities.
Smaller Company Securities Risk. Investing in securities of smaller
companies may involve greater risk than is associated with investing in more established companies. Companies with smaller capitalization
may have limited product lines, markets or financial resources; may lack management depth or experience; and may be more vulnerable to
adverse general market or economic developments than larger more established companies.
Debt Securities Risk: Investments in debt securities are generally
subject to credit risk, extension risk, interest rate risk, prepayment risk and spread risk.
Below Investment Grade Securities Risk. Investing in below investment
grade debt instruments (commonly referred to as “junk bonds”) involves additional risks than investment grade securities.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a below investment grade issuer to make principal
payments and interest payments than an investment grade issuer. An economic downturn could adversely affect the ability of highly leveraged
issuers to service their obligations or to repay their obligations upon maturity. Similarly, downturns in profitability in the energy
infrastructure industry could adversely affect the ability of below investment grade issuers in that industry to meet their obligations.
The market values of lower quality securities tend to reflect individual developments of the issuer to a greater extent than do higher
quality securities, which react primarily to fluctuations in the general level of interest rates.
The secondary market for below investment grade securities may not be as
liquid as the secondary market for more highly rated securities. There are fewer dealers in the market for below investment grade securities
than investment grade obligations. The prices quoted by different dealers may vary significantly, and the spread between the bid and asked
price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market
for below investment grade securities could contract further, independent of any specific adverse change in the condition of a particular
issuer, and these instruments may become illiquid. As a result, it may be more difficult to sell these securities or we may be able to
sell the securities only at prices lower than if such securities were widely traded. This may affect adversely our ability to make required
distribution or interest payments on our outstanding senior securities. Prices realized upon the sale of such lower-rated or unrated securities,
under these circumstances, may be less than the prices used in calculating our NAV.
Capital Markets Risk. Global financial markets and economic conditions
have been, and may continue to be, volatile due to a variety of factors, including significant write-offs in the financial services sector.
Despite more stabilized economic activity, if the volatility continues, the cost of raising capital in the debt and equity capital markets,
and the ability to raise capital, may be impacted. In particular, concerns about the general stability of financial markets and specifically
the solvency of lending counterparties, may impact the cost of raising capital from the credit markets through increased interest rates,
tighter lending standards, difficulties in refinancing debt on existing terms or at all and reduced, or in some cases ceasing to provide,
funding to borrowers. In addition, lending counterparties under existing revolving credit facilities and other debt instruments may be
unwilling or unable to meet their funding obligations. As a result of any of the foregoing, we or the companies in which we invest may
be unable to obtain new debt or equity financing on acceptable terms. If funding is not available when needed, or is available only on
unfavorable terms, we or the companies in which we invest may not be able to meet obligations as they come due. Moreover, without adequate
funding, midstream energy entities may be unable to execute their growth strategies, complete future acquisitions, take advantage of other
business opportunities or respond to competitive pressures, any of which could have a material adverse effect on their revenues and results
of operations.
Restricted Security Risk. We may invest up to 30% of total assets
in restricted securities, primarily through direct placements. Restricted securities are less liquid than securities traded in the open
market because of statutory and contractual restrictions on resale. Such securities are, therefore, unlike securities that are traded
in the open market, which can be expected to be sold immediately if the market is adequate. This lack of liquidity creates special risks
for us.
Liquidity Risk. Certain energy infrastructure securities may trade
less frequently than those of other companies due to their smaller capitalizations. Investments in securities that are less actively traded
or over time experience decreased trading volume may be difficult to dispose of when we believe it is desirable to do so, may restrict
our ability to take advantage of other opportunities, and may be more difficult to value.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Tax Risk. We have elected to be treated, and intend to qualify each
year, as a “regulated investment company” (“RIC”) under the Code. To maintain our qualification for federal income
tax purposes as a RIC under the Code, we must meet certain source-of-income, asset diversification and annual distribution requirements,
as discussed in detail below under “Certain U.S. Federal Income Tax Considerations.” If for any taxable year we fail to qualify
for the special federal income tax treatment afforded to RICs, all of our taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to our stockholders) and our income available for distribution will be reduced.
Non-Diversification Risk. We are registered as a non-diversified,
closed-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number
or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. However, in order to
qualify as a RIC for federal income tax purposes, we must meet certain requirements.
Covered Call Risk. We cannot guarantee that our covered call option
strategy will be effective. There are several risks associated with transactions in options on securities. The significant differences
between the securities and options markets could result in an imperfect correlation between these markets. The use of options may require
us to sell portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation
we can realize on an investment, or may cause us to hold a security we might otherwise sell. There can be no assurance that a liquid market
will exist when we seek to close out an option position. Factors such as supply and demand, interest rates, the current market price of
the underlying security in relation to the exercise price of the option, the dividend or distribution yield of the underlying security,
the actual or perceived volatility of the underlying security and the time remaining until the expiration date, could impact or cause
to vary over time the amount of income we are able to generate through our covered call option strategy. The number of covered call options
we can write is limited by the number of shares of the corresponding common stock we hold. Furthermore, our covered call option transactions
may be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options
are traded. If we fail to maintain any required asset coverage ratios in connection with any use by us of leverage, we may be required
to redeem or prepay some or all of our leverage instruments. Such redemption or prepayment would likely result in our seeking to terminate
early all or a portion of any option transaction. Early termination of an option could result in a termination payment by or to us.
Hedging Strategy Risk. We may use interest rate transactions for hedging
purposes only, in an attempt to reduce the interest rate risk arising from our leveraged capital structure. There is no assurance that
the interest rate hedging transactions into which we enter will be effective in reducing our exposure to interest rate risk. Hedging transactions
are subject to correlation risk, which is the risk that payment on our hedging transactions may not correlate exactly with our payment
obligations on senior securities. Interest rate transactions that we may use for hedging purposes, such as swaps, caps and floors, will
expose us to certain risks that differ from the risks associated with our portfolio holdings.
Delay in Use of Proceeds Risk. Although we expect to fully invest
the net proceeds of any offering within three months after the closing of the offering, such investments may be delayed if suitable investments
are unavailable at the time, if we are unable to secure firm commitments for direct investments, if market conditions and volumes of the
securities of midstream energy entities are not favorable at the time or for other reasons.
Valuation Risk. We may invest up to 30% of total assets in restricted
securities, which are subject to restrictions on resale. The value of such investments ordinarily will be based on fair valuations determined
by the Adviser pursuant to procedures adopted by the Board of Directors. Restrictions on resale or the absence of a liquid secondary market
may affect adversely our ability to determine NAV. The sale price of securities that are restricted or otherwise are not readily marketable
may be higher or lower than our most recent valuations.
Competition Risk. At the time we completed our initial public offering
in February 2004, we were the only publicly traded investment company offering access to a portfolio of energy infrastructure MLPs. Since
that time, a number of alternative vehicles for investment in a portfolio of energy infrastructure MLPs, including other publicly traded
investment companies and private funds, have emerged. These competitive conditions may adversely impact our ability to meet our investment
objective, which in turn could adversely impact our ability to make interest or distribution payments.
Management Risk. The Adviser was formed in October 2002 to provide
portfolio management services to institutional and high net worth investors seeking professional management of their MLP investments.
The Adviser has been managing our portfolio since we began operations in February 2004. To the extent that the Adviser’s assets
under management grow, the Adviser may have to hire additional personnel and, to the extent it is unable to hire qualified individuals,
its operations may be adversely affected.
Subsidiary Risks. By investing in any Subsidiary, we will be indirectly
exposed to the risks associated with such Subsidiary’s investments. The instruments that will be held by any Subsidiary will generally
be similar to those that are permitted to be held by the Company and will be subject to the same risks that apply to similar investments
if held directly by the Company. The Subsidiaries will not be registered under the 1940 Act, and, unless otherwise noted, will not be
subject to all of the protections of the 1940 Act. However, we will wholly own and control any Subsidiary, and we and any Subsidiary will
each be managed by our Adviser and will share the same portfolio management team. Our Board of Directors will have oversight responsibility
for the investment activities of the Company, including its investment in the Subsidiaries, and our role as sole shareholder of any Subsidiary.
Changes in the laws of the United States and/or any jurisdiction in which a Subsidiary if formed could result in our inability or the
inability of the Subsidiaries to operate as expected and could adversely affect the Company.
Additional Information
(unaudited) (continued)
Additional Risks to Common Stockholders
Leverage Risk. We are currently leveraged and intend to continue to
use leverage primarily for investment purposes. Leverage, which is a speculative technique, could cause us to lose money and can magnify
the effect of any losses. Weakness in the credit markets may cause our leverage costs to increase and there is a risk that we may not
be able to renew or replace existing leverage on favorable terms or at all. If the cost of leverage is no longer favorable, or if we are
otherwise required to reduce our leverage, we may not be able to maintain common stock distributions at historical levels and common stockholders
will bear any costs associated with selling portfolio securities. If our net asset value of our portfolio declines or remains subject
to heightened market volatility, there is an increased risk that we will be unable to maintain coverage ratios for debt securities and
preferred stock mandated by the 1940 Act, rating agency guidelines or contractual terms of bank lending facilities or privately placed
notes. If we do not cure any deficiencies within specified cure periods, we will be required to redeem such senior securities in amounts
that are sufficient to restore the required coverage ratios or, in some cases, offer to redeem all of such securities. As a result, we
may be required to sell portfolio securities at inopportune times, and we may incur significant losses upon the sale of such securities.
There is no assurance that a leveraging strategy will be successful.
Market Impact Risk. The sale of our common stock (or the perception
that such sales may occur) may have an adverse effect on prices in the secondary market for our common stock. An increase in the number
of common shares available may put downward pressure on the market price for our common stock.
Dilution Risk. The voting power of current stockholders will be diluted
to the extent that such stockholders do not purchase shares in any future common stock offerings or do not purchase sufficient shares
to maintain their percentage interest.
If we are unable to invest the proceeds of such offering as intended, our
per share distribution may decrease and we may not participate in market advances to the same extent as if such proceeds were fully invested
as planned.
Market Discount Risk. Our common stock has traded both at a premium
and at a discount in relation to NAV. We cannot predict whether our shares will trade in the future at a premium or discount to NAV.
Additional Risks to Senior Security Holders
Additional risks of investing in senior securities, include the following:
Interest Rate Risk. Distributions and interest payable on our senior
securities are subject to interest rate risk. To the extent that distributions or interest on such securities are based on short-term
rates, our leverage costs may rise so that the amount of distributions or interest due to holders of senior securities would exceed the
cash flow generated by our portfolio securities. To the extent that our leverage costs are fixed, our leverage costs may increase when
our senior securities mature. This might require that we sell portfolio securities at a time when we would otherwise not do so, which
may adversely affect our future ability to generate cash flow. In addition, rising market interest rates could negatively impact the value
of our investment portfolio, reducing the amount of assets serving as asset coverage for senior securities.
Senior Leverage Risk. Our preferred stock will be junior in liquidation
and with respect to distribution rights to our debt securities and any other borrowings. Senior securities representing indebtedness may
constitute a substantial lien and burden on preferred stock by reason of their prior claim against our income and against our net assets
in liquidation. We may not be permitted to declare distributions with respect to any series of our preferred stock unless at such time
we meet applicable asset coverage requirements and the payment of principal or interest is not in default with respect to debt securities
or any other borrowings.
Our debt securities, upon issuance, are expected to be unsecured obligations
and, upon our liquidation, dissolution or winding up, will rank: (1) senior to all of our outstanding common stock and any outstanding
preferred stock; (2) on a parity with any of our unsecured creditors and any unsecured senior securities representing our indebtedness;
and (3) junior to any of our secured creditors. Secured creditors of ours may include, without limitation, parties entering into interest
rate swap, floor or cap transactions, or other similar transactions with us that create liens, pledges, charges, security interests, security
agreements or other encumbrances on our assets.
Ratings and Asset Coverage Risk. To the extent that senior securities
are rated, a rating does not eliminate or necessarily mitigate the risks of investing in our senior securities, and a rating may not fully
or accurately reflect all of the credit and market risks associated with that senior security. A rating agency could downgrade the rating
of our shares of preferred stock or debt securities, which may make such securities less liquid in the secondary market, though probably
with higher resulting interest rates. If a rating agency downgrades, or indicates a potential downgrade to, the rating assigned to a senior
security, we may alter our portfolio or redeem a portion of our senior securities. We may voluntarily redeem a senior security under certain
circumstances to the extent permitted by its governing documents.
Inflation Risk. Inflation is the reduction in the purchasing power
of money resulting from an increase in the price of goods and services. Inflation risk is the risk that the inflation adjusted or “real”
value of an investment in preferred stock or debt securities or the income from that investment will be worth less in the future. As inflation
occurs, the real value of the preferred stock or debt securities and the distributions or interest payable to holders of preferred stock
or debt securities declines.
Decline in Net Asset Value Risk. A material decline in our NAV may
impair our ability to maintain required levels of asset coverage for our preferred stock or debt securities.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Tortoise Midstream Energy Fund, Inc.
We are designed primarily as a long-term investment vehicle, and our securities
are not an appropriate investment for a short-term trading strategy. An investment in our securities should not constitute a complete
investment program for any investor. Due to the uncertainty in all investments, there can be no assurance that we will achieve our investment
objective. Investing in our securities involves risk, including the risk that you may receive little or no return on your investment.
Before investing in our securities, you should consider carefully the summary risks set forth below.
Capital Markets Volatility Risk. Our capital structure and performance
may be adversely impacted by weakness in the credit markets and stock market if such weakness results in declines in the value of midstream
energy entities in which we invest. If the value of our investments decline or remain volatile, there is a risk that we may be required
to reduce outstanding leverage, which could adversely affect our stock price and ability to pay distributions at historical levels. A
sustained economic slowdown may adversely affect the ability of midstream energy entities to sustain their historical distribution levels,
which in turn, may adversely affect our ability to sustain distributions at historical levels. Midstream energy entities that have historically
relied heavily on outside capital to fund their growth may be impacted by a slowdown in the capital markets. The performance of the midstream
energy sector is dependent on several factors including the condition of the financial sector, the general economy and the commodity markets.
Concentration Risk. Under normal circumstances, we will concentrate
our investments in the energy infrastructure sector, and will invest in a portfolio consisting primarily of midstream energy entities
in the energy infrastructure sector, with an emphasis on natural gas infrastructure entities. Risks inherent in the business of these
types of entities include (1) the volume of natural gas or other energy commodities available for transporting, processing, storing or
distributing, (2) energy commodity prices, (3) demand for natural gas, crude oil, and refined petroleum products, (4) climate change regulation,
(5) depletion of natural gas reserves and other commodities, (6) changes in the regulatory environment, (7) extreme weather patterns,
(8) a rising interest rate environment, (9) the threat of terrorism and related military activity and (10) face operating risks, including
the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards.
Industry Specific
Risk. Energy infrastructure companies also are subject to risks specific to the industry they serve.
MLP Risks. An investment in MLP securities involves some risks that
differ from the risks involved in an investment in the common stock of a corporation, including governance risk, tax risk, and cash flow
risk. Governance risk involves the risks associated with the ownership structure of MLPs. MLPs are also subject to tax risk, which is
the risk that MLPs might lose their partnership status for tax purposes. Cash flow risk is the risk that MLPs will not make distributions
to holders (including us) at anticipated levels or that such distributions will not have the expected tax character. As a result, there
could be a material reduction in our cash flow and there could be a material decrease in the value of our common shares.
Equity Securities Risk. Equity securities, including MLP common units,
can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment
towards the midstream energy sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor
performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). Prices of equity securities
also can be affected by fundamentals unique to the entity, including size, earnings power, coverage ratio and characteristics and features
of different classes of securities.
Smaller Company Securities Risk. Investing in securities of smaller
companies may involve greater risk than is associated with investing in more established companies. Companies with smaller capitalization
may have limited product lines, markets or financial resources; may lack management depth or experience; and may be more vulnerable to
adverse general market or economic developments than larger more established companies.
Debt Securities Risk: Investments in debt securities are generally
subject to credit risk, extension risk, interest rate risk, prepayment risk and spread risk.
Below Investment Grade Securities Risk. Investing in below investment
grade debt instruments (commonly referred to as “junk bonds”) involves additional risks than investment grade securities.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a below investment grade issuer to make principal
payments and interest payments than an investment grade issuer. An economic downturn could adversely affect the ability of highly leveraged
issuers to service their obligations or to repay their obligations upon maturity. Similarly, downturns in profitability in the energy
infrastructure industry could adversely affect the ability of below investment grade issuers in that industry to meet their obligations.
The market values of lower quality securities tend to reflect individual developments of the issuer to a greater extent than do higher
quality securities, which react primarily to fluctuations in the general level of interest rates.
The secondary market for below investment grade securities may not be as
liquid as the secondary market for more highly rated securities. There are fewer dealers in the market for below investment grade securities
than investment grade obligations. The prices quoted by different dealers may vary significantly, and the spread between the bid and asked
price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market
for below investment grade securities could contract further, independent
Additional Information
(unaudited) (continued)
of any specific adverse change in the condition of a particular issuer, and
these instruments may become illiquid. As a result, it may be more difficult to sell these securities or we may be able to sell the securities
only at prices lower than if such securities were widely traded. This may affect adversely our ability to make required distribution or
interest payments on our outstanding senior securities. Prices realized upon the sale of such lower-rated or unrated securities, under
these circumstances, may be less than the prices used in calculating our NAV.
Capital Markets Risk. Global financial markets and economic conditions
have been, and may continue to be, volatile due to a variety of factors, including significant write-offs in the financial services sector.
Despite more stabilized economic activity, if the volatility continues, the cost of raising capital in the debt and equity capital markets,
and the ability to raise capital, may be impacted. In particular, concerns about the general stability of financial markets and specifically
the solvency of lending counterparties, may impact the cost of raising capital from the credit markets through increased interest rates,
tighter lending standards, difficulties in refinancing debt on existing terms or at all and reduced, or in some cases ceasing to provide,
funding to borrowers. In addition, lending counterparties under existing revolving credit facilities and other debt instruments may be
unwilling or unable to meet their funding obligations. As a result of any of the foregoing, we or the companies in which we invest may
be unable to obtain new debt or equity financing on acceptable terms. If funding is not available when needed, or is available only on
unfavorable terms, we or the companies in which we invest may not be able to meet obligations as they come due. Moreover, without adequate
funding, midstream energy entities may be unable to execute their growth strategies, complete future acquisitions, take advantage of other
business opportunities or respond to competitive pressures, any of which could have a material adverse effect on their revenues and results
of operations.
Restricted Securities Risk. We may invest up to 50% of Total Assets
in restricted securities, primarily through direct placements. Restricted securities are less liquid than securities traded in the open
market because of statutory and contractual restrictions on resale. Such securities are, therefore, unlike securities that are traded
in the open market, which can be expected to be sold immediately if the market is adequate.
Liquidity Risk. Although equity securities of midstream energy entities
trade on the NYSE, NYSE MKT LLC (formerly known as AMEX), and the NASDAQ National Market, certain midstream energy securities may trade
less frequently than those of larger companies due to their smaller capitalizations. In the event certain midstream energy securities
experience limited trading volumes, the prices of such securities may display abrupt or erratic movements at times. In addition, it may
be more difficult for us to buy and sell significant amounts of such securities without an unfavorable impact on prevailing market prices.
Tax Risk. We have elected to be treated, and intend to qualify each
year, as a “regulated investment company” (“RIC”) under the Code. To maintain our qualification for federal income
tax purposes as a RIC under the Code, we must meet certain source-of-income, asset diversification and annual distribution requirements,
as discussed in detail below under “Certain U.S. Federal Income Tax Considerations.” If for any taxable year we fail to qualify
for the special federal income tax treatment afforded to RICs, all of our taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to our stockholders) and our income available for distribution will be reduced.
Non-Diversification Risk. We are registered as a non-diversified,
closed-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number
or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. However, in order to
qualify as a RIC for federal income tax purposes, we must meet certain requirements.
Covered Call Risk. We cannot guarantee that our covered call option
strategy will be effective. There are several risks associated with transactions in options on securities. The significant differences
between the securities and options markets could result in an imperfect correlation between these markets. The use of options may require
us to sell portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation
we can realize on an investment, or may cause us to hold a security we might otherwise sell. There can be no assurance that a liquid market
will exist when we seek to close out an option position. Factors such as supply and demand, interest rates, the current market price of
the underlying security in relation to the exercise price of the option, the dividend or distribution yield of the underlying security,
the actual or perceived volatility of the underlying security and the time remaining until the expiration date, could impact or cause
to vary over time the amount of income we are able to generate through our covered call option strategy. The number of covered call options
we can write is limited by the number of shares of the corresponding common stock we hold. Furthermore, our covered call option transactions
may be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options
are traded. If we fail to maintain any required asset coverage ratios in connection with any use by us of leverage, we may be required
to redeem or prepay some or all of our leverage instruments. Such redemption or prepayment would likely result in our seeking to terminate
early all or a portion of any option transaction. Early termination of an option could result in a termination payment by or to us.
Hedging Strategy Risk. We may use interest rate transactions for hedging
purposes only, in an attempt to reduce the interest rate risk arising from our leveraged capital structure. There is no assurance that
the interest rate hedging transactions into which we enter will be effective in reducing our exposure to interest rate risk. Hedging transactions
are subject to correlation risk, which is the risk that payment on our hedging transactions may not correlate exactly with our payment
obligations on senior securities.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Delay in Use of Proceeds Risk. Although we expect to fully invest
the net proceeds of any offering within three months after the closing of the offering, such investments may be delayed if suitable investments
are unavailable at the time, if we are unable to secure firm commitments for direct investments, if market conditions and volumes of the
securities of midstream energy entities are not favorable at the time or for other reasons.
Valuation Risk. We may invest up to 50% of total assets in restricted
securities, which are subject to restrictions on resale. The value of such investments ordinarily will be based on fair valuations determined
by the Adviser pursuant to procedures adopted by the Board of Directors. Restrictions on resale or the absence of a liquid secondary market
may affect adversely our ability to determine NAV. The sale price of securities that are restricted or otherwise are not readily marketable
may be higher or lower than our most recent valuations.
Competition Risk. A number of alternatives exist for investing in
a portfolio of energy infrastructure entities, including other publicly traded investment companies, structured notes, private funds,
open-end funds and indexed products. These competitive conditions may adversely impact our ability to meet our investment objective, which
in turn could adversely impact our ability to make distributions or interest or distribution payments.
Management Risk. The Adviser was formed in October 2002 to provide
portfolio management services to institutional and high net worth investors seeking professional management of their MLP investments.
The Adviser has been managing our portfolio since we began operations in July 2010. To the extent that the Adviser’s assets under
management grow, the Adviser may have to hire additional personnel and, to the extent it is unable to hire qualified individuals, its
operations may be adversely affected.
Subsidiary Risks. By investing in any Subsidiary, we will be indirectly
exposed to the risks associated with such Subsidiary’s investments. The instruments that will be held by any Subsidiary will generally
be similar to those that are permitted to be held by the Company and will be subject to the same risks that apply to similar investments
if held directly by the Company. The Subsidiaries will not be registered under the 1940 Act, and, unless otherwise noted, will not be
subject to all of the protections of the 1940 Act. However, we will wholly own and control any Subsidiary, and we and any Subsidiary will
each be managed by our Adviser and will share the same portfolio management team. Our Board of Directors will have oversight responsibility
for the investment activities of the Company, including its investment in the Subsidiaries, and our role as sole shareholder of any Subsidiary.
Changes in the laws of the United States and/or any jurisdiction in which a Subsidiary if formed could result in our inability or the
inability of the Subsidiaries to operate as expected and could adversely affect the Company.
Leverage Risk. Our use of leverage through the issuance of preferred
stock or debt securities, and any borrowings (other than for temporary or emergency purposes) would be considered “senior securities”
for purposes of the 1940 Act and create risks. Leverage is a speculative technique that may adversely affect common stockholders. If the
return on securities acquired with borrowed funds or other leverage proceeds does not exceed the cost of the leverage, the use of leverage
could cause us to lose money. Successful use of leverage depends on our Adviser’s ability to predict or hedge correctly interest
rates and market movements, and there is no assurance that the use of a leveraging strategy will be successful during any period in which
it is used. Because the fee paid to our Adviser will be calculated on the basis of Managed Assets, the fees will increase when leverage
is utilized, giving our Adviser an incentive to utilize leverage.
Market Impact Risk. The sale of our common stock (or the perception
that such sales may occur) may have an adverse effect on prices in the secondary market for our common stock. An increase in the number
of common shares available may put downward pressure on the market price for our common stock.
Dilution Risk. The voting power of current stockholders will be diluted
to the extent that such stockholders do not purchase shares in any future common stock offerings or do not purchase sufficient shares
to maintain their percentage interest.
If we are unable to invest the proceeds of such offering as intended, our
per share distribution may decrease and we may not participate in market advances to the same extent as if such proceeds were fully invested
as planned.
Market Discount Risk. Our common stock has traded both at a premium
and at a discount in relation to NAV. We cannot predict whether our shares will trade in the future at a premium or discount to NAV.
Additional Risks to Senior Securities Holders
Interest Rate Risk. Distributions and interest payable on our senior
securities are subject to interest rate risk. To the extent that distributions or interest on such securities are based on short-term
rates, our leverage costs may rise so that the amount of distributions or interest due to holders of senior securities would exceed the
cash flow generated by our portfolio securities. To the extent that our leverage costs are fixed, our leverage costs may increase when
our senior securities mature. This might require that we sell portfolio securities at a time when we would otherwise not do so, which
may adversely affect our future ability to generate cash flow. In addition, rising market interest rates could negatively impact the value
of our investment portfolio, reducing the amount of assets serving as asset coverage for senior securities.
Senior Leverage Risk. Preferred stock would be junior in liquidation
and with respect to distribution rights to debt securities and any other borrowings. Senior securities representing indebtedness may constitute
a substantial lien and burden on any preferred stock by reason of their prior claim against our income and against our net assets in liquidation.
We may not be permitted to declare distributions with respect to any series of preferred stock unless at such time we meet applicable
asset coverage requirements and the payment of principal or interest is not in default with respect to the Notes or any other borrowings.
Additional Information
(unaudited) (continued)
Ratings and Asset Coverage Risk. To the extent that senior securities
are rated, a rating does not eliminate or necessarily mitigate the risks of investing in our senior securities, and a rating may not fully
or accurately reflect all of the credit and market risks associated with a security. A rating agency could downgrade the rating of our
shares of preferred stock or debt securities, which may make such securities less liquid in the secondary market, though probably with
higher resulting interest rates. If a rating agency downgrades, or indicates a potential downgrade to, the rating assigned to a senior
security, we may alter our portfolio or redeem some senior securities. We may voluntarily redeem a senior security under certain circumstances
to the extent permitted by its governing documents.
Inflation Risk. Inflation is the reduction in the purchasing power
of money resulting from an increase in the price of goods and services. Inflation risk is the risk that the inflation adjusted or “real”
value of an investment in preferred stock or debt securities or the income from that investment will be worth less in the future. As inflation
occurs, the real value of the preferred stock or debt securities and the distributions payable to holders of preferred stock or interest
payable to holders of debt securities declines.
Decline in Net Asset Value Risk. A material decline in our NAV may
impair our ability to maintain required levels of asset coverage for our preferred stock or debt securities.
Tortoise Power and Energy Infrastructure Fund, Inc.
General Business Risk. We are a Maryland corporation registered as
a non-diversified, closed-end management investment company under the 1940 Act. We are subject to all of the business risks and uncertainties
associated with any business, including the risk that we will not achieve our investment objectives and that the value of an investment
in our securities could decline substantially and cause you to lose some or all of your investment.
General Securities Risk. We invest in securities that may be subject
to certain risks, including: (1) issuer risk, (2) credit risk, (3) interest rate risk, (4) reinvestment risk, (5) call or prepayment risk,
(6) valuation risk, and (7) duration and maturity risk.
Capital Markets Risk. Global financial markets and economic conditions
have been, and continue to be, volatile due to a variety of factors, including significant write-offs in the financial services sector.
The third and fourth quarters of 2009 and the first and second quarters of 2010 witnessed more stabilized economic activity as expectations
for an economic recovery increased. However, if the volatility continues, the cost of raising capital in the fixed income and equity capital
markets and the ability to raise capital may be impacted. In particular, concerns about the general stability of financial markets and
specifically the solvency of lending counterparties, may impact the cost of raising capital from the credit markets through increased
interest rates, tighter lending standards, difficulties in refinancing debt on existing terms or at all and reduced, or in some cases
ceasing to provide, funding to borrowers. In addition, lending counterparties under existing revolving credit facilities and other fixed
income instruments may be unwilling or unable to meet their funding obligations. In addition, measures taken by the U.S. Government to
stimulate the U.S. economy may not be successful or may not have the intended effect. As a result of any of the foregoing, companies may
be unable to obtain new fixed income or equity financing on acceptable terms. If funding is not available when needed, or is available
only on unfavorable terms, companies may not be able to meet their obligations as they come due. Moreover, without adequate funding, companies
may be unable to execute their maintenance and growth strategies, complete future acquisitions, take advantage of other business opportunities
or respond to competitive pressures, any of which could have a material adverse effect on their revenues and results of operations.
Investment Grade Fixed Income Securities Risk. We may invest a portion
of our assets in fixed income securities rated “investment grade” by nationally recognized statistical rating organizations
(“NRSROs”) or judged by our Adviser to be of comparable credit quality. Although we do not intend to do so, we may invest
up to 100% in such securities. Investment grade fixed income securities are rated Baa3 or higher by Moody’s Investors Service (“Moody’s”),
BBB- or higher by Standard & Poor’s Ratings Services (“S&P”), or BBB- or higher by Fitch, Inc. (“Fitch”).
Investment grade fixed income securities generally pay yields above those of otherwise-comparable U.S. government securities because they
are subject to greater risks than U.S. government securities, and yields that are below those of non-investment grade fixed income securities,
commonly referred to as “junk bonds,” because they are considered to be subject to fewer risks than non-investment grade fixed
income securities. Despite being considered to be subject to fewer risks than junk bonds, investment grade fixed income securities are,
in fact, subject to risks, including volatility, credit risk and risk of default, sensitivity to general economic or industry conditions,
potential lack of resale opportunities (illiquidity), and additional expenses to seek recovery from issuers who default.
MLP Risks. An investment in MLP securities involves some risks that
differ from the risks involved in an investment in the common stock of a corporation, including governance risk, tax risk, and cash flow
risk. Governance risk involves the risks associated with the ownership structure of MLPs. MLPs are also subject to tax risk, which is
the risk that MLPs might lose their partnership status for tax purposes. Cash flow risk is the risk that MLPs will not make distributions
to holders (including us) at anticipated levels or that such distributions will not have the expected tax character. As a result, there
could be a material reduction in our cash flow and there could be a material decrease in the value of our common shares.
Restricted Securities Risk. We will not invest more than 15% of our
total assets in restricted securities that are ineligible for resale under Rule 144A, all of which may be illiquid securities. Restricted
securities (including Rule 144A securities) are less liquid than freely tradable securities because of statutory and contractual restrictions
on resale. Such securities are, therefore, unlike freely tradable securities, which can be expected to be sold immediately if the market
is adequate. This lack of liquidity creates special risks for us.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Rule 144A Securities Risk. The Fund may purchase Rule 144A securities.
Rule 144A provides an exemption from the registration requirements of the 1933 Act for the resale of certain restricted securities to
qualified institutional buyers, such as the Fund. Securities saleable among qualified institutional buyers pursuant to Rule 144A will
not be counted towards the 15% limitation on restricted securities.
An insufficient number of qualified institutional buyers interested in purchasing
Rule 144A-eligible securities held by us, however, could affect adversely the marketability of certain Rule 144A securities, and we might
be unable to dispose of such securities promptly or at reasonable prices. To the extent that liquid Rule 144A securities that the Fund
holds become illiquid, due to the lack of sufficient qualified institutional buyers or market or other conditions, the percentage of the
Fund’s assets invested in illiquid assets would increase and the fair value of such investments may become not readily determinable.
In addition, if for any reason we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less
than the fair value at which we previously recorded these investments.
Tax Risk. We have elected to be treated, and intend to qualify each
year, as a “regulated investment company” (“RIC”) under the Code. To maintain our qualification for federal income
tax purposes as a RIC under the Code, we must meet certain source-of-income, asset diversification and annual distribution requirements,
as discussed in detail below under “Certain U.S. Federal Income Tax Considerations.” If for any taxable year we fail to qualify
for the special federal income tax treatment afforded to RICs, all of our taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to our stockholders) and our income available for distribution will be reduced.
Equity Securities Risk. Equity securities of entities that operate
in the power and energy infrastructure sectors can be affected by macroeconomic and other factors affecting the stock market in general,
expectations about changes in interest rates, investor sentiment towards such entities, changes in a particular issuer’s financial
condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of
distributions). Prices of equity securities of individual entities also can be affected by fundamentals unique to the company or partnership,
including earnings power and coverage ratios.
Non-investment Grade Fixed Income Securities Risk. We will not invest
more than 25% of our total assets in fixed income securities rated non-investment grade by NRSROs or unrated securities of comparable
quality. Non-investment grade securities are rated Ba1 or lower by Moody’s, BB+ or lower by S&P or BB or lower by Fitch or,
if unrated are determined by our Adviser to be of comparable credit quality. Non-investment grade securities, also sometimes referred
to as “junk bonds,” generally pay a premium above the yields of U.S. government securities or fixed income securities of investment
grade issuers because they are subject to greater risks than these securities. These risks, which reflect their speculative character,
include the following: greater volatility; greater credit risk and risk of default; potentially greater sensitivity to general economic
or industry conditions; potential lack of attractive resale opportunities (illiquidity); and additional expenses to seek recovery from
issuers who default.
Non-U.S. Securities Risk. We may invest up to 10% of our total assets
in securities issued by non-U.S. issuers (including Canadian issuers) and that otherwise meet our investment objectives. This may include
investments in the securities of non-U.S. issuers that involve risks not ordinarily associated with investments in securities and instruments
of U.S. issuers, including different accounting, auditing and financial standards, less government supervision and regulation, additional
tax withholding and taxes, difficulty enforcing rights in foreign countries, less publicly available information, difficulty effecting
transactions, higher expenses, and exchange rate risk.
Valuation Risk. The fair value of certain of our investments may not
be readily determinable. The fair value of these securities will be determined pursuant to methodologies established by our Board of Directors.
While the fair value of securities we acquire through direct placements generally will be based on a discount from quoted market prices,
other factors may adversely affect our ability to determine the fair value of such a security. Our determination of fair value may differ
materially from the values that would have been used if a ready market for these securities had existed.
Leverage Risk. Our use of leverage through borrowings or the issuance
of preferred stock or fixed income securities, and any other transactions involving indebtedness (other than for temporary or emergency
purposes) would be considered “senior securities” for purposes of the 1940 Act. Under normal circumstances, we will not employ
leverage above 20% of our total assets at time of incurrence. Leverage is a speculative technique that may adversely affect common stockholders.
If the return on securities acquired with borrowed funds or other leverage proceeds does not exceed the cost of the leverage, the use
of leverage could cause us to lose money. There is no assurance that a leveraging strategy will be successful.
Hedging Strategy Risk. We may use interest rate swap transactions,
for hedging purposes only, in an attempt to reduce the interest rate risk arising from our leveraged capital structure. Interest rate
swap transactions that we may use for hedging purposes will expose us to certain risks that differ from the risks associated with our
portfolio holdings. The use of hedging transactions might result in reduced overall performance, whether or not adjusted for risk, than
if we had not engaged in such transactions.
Additional Information
(unaudited) (continued)
Liquidity Risk. Certain securities may trade less frequently than
those of larger companies that have larger market capitalizations. Investments in securities that are less actively traded or over time
experience decreased trading volume may be difficult to dispose of when we believe it is desirable to do so, may restrict our ability
to take advantage of other opportunities, and may be more difficult to value.
Non-Diversification Risk. We are registered as a non-diversified,
closed-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number
or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. However, in order to
qualify as a RIC for federal income tax purposes, we must meet certain requirements.
Competition Risk. There are a number of alternatives to us as vehicles
for investment in a portfolio of companies operating primarily in the power and energy infrastructure sectors, including publicly traded
investment companies, structured notes, private funds, open-end funds and indexed products. In addition, recent tax law changes have increased
the ability of RICs or other institutions to invest in MLPs. These competitive conditions may adversely impact our ability to meet our
investment objectives, which in turn could adversely impact our ability to make interest or distribution payments on any securities we
may issue.
Performance Risk. We may not be able to achieve operating results
that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition,
the 1940 Act and restrictions and provisions in credit facilities and fixed income securities may limit our ability to make distributions.
For federal income tax purposes, we are required to distribute substantially all of our net investment income each year both to reduce
our federal income tax liability and to avoid a potential excise tax. If our ability to make distributions on our common shares is limited,
such limitations could, under certain circumstances, impair our ability to maintain our qualification for taxation as a RIC, which would
have adverse consequences for our stockholders.
Legal and Regulatory Change Risks. The regulatory environment for
closed-end companies is evolving, and changes in the regulation of closed-end companies may adversely affect the value of our investments,
our ability to obtain the leverage that we might otherwise obtain, or to pursue our trading strategy. In addition, the securities markets
are subject to comprehensive statutes and regulations. The Securities and Exchange Commission (“SEC”), other regulators and
self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies. The effect
of any future regulatory change on us could be substantial and adverse.
Management Risk. Our Adviser was formed in October 2002 to provide
portfolio management services to institutional and high-net worth investors seeking professional management of their MLP investments.
Our Adviser has been managing our portfolio since we began operations in July 2009. To the extent that the Adviser’s assets under
management grow, the Adviser may have to hire additional personnel and, to the extent it is unable to hire qualified individuals, its
operations may be adversely affected.
Concentration Risk. The Fund’s strategy of concentrating in
power and energy infrastructure investments means that the performance of the Fund will be closely tied to the performance of these particular
market sectors. The Fund’s concentrations in these investments may present more risk than if it were broadly diversified over numerous
industries and sectors of the economy. A downturn in these investments would have a greater impact on the Fund than on a fund that does
not concentrate in such investments. At times, the performance of these investments may lag the performance of other industries or the
market as a whole.
Risks Related to Investing in the Power and Energy Infrastructure Sectors
Under normal circumstances, we plan to invest at least 80% of our total assets
(including assets we obtain through leverage) in the securities of companies that derive more than 50% of their revenue from power or
energy infrastructure operations. Our focus on the power and energy infrastructure sectors may present more risks than if it were broadly
diversified over numerous sectors of the economy. Therefore, a downturn in the power and energy infrastructure sectors would have a larger
impact on us than on an investment company that does not concentrate in these sectors. Specific risks of investing in the power and energy
infrastructure sectors include the following: (1) interest rate risk, (2) credit rating downgrade risk, (3) terrorism and natural disasters
risk, (4) climate change regulation risk, (5) operating risk (6) power infrastructure company risk, and (7) energy infrastructure company
risk.
Power Infrastructure Company Risk. Companies operating in the power
infrastructure sector also are subject to additional risks, including: (1) regulatory risk, (2) Federal Energy Regulatory Commission risk,
(3) environmental risk and (4) competition risk. To the extent that any of these risks materialize for a company whose securities are
in our portfolio, the value of these securities could decline and our net asset value and share price could be adversely affected.
Energy Infrastructure Company Risk. Companies operating in the energy
infrastructure sector also are subject to additional risks, including: (1) pipeline company risk, (2) gathering and processing company
risk, (3) propane company risk, (4) supply and demand risk, (5) price volatility risk, (6) competition risk, and (7) regulatory risk.
To the extent that any of these risks materialize for a company whose securities are in our portfolio, the value of these securities could
decline and our net asset value and share price would be adversely affected.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Additional Risks to Common Stockholders
Market Impact Risk. The sale of our common stock (or the perception
that such sales may occur) may have an adverse effect on prices in the secondary market for our common stock by increasing the number
of shares available, which may put downward pressure on the market price for our common stock. Our ability to sell shares of common stock
below NAV may increase this pressure. These sales also might make it more difficult for us to sell additional equity securities in the
future at a time and price we deem appropriate.
Dilution Risk. The voting power of current stockholders will be diluted
to the extent that such stockholders do not purchase shares in any future common stock offerings or do not purchase sufficient shares
to maintain their percentage interest. In addition, if we sell shares of common stock below NAV, our NAV will fall immediately after such
issuance.
If we are unable to invest the proceeds of such offering as intended, our
per share distribution may decrease and we may not participate in market advances to the same extent as if such proceeds were fully
invested as planned.
Market Discount Risk. Our common stock has traded both at a premium
and at a discount in relation to NAV. We cannot predict whether our shares will trade in the future at a premium or discount to NAV.
Additional Risks to Senior Security Holders
Additional risks of investing in preferred stock or debt securities issued
by us include the following:
Interest Rate Risk. Distributions and interest payable on our senior
securities are subject to interest rate risk. To the extent that distributions on such securities are based on short-term rates, our leverage
costs may rise so that the amount of distributions or interest due to holders of senior securities would exceed the cash flow generated
by our portfolio securities. To the extent that our leverage costs are fixed, our leverage costs may increase when our senior securities
mature. This might require that we sell portfolio securities at a time when we would otherwise not do so, which may adversely affect our
future ability to generate cash flow. In addition, rising market interest rates could negatively impact the value of our investment portfolio,
reducing the amount of assets serving as asset coverage for senior securities.
Senior Leverage Risk. Our preferred stock will be junior in liquidation
and with respect to distribution rights to our debt securities and any other borrowings. Senior securities representing indebtedness may
constitute a substantial lien and burden on preferred stock by reason of their prior claim against our income and against our net assets
in liquidation. We may not be permitted to declare distributions with respect to any series of our preferred stock unless at such time
we meet applicable asset coverage requirements and the payment of principal or interest is not in default with respect to senior debt
securities or any other borrowings.
Our debt securities, upon issuance, are expected to be unsecured obligations
and, upon our liquidation, dissolution or winding up, will rank: (1) senior to all of our outstanding common stock and any outstanding
preferred stock; (2) on a parity with any of our unsecured creditors and any unsecured senior securities representing our indebtedness;
and (3) junior to any of our secured creditors. Secured creditors of ours may include, without limitation, parties entering into interest
rate swap, floor or cap transactions, or other similar transactions with us that create liens, pledges, charges, security interests, security
agreements or other encumbrances on our assets.
Ratings and Asset Coverage Risk. To the extent that senior securities
are rated, a rating does not eliminate or necessarily mitigate the risks of investing in our senior securities, and a rating may not fully
or accurately reflect all of the credit and market risks associated with that senior security. A rating agency could downgrade the rating
of our shares of preferred stock or debt securities, which may make such securities less liquid in the secondary market, though probably
with higher resulting interest rates. If a rating agency downgrades, or indicates a potential downgrade to, the rating assigned to a senior
security, we may alter our portfolio or redeem a portion of our senior securities. We may voluntarily redeem a senior security under certain
circumstances to the extent permitted by its governing documents.
Inflation Risk. Inflation is the reduction in the purchasing power
of money resulting from an increase in the price of goods and services. Inflation risk is the risk that the inflation adjusted or “real”
value of an investment in preferred stock or debt securities or the income from that investment will be worth less in the future. As inflation
occurs, the real value of the preferred stock or debt securities and the distributions or interest payable to holders of preferred stock
or debt securities declines.
Decline in Net Asset Value Risk. A material decline in our NAV may
impair our ability to maintain required levels of asset coverage for our preferred stock or debt securities.
Additional Information
(unaudited) (continued)
Tortoise Pipeline & Energy Fund, Inc.
The following are the general risks of investing in our securities that affect
our ability to achieve our investment objective. The risks below could lower the returns and distributions on common stock and reduce
the amount of cash and net assets available to make distribution payments on preferred stock and interest payments on debt securities.
Capital Markets Volatility Risk. Our capital structure and performance
may be adversely impacted by weakness in the credit markets and stock market if such weakness results in declines in the value of companies
in which we invest. If the value of our investments decline or remain volatile, there is a risk that we may be required to reduce outstanding
leverage, which could adversely affect our stock price and ability to pay distributions at historical levels. A sustained economic slowdown
may adversely affect the ability of the companies in which we invest to obtain new debt or equity financing on acceptable terms. If funding
is not available when needed, or is available only on unfavorable terms, we or the companies in which we invest may not be able to meet
obligations as they come due. Moreover, without adequate funding, energy infrastructure companies may be unable to execute their growth
strategies, complete future acquisitions, take advantage of other business opportunities or respond to competitive pressures, any of which
could have a material adverse effect on their revenues and results of operations.
Rising interest rates could limit the capital
appreciation of equity units of energy infrastructure companies as a result of the increased availability of alternative investments
at competitive yields. Rising interest rates may increase the cost of capital for companies operating in this sector. A higher cost
of capital or an inflationary period may lead to inadequate funding, which could limit growth from acquisition or expansion
projects, the ability of such entities to make or grow dividends or distributions or meet debt obligations, the ability to respond
to competitive pressures, all of which could adversely affect the prices of their securities.
Concentration Risk. Our strategy of concentrating in energy infrastructure
investments means that our performance will be closely tied to the performance of the energy infrastructure sector, which includes midstream,
upstream and downstream energy industries. Our concentration in these investments may present more risk than if we were broadly diversified
over numerous industries and sectors of the economy. A downturn in these investments would have a greater impact on us than on a fund
that does not concentrate in such investments. At times, the performance of these investments may lag the performance of other industries
or the market as a whole. Risks inherent in the business of energy infrastructure companies include:
| • | Supply and Demand Risk. A decrease in the production of natural gas, NGLs, crude oil, coal, refined petroleum products or other
energy commodities, or a decrease in the volume of such commodities available for transporting, storing, gathering, processing, distributing,
exploring, developing, managing or producing may adversely impact the financial performance and profitability of energy infrastructure
companies. Production declines and volume decreases could be caused by various factors, including depletion of resources, declines in
estimates of proved reserves, labor difficulties, political events, OPEC actions, changes in commodity prices, declines in production
from existing facilities, environmental proceedings, increased regulations, equipment failures and unexpected maintenance problems, failure
to obtain necessary permits, unscheduled outages, unanticipated expenses, inability to successfully carry out new construction or acquisitions,
import supply disruption, increased competition from alternative energy sources or related commodity prices and other events. Alternatively,
a sustained decline in or varying demand for such commodities could also adversely affect the financial performance of energy infrastructure
companies. Factors that could lead to a decline in demand include economic recession or other adverse economic conditions, higher fuel
taxes or governmental regulations, increases in fuel economy, consumer shifts to the use of alternative fuel sources, changes in commodity
prices or weather. |
| • | Operating Risk. energy infrastructure companies are subject to many operating risks, including: equipment failure causing outages;
structural, maintenance, impairment and safety problems; transmission or transportation constraints, inoperability or inefficiencies;
dependence on a specified fuel source, including the transportation of fuel; changes in electricity and fuel usage; availability of competitively
priced alternative energy sources; changes in generation efficiency and market heat rates; lack of sufficient capital to maintain facilities;
significant capital expenditures to keep older assets operating efficiently; seasonality; changes in supply and demand for energy commodities;
catastrophic and/or weather- related events such as fires, explosions, floods, earthquakes, hurricanes and similar occurrences; storage,
handling, disposal and decommissioning costs; and environmental compliance. Breakdown or failure of a pipeline or other energy infrastructure
company’s assets may prevent the company from performing under applicable sales agreements, which in certain situations, could result
in termination of the agreement or incurring a liability for liquidated damages. A company’s ability to successfully and timely
complete capital improvements to existing or other capital projects is contingent upon many variables. Should any such efforts be unsuccessful,
a pipeline or other energy infrastructure company could be subject to additional costs and / or the write-off of its investment in the
project or improvement. As a result of the above risks and other potential hazards associated with energy infrastructure companies, certain
companies may become exposed to significant liabilities for which they may not have adequate insurance coverage. Any of the aforementioned
risks or related regulatory and environmental risks could have a material adverse effect on the business, financial condition, results
of operations and cash flows of energy infrastructure companies. |
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
| • | Regulatory Risk. Energy infrastructure issuers are subject to regulation by various governmental authorities in various jurisdictions
and may be adversely affected by the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards.
Regulation exists in multiple aspects of their operations, including how facilities are constructed, maintained and operated, environmental
and safety controls, and the prices they may charge for the products and services they provide. Various governmental authorities have
the power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative,
civil and criminal penalties, including fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted
in the future which may increase compliance costs and may adversely affect the financial performance of energy infrastructure companies.
Pipeline companies engaged in interstate pipeline transportation of natural gas, refined petroleum products and other products are subject
to regulation by the Federal Energy Regulatory Commission (“FERC”) with respect to tariff rates these companies may charge
for pipeline transportation services. An adverse determination by the FERC with respect to the tariff rates of a pipeline or other energy
infrastructure company could have a material adverse effect on its business, financial condition, results of operations and cash flows
and its ability to make cash distributions to its equity owners. Prices for certain electric power companies are regulated in the U.S.
with the intention of protecting the public while ensuring that the rate of return earned by such companies is sufficient to attract growth
capital and to provide appropriate services but do not provide any assurance as to achievement of earnings levels. We could become subject
to the FERC’s jurisdiction if we are deemed to be a holding company of a public utility company or of a holding company of a public
utility company, and we may be required to aggregate securities held by us or other funds and accounts managed by the Adviser and its
affiliates, or be prohibited from buying certain securities or be forced to divest certain securities. |
| • | Environmental Risk. Energy infrastructure company activities are subject to stringent environmental laws and regulation by
many federal, state and local authorities, international treaties and foreign governmental authorities. Failure to comply with such laws
and regulations or to obtain any necessary environmental permits pursuant to such laws and regulations could result in fines or other
sanctions. Congress and other domestic and foreign governmental authorities have either considered or implemented various laws and regulations
to restrict or tax certain emissions, particularly those involving air and water emissions. Existing environmental regulations could be
revised or reinterpreted, new laws and regulations could be adopted or become applicable, and future changes in environmental laws and
regulations could occur, which could impose additional costs on the operation of power plants. Energy infrastructure companies have made
and will likely continue to make significant capital and other expenditures to comply with these and other environmental laws and regulations.
Changes in, or new, environmental restrictions may force energy infrastructure companies to incur significant expenses or expenses that
may exceed their estimates. There can be no assurance that such companies would be able to recover all or any increased environmental
costs from their customers or that their business, financial condition or results of operations would not be materially and adversely
affected by such expenditures or any changes in domestic or foreign environmental laws and regulations, in which case the value of these
companies’ securities in our portfolio could be adversely affected. In addition, a pipeline or other energy infrastructure company
may be responsible for any on-site liabilities associated with the environmental condition of facilities that it has acquired, leased
or developed, regardless of when the liabilities arose and whether they are known or unknown. |
| • | Price Volatility Risk. The volatility of energy commodity prices can affect certain energy infrastructure companies due to
the impact of prices on the volume of commodities transported, stored, gathered, processed, distributed, developed or produced. Most pipeline
companies are not subject to direct commodity price exposure because they do not own the underlying energy commodity. Nonetheless, the
price of a pipeline company security can be adversely affected by the perception that the performance of all such entities is directly
tied to commodity prices. However, the operations, cash flows and financial performance of other energy infrastructure companies in which
we will invest may be more directly affected by energy commodity prices, especially those energy companies owning the underlying energy
commodity. Commodity prices fluctuate for several reasons, including changes in global and domestic market and economic conditions, the
impact of weather on demand, levels of domestic production and imported commodities, energy conservation, domestic and foreign governmental
regulation, political instability, conservation efforts, and taxation and the availability of local, intrastate and interstate transportation
systems. Volatility of commodity prices may also make it more difficult for energy companies to raise capital to the extent the market
perceives that their performance may be directly or indirectly tied to commodity prices. Historically, energy commodity prices have been
cyclical and exhibited significant volatility which may adversely impact other energy infrastructure companies in which we invest. |
| • | Terrorism Risk. Energy infrastructure companies, and the market for their securities, are subject to disruption as a result
of terrorist activities, such as the terrorist attacks on the World Trade Center on September 11, 2001; war, such as the wars in Afghanistan
and Iraq and their aftermaths; and other geopolitical events, including upheaval in the Middle East or other energy producing regions.
The U.S. government has issued warnings that energy assets, specifically those related to energy infrastructure, production facilities,
and transmission and distribution facilities, might be specific targets of terrorist activity. Such events have led, and in the future
may lead, to short-term market volatility and may have long-term effects on companies in the energy infrastructure industry and markets.
Such events may also adversely affect our business and financial condition. |
Additional Information
(unaudited) (continued)
| • | Natural Disaster Risk. Natural risks, such as earthquakes, flood, lightning, hurricanes and wind, are inherent risks in infrastructure
company operations. For example, extreme weather patterns, such as Hurricane Ivan in 2004 and Hurricanes Katrina and Rita in 2005, the
Tohuku earthquake and resulting tsunami in Japan in 2011, Hurricane Sandy in 2012 and Hurricane Harvey in 2017, or the threat thereof,
could result in substantial damage to the facilities of certain companies located in the affected areas and significant volatility in
the supply of energy and could adversely impact the prices of the securities in which we invest. This volatility may create fluctuations
in commodity prices and earnings of energy infrastructure companies. |
| • | Climate Change Regulation Risk. Climate change regulation could result in increased operations and capital costs for the companies
in which we invest. Voluntary initiatives and mandatory controls have been adopted or are being discussed both in the United States and
worldwide to reduce emissions of “greenhouse gases” such as carbon dioxide, a by-product of burning fossil fuels, which some
scientists and policymakers believe contribute to global climate change. These measures and future measures could result in increased
costs to certain companies in which we invest to operate and maintain facilities and administer and manage a greenhouse gas emissions
program and may reduce demand for fuels that generate greenhouse gases and that are managed or produced by companies in which we invest. |
Industry Specific Risk. Energy infrastructure companies are subject
to specific risks, including:
| • | Renewable and power infrastructure companies are subject to many risks, including earnings variability based upon weather patterns
in the locations where the company operates, the change in the demand for electricity, the cost to produce power, and the regulatory environment.
Further, share prices are partly based on the interest rate environment, the sustainability and potential growth of the dividend, and
the outcome of various rate cases undertaken by the company or a regulatory body. |
| • | Pipeline companies are subject to varying demand for crude oil, natural gas, NGLs or refined products in the markets served by the
pipeline; changes in the availability of products for transporting, gathering, processing or sale due to natural declines in reserves
and production in the supply areas serviced by the company’s facilities; sharp decreases in crude oil or natural gas prices that
cause producers to curtail production or reduce capital spending for exploration activities; and environmental regulation. Specifically,
demand for gasoline, which accounts for a substantial portion of refined product transportation, depends on price, prevailing economic
conditions in the markets served, and demographic and seasonal factors. |
| • | Processing companies are subject to declines in production of natural gas fields, which utilize the processing facilities as a way
to market the gas, prolonged depression in the price of natural gas, which curtails production due to lack of drilling activity and declines
in the prices of NGL products and natural gas prices, resulting in lower processing margins. |
| • | Integrated energy companies are impacted by declines in the demand for and prices of natural gas, crude oil and refined petroleum
products. Reductions in prices for natural gas and crude oil can cause a given reservoir to become uneconomic for continued production
earlier than it would if prices were higher. The operating margins and cash flows of integrated energy companies may fluctuate widely
in response to a variety of factors, including global and domestic economic conditions, weather conditions, natural disasters, the supply
and price of imported energy commodities, change in the level and relationship in crude oil and refined petroleum product pricing, political
instability, conservation efforts and governmental regulation. The accuracy of any reserve estimate is a function of the quality of available
data, the accuracy of assumptions regarding future commodity prices and costs, and engineering and geological interpretations and judgments.
Due to natural declines in reserves and production, exploitation and production companies must economically find or acquire and develop
additional reserves in order to maintain and grow their revenues and distributions. Integrated energy companies are also subject to risks
related to operations (such as fires and explosions) as well as the potential environmental and regulatory risks of such events, which
may adversely impact their business and financial condition. |
| • | Renewable and power infrastructure companies are subject to many risks, including earnings variability based upon weather patterns
in the locations where the company operates, the change in the demand for electricity, the cost to produce power, and the regulatory environment.
Furthermore, share prices are partly based on the interest rate environment, the sustainability and potential growth of the dividend,
and the outcome of various rate cases undertaken by the company or a regulatory body. |
MLP Risks. An investment in MLP securities involves some risks that
differ from the risks involved in an investment in the common stock of a corporation, including governance risk, tax risk, and cash flow
risk. Governance risk involves the risks associated with the ownership structure of MLPs. MLPs are also subject to tax risk, which is
the risk that MLPs might lose their partnership status for tax purposes. Cash flow risk is the risk that MLPs will not make distributions
to holders (including us) at anticipated levels or that such distributions will not have the expected tax character. As a result, there
could be a material reduction in our cash flow and there could be a material decrease in the value of our common shares.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Equity Securities Risk. Equity securities can be affected by macroeconomic
and other factors affecting the stock market in general, expectations about changes in interest rates, investor sentiment toward such
entities, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular
issuer. Prices of equity securities of individual entities also can be affected by fundamentals unique to the company or partnership,
including size, earnings power, coverage ratio and characteristics and features of different classes of securities. Equity securities
are susceptible to general stock market fluctuations and to volatile increases and decreases in value. The equity securities we hold may
experience sudden, unpredictable drops in value or long periods of decline in value. In addition, by writing covered call options, capital
appreciation potential will be limited on a portion of our investment portfolio.
Foreign Securities Risk. Investments in securities (including ADRs)
of foreign issuers involve risks not ordinarily associated with investments in securities and instruments of U.S. issuers. For example,
foreign companies are not generally subject to uniform accounting, auditing and financial standards and requirements comparable to those
applicable to U.S. companies. Foreign securities exchanges, brokers and companies may be subject to less government supervision and regulation
than exists in the U.S. Dividend and interest income may be subject to withholding and other foreign taxes, which may adversely affect
the net return on such investments. The Fund may not be able to pass through to its shareholders any foreign income tax credits as a result
of any foreign income taxes it pays. There may be difficulty in obtaining or enforcing a court judgment abroad. In addition, it may be
difficult to effect repatriation of capital invested in certain countries. With respect to certain countries, there are risks of expropriation,
confiscatory taxation, political or social instability or diplomatic developments that could affect the Fund’s assets held in foreign
countries. Furthermore, foreign companies operate and serve customers in many parts of the world, and encounter a variety of political
and legal risks unique to those jurisdictions. Local economic conditions may vary and may have a meaningful influence on the outcome of
business activities. Some of these risks are impacted by regional inflation, economic cycles, currency volatility, sovereign debt markets,
local economic environments, and regional trade patterns. There may be less publicly available information about a foreign company than
there is regarding a U.S. company, and many foreign companies are not subject to accounting, auditing, and financial reporting standards,
regulatory framework and practices comparable to those in the U.S. Foreign securities markets may have substantially less volume than
U.S. securities markets and some foreign company securities are less liquid than securities of otherwise comparable U.S. companies. Foreign
markets also have different clearance and settlement procedures that could cause the Fund to encounter difficulties in purchasing and
selling securities on such markets and may result in the Fund missing attractive investment opportunities or experiencing a loss. In addition,
a portfolio that includes securities issued by foreign issuers can expect to have a higher expense ratio because of the increased transaction
costs in foreign markets and the increased costs of maintaining the custody of such foreign securities. When investing in securities issued
by foreign issuers, there is also the risk that the value of such an investment or the Fund’s income, measured in U.S. dollars,
will decrease because of unfavorable changes in currency exchange rates.
Liquidity Risk. We may invest in securities of any market capitalization
and may be exposed to liquidity risk when trading volume, lack of a market maker, or legal restrictions impair our ability to sell particular
securities or close call option positions at an advantageous price or a timely manner. We may invest in mid-cap and small-cap companies,
which may not have the management experience, financial resources, product diversification and competitive strengths of large-cap companies.
Analysts and other investors may follow these companies less actively and therefore information about these companies may not be as readily
available as that for large-cap companies. Therefore, their securities may be more volatile and less liquid than the securities of larger,
more established companies. In the event certain securities experience limited trading volumes, the prices of such securities may display
abrupt or erratic movements at times. In addition, it may be more difficult for us to buy and sell significant amounts of such securities
without an unfavorable impact on prevailing market prices. As a result, these securities may be difficult to sell at a favorable price
at the times when we believe it is desirable to do so. Investment of our capital in securities that are less actively traded (or over
time experience decreased trading volume) may restrict our ability to take advantage of other market opportunities or to sell those securities.
This also may affect adversely our ability to make required interest payments on our debt securities and distributions on any of our preferred
stock, to redeem such securities, or to meet asset coverage requirements.
Non-Diversification Risk. We are registered as a non-diversified,
closed-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number
or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. However, in order to
qualify as a RIC for federal income tax purposes, we must meet certain requirements.
Performance and Distribution Risk. We may not be able to achieve operating
results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time.
We cannot assure you that you will receive distributions at a particular level or at all. Dividends and distributions on equity securities
are not fixed but are declared at the discretion of the issuer’s board of directors. If stock market volatility declines, the level
of premiums from writing covered call options will likely decrease as well. Payments to close-out written call options will reduce amounts
available for distribution from gains earned in respect of call option expiration or close out. The equity securities in which we invest
may not appreciate or may decline in value. Net realized and unrealized gains on the securities investments will be determined primarily
by the direction and movement of the applicable securities markets and our holdings. Any gains that we do realize on the disposition of
any securities may not be sufficient to offset losses on other securities or option transactions. A significant decline in the value of
the securities in which we invest may negatively impact our ability to pay distributions or cause you to lose all or a part of your investment.
Additional Information
(unaudited) (continued)
In addition, the 1940 Act may limit our ability to make distributions in
certain circumstances. Restrictions and provisions in any future credit facilities and our debt securities may also limit our ability
to make distributions. For federal income tax purposes, we are required to distribute substantially all of our net investment income each
year both to reduce our federal income tax liability and to avoid a potential excise tax. If our ability to make distributions on our
common shares is limited, such limitations could, under certain circumstances, impair our ability to maintain our qualification for taxation
as a RIC, which would have adverse consequences for our stockholders.
Quarterly Results Risk. We could experience fluctuations in our operating
results due to a number of factors, including the return on our investments, the level of our expenses, variations in and the timing of
the recognition of realized and unrealized gains or losses on our investments and written call options, the level of call premium we receive
by writing covered calls, the degree to which we encounter competition in our markets and general economic conditions. As a result of
these factors, results for any period should not be relied upon as being indicative of performance in future periods.
Restricted Securities Risk. We may invest up to 30% of our total assets
in unregistered or otherwise restricted securities, primarily through direct investments in securities of listed companies. Restricted
securities (including Rule 144A securities) are less liquid than securities traded in the open market because of statutory and contractual
restrictions on resale. Such securities are, therefore, unlike securities that are traded in the open market, which can be expected to
be sold immediately if the market is adequate. This lack of liquidity may create special risks for us. However, we could sell such securities
in private transactions with a limited number of purchasers or in public offerings under the 1933 Act.
Restricted securities are subject to statutory and contractual restrictions
on their public resale, which may make it more difficult to value them, may limit our ability to dispose of them and may lower the amount
we could realize upon their sale. To enable us to sell our holdings of a restricted security not registered under the 1933 Act, we may
have to cause those securities to be registered. The expenses of registering restricted securities may be determined at the time we buy
the securities. When we must arrange registration because we wish to sell the security, a considerable period may elapse between the time
the decision is made to sell the security and the time the security is registered so that we could sell it. We would bear the risks of
any downward price fluctuation during that period.
Portfolio Turnover Risk. We may, but under normal market conditions
do not intend to, engage in frequent and active trading of portfolio securities to achieve our investment objective. However, annual portfolio
turnover as a result of our purchases and sales of equity securities and call options may exceed 100%, which is higher than many other
investment companies and would involve greater trading costs to us and may result in greater realization of taxable capital gains.
Hedging and Derivatives Risk. In addition to writing call options
as part of the investment strategy, we may invest in derivative instruments for hedging or risk management purposes. Our use of derivatives
could enhance or decrease the cash available to us for payment of distributions or interest, as the case may be. Derivatives can be illiquid,
may disproportionately increase losses and have a potentially large negative impact on our performance. Derivative transactions, including
options on securities and securities indices and other transactions in which we may engage (such as forward currency transactions, futures
contracts and options thereon, and total return swaps), may subject us to increased risk of principal loss due to unexpected movements
in stock prices, changes in stock volatility levels, interest rates and foreign currency exchange rates and imperfect correlations between
our securities holdings and indices upon which derivative transactions are based. We also will be subject to credit risk with respect
to the counterparties to any over-the-counter derivatives contracts we purchased. If a counterparty becomes bankrupt or otherwise fails
to perform its obligations under a derivative contract, we may experience significant delays in obtaining any recovery under the derivative
contract in a bankruptcy or other reorganization proceeding. We may obtain only a limited recovery or may obtain no recovery in such circumstances.
In addition, if the counterparty to a derivative transaction defaults, we would not be able to use the anticipated net receipts under
the derivative to offset our cost of financial leverage.
Interest rate transactions will expose us to certain risks that differ from
the risks associated with our portfolio holdings. There are economic costs of hedging reflected in the price of interest rate swaps, floors,
caps and similar techniques, the costs of which can be significant, particularly when long-term interest rates are substantially above
short-term rates. In addition, our success in using hedging instruments is subject to our Adviser’s ability to predict correctly
changes in the relationships of such hedging instruments to our leverage risk, and there can be no assurance that our Adviser’s
judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance,
whether or not adjusted for risk, than if we had not engaged in such transactions. There is no assurance that the interest rate hedging
transactions into which we enter will be effective in reducing our exposure to interest rate risk. Hedging transactions are subject to
correlation risk, which is the risk that payment on our hedging transactions may not correlate exactly with our payment obligations on
senior securities. To the extent there is a decline in interest rates, the value of certain derivatives could decline, and result in a
decline in our net assets.
Tax Risk. We have elected to be treated, and intend to qualify each
year, as a “regulated investment company” (“RIC”) under the Code. To maintain our qualification for federal income
tax purposes as a RIC under the Code, we must meet certain source-of-income, asset diversification and annual distribution requirements,
as discussed in detail below under “Certain U.S. Federal Income Tax Considerations.” If for any taxable year we fail to qualify
for the special federal income tax treatment afforded to RICs, all of our taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to our stockholders) and our income available for distribution will be reduced.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Anti-Takeover Provisions Risks. Maryland law and our Charter and Bylaws
include provisions that could delay, defer or prevent other entities or persons from acquiring control of us, causing us to engage in
certain transactions or modifying our structure. These provisions may be regarded as “anti-takeover” provisions. Such provisions
could limit the ability of common stockholders to sell their shares at a premium over the then-current market prices by discouraging a
third party from seeking to obtain control of us.
Below Investment Grade Securities Risk. Investing in below investment
grade debt instruments (commonly referred to as “junk bonds”) involves additional risks than investment grade securities.
Adverse changes in economic conditions are more likely to lead to a weakened capacity of a below investment grade issuer to make principal
payments and interest payments than an investment grade issuer. An economic downturn could adversely affect the ability of highly leveraged
issuers to service their obligations or to repay their obligations upon maturity. Similarly, downturns in profitability in the energy
infrastructure industry could adversely affect the ability of below investment grade issuers in that industry to meet their obligations.
The market values of lower quality securities tend to reflect individual developments of the issuer to a greater extent than do higher
quality securities, which react primarily to fluctuations in the general level of interest rates.
The secondary market for below investment grade securities may not be as
liquid as the secondary market for more highly rated securities. There are fewer dealers in the market for below investment grade securities
than investment grade obligations. The prices quoted by different dealers may vary significantly, and the spread between the bid and asked
price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market
for below investment grade securities could contract further, independent of any specific adverse change in the condition of a particular
issuer, and these instruments may become illiquid. As a result, it may be more difficult to sell these securities or we may be able to
sell the securities only at prices lower than if such securities were widely traded. This may affect adversely our ability to make required
distribution or interest payments on our outstanding senior securities. Prices realized upon the sale of such lower-rated or unrated securities,
under these circumstances, may be less than the prices used in calculating our NAV.
Because investors generally perceive that there are greater risks associated
with lower quality securities of the type in which we may invest a portion of our assets, the yields and prices of such securities may
tend to fluctuate more than those for higher rated securities. In the lower quality segments of the debt securities market, changes in
perceptions of issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher
quality segments of the debt securities market, resulting in greater yield and price volatility.
Factors having an adverse impact on the market value of below investment
grade securities may have an adverse effect on our NAV and the market value of our common stock. In addition, we may incur additional
expenses to the extent we are required to seek recovery upon a default in payment of principal or interest on our portfolio holdings.
In certain circumstances, we may be required to foreclose on an issuer’s assets and take possession of its property or operations.
In such circumstances, we would incur additional costs in disposing of such assets and potential liabilities from operating any business
acquired.
Counterparty Risk. We may be subject to credit risk with respect to
the counterparties to certain derivative agreements entered into by us. If a counterparty becomes bankrupt or otherwise fails to perform
its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery
under the derivative contract in a bankruptcy or other reorganization proceeding. We may obtain only a limited recovery or may obtain
no recovery in such circumstances.
Management Risk. Our Adviser was formed in 2002 to provide portfolio
management to institutional and high-net worth investors seeking professional management of their MLP investments. Our Adviser has been
managing our portfolio since we began operations. To the extent that the Adviser’s assets under management grow, the Adviser may
have to hire additional personnel and, to the extent it is unable to hire qualified individuals, its operations may be adversely affected.
Additional Risks to Common Stockholders
Leverage Risk. Our use of leverage through the issuance of preferred
stock (“Tortoise Preferred Shares”) and senior notes (“Tortoise Notes”) along with the issuance of any additional
preferred stock or debt securities, and any additional borrowings or other transactions involving indebtedness (other than for temporary
or emergency purposes) are or would be considered “senior securities” for purposes of the 1940 Act and create risks. Leverage
is a speculative technique that may adversely affect common stockholders. If the return on securities acquired with borrowed funds or
other leverage proceeds does not exceed the cost of the leverage, the use of leverage could cause us to lose money. Successful use of
leverage depends on the Adviser’s ability to predict or hedge correctly interest rates and market movements, and there is no assurance
that the use of a leveraging strategy will be successful during any period in which it is used. Because the fee paid to the Adviser will
be calculated on the basis of Managed Assets, the fees will increase when leverage is utilized, giving the Adviser an incentive to utilize
leverage.
Our issuance of senior securities involves offering expenses and other costs,
including interest payments, which are borne indirectly by our common stockholders. Fluctuations in interest rates could increase interest
or distribution payments on our senior securities, and could reduce cash available for distributions on common stock. Increased operating
costs, including the financing cost associated with any leverage, may reduce our total return to common stockholders.
Additional Information
(unaudited) (continued)
The 1940 Act and/or the rating agency guidelines applicable to senior securities
impose asset coverage requirements, distribution limitations, voting right requirements (in the case of the senior equity securities),
and restrictions on our portfolio composition and our use of certain investment techniques and strategies. The terms of any senior securities
or other borrowings may impose additional requirements, restrictions and limitations that are more stringent than those currently required
by the 1940 Act, and the guidelines of the rating agencies that rate outstanding senior securities. These requirements may have an adverse
effect on us and may affect our ability to pay distributions on common stock and preferred stock. To the extent necessary, we intend to
redeem our senior securities to maintain the required asset coverage. Doing so may require that we liquidate portfolio securities at a
time when it would not otherwise be desirable to do so. Nevertheless, it is not anticipated that the 1940 Act requirements, the terms
of any senior securities or the rating agency guidelines will impede the Adviser in managing our portfolio in accordance with our investment
objective and policies.
Market Impact Risk. The sale of our common stock (or the perception
that such sales may occur) may have an adverse effect on prices in the secondary market for our common stock. An increase in the number
of common shares available may put downward pressure on the market price for our common stock.
Dilution Risk. The voting power of current stockholders will be diluted
to the extent that current stockholders do not purchase shares in any future common stock offerings or do not purchase sufficient shares
to maintain their percentage interest.
If we are unable to invest the proceeds of such offering as intended, our
per share distribution may decrease and we may not participate in market advances to the same extent as if such proceeds were fully invested
as planned.
Market Discount Risk. Our common stock has traded both at a premium
and at a discount in relation to NAV. We cannot predict whether our shares will trade in the future at a premium or discount to NAV. Shares
of closed-end investment companies frequently trade at a discount from NAV, but in some cases have traded above NAV. Continued development
of alternatives as a vehicle for investment in MLP securities may contribute to reducing or eliminating any premium or may result in our
shares trading at a discount. The risk of the shares of common stock trading at a discount is a risk separate from the risk of a decline
in our NAV as a result of investment activities. Our NAV will be reduced immediately following an offering of our common or preferred
stock, due to the offering costs for such stock, which are borne entirely by us. Although we also bear the offering costs of debt securities,
such costs are amortized over time and therefore do not impact our NAV immediately following an offering.
Whether stockholders will realize a gain or loss for federal income tax purposes
upon the sale of our common stock depends upon whether the market value of the common shares at the time of sale is above or below the
stockholder’s basis in such shares, taking into account transaction costs, and is not directly dependent upon our NAV. Because the
market value of our common stock will be determined by factors such as the relative demand for and supply of the shares in the market,
general market conditions and other factors beyond our control, we cannot predict whether our common stock will trade at, below or above
NAV, or at, below or above the public offering price for common stock.
Additional Risks to Senior Security Holders
Generally, an investment in preferred stock or debt securities (collectively,
“senior securities”) is subject to the following risks:
Interest Rate Risk. Distributions and interest payable on our senior
securities are subject to interest rate risk. To the extent that distributions or interest on such securities are based on short-term
rates, our leverage costs may rise so that the amount of distributions or interest due to holders of senior securities would exceed the
cash flow generated by our portfolio securities. To the extent that our leverage costs are fixed, our leverage costs may increase when
our senior securities mature. This might require that we sell portfolio securities at a time when we would otherwise not do so, which
may adversely affect our future ability to generate cash flow. In addition, rising market interest rates could negatively impact the value
of our investment portfolio, reducing the amount of assets serving as asset coverage for senior securities.
Senior Leverage Risk. Preferred stock will be junior in liquidation
and with respect to distribution rights to debt securities and any other borrowings. Senior securities representing indebtedness may constitute
a substantial lien and burden on preferred stock by reason of their prior claim against our income and against our net assets in liquidation.
We may not be permitted to declare distributions or other distributions with respect to any series of preferred stock unless at such time
we meet applicable asset coverage requirements and the payment of principal or interest is not in default with respect to the Tortoise
Notes or any other borrowings.
Our debt securities, upon issuance, are expected to be unsecured obligations
and, upon our liquidation, dissolution or winding up, will rank: (1) senior to all of our outstanding common stock and any outstanding
preferred stock; (2) on a parity with any of our unsecured creditors and any unsecured senior securities representing our indebtedness;
and (3) junior to any of our secured creditors. Secured creditors of ours may include, without limitation, parties entering into interest
rate swap, floor or cap transactions, or other similar transactions with us that create liens, pledges, charges, security interests, security
agreements or other encumbrances on our assets.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Ratings and Asset Coverage Risk. To the extent that senior securities
are rated, a rating does not eliminate or necessarily mitigate the risks of investing in our senior securities, and a rating may not fully
or accurately reflect all of the credit and market risks associated with a security. A rating agency could downgrade the rating of our
shares of preferred stock or debt securities, which may make such securities less liquid in the secondary market, though probably with
higher resulting interest rates. If a rating agency downgrades, or indicates a potential downgrade to, the rating assigned to a senior
security, we may alter our portfolio or redeem some senior securities. We may voluntarily redeem a senior security under certain circumstances
to the extent permitted by its governing documents.
Inflation Risk. Inflation is the reduction in the purchasing power
of money resulting from an increase in the price of goods and services. Inflation risk is the risk that the inflation adjusted or “real”
value of an investment in preferred stock or debt securities or the income from that investment will be worth less in the future. As inflation
occurs, the real value of the preferred stock or debt securities and the distributions or interest payable to holders of preferred stock
or interest payable to holders of debt securities declines.
Decline in Net Asset Value Risk. A material decline in our NAV may
impair our ability to maintain required levels of asset coverage for our preferred stock or debt securities.
General Risks Associated with an Investment in a Closed-End Fund
Market Discount Risk. As with any shares, the price of the Fund’s
shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than the original
investment. Common shares are designed for long-term investors and should not be treated as trading vehicles. Common shares of closed-end
management investment companies frequently trade at a discount from their NAV. Common shares of closed-end management investment companies
like the Fund that invest primarily in equity securities have during some periods traded at prices higher than their NAV and during other
periods traded at prices lower than their NAV. The Fund cannot assure you that its common shares will trade at a price higher than or
equal to NAV. In addition to NAV, the market price of the Fund’s common shares may be affected by such factors as distribution levels,
which are in turn affected by expenses, distribution stability, liquidity, the market for equity securities of MLPs, and market supply
and demand the Fund’s shares may trade at a price that is less than the offering price.
Investment Risk. An investment in the Fund’s common shares is
subject to investment risk, including the possible loss of the entire amount that you invest. An investment in common shares represents
an indirect investment in the securities owned by the Fund. The value of these securities, like other market investments, may move up
or down. The Fund common shares at any point in time may be worth less than their value at closing of the Merger.
Tortoise Energy Independence Fund, Inc.
General. We are designed primarily as a long-term investment vehicle
and not as a trading tool. An investment in our securities should not constitute a complete investment program for any investor and involves
a high degree of risk. Due to the uncertainty in all investments, there can be no assurance that we will achieve our investment objective.
The value of an investment in our common stock could decline substantially and cause you to lose some or all of your investment.
Non-Diversification Risk. We are registered as a non-diversified,
closed-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number
or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. However, in order to
qualify as a RIC for federal income tax purposes, we must meet certain requirements.
Concentration Risk. Our strategy of concentrating in North American
energy investments, particularly upstream energy companies, means that our performance will be closely tied to the performance of the
energy industry. Our concentration in these investments may present more risk than if we were broadly diversified over numerous industries
and sectors of the economy. A downturn in these investments would have a greater impact on us than on a fund that does not concentrate
in such investments. At times, the performance of these investments may lag the performance of other industries or the market as a whole.
Risks inherent in the business of energy companies include:
| • | Commodity Price Volatility Risk. The volatility of energy commodity prices can significantly affect energy companies due to
the impact of prices on the volume of commodities developed, produced, gathered and processed. Historically, energy commodity prices have
been cyclical and exhibited significant volatility which may adversely impact the value, operations, cash flows and financial performance
of energy companies in which we invest. |
Commodity prices fluctuate for several reasons and can be swift,
including changes in global and domestic energy market, general economic conditions, consumer demand, price and level of foreign imports,
the impact of weather on demand, levels of domestic and worldwide supply, levels of production and imports, domestic and foreign governmental
regulation, political instability, acts of war and terrorism, the success and costs of exploration projects, conservation and environmental
protection efforts, alternative energy, taxation and the availability of local, intrastate and interstate transportation systems.
Additional Information
(unaudited) (continued)
| • | Supply and Demand Risk. A decrease in the exploration, production or development of natural gas, NGLs, crude oil, refined petroleum
products, or a decrease in the volume of such commodities, may adversely impact the financial performance and profitability of energy
companies. Production declines and volume decreases could be caused by various factors, including changes in commodity prices, oversupply,
depletion of resources, declines in estimates of proved reserves, catastrophic events affecting production, labor difficulties, political
events, production variance from expectations, Organization of the Petroleum Exporting Countries (“OPEC”) actions, environmental
proceedings, increased regulations, equipment failures and unexpected maintenance problems or outages, inability to obtain necessary permits
or carryout new construction or acquisitions, unanticipated expenses, import supply disruption, increased competition from alternative
energy sources, and other events. All of the above is particularly true for new or emerging areas of supply in North America that may
have limited or no production history. Reductions in or prolonged periods of low prices for natural gas and crude oil can cause a given
reservoir to become uneconomic for continued production earlier than it would if prices were higher. |
A sustained decline in or varying demand for such commodities,
could also adversely affect the financial performance of energy companies. Factors that could lead to a decline in demand include economic
recession or other adverse economic conditions, political and economic conditions in other natural resource producing countries including
embargoes, hostilities in the Middle East, military campaigns and terrorism, OPEC actions, higher fuel taxes or governmental regulations,
increases in fuel economy, consumer shifts to the use of alternative fuel sources, exchange rates, and changes in commodity prices or
weather.
| • | Reserve & Depletion Risk. Energy companies’ estimates of proved reserves and projected future net revenue are generally
based on internal reserve reports, engineering data, and reports of independent petroleum engineers. Estimated reserves are based on many
assumptions that may prove inaccurate and require subjective estimates of underground accumulations and assumptions concerning future
prices, production levels, and operating and development costs. As a result, estimated quantities of proved reserves, projections of future
production rates, and the timing of related expenditures may prove to be inaccurate. Any material negative inaccuracies in these reserve
estimates or underlying assumptions could materially lower the value of upstream energy companies. Future natural gas, NGL and oil production
is highly dependent upon the success in acquiring or finding additional reserves that are economically recoverable. This can be particularly
true for new areas of exploration and development, such as in North American oil and gas reservoirs, including shale. A portion of any
one upstream company’s assets may be dedicated to crude oil or natural gas reserves that naturally deplete over time and a significant
slowdown in the identification or availability of reasonably priced and accessible proved reserves for these companies could adversely
affect their business. |
| • | Operating Risk. Energy companies are subject to many operating risks, including: equipment failure causing outages; structural,
maintenance, impairment and safety problems; transmission or transportation constraints, inoperability or inefficiencies; dependence on
a specified fuel source; changes in electricity and fuel usage; availability of competitively priced alternative energy sources; changes
in generation efficiency and market heat rates; lack of sufficient capital to maintain facilities; significant capital expenditures to
keep older assets operating efficiently; seasonality; changes in supply and demand for energy; catastrophic and/or weather-related events
such as spills, leaks, well blowouts, uncontrollable flows, ruptures, fires, explosions, floods, earthquakes, hurricanes, discharges of
toxic gases and similar occurrences; storage, handling, disposal and decommissioning costs; and environmental compliance. Breakdown or
failure of an energy company’s assets may prevent it from performing under applicable sales agreements, which in certain situations,
could result in termination of the agreement or incurring a liability for liquidated damages. As a result of the above risks and other
potential hazards associated with energy companies, certain companies may become exposed to significant liabilities for which they may
not have adequate insurance coverage. Any of the aforementioned risks could have a material adverse effect on the business, financial
condition, results of operations and cash flows of energy companies. |
The energy industry is cyclical and from time to time may experience
a shortage of drilling rigs, equipment, supplies, or qualified personnel, or due to significant demand, such services may not be available
on commercially reasonable terms. A company’s ability to successfully and timely complete capital improvements to existing or other
capital projects is contingent upon many variables. Should any such efforts be unsuccessful, an energy company could be subject to additional
costs and / or the write-off of its investment in the project or improvement. The marketability of oil and gas production depends in large
part on the availability, proximity and capacity of pipeline systems owned by third parties. Oil and gas properties are subject to royalty
interests, liens and other burdens, encumbrances, easements or restrictions, all of which could impact the production of a particular
energy company. Oil and gas companies operate in a highly competitive and cyclical industry, with intense price competition. A significant
portion of their revenues may depend on a relatively small number of customers, including governmental entities and utilities.
Energy companies engaged in interstate pipeline transportation
of natural gas, refined petroleum products and other products are subject to regulation by the Federal Energy Regulatory Commission (“FERC”)
with respect to tariff rates these companies may charge for pipeline transportation services. An adverse determination by the FERC with
respect to the tariff rates of an energy company could have a material adverse effect on its business, financial condition, results of
operations and cash flows and its ability to make cash distributions to its equity owners.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
| • | Regulatory Risk. Energy companies are subject to regulation by governmental authorities in various jurisdictions and may be
adversely affected by the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards. Regulation
exists in multiple aspects of their operations, including reports and permits concerning exploration, drilling, and production; how facilities
are constructed, maintained and operated; how wells are spaced; the unitization and pooling of properties; environmental and safety controls,
including emissions release, the reclamation and abandonment of wells and facility sites, remediation, protection of endangered species,
and the discharge and disposition of waste materials; offshore oil and gas operations; and the prices they may charge for the oil and
gas produced or transported under federal and state leases and other products and services. Various governmental authorities have the
power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil
and criminal penalties, including fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the
future which may increase compliance costs and may adversely affect the financial performance of energy companies. Additionally, legislation
has been proposed that would, if enacted into law, make significant changes to U.S. federal income tax laws, including the elimination
of certain U.S. federal income tax benefits currently available to oil and gas exploration and production companies. |
The use of methods such as hydraulic fracturing may be subject
to new or different regulation in the future. Any new state or federal regulations that may be imposed on hydraulic fracturing could result
in additional permitting and disclosure requirements (including of substances used in the fracturing process) and in additional operating
restrictions. The imposition of various conditions and restrictions on drilling and completion operations could lead to operational delays
and increased costs and, moreover, could delay or effectively prevent the development of oil and gas from formations that would not be
economically viable without the use of hydraulic fracturing.
| • | Environmental Risk. Energy company activities are subject to stringent environmental laws and regulation by many federal, state
and local authorities, international treaties and foreign governmental authorities. Failure to comply with such laws and regulations or
to obtain any necessary environmental permits pursuant to such laws and regulations could result in fines or other sanctions. Congress
and other domestic and foreign governmental authorities have either considered or implemented various laws and regulations to restrict
or tax certain emissions, particularly those involving air and water emissions. Existing environmental regulations could be revised or
reinterpreted, new laws and regulations could be adopted or become applicable, and future changes in environmental laws and regulations
could occur, which could impose significant additional costs. Energy companies have made and will likely continue to make significant
capital and other expenditures to comply with these and other environmental laws and regulations. There can be no assurance that such
companies would be able to recover all or any increased environmental costs from their customers or that their business, financial condition
or results of operations would not be materially and adversely affected by such expenditures or any changes in domestic or foreign environmental
laws and regulations, in which case the value of these companies’ securities could be adversely affected. In addition, energy companies
may be responsible for environmentally-related liabilities, including any on-site liabilities associated with the environmental condition
of facilities that it has acquired, leased or developed, or liabilities from associated activities, regardless of when the liabilities
arose and whether they are known or unknown. |
Hydraulic fracturing is a common practice used to stimulate production
of natural gas and/or oil from dense subsurface rock formations such as shales that generally exist several thousand feet below ground.
The companies in which we will invest commonly apply hydraulic-fracturing techniques in onshore oil and natural gas drilling and completion
programs. The process involves the injection of water, sand, and additives under pressure into a targeted subsurface formation. The water
and pressure create fractures in the rock formations, which are held open by the grains of sand, enabling the oil or natural gas to flow
to the wellbore. The use of hydraulic fracturing may produce certain wastes that may in the future be designated as hazardous wastes and
may thus become subject to more rigorous and costly compliance and disposal requirements. The EPA has commenced a study of potential environmental
effects of hydraulic fracturing on drinking water and groundwater, with initial results expected to be available by late 2012 and final
results by 2014 and, more recently in October 2011, the EPA announced that it is launching a study regarding wastewater resulting from
hydraulic fracturing activities and currently plans to propose standards by 2014 that such wastewater must meet before being transported
to a treatment plant. Also, the Department of Energy is conducting an investigation into practices the agency could recommend to better
protect the environment from drilling using hydraulic fracturing completion methods and the Department of the Interior has proposed disclosure,
well testing and monitoring requirements for hydraulic fracturing on federal lands. The White House Council on Environmental Quality and
a committee of the US House of Representatives are reviewing hydraulic-fracturing practices. At the same time, legislation has been introduced
before Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the fracturing
process. In addition, some states have adopted, and other states are considering adopting, regulations that could impose more stringent
permitting, disclosure and well construction requirements on hydraulic fracturing operations. Additional regulations could be imposed
that could include, among other things, limiting injection of oil and gas well wastewater into underground disposal wells, due to concerns
about the possibility of minor earthquakes being linked to such injection, an indirect activity to drilling utilized in certain geographic
regions. If new laws or regulations that significantly restrict hydraulic fracturing or associated activity are adopted, such laws could
make it more difficult or costly for the companies in which we invest to perform fracturing to stimulate production from tight formations,
which could adversely impact their production levels, operations, cash flow and the value of their securities.
Additional Information
(unaudited) (continued)
| • | Climate Change Regulation Risk. Climate change regulation could result in increased operations and capital costs for the companies
in which we invest. Voluntary initiatives and mandatory controls have been adopted or are being discussed both in the U.S. and worldwide
to reduce emissions of “greenhouse gases” such as carbon dioxide, a by-product of burning fossil fuels, which some scientists
and policymakers believe contribute to global climate change. These measures and future measures could result in increased costs to certain
companies in which the Fund invests to operate and maintain facilities and administer and manage a greenhouse gas emissions program and
may reduce demand for fuels that generate greenhouse gases and that are managed or produced by companies in which we invest. These actions
could result in increased costs of operations and impact the demand and prices for fossil fuels. |
| • | Terrorism Risk. Energy companies, and the market for their securities, are subject to disruption as a result of terrorist activities,
such as the terrorist attacks on the World Trade Center on September 11, 2001; war, such as the wars in Afghanistan and Iraq and their
aftermaths; and other geopolitical events, including upheaval in the Middle East or other energy producing regions. Cyber hacking could
also cause significant disruption and harm to energy companies. The U.S. government has issued warnings that energy assets, specifically
those related to energy, including exploration and production facilities, pipelines and transmission and distribution facilities, might
be specific targets of terrorist activity. Such events have led, and in the future may lead, to short-term market volatility and may have
long-term effects on companies in the energy industry and markets. Such events may also adversely affect our business and financial condition. |
| • | Natural Disaster Risk. Natural risks, such as earthquakes, flood, lightning, hurricanes, tsunamis, tornadoes and wind, are
inherent risks in energy company operations. For example, extreme weather patterns, such as Hurricane Ivan in 2004 and Hurricanes Katrina
and Rita in 2005, the Tohuku earthquake and resulting tsunami in Japan in 2011, or the threat thereof, could result in substantial damage
to the facilities of certain companies located in the affected areas and significant volatility in the supply of energy and could adversely
impact the prices of the securities in which we invest. This volatility may create fluctuations in commodity prices and earnings of energy
companies. |
Equity Securities Risk. Equity securities can be affected by macroeconomic
and other factors affecting the stock market in general, expectations about changes in interest rates, investor sentiment toward such
entities, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular
issuer. Prices of equity securities of individual entities also can be affected by fundamentals unique to the company or partnership,
including size, earnings power, coverage ratio and characteristics and features of different classes of securities. Equity securities
are susceptible to general stock market fluctuations and to volatile increases and decreases in value. The equity securities held by the
Fund may experience sudden, unpredictable drops in value or long periods of decline in value. In addition, by writing covered call options,
capital appreciation potential will be limited on a portion of our investment portfolio.
MLP Risks. An investment in MLP securities involves some risks that
differ from the risks involved in an investment in the common stock of a corporation, including governance risk, tax risk, and cash flow
risk. Governance risk involves the risks associated with the ownership structure of MLPs. MLPs are also subject to tax risk, which is
the risk that MLPs might lose their partnership status for tax purposes. Cash flow risk is the risk that MLPs will not make distributions
to holders (including us) at anticipated levels or that such distributions will not have the expected tax character. As a result, there
could be a material reduction in our cash flow and there could be a material decrease in the value of our common shares.
Non-U.S. Securities Risk. Investments in securities of non-U.S. issuers
(including Canadian issuers) involve risks not ordinarily associated with investments in securities and instruments of U.S. issuers. For
example, non-U.S. companies are not generally subject to uniform accounting, auditing and financial standards and requirements comparable
to those applicable to U.S. companies. Non-U.S. securities exchanges, brokers and companies may be subject to less government supervision
and regulation than exists in the U.S. Dividend and interest income may be subject to withholding and other non-U.S. taxes, which may
adversely affect the net return on such investments. Because we intend to limit our investments to no more than 35% of our Total Assets
in securities issued by non-U.S. issuers (including Canadian issuers), we not be able to pass through to our stockholders any foreign
income tax credits as a result of any foreign income taxes we pay. There may be difficulty in obtaining or enforcing a court judgment
abroad. In addition, it may be difficult to effect repatriation of capital invested in certain countries. With respect to certain countries,
there are also risks of expropriation, confiscatory taxation, political or social instability or diplomatic developments that could affect
the Fund’s assets held in non-U.S. countries. There may be less publicly available information about a non-U.S. company than there
is regarding a U.S. company. Non-U.S. securities markets may have substantially less volume than U.S. securities markets and some non-U.S.
company securities are less liquid than securities of otherwise comparable U.S. companies. Non-U.S. markets also have different clearance
and settlement procedures that could cause the Fund to encounter difficulties in purchasing and selling securities on such markets and
may result in the Fund missing attractive investment opportunities or experiencing a loss. In addition, a portfolio that includes securities
issued by non-U.S. issuers can expect to have a higher expense ratio because of the increased transaction costs in non-U.S. markets and
the increased costs of maintaining the custody of such non-U.S. securities. When investing in securities issued by non-U.S. issuers, there
is also the risk that the value of such an investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency
exchange rates. We may, but do not currently intend to, hedge our exposure to non-U.S. currencies.
Capital Markets Risk. Global financial markets and economic conditions
have been, and may continue to be, volatile due to a variety of factors, including significant write-offs in the financial services sector.
Despite more stabilized economic activity, if the volatility continues, the cost of raising capital in the debt and equity capital markets,
and the ability to raise capital, may be impacted. In particular, concerns about the general stability of financial markets and specifically
the solvency of lending counterparties, may impact the cost of raising capital from the credit markets through increased interest rates,
tighter lending standards, difficulties in refinancing debt on existing terms or at all and reduced, or in some cases ceasing to provide,
funding to borrowers. In addition, lending counterparties under existing revolving credit
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
facilities and other debt instruments may be unwilling or unable to meet
their funding obligations. As a result of any of the foregoing, we or the companies in which we invest may be unable to obtain new debt
or equity financing on acceptable terms. If funding is not available when needed, or is available only on unfavorable terms, we or the
companies in which we invest may not be able to meet obligations as they come due. Moreover, without adequate funding, energy companies
may be unable to execute their growth strategies, complete future acquisitions, take advantage of other business opportunities or respond
to competitive pressures, any of which could have a material adverse effect on their revenues and results of operations.
Rising interest rates could limit the capital appreciation of equity units
of energy companies as a result of the increased availability of alternative investments at competitive yields. Rising interest rates
may increase the cost of capital for companies operating in this sector. A higher cost of capital or an inflationary period may lead to
inadequate funding, which could limit growth from acquisition or expansion projects, the ability of such entities to make or grow dividends
or distributions or meet debt obligations, the ability to respond to competitive pressures, all of which could adversely affect the prices
of their securities.
In 2010, several European Union (“EU”) countries, including Greece,
Ireland, Italy, Spain, and Portugal, began to face budget issues, some of which may have negative long-term effects for the economies
of those countries and other EU countries. There is continued concern about national-level support for the euro and the accompanying coordination
of fiscal and wage policy among European Economic and Monetary Union member countries. A return to unfavorable economic conditions could
impair our ability to achieve our investment objective. In addition, the events surrounding the recent negotiations regarding the U.S.
federal government debt ceiling and the resulting agreement could adversely affect us. In 2011, S&P lowered its long-term sovereign
credit rating on the U.S. federal government debt to “AA+” from “AAA.” We cannot predict the effects of these
or similar events in the future on the U.S. economy and securities markets or on our portfolio.
Credit Risk. Credit risk refers to the possibility that the issuer
of a security or other instrument will be unable to make timely interest payments and/or repay the principal on its debt. Because we may
invest up to 20% of our Total Assets in debt securities, including those rated below investment grade, commonly referred to as “junk
bonds,” we may be subject to a greater degree of credit risk than a fund investing only in investment grade securities. Generally,
lower-grade securities provide a higher yield than higher-grade securities of similar maturity but are subject to greater risks, such
as greater credit risk, greater volatility and greater liquidity concerns. Such securities are generally regarded as predominantly speculative
and are more susceptible to non-payment of interest and principal and default than higher-grade securities and are more sensitive to specific
issuer developments or real or perceived general adverse economic changes than higher-grade securities. The market for lower-grade securities
may also have less information available than the market for other securities, further complicating evaluations and valuations of such
securities.
Covered Call Risks. We cannot guarantee that our covered call option
strategy will be effective. There are several risks associated with transactions in options on securities, including:
| • | There are significant differences between the securities and options markets that could result in an imperfect correlation between
these markets, causing a given covered call option transaction not to achieve its objectives. A decision as to whether, when and how to
use covered calls (or other options) involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful
because of market behavior or unexpected events. |
| • | The use of options may require us to sell portfolio securities at inopportune times or for prices other than current market values,
may limit the amount of appreciation we can realize on an investment, or may cause us to hold a security we might otherwise sell. As the
writer of a covered call option, we forego, during the option’s life, the opportunity to profit from increases in the market value
of the security covering the call option above the exercise price of the call option, but retain the risk of loss should the price of
the underlying security decline. Although such loss would be offset in part by the option premium received, in a situation in which the
price of a particular stock on which we have written a covered call option declines rapidly and materially or in which prices in general
on all or a substantial portion of the stocks on which we have written covered call options decline rapidly and materially, we could sustain
material depreciation or loss to the extent we do not sell the underlying securities (which may require it to terminate, offset or otherwise
cover our option position as well). |
| • | There can be no assurance that a liquid market will exist when we seek to close out an option position. If we were unable to close
out a covered call option that we had written on a security, we would not be able to sell the underlying security unless the option expired
without exercise. Reasons for the absence of a liquid secondary market for exchange-traded options may include, but are not limited to,
the following: (i) there may be insufficient trading interest; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes
or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the trading facilities
may not be adequate to handle current trading volume; or (vi) the relevant exchange could discontinue the trading of options. In addition,
our ability to terminate OTC options may be more limited than with exchange-traded options and may involve the risk that counterparties
participating in such transactions will not fulfill their obligations. |
| • | The principal factors affecting the market value of an option include supply and demand, interest rates, the current market price
of the underlying security in relation to the exercise price of the option, the dividend or distribution yield of the underlying security,
the actual or perceived volatility of the underlying security and the time remaining until the expiration date. Any of the foregoing could
impact or cause to vary over time the amount of income we are able to generate through our covered call option strategy. |
Additional Information
(unaudited) (continued)
| • | The number of covered call options we can write is limited by the number of shares of the corresponding common stock we hold. Furthermore,
our covered call option transactions may be subject to limitations established by each of the exchanges, boards of trade or other trading
facilities on which such options are traded. |
| • | If we fail to maintain any required asset coverage ratios in connection with any use by us of leverage, we may be required to redeem
or prepay some or all of our leverage instruments. Such redemption or prepayment would likely result in our seeking to terminate early
all or a portion of any option transaction. Early termination of an option could result in a termination payment by or to us. |
Legal and Regulatory Risk. Legal, tax and regulatory changes could
occur and may adversely affect us or our ability to pursue our investment strategy and/or increase the costs of implementing such strategies.
New (or revised) laws or regulations may be imposed by the Commodity Futures Trading Commission (“CFTC”), the SEC, the U.S.
Federal Reserve or other banking regulators, other governmental regulatory authorities or self-regulatory organizations that supervise
the financial markets that could adversely affect us. In particular, these agencies are empowered to promulgate a variety of new rules
pursuant to recently enacted financial reform legislation in the United States. We also may be adversely affected by changes in the enforcement
or interpretation of existing statutes and rules by these governmental regulatory authorities or self-regulatory organizations.
The recent instability in the financial markets has led the U.S. government
and foreign governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the
financial markets that have experienced extreme volatility, and in some cases a lack of liquidity. U.S. federal and state governments
and foreign governments, their regulatory agencies or self-regulatory organizations may take additional actions that affect the regulation
of the securities in which we invest, or the issuers of such securities, in ways that are unforeseeable and on an “emergency”
basis with little or no notice, with the consequence that some market participants’ ability to continue to implement certain strategies
or manage the risk of their outstanding positions has been suddenly and/or substantially eliminated or otherwise negatively impacted.
Given the complexities of the global financial markets and the limited timeframe within which governments have been able to take action,
these interventions have sometimes been unclear in scope and application, resulting in confusion and uncertainty, which in itself has
been materially detrimental to the efficient functioning of such markets as well as previously successful investment strategies. Decisions
made by government policy makers could exacerbate the current economic difficulties in the U.S. and other countries.
In addition, the securities and futures markets are subject to comprehensive
statutes, regulations and margin requirements. The CFTC, the SEC, the Federal Deposit Insurance Corporation, other regulators and self-regulatory
organizations and exchanges are authorized under these statutes, regulations and otherwise to take extraordinary actions in the event
of market emergencies. We and our Adviser have historically been eligible for exemptions from certain regulations. However, there is no
assurance that we or our Adviser will continue to be eligible for such exemptions. For example, we have filed with the CFTC and the National
Futures Association a notice claiming an exclusion from the definition of the term “commodity pool operator” under Regulation
4.5 under the Commodity Exchange Act, as amended (the “CEA”), with respect to our operation. However, the CFTC has recently
adopted amendments to CFTC Regulation 4.5, which, when effective, may subject our Adviser to regulation by the CFTC, and require it to
operate us subject to applicable CFTC requirements, including registration, disclosure and operational requirements. Compliance with these
additional requirements may increase our expenses. Certain of the rules that would apply to us if we becomes subject to CFTC regulation
have not yet been adopted, and while it is unclear what the effect of those rules would be on us if they are adopted, these rules could
potentially limit or restrict our ability to pursue our investment objective and execute our investment strategy.
Congress recently enacted legislation that provides for new regulation of
the derivatives market, including clearing, margin, reporting, recordkeeping, and registration requirements. Because the legislation leaves
much to agency rule making, its ultimate impact remains unclear. New regulations could, among other things, restrict our ability to engage
in derivative transactions (for example, by making certain types of derivative transactions no longer available to us) and/or increase
the costs of such derivative transactions (for example, by increasing margin or capital requirements), and we may be unable to execute
our investment strategy as a result. It is unclear how the regulatory changes will affect counterparty risk.
The CFTC and certain futures exchanges have established limits, referred
to as “position limits,” on the maximum net long or net short positions which any person may hold or control in particular
options and futures contracts; those position limits may also apply to certain other derivatives positions we may wish to take. All positions
owned or controlled by the same person or entity, even if in different accounts, may be aggregated for purposes of determining whether
the applicable position limits have been exceeded. Thus, even if we do not intend to exceed applicable position limits, it is possible
that different clients managed by our Adviser and its affiliates may be aggregated for this purpose. Therefore it is possible that the
trading decisions of our Adviser may have to be modified and that positions we hold may have to be liquidated in order to avoid exceeding
such limits. The modification of investment decisions or the elimination of open positions, if it occurs, may adversely affect our performance.
Performance and Distribution Risk. We may not be able to achieve operating
results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time.
We cannot assure you that you will receive distributions at a particular level or at all. Dividends and distributions on equity securities
are not fixed but are declared at the discretion of the issuer’s board of directors. If stock market volatility declines, the level
of premiums from writing covered call options will likely decrease as well. Payments to close-out written call options will reduce amounts
available for distribution from gains earned in respect of call option expiration or close out. The equity securities in which we invest
may not appreciate or may decline in value. Net realized and unrealized gains on the securities investments will be determined primarily
by the direction and movement of the applicable securities markets and the Fund’s holdings. Any gains that we do realize on the
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
disposition of any securities may not be sufficient to offset losses on other
securities or option transactions. A significant decline in the value of the securities in which we invest may negatively impact our ability
to pay distributions or cause you to lose all or a part of your investment.
In addition, the 1940 Act may limit our ability to make distributions in
certain circumstances. Restrictions and provisions in any future credit facilities and our debt securities may also limit our ability
to make distributions. For federal income tax purposes, we are required to distribute substantially all of our net investment income each
year both to reduce our federal income tax liability and to avoid a potential excise tax. If our ability to make distributions on our
common stock is limited, such limitations could, under certain circumstances, impair our ability to maintain our qualification for taxation
as a RIC, which would have adverse consequences for our stockholders.
Operating Results Risk. We could experience fluctuations in our operating
results due to a number of factors, including the return on our investments, the level of our expenses, variations in and the timing of
the recognition of realized and unrealized gains or losses on our investments and written call options, the level of call premium we receive
by writing covered calls, the degree to which we encounter competition in our markets and general economic conditions. As a result of
these factors, results for any period should not be relied upon as being indicative of performance in future periods.
Portfolio Turnover Risk. We may, but under normal market conditions
do not intend to, engage in frequent and active trading of portfolio securities to achieve our investment objective. However, annual portfolio
turnover as a result of our purchases and sales of equity securities and call options in connection with our covered call option strategy
may exceed 100%, which is higher than many other investment companies and would involve greater trading costs to us and may result in
greater realization of taxable capital gains.
Leverage Risk. Our use of leverage through the issuance of preferred
stock or debt securities, and any borrowings or other transactions involving indebtedness (other than for temporary or emergency purposes)
would be considered “senior securities” for purposes of the 1940 Act and create risks. Leverage is a speculative technique
that may adversely affect common stockholders. If the return on securities acquired with borrowed funds or other leverage proceeds does
not exceed the cost of the leverage, the use of leverage could cause us to lose money. Successful use of leverage depends on our Adviser’s
ability to predict or hedge correctly interest rates and market movements, and there is no assurance that the use of a leveraging strategy
will be successful during any period in which it is used. Because the fee paid to our Adviser will be calculated on the basis of Managed
Assets, the fees will increase when leverage is utilized, giving our Adviser an incentive to utilize leverage.
Our issuance of senior securities involves offering expenses and other costs,
including interest payments, which are borne indirectly by our common stockholders. Fluctuations in interest rates could increase interest
or distribution payments on our senior securities, and could reduce cash available for distributions on common stock. Increased operating
costs, including the financing cost associated with any leverage, may reduce our total return to common stockholders.
The 1940 Act and/or the rating agency guidelines applicable to senior securities
impose asset coverage requirements, distribution limitations, voting right requirements (in the case of the senior equity securities),
and restrictions on our portfolio composition and our use of certain investment techniques and strategies. The terms of any senior securities
or other borrowings may impose additional requirements, restrictions and limitations that are more stringent than those currently required
by the 1940 Act, and the guidelines of the rating agencies that rate outstanding senior securities. These requirements may have an adverse
effect on us and may affect our ability to pay distributions on common stock and preferred stock. To the extent necessary, we currently
intend to redeem any senior securities to maintain the required asset coverage. Doing so may require that we liquidate portfolio securities
at a time when it would not otherwise be desirable to do so.
Hedging and Derivatives Risk. In addition to writing call options
as part of the investment strategy, we may invest in derivative instruments for hedging or risk management purposes. Our use of derivatives
could enhance or decrease the cash available to us for payment of distributions or interest, as the case may be. Derivatives can be illiquid,
may disproportionately increase losses and have a potentially large negative impact on our performance. Derivative transactions, including
options on securities and securities indices and other transactions in which we may engage (such as forward currency transactions, futures
contracts and options thereon, and total return swaps), may subject us to increased risk of principal loss due to unexpected movements
in stock prices, changes in stock volatility levels, interest rates and foreign currency exchange rates and imperfect correlations between
our securities holdings and indices upon which derivative transactions are based. We also will be subject to credit risk with respect
to the counterparties to any OTC derivatives contracts we purchased. If a counterparty becomes bankrupt or otherwise fails to perform
its obligations under a derivative contract, we may experience significant delays in obtaining any recovery under the derivative contract
in a bankruptcy or other reorganization proceeding. We may obtain only a limited recovery or may obtain no recovery in such circumstances.
In addition, if the counterparty to a derivative transaction defaults, we would not be able to use the anticipated net receipts under
the derivative to offset our cost of financial leverage.
Interest rate transactions will expose us to certain risks that differ from
the risks associated with our portfolio holdings. There are economic costs of hedging reflected in the price of interest rate swaps, floors,
caps and similar techniques, the costs of which can be significant, particularly when long-term interest rates are substantially above
short-term rates. In addition, our success in using hedging instruments is subject to our Adviser’s ability to predict correctly
changes in the relationships of such hedging instruments to our leverage risk, and there can be no assurance that our Adviser’s
judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance,
whether or not adjusted for risk, than if we had not engaged in such transactions. There is no assurance that the interest rate hedging
transactions into which we enter will be effective in reducing our exposure to interest rate risk. Hedging transactions are subject to
correlation risk, which is the risk that payment on our hedging transactions may not correlate exactly with our payment obligations on
senior securities. To the extent there is a decline in interest rates, the value of certain derivatives could decline, and result in a
decline in our net assets
Additional Information
(unaudited) (continued)
Tax Risk. We have elected to be treated, and intend to qualify each
year, as a “regulated investment company” (“RIC”) under the Code. To maintain our qualification for federal income
tax purposes as a RIC under the Code, we must meet certain source-of-income, asset diversification and annual distribution requirements,
as discussed in detail below under “Certain U.S. Federal Income Tax Considerations.” If for any taxable year we fail to qualify
for the special federal income tax treatment afforded to RICs, all of our taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to our stockholders) and our income available for distribution will be reduced.
Liquidity Risk. We may invest in securities of any market capitalization
and may be exposed to liquidity risk when trading volume, lack of a market maker, or legal restrictions impair our ability to sell particular
securities or close call option positions at an advantageous price or a timely manner. We may invest in mid-capitalization and small-capitalization
companies, which may be more volatile and more likely than large-capitalization companies to have narrower product lines, fewer financial
resources, less management depth and experience and less competitive strength. In the event certain securities experience limited trading
volumes, the prices of such securities may display abrupt or erratic movements at times. These securities may be difficult to sell at
a favorable price at the times when we believe it is desirable to do so.
Delay in Use of Proceeds Risk. Although we expect to fully invest
the net proceeds of this offering within three to six months after the closing of this offering, such investments may be delayed if suitable
investments are unavailable at the time, if market conditions and volumes of securities are not favorable at the time or for other reasons.
As a result, the proceeds may be invested in money market mutual funds, cash, cash equivalents, securities issued or guaranteed by the
U.S. Government or its instrumentalities or agencies, high quality, short-term money market instruments, short-term debt securities, certificates
of deposit, bankers’ acceptances and other bank obligations, commercial paper or other liquid debt securities. The three to six
month timeframe associated with the anticipated use of proceeds could lower returns and lower our yield in the first year after the issuance
of the common stock.
Restricted Securities Risk. We may invest up to 30% of our Total Assets
in restricted securities that are ineligible for resale under Rule 144A, all of which may be illiquid securities. Restricted securities
(including Rule 144A securities) are less liquid than securities traded in the open market because of statutory and contractual restrictions
on resale. Such securities are, therefore, unlike securities that are traded in the open market, which can be expected to be sold immediately
if the market is adequate. This lack of liquidity may create special risks for us. However, we could sell such securities in private transactions
with a limited number of purchasers or in public offerings under the 1933 Act.
Restricted securities are subject to statutory and contractual restrictions
on their public resale, which may make it more difficult to value them, may limit our ability to dispose of them and may lower the amount
we could realize upon their sale. To enable us to sell our holdings of a restricted security not registered under the 1933 Act, we may
have to cause those securities to be registered. The expenses of registering restricted securities may be determined at the time we buy
the securities. When we must arrange registration because we wish to sell the security, a considerable period may elapse between the time
the decision is made to sell the security and the time the security is registered so that we could sell it. We would bear the risks of
any downward price fluctuation during that period.
Rule 144A Securities Risk. We may purchase Rule 144A securities. Rule
144A provides an exemption from the registration requirements of the 1933 Act for the resale of certain restricted securities to qualified
institutional buyers, such as us. Securities saleable among qualified institutional buyers pursuant to Rule 144A will not be counted towards
the 30% limitation on restricted securities. An insufficient number of qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by us, however, could affect adversely the marketability of certain Rule 144A securities, and we might be unable to dispose
of such securities promptly or at reasonable prices.
Anti-Takeover Provisions Risks. Maryland law and our Articles of Incorporation
(“Charter”) and Bylaws include provisions that could delay, defer or prevent other entities or persons from acquiring control
of us, causing us to engage in certain transactions or modifying our structure. These provisions may be regarded as “anti-takeover”
provisions. Such provisions could limit the ability of common stockholders to sell their shares at a premium over the then-current market
prices by discouraging a third party from seeking to obtain control of us.
Management Risk. To the extent that our Adviser’s assets under
management grow, our Adviser may have to hire additional personnel and, to the extent they are unable to hire or retain qualified individuals,
our operations may be adversely affected. There can be no guarantee that the Adviser’s application of investment techniques, call
option strategy and risk analyses in making investment decisions for us will produce the desired results.
Market Discount Risk. Shares of closed-end investment companies frequently
trade at a discount from net asset value but in some cases have traded above net asset value. Continued development of alternatives as
a vehicle for investing in listed energy infrastructure securities may contribute to reducing or eliminating any premium or may result
in our shares trading at a discount. The risk of the shares of common stock trading at a discount is a risk separate from the risk of
a decline in our net asset value as a result of investment activities. Our net asset value will be reduced immediately following an offering
of our common or preferred stock due to the offering costs for such stock, which are borne entirely by us. Although we also bear the offering
costs of debt securities, such costs are amortized over time and therefore do not impact our net asset value immediately following an
offering.
Whether stockholders will realize a gain or loss for federal income tax purposes
upon the sale of our common stock depends upon whether the market value of the common stock at the time of sale is above or below the
stockholder’s basis in such shares, taking into account transaction costs, and it is not directly dependent upon our net asset value.
Because the market value of our common stock will be determined by factors
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
such as the relative demand for and supply of the shares in the market, general
market conditions and other factors beyond our control, we cannot predict whether our common stock will trade at, below or above net asset
value, or at, below or above the public offering price for our common stock.
Ecofin Sustainable and Social Impact Term Fund
Management Risk. Our ability to achieve our investment objective is
directly related to our Adviser’s and our Subadviser’s investment strategies for the Fund. The value of your investment in
our common shares may vary with the effectiveness of the research and analysis conducted by our Adviser and our Subadviser and their ability
to identify and take advantage of attractive investment opportunities. If the investment strategies of our Adviser and our Subadviser
do not produce the expected results, the value of your investment could be diminished or even lost entirely, and we could underperform
the market or other funds with similar investment objectives.
Asset Allocation Risk. Our investment performance depends, at least
in part, on how the Investment Committee of our Adviser allocates and reallocates our assets among the various asset classes and security
types in which we may invest. Such allocation decisions could cause our investments to be allocated to asset classes and security types
that perform poorly or underperform other asset classes and security types or available investments.
Non-Diversification Risk. We are registered as a non-diversified,
closed-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number
or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. However, in order to
qualify as a RIC for federal income tax purposes, we must meet certain requirements
Limited Term and Tender Offer Risks. We are
scheduled to dissolve as of the as of the close of business twelve years from the effective date of the initial registration statement
of the Fund (such date, including any extension, the “Termination Date”). Our investment policies are not designed to return
to common shareholders their original net asset value or purchase price. Our final distribution to common shareholders on the Termination
Date and the amount paid to participating common shareholders upon completion of an eligible tender offer will be based upon our net asset
value at such time. Our Declaration of Trust provides that an eligible tender offer (an “Eligible Tender Offer”) is a tender
offer by the Fund to purchase up to 100% of the then-outstanding common shares of beneficial interest (“common shares”) of
the Fund as of a date within the 12 months preceding the Termination Date. Depending on a variety of factors, including the performance
of our investment portfolio over the period of our operations, the amount distributed to common shareholders in connection with our termination
or paid to participating common shareholders upon completion of an Eligible Tender Offer may be less, and potentially significantly less,
than your original investment. Additionally, given the nature of certain of our investments, the amount actually distributed upon our
termination may be less than our net asset value per share on the Termination Date, and the amount actually paid upon completion of an
Eligible Tender Offer may be less than our net asset value per share on the expiration date of the Eligible Tender Offer.
Because our assets will be liquidated in connection with our termination
or to pay for common shares tendered in an Eligible Tender Offer, we may be required to sell portfolio securities when we otherwise would
not, including at times when market conditions are not favorable, which may cause us to lose money. Given the nature of certain of our
investments, particularly our direct investments, we may be unable to liquidate certain of our investments until well after the Termination
Date. In this case, we may make one or more additional distributions after the Termination Date of any cash received from the ultimate
liquidation of those investments. This would delay distribution payments, perhaps for an extended period of time, and there can be no
assurance that the total value of the cash distribution made on the Termination Date and such subsequent distributions, if any, will equal
our net asset value on the Termination Date, depending on the ultimate results of such post-Termination Date asset liquidations. If, as
a result of lack of market liquidity or other adverse market conditions, our Board of Directors determines it is in the best interest
of the Fund, we may transfer any portfolio investments that remain unsold on the Termination Date to a liquidating trust and distribute
interests in such liquidating trust to common shareholders as part of our final distribution. Interests in the liquidating trust are expected
to be nontransferable, except by operation of law. There can be no assurance as to the timing of or the value obtained from the liquidation
of any investments transferred to a liquidating trust.
The obligation to terminate on the Termination Date also may impact adversely
the implementation of our investment strategies. There can be no assurance that our Adviser and our Subadviser will be successful in their
efforts to minimize any detrimental effects on our investment performance caused by our obligation to liquidate our investment portfolio
and distribute all of our liquidated net assets to common shareholders of record on the Termination Date. In particular, our Adviser and
our Subadviser may face difficulties exiting our direct investments on or prior to the Termination Date at favorable prices, if at all.
In addition, as we approach the Termination Date, we may invest the proceeds of sold, matured or called securities in money market mutual
funds, cash, cash equivalents, securities issued or guaranteed by the U.S. government or its instrumentalities or agencies, high quality,
short-term money market instruments, short-term debt securities, certificates of deposit, bankers’ acceptances and other bank obligations,
commercial paper or other liquid debt securities, which may adversely affect our investment performance. In the course of the liquidation,
we must continue to satisfy the asset diversification requirements to qualify as a RIC for federal income tax purposes, which may also
have a negative effect on our investment performance. If we fail to comply with these requirements, we may be liable for federal income
tax in the year of the liquidation. Moreover, rather than reinvesting the proceeds of sold, matured or called securities, we may distribute
the proceeds in one or more liquidating distributions prior to the final liquidation, which may cause fixed expenses to increase when
expressed as a percentage of our total assets.
Additional Information
(unaudited) (continued)
If we conduct an Eligible Tender Offer, we anticipate that funds to pay the
aggregate purchase price of common shares accepted for purchase pursuant to the tender offer will be first derived from any cash on hand
and then from the proceeds from the sale of portfolio investments. In addition, we may be required to dispose of portfolio investments
in connection with any reduction in our outstanding leverage necessary in order to maintain our desired leverage ratios following an Eligible
Tender Offer. The risks related to the disposition of portfolio investments in connection with our termination also would be present in
connection with the disposition of portfolio investments in connection with an Eligible Tender Offer. It is likely that during the pendency
of an Eligible Tender Offer, and possibly for a time thereafter, we will hold a greater than normal percentage of our total assets in
money market mutual funds, cash, cash equivalents, securities issued or guaranteed by the U.S. government or its instrumentalities or
agencies, high quality, short-term money market instruments, short-term debt securities, certificates of deposit, bankers’ acceptances
and other bank obligations, commercial paper or other liquid debt securities, which may adversely affect our investment performance. If
our tax basis for the portfolio investments sold is less than the sale proceeds, we will recognize capital gains, which we will be required
to distribute to common shareholders. In addition, our purchase of tendered common shares pursuant to an Eligible Tender Offer will have
tax consequences for tendering common shareholders and may have tax consequences for non-tendering common shareholders. The purchase of
common shares pursuant to an Eligible Tender Offer will have the effect of increasing the proportionate interest in the Fund of non-tendering
common shareholders. All shareholders remaining after an Eligible Tender Offer will be subject to proportionately higher expenses due
to the reduction in our total assets resulting from payment for the tendered common shares. Such reduction in our total assets also may
result in less investment flexibility, reduced diversification and greater volatility for the Fund, and may have an adverse effect on
our investment performance.
We are not required to conduct an Eligible Tender Offer. Our Declaration
of Trust provides that, following an Eligible Tender Offer, the Fund must have at least $100 million of net assets to ensure our continued
viability (the “Termination Threshold”). If we conduct an Eligible Tender Offer, there can be no assurance that the number
of tendered common shares would not result in our net assets totaling less than the Termination Threshold, in which case the Eligible
Tender Offer will be terminated, no common shares will be repurchased pursuant to the Eligible Tender Offer and we will terminate on the
Termination Date subject to permitted extensions. Following the completion of an Eligible Tender Offer in which the number of tendered
common shares would result in our net assets totaling greater than the Termination Threshold, our Board of Directors may eliminate the
Termination Date upon the affirmative vote of a majority of our Board of Directors and without a vote of our shareholders. Thereafter,
we will have a perpetual existence. Our Adviser may have a conflict of interest in recommending to our Board of Directors that the Termination
Date be eliminated and we have a perpetual existence. We are not required to conduct additional tender offers following an Eligible Tender
Offer and conversion to perpetual existence. Therefore, remaining common shareholders may not have another opportunity to participate
in a tender offer. Shares of closed-end management investment companies frequently trade at a discount from their net asset value, and
as a result remaining common shareholders may only be able to sell their common shares at a discount to net asset value
Essential Asset-Based
Investing Risks. Our focus on essential asset-based investments means that our performance will be closely tied to the performance
of issuers or projects in essential asset sectors such as the education, housing, healthcare, social and human services, power, water,
energy, infrastructure, basic materials, industrial, transportation and telecommunications sectors and the fiscal and financial health
of issuers of municipal securities funding essential asset projects. The concentration of our investments in these sectors may present
more risk than if we were broadly diversified over numerous industries and sectors of the economy. A downturn in one or more of these
sectors would have a greater impact on us than on a fund that does not focus on essential asset-based investments. The performance of
the securities of issuers in multiple essential asset sectors may react similarly to certain market, economic and other factors. This
correlation may be higher during periods of market stress, and there may be times when the performance of securities of issuers in multiple
essential asset sectors lags the performance of the market as a whole. There can be no assurance that the allocation of our assets among
securities of issuers across the range of essential asset sectors will provide our common shareholders with any of the benefits typically
associated with sector diversification.
In addition, our portfolio will be subject to sector specific risks of the
energy and energy infrastructure sector, sustainable infrastructure sector and social infrastructure sector. Accordingly, we expect that
the performance of our investment portfolio will be closely tied to the performance of these sectors. Risks inherent in the businesses
of such companies may include:
| • | Operating Risk. Energy and infrastructure companies are subject to many operating risks, including equipment failure causing
outages; structural, maintenance, impairment and safety problems; transmission or transportation constraints, inoperability or inefficiencies;
dependence on a specified fuel source; changes in electricity and fuel usage; availability of competitively priced alternative energy
sources; changes in generation efficiency and market heat rates; lack of sufficient capital to maintain facilities; significant capital
expenditures to keep older assets operating efficiently; seasonality; changes in supply and demand for energy; catastrophic and/or weather-related
events such as spills, leaks, well blowouts, uncontrollable flows, ruptures, fires, explosions, floods, earthquakes, hurricanes, discharges
of toxic gases and similar occurrences; storage, handling, disposal and decommissioning costs; and environmental compliance. |
The energy and infrastructure sectors are cyclical and from time
to time may experience a shortage of drilling rigs, equipment, supplies or qualified personnel. A company may not be able to successfully
and timely complete capital improvements to existing or other capital projects, which could subject the company to additional costs and/or
the write-off of its investment in the project or improvement. The marketability of oil and gas production depends in large part on the
availability, proximity and capacity of pipeline systems owned by third parties. Oil and gas properties are subject to royalty interests,
liens and other burdens, encumbrances, easements or restrictions, all of which could impact the production of a particular energy company.
Oil and gas companies operate in a highly competitive and cyclical industry, with intense price competition. A significant portion of
their revenues may depend on a relatively small number of customers, including governmental entities and utilities.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Energy companies engaged in interstate pipeline transportation
of natural gas, refined petroleum products and other products are subject to federal regulation with respect to the tariff rates these
companies may charge for pipeline transportation services. An adverse determination with respect to the tariff rates of an energy company
could have a detrimental effect on its business. Clean energy-related investments are subject to many of the same operating risks that
apply to traditional energy companies, as described above. Such companies can also be negatively affected by lower energy output resulting
from variable inputs, mechanical breakdowns, faulty technology, competitive electricity markets or changing laws that mandate the use
of renewable energy sources by electric utilities. In addition, companies that engage in energy efficiency projects may be unable to protect
their intellectual property or face declines in the demand for their services due to changing governmental policies or budgets, among
other things.
Recently imposed tariffs on imports could affect a number of energy
sectors, including oil, gas, solar and wind sectors by increasing operating costs.
| • | Construction Risk. To the extent we invest in projects that involve significant construction, including but not limited to
clean energy-related investments, such projects are subject to construction risk. Construction delays may adversely affect companies that
generate power from clean sources. The ability of these projects to generate revenues will often depend upon their successful completion
of the construction and operation of generating assets. Capital equipment for renewable energy projects needs to be manufactured, shipped
to project sites, installed and tested on a timely basis. In addition, on-site roads, substations, interconnection facilities and other
infrastructure all need to be either built or purchased and installed by the operating companies of these projects. Construction phases
may not be completed or may be substantially delayed, as a result of inclement weather, labor disruptions, technical complications or
other reasons, and material cost over-runs may be incurred, which may result in such projects being unable to earn positive income, which
could negatively impact the market values of our Direct Investments in clean energy-related issuers. |
| • | Regulatory Risk. Energy and infrastructure companies, including sustainable and social infrastructure companies, are subject
to regulation by governmental authorities in various jurisdictions and may be adversely affected by the imposition of special tariffs
and changes in tax laws, regulatory policies and accounting standards. Regulation exists in multiple aspects of their operations, including
reports and permits concerning exploration, drilling and production; how facilities are constructed, maintained and operated; how wells
are spaced; the unitization and pooling of properties; environmental and safety controls, including emissions release, the reclamation
and abandonment of wells and facility sites, remediation, protection of endangered species and the discharge and disposition of waste
materials; offshore oil and gas operations; and the prices they may charge for the oil and gas produced or transported under federal and
state leases and other products and services. Stricter laws, regulations or enforcement policies could be enacted in the future which
may increase compliance costs and may adversely affect the financial performance of such companies. Additionally, future legislation may
make significant changes to U.S. federal income tax laws, including the elimination of certain U.S. federal income tax benefits currently
available to oil and gas exploration and production companies. The use of methods such as hydraulic fracturing may be subject to new or
different regulation in the future. Any new state or federal regulations that may be imposed on hydraulic fracturing could result in additional
permitting and disclosure requirements (including of substances used in the fracturing process) and in additional operating restrictions.
The imposition of various conditions and restrictions on drilling and completion operations could lead to operational delays and increased
costs and, moreover, could delay or effectively prevent the development of oil and gas from formations that would not be economically
viable without the use of hydraulic fracturing. |
The market for electricity generation projects is influenced by
U.S. federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated
by electric utilities. Customer purchases of, or further investment in the research and development of, clean energy technologies could
be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for clean energy
project development and investments. For example, without certain major incentive programs and or the regulatory mandated exception for
clean energy systems, utility customers are often charged interconnection or stand by fees for putting distributed power generation on
the electric utility network. These fees could increase the cost to customers of using clean energy and make it less desirable.
| • | Environmental Risk. Energy and infrastructure company activities, including sustainable and social infrastructure company activities,
are subject to stringent environmental laws and regulation by many federal, state and local authorities, international treaties and foreign
governmental authorities. Failure to comply with such laws and regulations or to obtain any necessary environmental permits pursuant to
such laws and regulations could result in fines or other sanctions. Congress and other domestic and foreign governmental authorities have
either considered or implemented various laws and regulations to restrict or tax certain emissions, particularly those involving air and
water emissions. Existing environmental regulations could be revised or reinterpreted, new laws and regulations could be adopted or become
applicable, and future changes in environmental laws and regulations could occur, which could impose significant additional costs. Energy
companies have made and will likely continue to make significant capital and other expenditures to comply with these and other environmental
laws and regulations. There can be no assurance that such companies would be able to recover all or any increased environmental costs
from their customers. In addition, energy companies may be responsible for environmentally-related liabilities, including any on-site
liabilities associated with the environmental condition of facilities that it has acquired, leased or developed, or liabilities from associated
activities, regardless of when the liabilities arose and whether they are known or unknown. |
Additional Information
(unaudited) (continued)
| • | Climate Change Regulation Risk. Climate change regulation could result in increased operations and capital costs for the companies
in which we invest. Voluntary initiatives and mandatory controls have been adopted or are being discussed both in the United States and
worldwide to reduce emissions of “greenhouse gases” such as carbon dioxide, a by-product of burning fossil fuels, which some
scientists and policymakers believe contribute to global climate change. These measures and future measures could result in increased
costs to certain companies in which we invest and could impact the demand and prices for fossil fuels. |
| • | Government Incentives Risk. The reduction or elimination of government economic incentives could impede growth of certain essential
asset issuers including in particular clean energy companies. Because a significant portion of the revenues to the clean energy-related
issuers in which we expect to invest are expected to involve the market for the international and domestic electricity grids, the reduction
or elimination of government and economic incentives may adversely affect the growth of this market or result in increased price competition. |
| • | Renewable Energy Risk. Renewable energy companies are dependent upon factors such as available solar resource, wind conditions,
weather conditions and power generating equipment performance that may significantly impact the performance of such companies. Solar,
wind and weather conditions generally have natural variations from season to season and from year to year and may also change permanently
because of climate change or other factors. Solar and wind energy is highly dependent on weather conditions and, in particular, on available
solar and wind conditions. Moreover, power generating equipment used generally by renewable energy companies is accompanied by the attendant
costs of maintaining such equipment while in use and subject to risks of obsolescence associated with emerging and disruptive new technologies. |
| • | Gas Risk. Gas transmission companies and gas distribution companies are undergoing significant changes. Many companies have
diversified into oil and gas exploration and development, making returns more sensitive to energy prices. Gas utility companies have been
adversely affected by disruptions in the oil industry and have also been affected by increased concentration and competition. In certain
jurisdictions, acquisitions and dispositions in this industry might require regulatory approvals and be subject to significant regulatory
requirements. Obtaining any such approvals and complying with any such regulatory requirements may be costly and/or time-consuming to
obtain. For example, in the United States, interstate transmission companies are regulated by the Federal Energy Regulatory Commission
(“FERC”), so certain of the Fund’s acquisitions and dispositions may be subject to FERC approval under the U.S. Federal
Power Act, as amended. |
| • | Commodity Price Volatility Risk. The volatility of energy commodity prices can significantly affect energy companies due to
the impact of prices on the volume of commodities developed, produced, gathered and processed. In addition, the performance of clean energy-related
investments may be affected by changes in the market price of electricity. |
Historically, commodity prices have been cyclical and exhibited
significant volatility, which may adversely impact the market prices, operations, cash flows and financial performance of our investments
in the energy sector. Commodity prices fluctuate for several reasons, including changes in global and domestic energy market, general
economic conditions, consumer demand, price and level of foreign imports, the impact of weather on demand, levels of domestic and worldwide
supply, levels of production and imports, domestic and foreign governmental regulation, political instability, acts of war and terrorism,
the success and costs of resource development, conservation and environmental protection efforts, competition from other sources, taxation
and the availability of local, intrastate and interstate transportation systems.
| • | Supply and Demand Risk. A decrease in the exploration, production or development of natural gas, natural gas liquids, crude
oil or refined petroleum products, or a decrease in the volume of such commodities, may adversely impact the financial performance and
profitability of energy companies. Production declines and volume decreases could be caused by various factors, including changes in commodity
prices, oversupply, depletion of resources, declines in estimates of proved reserves, catastrophic events affecting production, labor
difficulties, political events, production variance from expectations, Organization of the Petroleum Exporting Countries (“OPEC”)
actions, environmental proceedings, increased regulations, equipment failures and unexpected maintenance problems or outages, inability
to obtain necessary permits or carry out new construction or acquisitions, unanticipated expenses, import supply disruption, increased
competition from alternative energy sources and other events. Reductions in or prolonged periods of low prices for natural gas and crude
oil can cause a given reservoir to become uneconomic for continued production earlier than it would if prices were higher. |
A sustained decline in or varying demand for such commodities
could also adversely affect the financial performance of energy companies. Factors that could lead to a decline in demand include economic
recession or other adverse economic conditions, political and economic conditions in other natural resource producing countries including
embargoes, hostilities in the Middle East, military campaigns and terrorism, OPEC actions, higher fuel taxes or governmental regulations,
increases in fuel economy, consumer shifts to the use of alternative fuel sources, exchange rates and changes in commodity prices or weather.
| • | Water Risk. Water supply utilities are companies that collect, purify, distribute and sell water. In the United States and
around the world the industry is highly fragmented because most of the supplies are owned by local authorities. Companies in this industry
are generally mature and are experiencing little or no per capita volume growth. Water supply utilities are subject to the risk of existing
or future environmental contamination, including, among others, soil and groundwater contamination as well as the delivery of contaminated
water, as a result of the spillage of hazardous materials or other pollutants. Water supply utilities are also subject to the risk of
increased costs, which may result from a number of factors, including fluctuations in water availability or costs associated with desalination. |
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
| • | Public Infrastructure Risks. We may invest in public infrastructure projects that constitute significant strategic value to
public or governmental bodies. Such assets may have a national or regional profile and may have monopolistic or oligopolistic characteristics.
The very nature of these assets could create additional risks not common in other industry sectors. Given the national or regional profile
and/or irreplaceable nature of certain strategic assets, such assets may constitute a higher risk target for terrorist acts or political
actions, such as expropriation, which may negatively affect the operations, revenue, profitability or contractual relationships of investments.
For example, in response to public pressure and/or lobbying efforts by specific interest groups, government entities may put pressure
on these investments to reduce toll rates, limit or abandon planned rate increases and/or exempt certain classes of users from tolls.
Given the essential nature of the services provided by certain public infrastructure, there is also a higher probability that if an owner
of such assets fails to make such services available, users of such services may incur significant damage and may be unable to replace
the supply or mitigate any such damage, thereby heightening the risks of third-party claims. These assets are also impacted by the interests
of local communities and stakeholders, which may affect the operation of such assets. Certain of these communities may have or develop
interests or objectives which are different from, or even in conflict with, the owners of such assets. |
| • | Education Risks. Education facilities may be impacted by risks beyond their operating and financial performance, including
being adversely impacted by changes in the political environment, public sentiment or regulation. This could cause a reduction or loss
in funding from local, state and federal governments. Additionally, certain education facilities (such as charter schools) are also operated
pursuant to charters granted by various state or other regulatory authorities and are dependent upon compliance with the terms of such
charters in order to obtain funding from local, state and federal governments and we can be adversely affected by a facility’s failure
to comply with its charter, an adverse audit or review, or non-renewal or revocation of a charter. |
Equity
Securities
Equity Securities
Risk, Including Common Stock Risk. Market prices of common stocks and other equity securities may be affected by macroeconomic and
other factors affecting the stock market in general, including changes in financial or political conditions that may affect particular
industries or the economy in general and changes in investor sentiment. Prices of equity securities of individual issuers also can be
affected by fundamentals unique to the issuer, including changes, or perceived changes, in the issuer’s business, financial condition
or prospects, and may fall to zero in the event of the issuer’s bankruptcy. Equity security prices have historically experienced
periods of significant volatility, particularly during recessions or other periods of financial stress, and can be expected to experience
significant volatility in the future. The equity securities we hold may undergo sudden, unpredictable drops in price or long periods
of price decline. There can be no assurance that the level of dividends paid with respect to the dividend paying equity securities in
which we invest will be maintained. In addition, by writing covered call options on a portion of the listed equity securities in our
investment portfolio, the capital appreciation potential of such securities will be limited.
The performance
of certain of the equity securities in which we invest, including certain common stocks and the preferred equities and MLPs in which
we invest, may be sensitive to changes in market interest rates and, accordingly, may be more highly correlated than the broader equity
markets with the performance of debt securities, including the debt securities in which we invest. Accordingly, there can be no assurance
that the allocation of our assets among equity and debt securities will provide our common shareholders with any of the benefits typically
associated with asset class diversification.
Small- and Mid-Capitalization
Company Risk. Investing in equity securities of small-capitalization and mid-capitalization companies may involve greater risks than
investing in equity securities of larger, more established companies. Small-capitalization and mid-capitalization companies generally
have limited product lines, markets and financial resources. Their equity securities may trade less frequently and in more limited volumes
than the equity securities of larger, more established companies. Also, small-capitalization and mid-capitalization companies are typically
subject to greater changes in earnings and business prospects than larger companies. As a result, the market prices of their equity securities
may experience greater volatility and may decline more than those of large-capitalization companies in market downturns.
Preferred Equity
Risk. The right of a holder of an issuer’s preferred equity to distributions, dividends and liquidation proceeds is junior
to the rights of the issuer’s creditors, including holders of debt securities. Market prices of preferred equities may be subject
to factors that affect debt and equity securities, including changes in market interest rates and changes, or perceived changes, in the
issuer’s creditworthiness. Holders of preferred equity may suffer a loss of value if distribution or dividend rates are reduced
or distributions or dividends are not paid. Under normal conditions, holders of preferred equity usually do not have voting rights with
respect to the issuer. The ability of holders of preferred equity to participate in the issuer’s growth may be limited.
MLP Risks. An
investment in MLP securities involves some risks that differ from the risks involved in an investment in the common stock of a corporation,
including governance risk, tax risk, and cash flow risk. Governance risk involves the risks associated with the ownership structure of
MLPs. MLPs are also subject to tax risk, which is the risk that MLPs might lose their partnership status for tax purposes. Cash flow
risk is the risk that MLPs will not make distributions to holders (including us) at anticipated levels or that such distributions will
not have the expected tax character. As a result, there could be a material reduction in our cash flow and there could be a material
decrease in the value of our common shares.
Additional Information
(unaudited) (continued)
Debt Securities
Debt Securities Risks. Investments in debt securities are generally
subject to credit risk, extension risk, interest rate risk, prepayment risk and spread risk:
| • | Credit Risk. Credit risk is the risk that the market value of debt securities may decline if the issuer or the borrower, or
a guarantor, defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making timely payments of principal or interest. We could lose money if the issuer of or borrower under, or a guarantor of, a
debt security defaults or is unable or unwilling to make timely principal or interest payments. The lower quality or unrated securities
in which we invest may present increased credit risk as compared to higher rated securities, including the possibility of default or bankruptcy. |
| • | Extension Risk. During periods of rising market interest rates, it becomes more expensive for a borrower to refinance its existing
debt obligations. During such periods, repayments of debt securities may occur more slowly than anticipated by the market because the
issuer or borrower will prefer to pay interest at a lower rate. This may cause the market prices of such debt securities to decline. |
| • | Interest Rate Risk. The market prices of debt securities typically decline in the event of increases in market interest rates,
which are currently near historically low levels. Changes in government policy may cause market interest rates to rise, which may result
in periods of market volatility or harm our performance and net asset value. Declines in market interest rates also may increase prepayments
of debt securities, which, in turn, would increase prepayment risk. Debt securities with longer maturities tend to be more sensitive to
changes in market interest rates, typically making their prices more volatile than securities with shorter maturities. The Federal Reserve
recently raised the federal funds rate several times, and has indicated that it may continue to do so. Therefore, there is a risk that
interest rates will rise, which will likely drive down bond prices. |
| • | Prepayment, Call or Reinvestment Risk. Many issuers and borrowers have a right to prepay their debt securities prior to the
stated maturity date. If market interest rates fall, an issuer or borrower may exercise this right in order to refinance its debt obligations
at a lower rate. In that event, a holder of the issuer’s or borrower’s debt securities will not benefit from the rise in market
price that normally accompanies a decline in market interest rates. Reinvestment risk is the risk that, upon the sale or repayment (at
maturity or otherwise) of debt securities we hold, we will be required to reinvest the proceeds in debt securities paying lower interest
rates than the debt securities that were sold or repaid. In this event, our distribution rate may decline. A decline in the income we
receive from our investments is likely to have a negative effect on our market price, net asset value and/or overall return. |
| • | Spread Risk. Wider credit spreads and decreasing market values typically represent a deterioration of a debt security’s
credit soundness and a perceived greater likelihood or risk of default by the issuer. High Yield Securities Risks. High yield debt securities,
commonly referred to as “junk” bonds, are debt securities rated below investment grade (i.e., BB+/Ba1 or lower) or unrated
securities that our Adviser or Subadviser deems to be of comparable quality. These securities may be subject to greater levels of credit
and liquidity risk than debt securities rated investment grade. In addition, high yield debt securities generally have greater price fluctuations,
are less liquid and are more likely to experience a default than higher rated debt securities. High yield debt securities are considered
predominately speculative with respect to the issuer’s continuing ability to make principal and interest payments. High yield debt
securities are especially subject to adverse changes in general economic conditions and in the industries in which the issuers are engaged,
to changes in the financial condition of the issuers and to price fluctuations in response to changes in interest rates. |
During recessions, other periods of financial stress or periods
of rising interest rates, highly leveraged issuers may experience financial stress that could adversely affect their ability to make payments
of interest and principal and increase the possibility of default. The market prices of high yield debt securities have historically been
subject to significant, rapid declines, reflecting an expectation that many issuers of such securities might experience financial difficulties.
In these events, the yields on high yield debt securities rise dramatically, reflecting the risk that holders of such securities could
lose a substantial portion of the value of their investment as a result of the issuers’ financial restructuring or default. It can
be expected that similar market price declines will occur in the future. The market for high yield debt securities generally is thinner
and less active than that for higher rated securities, which may limit our ability to sell such securities at fair value in response to
changes in the economy or financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis,
also may decrease the market prices and liquidity of high yield debt securities, especially in a thinly traded market. Changes by NRSROs
in their rating of a debt security may affect the market price of such security. Analysis of the creditworthiness of issuers of high yield
debt securities may be more complex than for issuers of higher-quality debt securities, and our ability to achieve our investment objective
may, to the extent we invest in high yield debt securities, be more dependent upon our Adviser’s credit analysis than would be the
case if we were investing in higher-quality debt securities.
The corporate debt securities in which we invest generally will
be high yield debt securities. Because the performance of high yield corporate debt securities, especially during periods of market stress,
may be affected by changes, or perceived changes, in the issuer’s business, financial condition or prospects, the performance of
our investments in high yield corporate debt securities may be correlated with the performance of equity securities, including the equity
securities in which we invest. Accordingly, there can be no assurance that the allocation of our assets among equity and debt securities
will provide our common shareholders with any of the benefits typically associated with asset class diversification.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Defaulted Securities Risks. Defaulted securities are speculative and
involve substantial risks in addition to the risks of investing in high yield securities or unrated securities of comparable quality that
have not defaulted. We generally will not receive interest payments on the defaulted securities and there is a substantial risk that principal
will not be repaid. We may incur additional expenses to the extent we are required to seek recovery upon a default in the payment of principal
of or interest on our portfolio holdings. In any reorganization or liquidation proceeding relating to a defaulted security, we may lose
the value of our entire investment or may be required to accept cash or securities with a value less than our original investment. Defaulted
securities and any securities received in exchange for defaulted securities may be subject to restrictions on resale.
Bank Loan and Loan Participation Risks. Investing in bank loans involves
risks that are additional to and different from those relating to investing in other types of debt securities. Any specific collateral
used to secure a bank loan may decline in value or become illiquid, which would adversely affect the loan’s value. In the event
of a borrower’s bankruptcy or other default, we could experience delays or limitations with respect to our ability to realize the
benefits of the collateral securing a bank loan, and there can be no assurance regarding the value that may be obtained upon the sale
of collateral. No active trading market may exist for certain bank loans or loan participations, which may impair our ability to realize
full value in the event we need to sell a loan or loan participation and make it difficult for us to value the bank loans and loan participations
in which we invest. Adverse market conditions may impair the liquidity of some actively traded bank loans and loan participations. To
the extent that a secondary market does exist for certain bank loans and loan participations, the market may be subject to irregular trading
activity and wide bid/ask spreads, which may result in limited liquidity and pricing transparency. In addition, bank loans and loan participations
may be subject to restrictions on sales or assignment and generally are subject to extended settlement periods that may be longer than
seven days.
Subordinated loans are lower in priority of payment than senior loans. Accordingly,
they are typically lower rated and subject to greater risk that the cash flow of the borrower and the collateral securing the loan, if
any, may be insufficient to meet scheduled payments after giving effect to the borrower’s senior debt obligations. Subordinated
loans generally have greater price volatility than senior loans and may be less liquid. We may not be able to unilaterally enforce all
rights and remedies under a bank loan and with regard to any associated collateral. If we purchase a loan participation, we generally
will have no direct right to enforce compliance by the borrower with the terms of the loan agreement, and we may not directly benefit
from the collateral securing the underlying debt obligation. As a result, we would be exposed to the credit risk of both the borrower
under the bank loan and the lender selling the participation.
There is typically less available information about most bank loans than
is the case for many other types of debt instruments. Bank loans may not be deemed to be “securities” for purposes of the
federal securities laws, and bank loan investors may not have the protections of the anti-fraud provisions of the federal securities laws
and must rely instead on contractual provisions in loan agreements and applicable common-law fraud protections.
Municipal-Related Securities Risks. The yields on, and market prices
of, municipal-related securities are dependent on a variety of factors, including general conditions of the municipal securities market,
the size of a particular offering, the maturity of the obligation and the rating of the particular issue. The ability of issuers of municipal-related
securities to make timely payments of interest and repayments of principal may be diminished during general economic downturns including
in respect of potential reallocations of cost burdens among federal, state and local governments or among parties involved with operating
and managing our issuers. In addition, laws enacted in the future by Congress or state legislatures or referenda could extend the time
for payment of principal and/or interest, or impose other constraints on enforcement of such obligations or on the ability of municipalities
to levy taxes.
Issuers of municipal-related securities might seek protection under the bankruptcy
laws. In the event of bankruptcy of such an issuer, we could experience delays in collecting principal and interest and we may not be
able to collect all principal and interest to which we are entitled.
The availability of information in the municipal-related securities market
is less than in other markets, increasing the difficulty of evaluating and valuing securities. As a result, our investment performance
may be more dependent on the analytical abilities of our Adviser. The municipal-related securities we hold may be secured by payments
to be made by private entities, and changes in market conditions affecting such securities, including the downgrade of a private entity
obligated to make such payments, could have a negative impact on the value of our investments, the municipal-related securities market
generally or our performance. We may invest in municipal-related securities that are unsecured. While such unsecured investments may benefit
from the same or similar financial and other covenants available to indebtedness ranking ahead of the investments and may benefit from
cross-default provisions and security over an issuer’s assets, some or all of such terms may not be part of particular investments.
Moreover, our ability to influence an issuer’s affairs, especially during periods of financial distress or following an insolvency,
is likely to be substantially less than that of senior creditors. For example, under typical subordination terms, senior creditors are
able to block the acceleration of the debt or the exercise by debt holders of other rights they may have as creditors. Accordingly, we
may not be able to take steps to protect our investments in a timely manner or at all and there can be no assurance that our rate of return
objectives overall or any particular investment will be achieved. The municipal-related securities market is a highly fragmented market
that is very technically driven and it is expected that there will be regional variations in economic conditions or supply-demand fundamentals.
Because the Fund expects to invest less than 50% of its total assets in tax-exempt municipal-related securities, the Fund does not expect
to be eligible to pay “exempt interest dividends” to shareholders and interest on municipal-related securities will be taxable
to shareholders of the Fund when received as a distribution from the Fund.
Additional Information
(unaudited) (continued)
In addition, our investments may be more sensitive to adverse economic, business
and/or political developments if our investment portfolio includes a substantial portion of its assets in the securities of similar or
related projects and/or types municipal-related securities (for example only, revenue bonds, general obligation bonds or private activity
bonds) as such events may adversely affect a specific industry or local political and economic conditions, leading to declines in the
creditworthiness and value of our investments. The secondary market for certain municipal-related securities, particularly below investment
grade municipal-related securities, tends to be less well-developed or liquid than many other securities markets, which may adversely
affect our ability to sell our investments at attractive prices.
Municipal leases and certificates of participation involve special risks
not normally associated with general obligation or revenue bonds. Leases and installment purchase or conditional sale contracts (which
typically provide for title to the leased asset to pass eventually to the governmental issuer) are typically utilized as a means for governmental
issuers to acquire property and equipment without meeting constitutional and statutory requirements for the issuance of debt. The debt
issuance limitations are deemed to be inapplicable because of the inclusion in many leases or contracts of “non-appropriation”
clauses that relieve the governmental issuer of any obligation to make future payments under the lease or contract unless money is appropriated
for such purpose by the appropriate legislative body on a yearly or other periodic basis. In addition, such leases or contracts may be
subject to the temporary abatement of payments in the event the governmental issuer is prevented from maintaining occupancy of the leased
premises or utilizing the leased equipment. Although the obligations may be secured by the leased equipment or facilities, the disposition
of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and may result in a
delay in recovering or the failure to fully recover our original investment. In the event of non-appropriation, an issuer would be in
default, and taking ownership of the assets may be a remedy available to us, although we do not anticipate that such a remedy would normally
be pursued. Certificates of participation, which represent interests in unmanaged pools of municipal leases or installment contracts,
involve the same risks as the underlying municipal leases. In addition, we may be dependent upon the municipal authority issuing the certificates
of participation to exercise remedies with respect to the underlying securities. Certificates of participation also entail a risk of default
or bankruptcy, both of the issuer of the municipal lease and also the municipal agency issuing the certificate of participation.
The municipal-related securities in which we invest generally will be directly
originated municipal securities. Directly originated securities represent obligations structured directly by a single purchaser, or a
limited number of institutional purchasers, and the issuer, and are typically not rated by credit rating agencies. We expect that the
directly originated municipal-related securities in which we invest generally will be deemed by our Adviser to be of comparable quality
to securities rated below investment grade and that such securities will belong to relatively small issues. We expect that the directly
originated municipal-related securities in which we invest will have limited trading markets and therefore will tend to be less liquid
than municipal securities rated investment grade or issued by traditional municipal issuers. This may make it difficult for us to value
the municipal-related securities in which we invest. In addition, we will likely be able to sell such municipal-related securities only
in private transactions with another investor or group of investors, and there can be no assurance that we will be able to successfully
arrange such transactions if and when we desire to sell any of our municipal related securities or, if successfully arranged, that we
will be able to obtain favorable values upon the sale of our municipal-related securities in such transactions.
Additional risks for investing in municipal securities depending on the types
of each securities include:
| • | Municipal Note Risks. Municipal notes are shorter term municipal debt obligations that typically provide interim financing
in anticipation of tax collection, bond sales or revenue receipts. To the extent there is a shortfall in the anticipated proceeds, the
notes may not be fully repaid by an issuer and our returns would be adversely affected. |
| • | Private Activity Bond Risks. Private activity bonds are, in most cases, tax-exempt securities issued by states, municipalities
or public authorities to provide funds, typically through a loan or lease arrangement, to a private entity for the purpose of financing
construction or improvement of a facility to be used by the entity. Such bonds are secured typically by revenues derived from loan repayments
or lease payments due from the entity, which may or may not be guaranteed by a parent entity or otherwise secured. Private activity securities
generally are not secured by a pledge of the taxing power of the issuer of such bonds. Repayment of such securities generally depends
on the revenues of a private entity and may be subject to additional risk of non-payment. |
| • | General Obligation Bond Risks. General obligation bonds are secured by the issuer’s pledge of its full faith, credit
and taxing power for the payment of principal and interest. Timely payments by the issuer and the repayment of principal when due depend
on its credit quality, ability to raise tax revenues and ability to maintain an adequate tax base. The taxing power of any governmental
entity may be limited, however, by provisions of its state constitution or laws, and an entity’s creditworthiness will depend on
many factors, including, for example only, potential erosion of its tax base due to population declines, natural disasters, declines in
the state’s industrial base or inability to attract new industries, economic limits on the ability to tax without eroding the tax
base, state legislative proposals or voter initiatives to limit ad valorem real property taxes and the extent to which the entity relies
on federal or state aid, access to capital markets or other factors beyond the state’s or entity’s control. |
| • | Revenue Bond Risks. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities
or, in certain cases, from the proceeds of a special excise tax or other specific revenue source (for example, payments from the user
of the facility being financed) and accordingly, the timely payment of interest and the repayment of principal in accordance with the
terms of the revenue or special obligation bond depends on the economic viability of such facility or such revenue source. |
| • | Moral Obligation Bond Risks. Moral obligation bonds are typically issued by special purpose public authorities. If an issuer
of moral obligation bonds is unable to meet its obligations, the repayment of such bonds becomes a moral commitment but not a legal obligation
of the state or municipality that created the special purpose public authority that issued the bonds. |
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
| • | Municipal Commercial Paper Risks. Municipal commercial paper is typically unsecured and issued to meet short-term financing
needs. The lack of security presents some risk of loss to us since, in the event of an issuer’s bankruptcy, unsecured creditors
are repaid only after the secured creditors out of the assets, if any, that remain. |
| • | Municipal Lease Obligation Risks. Certificates of participation issued by government authorities or entities to finance the
acquisition or construction of equipment, land and/or facilities represent participations in a lease, an installment purchase contract
or a conditional sales contract relating to such equipment, land or facilities and as with debt obligations, are subject to the risk of
non-payment. |
| • | Zero-Coupon Securities Risks. Interest on zero-coupon bonds is not paid on a current basis and accordingly, the values of such
securities are subject to greater fluctuations than are the value of securities that distribute income regularly and may be more speculative
than such bonds. Further, the values of zero coupon bonds may be highly volatile during periods when interest rates rise or fall. |
| • | Tender Option Bond Risks. Investments in tender option bond transactions expose us to counterparty risk and leverage risk,
as well as the risk of loss of principal. |
| • | Variable Rate Demand Obligation Risks. If the bank or financial institution that is the counterparty on a VRDO is unable to
pay, upon demand or at maturity, we may lose money. |
| • | Financial Futures Risks. Trading in financial futures contracts may tend to be less liquid than trading in other futures contracts.
The trading of futures contracts also is subject to certain market risks, such as inadequate trading activity, which could at times make
it difficult or impossible to liquidate existing positions. |
| • | Insured Municipal Bond Risks. Although municipal bond insurance is expected to protect us against losses caused by a bond issuer’s
failure to make interest or principal payments, such insurance does not protect us or our investors against losses caused by declines
in a bond’s market value. Further, we cannot be certain that any insurance company will make these payments. In addition, if we
purchase the insurance, we will bear any related premiums and other related costs, which will reduce our returns. |
| • | Participation Note Risks. Because a participation note is an obligation of the issuer, rather than a direct investment in shares
of the underlying security or basket of securities, we may suffer losses potentially equal to the full value of the participation note
if the issuer fails to perform its obligations. |
| • | Pay-in-Kind Note Risks. An issuer’s ability to repay the principal of an investment in pay-in-kind notes may be dependent
upon a liquidity event or the long-term success of such issuer, the occurrence of which is uncertain. |
Operating and Financial Risks of Issuers and Impact of Other Issuers.
One of the fundamental risks associated with our investments is credit risk, which is the risk that an issuer will be unable to make
principal and interest payments on its outstanding debt obligations when due and the related risk that the value of a debt security may
decline because of concerns about the issuer’s ability or willingness to make such payments. Because we may invest our assets in
high yield securities or unrated securities of comparable quality, our credit risks are greater than those of funds that buy only investment
grade securities. Investments in inverse floaters will increase our credit risk. Our return would be adversely impacted if an issuer of
debt securities in which we invest becomes unable to make such payments when due. Issuers in which we invest could deteriorate as a result
of, among other factors, adverse developments in their businesses, changes in the competitive environment or an economic downturn. As
a result, issuers that we expect to be stable may operate, or expect to operate, at a loss or have significant variations in operating
results, may require substantial additional capital to support their operations or to maintain their competitive position or may otherwise
have a weak financial condition or be experiencing financial distress. In addition, we and other investment funds sponsored by our Adviser
have made (and/or will in the future make) investments in issuers that have operations and assets in many jurisdictions. It is possible
that the activities of one issuer may have adverse consequences on one or more other issuers (including our issuers), even in cases where
the issuers are held by different Tortoise investment funds and have no other connection to each other.
Risks of Investments in Less Established Issuers. Although from time
to time we will seek to make investments in respect of established issuers, we have not established any minimum size for the issuers in
which we may invest and are expected to make investments in smaller, less established issuers. For example, such issuers may have shorter
operating histories on which to judge future performance and, if operating, may have negative cash flow. In the case of start-up enterprises,
such issuers may not have significant or any operating revenues. Less established issuers tend to have smaller capitalizations and fewer
resources (including cash) and, therefore, often are more vulnerable to funding shortfalls and financial failure. In addition, less mature
issuers could be deemed to be more susceptible to irregular accounting or other fraudulent practices. In the event of fraud by any issuer
in which we invest, we may suffer a partial or total loss of capital invested in that issuer. There can be no assurance that any such
losses will be offset by gains (if any) realized on the Fund’s other investments.
U.S. Government Obligation Risks. While U.S. Treasury obligations
are backed by the “full faith and credit” of the U.S. government, such securities are nonetheless subject to credit risk (i.e.,
the risk that the U.S. government may be, or be perceived to be, unable or unwilling to honor its financial obligations, such as making
payments). Securities issued or guaranteed by federal agencies or authorities and U.S. government-sponsored instrumentalities or enterprises
may or may not be backed by the full faith and credit of the U.S. government. Other Investment Risks
Additional Information
(unaudited) (continued)
Liquidity Risk. Our Direct Investments will be highly illiquid, and
we will likely be able to sell such securities only in private transactions with another investor or group of investors, and there can
be no assurance that we will be able to successfully arrange such transactions if and when we desire to sell any of our Direct Investments
or, if successfully arranged, that we will be able to obtain favorable values upon the sale of our Direct Investments in such transactions.
In addition, our investments in debt securities may expose us to liquidity risk. The corporate debt securities in which we invest generally
will be high yield debt securities, and these securities have historically been less liquid than securities rated investment grade, especially
during periods of market stress. We expect that the directly originated municipal securities in which we invest will have limited trading
markets and therefore will tend to be less liquid than municipal securities rated investment grade or issued by traditional municipal
issuers.
With respect to our investments in listed equity securities, we may invest
in securities of any market capitalization, including small- and mid-capitalization companies, and may be exposed to liquidity risk when
trading volume, lack of a market maker, or legal restrictions impair our ability to sell particular securities or close call option positions
at an advantageous price or a timely manner. We may invest in mid-capitalization and small-capitalization companies, which may be more
volatile and more likely than large-capitalization companies to have narrower product lines, fewer financial resources, less management
depth and experience and less competitive strength. In the event certain securities experience limited trading volumes, the prices of
such securities may display abrupt or erratic movements at times. These securities may be difficult to sell at a favorable price at the
times when we believe it is desirable to do so.
Private Company Securities Risk. Our investments in private companies
may be subject to higher risk than investments in securities of public companies. Little public information may exist about many of the
issuers of these securities, and we will be required to rely on the ability of our Adviser and Subadviser to obtain adequate information
to evaluate the potential risks and returns involved in investing in these issuers. If our Adviser or Subadviser is unable to obtain all
material information about the issuers of these securities, it may be difficult to make a fully informed investment decision, and we may
lose some or all of our investment in these securities. These factors could subject us to greater risk than investments in securities
of public companies and negatively affect our investment returns, which could negatively impact the dividends paid to you and the value
of your investment. In addition, we will likely be able to sell our investments in private companies only in private transactions with
another investor or group of investors, and there can be no assurance that we will be able to successfully arrange such transactions if
and when we desire to sell any of our investments in private companies or, if successfully arranged, that we will be able to obtain favorable
values upon the sale of our investments in private companies in such transactions.
Restricted Securities Risk, including Rule 144A Securities Risk. Restricted
securities are less liquid than securities traded in the open market because of statutory and contractual restrictions on resale. Such
securities are, therefore, unlike securities that are traded in the open market, which can be expected to be sold immediately if the market
is adequate. This lack of liquidity may create special risks for us.
Restricted securities are subject to statutory and contractual restrictions
on their public resale, which may make it more difficult to value them, may limit our ability to dispose of them and may lower the amount
we could realize upon their sale. To enable us to sell our holdings of a restricted security not registered under the Securities Act,
we may have to cause those securities to be registered. The expenses of registering restricted securities may be determined at the time
we buy the securities. When we must arrange registration because we wish to sell the security, a considerable period may elapse between
the time the decision is made to sell the security and the time the security is registered so that we could sell it. We would bear the
risks of any downward price fluctuation during that period.
Rule 144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified institutional buyers, such as us. However, an insufficient
number of qualified institutional buyers interested in purchasing the Rule 144A-eligible securities that we hold could affect adversely
the marketability of certain Rule 144A securities, and we might be unable to dispose of such securities promptly or at reasonable prices.
Non-U.S. Securities Risks. Investments in securities of non-U.S. issuers
(including Canadian issuers) involve risks not ordinarily associated with investments in securities and instruments of U.S. issuers. For
example, non-U.S. companies are not generally subject to uniform accounting, auditing and financial standards and requirements comparable
to those applicable to U.S. companies. Non-U.S. securities exchanges, brokers and companies may be subject to less government supervision
and regulation than exists in the U.S. Dividend and interest income may be subject to withholding and other non-U.S. taxes, which may
adversely affect the net return on such investments. Because we intend to limit our investments in securities issued by non-U.S. issuers
(including Canadian issuers) to no more than 30% of our total assets, we will not be able to pass through to our shareholders any foreign
income tax credits as a result of any foreign income taxes we pay. There may be difficulty in obtaining or enforcing a court judgment
abroad. In addition, it may be difficult to effect repatriation of capital invested in certain countries. With respect to certain countries,
there are also risks of expropriation, confiscatory taxation, political or social instability or diplomatic developments that could affect
the Fund’s assets held in non-U.S. countries. There may be less publicly available information about a non-U.S. company than there
is regarding a U.S. company. Non-U.S. securities markets may have substantially less volume than U.S. securities markets and some non-U.S.
company securities are less liquid than securities of otherwise comparable U.S. companies. Non-U.S. markets also have different clearance
and settlement procedures that could cause the Fund to encounter difficulties in purchasing and selling securities on such markets and
may result in the Fund missing attractive investment opportunities or experiencing a loss. In addition, a portfolio that includes securities
issued by non-U.S. issuers can expect to have a higher expense ratio because of the increased transaction costs in non-U.S. markets
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
and the increased costs of maintaining the custody of such non-U.S. securities.
When investing in securities issued by non-U.S. issuers, there is also the risk that the market price of such an investment, measured
in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. We do not currently intend to hedge our exposure
to non-U.S. currencies.
Investments in companies domiciled in the United Kingdom (“UK”),
or that otherwise have significant ties to the UK, are subject to Brexit risk. Brexit risk is the risk that the exit of the UK from the
European Union occurs in a disruptive manner. Potential effects of a disruptive Brexit include, but are not limited to, adverse effects
on supply chains and labor markets, the potential for new taxes to be imposed on goods crossing borders, declining real estate markets
and a weakening of the pound sterling. Emerging Market Securities Risks. Investments in securities of non-U.S. issuers located in emerging
markets involve all of the risks generally applicable to investments in securities of non-U.S. issuers. These risks are heightened with
respect to investments in emerging market securities. In addition, investments in emerging market securities are subject to a number of
risks, including risks related to economic structures that are less diverse and mature than those of developed countries; less stable
political systems and less developed legal systems; national policies that may restrict foreign investment; wide fluctuations in the value
of investments, possibly as a result of significant currency exchange rate fluctuations; smaller securities markets making investments
less liquid; and special custody arrangements.
Terrorism and Cybersecurity Risks. Essential asset issuers are subject
to disruption as a result of terrorist activities and other geopolitical events, including upheaval in the Middle East or other energy-producing
regions. Cyber hacking could also cause significant disruption and harm to essential asset issuers. The U.S. government has issued warnings
that certain essential assets, specifically those related to energy infrastructure, including exploration and production facilities, pipelines
and transmission and distribution facilities, might be specific targets of terrorist activity. Additionally, digital and network technologies
(collectively, “cyber networks”) might be at risk of cyberattacks that could potentially seek unauthorized access to digital
systems for purposes such as misappropriating sensitive information, corrupting data or causing operational disruption. Cyberattacks might
potentially be carried out by persons using techniques that could range from efforts to electronically circumvent network security or
overwhelm websites to intelligence gathering and social engineering functions aimed at obtaining information necessary to gain access.
Covered Call Risks. We cannot guarantee that our covered call option
overlay strategy will be effective. There are several risks associated with transactions in options on securities, including:
| • | There are significant differences between the securities and options markets that could result in an imperfect correlation between
these markets, causing a given covered call option transaction not to achieve its objectives. A decision as to whether, when and how to
use covered calls (or other options) involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful
because of market behavior or unexpected events. |
| • | The use of options may require us to sell portfolio securities at inopportune times or for prices other than current market values,
may limit the amount of appreciation we can realize on an investment or may cause us to hold a security we might otherwise sell. As the
writer of a covered call option, we forego, during the option’s life, the opportunity to profit from increases in the market value
of the security covering the call option above the exercise price of the call option, but retain the risk of loss should the price of
the underlying security decline. Although such loss would be offset in part by the option premium received, in a situation in which the
price of a particular stock on which we have written a covered call option declines rapidly and materially or in which prices in general
on all or a substantial portion of the stocks on which we have written covered call options decline rapidly and materially, we could sustain
material depreciation or loss to the extent we do not sell the underlying securities (which may require us to terminate, offset or otherwise
cover our option position as well). |
| • | There can be no assurance that a liquid market will exist when we seek to close out an option position. If we were unable to close
out a covered call option that we had written on a security, we would not be able to sell the underlying security unless the option expired
without exercise. Reasons for the absence of a liquid secondary market for exchange-traded options may include, but are not limited to,
the following: (1) there may be insufficient trading interest; (2) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (3) trading halts, suspensions or other restrictions may be imposed with respect to particular classes
or series of options; (4) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (5) the trading facilities
may not be adequate to handle current trading volume; or (6) the relevant exchange could discontinue the trading of options. In addition,
our ability to terminate OTC options may be more limited than with exchange-traded options and may involve the risk that counterparties
participating in such transactions will not fulfill their obligations. |
| • | The principal factors affecting the market value of an option include supply and demand, interest rates, the current market price
of the underlying security in relation to the exercise price of the option, the dividend or distribution yield of the underlying security,
the actual or perceived volatility of the underlying security and the time remaining until the expiration date. Any of the foregoing could
impact or cause to vary over time the amount of income we are able to generate through our covered call option overlay strategy. |
| • | The number of covered call options we can write is limited by the number of shares of the corresponding common stock we hold. Furthermore,
our covered call option transactions may be subject to limitations established by each of the exchanges, boards of trade or other trading
facilities on which such options are traded. |
Additional Information
(unaudited) (continued)
| • | If we fail to maintain any required asset coverage ratios in connection with any use by us of leverage, we may be required to redeem
or prepay some or all of our leverage instruments. Such redemption or prepayment would likely result in our seeking to terminate early
all or a portion of any option transaction. Early termination of an option could result in a termination payment by or to us. Hedging
and Derivatives Risks. In addition to writing call options as part of our investment strategy, we may invest in derivative instruments
for hedging or risk management purposes, and for short-term purposes such as maintaining market exposure pending investment of the proceeds
of this offering or transitioning our portfolio between different asset classes. Our use of derivatives could enhance or decrease the
cash available to us for payment of distributions or interest, as the case may be. Derivatives can be illiquid, may disproportionately
increase losses and have a potentially large negative impact on our performance. Derivative transactions, including options on securities
and securities indices and other transactions in which we may engage (such as forward currency transactions, futures contracts and options
thereon and total return swaps), may subject us to increased risk of principal loss due to unexpected movements in stock prices, changes
in stock volatility levels, interest rates and foreign currency exchange rates and imperfect correlations between our securities holdings
and indices upon which derivative transactions are based. We also will be subject to credit risk with respect to the counterparties to
any OTC derivatives contracts we enter into. |
Interest rate transactions will expose us to certain risks that differ from
the risks associated with our portfolio holdings. There are economic costs of hedging reflected in the price of interest rate swaps, floors,
caps and similar techniques, the costs of which can be significant, particularly when long-term interest rates are substantially above
short-term rates. In addition, our success in using hedging instruments is subject to our Adviser’s ability to predict correctly
changes in the relationships of such hedging instruments to our leverage risk, and there can be no assurance that our Adviser’s
judgment in this respect will be accurate. Consequently, the use of hedging transactions might result in a poorer overall performance,
whether or not adjusted for risk, than if we had not engaged in such transactions. There is no assurance that the interest rate hedging
transactions into which we enter will be effective in reducing our exposure to interest rate risk. Hedging transactions are subject to
correlation risk, which is the risk that payment on our hedging transactions may not correlate exactly with our payment obligations on
senior securities. To the extent there is a decline in interest rates, the market value of certain derivatives could decline and result
in a decline in our net assets.
Counterparty Risk. The risk exists that a counterparty to a derivatives
contract or other transaction in a financial instrument held by us or by a special purpose or structured vehicle in which we invest may
become insolvent or otherwise fail to perform its obligations, including making payments to us, due to financial difficulties. We may
obtain no or limited recovery in a bankruptcy or other reorganizational proceedings, and any recovery may be significantly delayed. Transactions
that we enter into may involve counterparties in the financial services sector and, as a result, events affecting the financial services
sector may cause our share value to fluctuate.
In the event of a counterparty’s (or its affiliate’s) insolvency,
our ability to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, could
be stayed or eliminated under new special resolution regimes adopted in the United States, the European Union and various other jurisdictions.
Such regimes generally provide government authorities with broad authority to intervene when a financial institution is experiencing financial
difficulty. In particular, the regulatory authorities could reduce, eliminate or convert to equity the liabilities us of a counterparty
subject to such proceedings in the European Union (sometimes referred to as a “bail in”).
Operational Risks
Distribution Risks. We may not be able to achieve operating results
that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. We cannot
assure you that you will receive distributions at a particular level or at all. Dividends and distributions on equity securities are not
fixed but are declared at the discretion of the issuer’s board of directors. If stock market volatility declines, the level of premiums
from writing covered call options will likely decrease as well. Payments to close-out written call options will reduce amounts available
for distribution from gains earned in respect of call option expiration or close out. A significant decline in the value of the securities
in which we invest may negatively impact our ability to pay distributions or cause you to lose all or a part of your investment.
In addition, the 1940 Act may limit our ability to make distributions in
certain circumstances. Restrictions and provisions in any future credit facilities and our debt securities also may limit our ability
to make distributions. For federal income tax purposes, we are required to distribute substantially all of our net investment income each
year to maintain our status as a RIC, to reduce our federal income tax liability and to avoid a potential excise tax. If our ability to
make distributions on our common shares is limited, such limitations could, under certain circumstances, impair our ability to maintain
our qualification for taxation as a RIC or result in our having an income or excise tax liability, which would have adverse consequences
for our shareholders.
Operating Results Risk. We could experience fluctuations in our operating
results due to a number of factors, including the return on our investments, the level of our expenses, variations in and the timing of
the recognition of realized and unrealized gains or losses on our investments and written call options, the level of call premium we receive
by writing covered calls, the degree to which we encounter competition in our markets and general economic conditions. As a result of
these factors, results for any period should not be relied upon as being indicative of performance in future periods.
Market Discount Risk. Shares of closed-end investment companies frequently
trade at a discount from net asset value. Continued development of alternative vehicles for investing in essential asset companies may
contribute to reducing or eliminating any premium or may result in our common shares trading at a discount. The risk that our common shares
may trade at a discount is separate from the risk of a decline in our net asset value as a result of investment activities.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Whether shareholders will realize a gain or loss for federal income tax purposes
upon the sale of their common shares depends upon whether the market value of the common shares at the time of sale is above or below
the shareholder’s basis in such common shares, taking into account transaction costs, and it is not directly dependent upon our
net asset value. Because the market price of our common shares will be determined by factors such as the relative demand for and supply
of the shares in the market, general market conditions and other factors beyond our control, we cannot predict whether our common shares
will trade at, below or above net asset value, or at, below or above the public offering price for our common shares.
Portfolio Turnover Risk. At times, particularly during our initial
twelve months of operation, our portfolio turnover may be higher. High portfolio turnover involves greater transaction costs to us and
may result in greater realization of capital gains, including short-term capital gains.
Valuation Risks. Our Direct Investments will typically consist of
securities for which a liquid trading market does not exist. The fair value of these securities may not be readily determinable. We will
value these securities in accordance with valuation procedures adopted by our Board of Directors. Our Board of Directors may use the services
of an independent valuation firm to review the fair value of certain securities prepared by our Adviser. The types of factors that may
be considered in fair value pricing of our investments include, as applicable, the nature and realizable value of any collateral, the
issuer’s ability to make payments, the markets in which the issuer does business, comparison to publicly traded companies, discounted
cash flow and other relevant factors. Because such valuations, and particularly valuations of non-traded securities and private companies,
are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. The determination of fair value
by our Board of Directors may differ materially from the values that would have been used if a liquid trading market for these securities
existed. Our net asset value could be adversely affected if the determinations regarding the fair value of our investments were materially
higher than the values that we ultimately realize upon the disposition of such securities.
Tax Risk. We have elected to be treated, and intend to qualify each
year, as a “regulated investment company” (“RIC”) under the Code. To maintain our qualification for federal income
tax purposes as a RIC under the Code, we must meet certain source-of-income, asset diversification and annual distribution requirements,
as discussed in detail below under “Certain U.S. Federal Income Tax Considerations.” If for any taxable year we fail to qualify
for the special federal income tax treatment afforded to RICs, all of our taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to our stockholders) and our income available for distribution will be reduced.
Leverage Risks. Our use of leverage through the issuance of preferred
shares or debt securities, and any borrowings or other transactions involving indebtedness (other than for temporary or emergency purposes),
would be considered “senior securities” for purposes of the 1940 Act and create risks. Leverage is a speculative technique
that may adversely affect common shareholders. If the return on investments acquired with borrowed funds or other leverage proceeds does
not exceed the cost of the leverage, the use of leverage could cause us to lose money. Successful use of leverage depends on our Adviser’s
ability to predict or hedge correctly interest rates and market movements, and there is no assurance that the use of a leveraging strategy
will be successful during any period in which it is used. Because the fee paid to our Adviser and Subadviser will be calculated on the
basis of Managed Assets, the fees will increase when leverage is utilized, giving our Adviser an incentive to utilize leverage.
Our issuance of senior securities involves offering expenses and other costs,
including interest payments, that are borne indirectly by our common shareholders. Fluctuations in interest rates could increase interest
or distribution payments on our senior securities and could reduce cash available for distributions on common shares. Increased operating
costs, including the financing cost associated with any leverage, may reduce our total return to common shareholders.
The 1940 Act and/or the rating agency guidelines applicable to senior securities
impose asset coverage requirements, distribution limitations, voting right requirements (in the case of the senior equity securities)
and restrictions on our portfolio composition and our use of certain investment techniques and strategies. The terms of any senior securities
or other borrowings may impose additional requirements, restrictions and limitations that are more stringent than those currently required
by the 1940 Act, and the guidelines of the rating agencies that rate outstanding senior securities. These requirements may have an adverse
effect on us and may affect our ability to pay distributions on common shares and preferred shares. To the extent necessary, we currently
intend to redeem any senior securities to maintain the required asset coverage. Doing so may require that we liquidate portfolio securities
at a time when it would not otherwise be desirable to do so.
Capital Markets Risks. In the event of an economic downturn or increased
financial stress, the cost of raising capital in the debt and equity capital markets may increase, and the ability to raise capital may
be limited. In particular, concerns about the general stability of financial markets and specifically the solvency of lending counterparties
may impact the cost of raising capital from the credit markets through increased interest rates, tighter lending standards, difficulties
in refinancing debt on existing terms or at all and reduced, or in some cases ceasing to provide, funding to borrowers. In addition, lending
counterparties under existing revolving credit facilities and other debt instruments may be unwilling or unable to meet their funding
obligations. As a result of any of the foregoing, we or the companies in which we invest may be unable to obtain new debt or equity financing
on acceptable terms. If funding is not available when needed, or is available only on unfavorable terms, we or the companies in which
we invest may not be able to meet obligations as they come due. Moreover, without adequate funding, essential asset companies may be unable
to execute their growth strategies, complete future acquisitions, take advantage of other business opportunities or respond to competitive
pressures, any of which could have a material adverse effect on their revenues and results of operations.
Additional Information
(unaudited) (continued)
Legal, Regulatory and Policy Risks. Legal and regulatory changes could
occur that may adversely affect us, our investments and our ability to pursue our investment strategies and/or increase the costs of implementing
such strategies. Certain changes have already been proposed and additional changes are expected. New or revised laws or regulations may
be imposed by the SEC, the U.S. Commodity Futures Trading Commission (the “CFTC”), the Internal Revenue Service, the U.S.
Federal Reserve or other governmental regulatory authorities or self-regulatory organizations that could adversely affect us. We also
may be adversely affected by changes in the enforcement or interpretation of existing statutes and rules by governmental regulatory authorities
or self-regulatory organizations.
Instability in financial markets during and following the 2007–2009
global financial crisis led the U.S. government and foreign governments to take a number of unprecedented actions designed to support
certain financial institutions and segments of the financial markets that experienced extreme volatility, and in some cases a lack of
liquidity. While economic and financial conditions in the United States and elsewhere have been recovering for several years, volatility
remains and a perception that conditions remain fragile persists to some extent. Withdrawal of government support or investor perception
that such efforts are not succeeding could adversely affect the market value and liquidity of certain securities.
In the event of future instability in financial markets, U.S. federal and
state governments and foreign governments, their regulatory agencies or self-regulatory organizations may take additional actions that
affect the regulation of the securities in which we invest, or the issuers of such securities, in ways that are unforeseeable and on an
“emergency” basis with little or no notice, with the consequence that some market participants’ ability to continue
to implement certain strategies or manage the risk of their outstanding positions may be suddenly and/or substantially eliminated or otherwise
negatively impacted. Given the complexities of the global financial markets and the limited timeframe within which governments may be
required to take action, these interventions may result in confusion and uncertainty, which in itself may be materially detrimental to
the efficient functioning of such markets as well as previously successful investment strategies.
In addition, the securities and futures markets are subject to comprehensive
statutes, regulations and margin requirements. The CFTC, the SEC, the Federal Deposit Insurance Corporation, other regulators and self-regulatory
organizations and exchanges are authorized under these statutes and regulations and otherwise to take extraordinary actions in the event
of market emergencies. We, our Adviser and our Subadviser historically have been eligible for exemptions from certain regulations. However,
there is no assurance that we, our Adviser or our Subadviser will continue to be eligible for such exemptions.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the
“Dodd-Frank Act”) and related regulatory developments have imposed comprehensive new regulatory requirements on swaps and
swap market participants. The new regulatory framework includes: (1) registration and regulation of swap dealers and major swap participants;
(2) requiring central clearing and execution of standardized swaps; (3) imposing margin requirements on swap transactions; (4) regulating
and monitoring swap transactions through position limits and large trader reporting requirements; and (5) imposing record keeping and
centralized and public reporting requirements, on an anonymous basis, for most swaps. The CFTC is responsible for the regulation of most
swaps and has completed most of its rules implementing the Dodd-Frank Act swap regulations. The SEC has jurisdiction over a small segment
of the market referred to as “security-based swaps,” which includes swaps on single securities or credits, or narrow-based
indices of securities or credits, but has not yet completed its rulemaking. The implementation of the provisions of the Dodd-Frank Act
by the SEC and the CFTC could adversely affect our ability to pursue our investment objective. The Dodd-Frank Act and the rules promulgated
thereunder could, among other things, adversely affect the value of our investments, restrict our ability to engage in derivative transactions
and/or increase the costs of such derivative transactions.
The CFTC and certain futures exchanges have established limits, referred
to as “position limits,” on the maximum net long or net short positions which any person may hold or control in particular
options and futures contracts; those position limits also may apply to certain other derivatives positions we may wish to take. All positions
owned or controlled by the same person or entity, even if in different accounts, may be aggregated for purposes of determining whether
the applicable position limits have been exceeded. Thus, even if we do not intend to exceed applicable position limits, it is possible
that different clients managed by our Adviser, our Subadviser and their affiliates may be aggregated for this purpose. Therefore it is
possible that the trading decisions of our Adviser or our Subadviser may have to be modified and that positions we hold may have to be
liquidated in order to avoid exceeding such limits. The modification of investment decisions or the elimination of open positions, if
it occurs, may adversely affect our performance.
Changes in U.S. social, political, regulatory and economic conditions or
in laws and policies governing foreign trade, manufacturing, development, investment and support for clean energy initiatives, and any
negative sentiments towards the United States as a result of such changes, could adversely affect the business of the essential asset
companies in which we expect to invest. In addition, reduced immigration into the United States of educated professionals from overseas
or negative sentiments towards the United States among non-U.S. employees or prospective employees could adversely affect the ability
of the companies in which we expect to invest to hire and retain highly skilled employees. Any of these developments could have an adverse
effect on the value of our investments.
The impact of continued trade tensions with China, or an escalation to a
trade war, may adversely effect currencies, commodities and individual companies in which we invest. U.S. companies that source material
and goods from China, and those that make large amounts of sales in China would be particularly vulnerable to an escalation of trade tensions.
Uncertainty regarding the outcome of the trade tensions and the potential for a trade war could cause the dollar to decline against safe
haven currencies, such as the Japanese yen and the euro.
2023 Annual Report | November 30, 2023
Additional Information
(unaudited) (continued)
Subsidiary Risks. By investing in any Subsidiary, we will be indirectly
exposed to the risks associated with such Subsidiary’s investments. The instruments that will be held by any Subsidiary will generally
be similar to those that are permitted to be held by the Fund and will be subject to the same risks that apply to similar investments
if held directly by the Fund. The Subsidiaries will not be registered under the 1940 Act, and, unless otherwise noted, will not be subject
to all of the investor protections of the 1940 Act. However, we will wholly own and control any Subsidiary, and we and any Subsidiary
will each be managed by our Adviser or our Subadviser and will share the same portfolio management teams. Our Board of Directors will
have oversight responsibility for the investment activities of the Fund, including its investment in the Subsidiaries, and our role as
sole shareholder of any Subsidiary. Changes in the laws of the United States and/or any jurisdiction in which a Subsidiary is formed could
result in our inability or the inability of the Subsidiaries to operate as expected and could adversely affect the Fund. For example,
changes in U.S. tax laws could affect the U.S. tax treatment of, or consequences of owning, the Fund or the Subsidiaries, including under
the RIC rules.
Segregation and Coverage Risks. Certain portfolio management techniques,
such as, among other things, entering into swap agreements, using reverse repurchase agreements, futures contracts or other derivative
transactions, may be considered senior securities under the 1940 Act unless steps are taken to segregate our assets or otherwise cover
our obligations. To avoid having these instruments considered senior securities, we segregate liquid assets with a value equal (on a mark-to-market
basis) to our obligations under these types of transactions, enter into offsetting transactions or otherwise cover such transactions.
In cases where we do not follow such procedures, such instruments may be considered senior securities and our use of such transactions
will be required to comply with the restrictions on senior securities under the 1940 Act. We may be unable to use segregated assets for
certain other purposes, which could result in us earning a lower return on our portfolio than we might otherwise earn if we did not have
to segregate those assets in respect of or otherwise cover such portfolio positions. To the extent our assets are segregated or committed
as cover, it could limit our investment flexibility. Segregating assets and covering positions will not limit or offset losses on related
positions. Limitations on Transactions with Affiliates Risk. The 1940 Act limits our ability to enter into certain transactions with certain
of our affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security directly from or to any
portfolio company that is considered our affiliate under the 1940 Act. However, we may under certain circumstances purchase any such portfolio
company’s securities in the secondary market, which could create a conflict for our Adviser or Subadviser between our interests
and the interests of the portfolio company, in that the ability of our Adviser or Subadviser, as applicable, to recommend actions in our
best interests might be impaired.
The 1940 Act also prohibits certain “joint” transactions with
certain of our affiliates, including Other Tortoise Accounts, which could include investments in the same issuer (whether at the same
or different times). To the extent there is a joint transaction among us and Other Tortoise Accounts requiring exemptive relief, we may
rely on an exemptive order from the SEC obtained by the Adviser and certain Other Tortoise Accounts that permits us, among other things,
to co-invest with certain other persons, including certain Other Tortoise Accounts, subject to certain terms and conditions. Such relief
may not cover all circumstances and we may be precluded from participating in certain transactions due to regulatory restrictions on transactions
with affiliates. Anti-Takeover Provisions Risks. Our Declaration of Trust and Bylaws include provisions that could delay, defer or prevent
other entities or persons from acquiring control of us, causing us to engage in certain transactions or modify our structure. These provisions
may be regarded as “anti-takeover” provisions. Such provisions could limit the ability of common shareholders to sell their
shares at a premium over the then-current market prices by discouraging a third party from seeking to obtain control of us.
Office of the Company
and of the Investment Adviser
Tortoise Capital Advisors, L.L.C.
6363 College Boulevard, Suite 100A
Overland Park, KS 66211
(913) 981-1020
(913) 981-1021 (fax)
www.tortoiseecofin.com
Board of Directors of
Tortoise Energy Infrastructure Corp.
Tortoise Midstream Energy Fund, Inc.
Tortoise Pipeline & Energy Fund, Inc.
Tortoise Energy Independence Fund, Inc.
Tortoise Power and Energy Infrastructure Fund, Inc.
Ecofin Sustainable and Social Impact Term Fund
H. Kevin Birzer, Chairman
Tortoise Capital Advisors, L.L.C.
Rand C. Berney
Independent
Conrad S. Ciccotello
Independent
Alexandra Herger
Independent
Jennifer Paquette
Independent
Administrator
U.S. Bancorp Fund Services, LLC
615 East Michigan St.
Milwaukee, Wis. 53202
Custodian
U.S. Bank, N.A.
1555 North Rivercenter Drive, Suite 302
Milwaukee, Wis. 53212
Transfer, Dividend Disbursing
and Reinvestment Agent
Computershare Trust Company, N.A. /
Computershare Inc.
P.O. Box 30170
College Station, Tex. 77842-3170
(800) 426-5523
www.computershare.com
Legal Counsel
Husch Blackwell LLP
4801 Main St.
Kansas City, Mo. 64112
Investor Relations
(866) 362-9331
info@tortoiseecofin.com
Stock Symbols
Listed NYSE Symbols: TYG, NTG, TTP, NDP, TPZ, TEAF
This report is for stockholder information. This is not a prospectus intended
for use in the purchase or sale of fund shares. Past performance is no guarantee of future results and your investment may be worth
more or less at the time you sell.
6363 College Boulevard, Suite 100A
Overland Park, KS 66211
www.tortoiseecofin.com
(b) Not applicable.
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant’s
Principal Executive Officer and its Principal Financial Officer. The Registrant has not made any changes to this code of ethics during
the period covered by this report. The Registrant has not granted any waivers from any provisions of this code of ethics during the period
covered by this report.
Item 3. Audit Committee Financial Expert.
The Registrant’s Board of Directors has determined that there is
at least one “audit committee financial expert” serving on its audit committee. Mr. Rand Berney is the “audit committee
financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) The Registrant has engaged its principal
accountant to perform audit services, audit-related services and tax services during the past two fiscal years. “Audit services”
refer to performing an audit of the Registrant's annual financial statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services”
refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit.
“Tax services” refer to professional services rendered by the principal accountant for tax compliance (including preparation
of tax returns), tax advice, and tax planning. The following table details the approximate amounts of aggregate fees billed to the
Registrant for the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
|
FYE 11/30/2023 |
FYE 11/30/2022 |
Audit Fees |
$ 87,350 |
$ 82,400 |
Audit-Related Fees |
— |
— |
Tax Fees |
$ 22,005 |
$ 10,530 |
All Other Fees |
— |
— |
(e)(1) The audit committee has adopted pre-approval
policies and procedures that require the audit committee to pre-approve (i) the selection of the Registrant’s independent registered
public accounting firm, (ii) the engagement of the independent registered public accounting firm to provide any non-audit services to
the Registrant, (iii) the engagement of the independent registered public accounting firm to provide any non-audit services to the Adviser
or any entity controlling, controlled by, or under common control with the Adviser that provides ongoing services to the Registrant, if
the engagement relates directly to the operations and financial reporting of the Registrant, and (iv) the fees and other compensation
to be paid to the independent registered public accounting firm. The Chairman of the audit committee may grant the pre-approval of any
engagement of the independent registered public accounting firm for non-audit services of less than $10,000, and such delegated pre-approvals
will be presented to the full audit committee at its next meeting. Under certain limited circumstances, pre-approvals are not required
under securities
law regulations for certain non-audit services below
certain de minimis thresholds. Since the adoption of these policies and procedures, the audit committee has pre-approved all audit and
non-audit services provided to the Registrant by the principal accountant.
(e)(2) None of these services provided by the principal
accountant were approved by the audit committee pursuant to the de minimis exception under Rule 2.01(c)(7)(i)(C) or Rule 2.01(c)(7)(ii)
of Regulation S-X.
(f) All of the principal accountant’s hours
spent on auditing the Registrant’s financial statements were attributed to work performed by full-time permanent employees of the
principal accountant.
(g) In the Registrant’s fiscal years ended November 30, 2023, and
2022, the Adviser was billed approximately $33,850 and $29,850 in fees, respectively, for tax and other non-audit services provided to
the Adviser. In the Registrant’s fiscal year ended November 30, 2023, and fiscal year ended November 30, 2022, the aggregate non-audit fees billed
by the registrant’s accountant for services rendered to the registrant was $22,005 and $10,530, respectively. In the Registrant’s
fiscal year ended November 30, 2023, and fiscal year ended November 30, 2022, the aggregate non-audit fees billed by the registrant’s
accountant for services rendered to the registrant, and rendered to the registrant’s Adviser, and any entity controlling, controlled
by, or under common control with the Adviser that provides ongoing services to the registrant was $55,855 and $40,380, respectively.
(h) The audit committee has considered whether the
principal accountant’s provision of services (other than audit services) to the Registrant, the Adviser or any entity controlling,
controlled by, or under common control with the Adviser that provides services to the Registrant is compatible with maintaining the principal
accountant’s independence in performing audit services.
(i) - (j) Not applicable.
Item 5. Audit Committee of Listed Registrants.
The Registrant has a separately-designated standing
audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, and is comprised of Mr. Rand
C. Berney, Mr. Conrad S. Ciccotello, Ms. Jennifer Paquette and Ms. Alexandra A. Herger.
Item 6. Investments.
| (a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1. |
Item 7. Disclosure of Proxy Voting Policies and
Procedures for Closed-End Management Investment Companies.
Copies of the proxy voting policies and procedures
of the Registrant and the Adviser are attached hereto as Exhibit 99.VOTEREG and Exhibit 99.VOTEADV, respectively.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Unless otherwise indicated, information is presented
as of November 30, 2023.
Portfolio Managers
As of the date of this filing, primary responsibility
for the day-to-day management of the Registrant’s portfolio is the joint responsibility of a team of portfolio managers consisting
of Brian A. Kessens, James R. Mick, Matthew G.P. Sallee, Robert J. Thummel, Jr., and Stephen Pang. Biographical information about each
portfolio manager named above as of the date of this filing is set forth below.
Name and
Address* |
Position(s) Held with
Company and Length
of Time Served |
Principal Occupation During Past Five Years |
Brian A. Kessens |
N/A |
Managing Director of the Adviser since January 2015 and a member of the Investment Committee of the Adviser since June 30, 2015; Senior Portfolio Manager of the Adviser since February 2019; Portfolio Manager of the Adviser from July 2013 to January 2019; CFA designation since 2006. |
James R. Mick |
N/A |
Managing Director of the Adviser since January 2014 and a member of the Investment Committee of the Adviser since June 30, 2015; Portfolio Manager of the Adviser since July 2013; Senior Investment Analyst of the Adviser from June 2012 to July 2013; Investment Analyst of the Adviser from 2011 to June 2012; Research analyst of the Adviser from 2006 to 2011. CFA designation since 2010. |
Matthew G.P. Sallee |
President since June 2015 |
Managing Director of the Adviser since January 2014 and a member of the Investment Committee of the Adviser since June 30, 2015; Senior Portfolio Manager of the Adviser since February 2019; Portfolio Manager of the Adviser from July 2013 to January 2019; CFA designation since 2009. |
Robert J. Thummel, Jr. |
N/A |
Managing Director of the Adviser since January 2014 and a member of the Investment Committee of the Adviser since June 30, 2015; Senior Portfolio Manager of the Adviser since February 2019; Portfolio Manager of the Adviser from July 2013 to January 2019. |
Stephen Pang |
N/A |
Managing Director of the Adviser since January 2019; Portfolio Manager of the Adviser since January 2018; Director of the Adviser from January 2017 to January 2019; Investment Analyst of the Adviser from January 2015 to January 2017; Vice President of TTP from May 2017 to December 2020.CFA designation since 2016. |
*The address of each portfolio manager is 6363 College
Boulevard, Suite 100A, Overland Park, Kansas 66211.
The Adviser also serves as the investment adviser
to TYG, NTG, TTP, NDP and TEAF.
The following table provides information about the
other accounts managed on a day-to-day basis by each of the portfolio managers as of November 30, 2023:
Name of Manager |
Number of
Accounts |
Total Assets of
Accounts |
Number of
Accounts
Paying a
Performance
Fee |
Total Assets of
Accounts Paying
a Performance
Fee |
Brian A. Kessens |
|
|
|
|
Registered investment companies |
7 |
$3,678,356,269 |
- |
- |
Other pooled investment vehicles |
2 |
$ 77,786,902 |
- |
- |
Other accounts |
347 |
$2,683,370,460 |
8 |
$ 1,015,666,402 |
James R. Mick |
|
|
|
|
Registered investment companies |
7 |
$3,678,356,269 |
- |
- |
Other pooled investment vehicles |
2 |
$ 77,786,902 |
- |
- |
Other accounts |
347 |
$2,683,370,460 |
8 |
$ 1,015,666,402 |
Matthew G.P. Sallee |
|
|
|
|
Registered investment companies |
7 |
$3,678,356,269 |
- |
- |
Other pooled investment vehicles |
2 |
$ 77,786,902 |
- |
- |
Other accounts |
347 |
$2,683,370,460 |
8 |
$ 1,015,666,402 |
Robert J. Thummel, Jr. |
|
|
|
|
Registered investment companies |
7 |
$3,678,356,269 |
- |
- |
Other pooled investment vehicles |
2 |
$ 77,786,902 |
- |
- |
Other accounts |
347 |
$2,683,370,460 |
8 |
$ 1,015,666,402 |
Stephen Pang |
|
|
|
|
Registered investment companies |
6 |
$3,178,579,350 |
- |
- |
Other pooled investment vehicles |
1 |
$69,811,054 |
- |
- |
Other accounts |
347 |
$2,683,370,460 |
8 |
$ 1,015,666,402 |
Material Conflicts of Interest
Conflicts of interest may arise from the fact that
the Adviser and its affiliates carry on substantial investment activities for other clients, in which the Registrant has no interest,
some of which may have investment strategies similar to the Registrant. In addition, conflicts of interest may arise from the fact that
a related person of the Adviser has an interest in a limited liability company client, similar to a general partner interest in a partnership,
for which the Adviser also serves as manager. The Adviser or its affiliates may have financial incentives to favor certain of these accounts
over the Registrant. For example, the Adviser may have an incentive to allocate potentially more favorable investment opportunities to
other funds and clients that pay the Adviser an incentive or performance fee. Performance and incentive fees also create the
incentive to allocate potentially riskier, but potentially better performing, investments to such funds and other clients in an effort
to increase the incentive fee. The Adviser also may have an incentive to make investments in one fund, having the effect of
increasing the value of a security in the same issuer held by another fund or client, which in turn, may result in an incentive fee being
paid to the Adviser by that other fund or client. Any of the Adviser’s or its affiliates’ proprietary accounts or other customer
accounts may
compete with the Registrant for specific trades. The
Adviser or its affiliates may give advice and recommend securities to, or buy or sell securities for, other accounts and customers, which
advice or securities recommended may differ from advice given to, or securities recommended or bought or sold for, the Registrant, even
though their investment objectives may be the same as, or similar to, the Registrant’s objectives. The Adviser has written allocation
policies and procedures designed to address potential conflicts of interest. For instance, when two or more clients advised by the Adviser
or its affiliates seek to purchase or sell the same publicly traded securities, the securities actually purchased or sold will be allocated
among the clients on a good faith equitable basis by the Adviser in its discretion and in accordance with the clients’ various investment
objectives and the Adviser’s procedures. In some cases, this system may adversely affect the price or size of the position the Registrant
may obtain or sell. In other cases, the Registrant’s ability to participate in volume transactions may produce better execution
for it. When possible, the Adviser combines all of the trade orders into one or more block orders, and each account participates at the
average unit or share price obtained in a block order. When block orders are only partially filled, the Adviser considers a number of
factors in determining how allocations are made, with the overall goal to allocate in a manner so that accounts are not preferred or disadvantaged
over time. The Adviser also has allocation policies for transactions involving private placement securities, which are designed to result
in a fair and equitable participation in offerings or sales for each participating client.
The Adviser also serves as investment adviser for
five other publicly traded management investment companies, all of which invest in the energy sector.
The Adviser will evaluate a variety of factors in
determining whether a particular investment opportunity or strategy is appropriate and feasible for the relevant account at a particular
time, including, but not limited to, the following: (1) the nature of the investment opportunity taken in the context of the other investments
at the time; (2) the liquidity of the investment relative to the needs of the particular entity or account; (3) the availability of the
opportunity (i.e., size of obtainable position); (4) the transaction costs involved; and (5) the investment or regulatory limitations
applicable to the particular entity or account. Because these considerations may differ when applied to the Registrant and relevant accounts
under management in the context of any particular investment opportunity, the Registrant’s investment activities, on the one hand,
and other managed accounts, on the other hand, may differ considerably from time to time. In addition, the Registrant’s fees and
expenses will differ from those of the other managed accounts. Accordingly, stockholders should be aware that the Registrant’s future
performance and the future performance of the other accounts of the Adviser may vary.
From time to
time, the Adviser may seed proprietary accounts for the purpose of evaluating a new investment strategy that eventually may be available
to clients through one or more product structures. Such accounts also may serve the purpose of establishing a performance record for the
strategy. The Adviser’s management of accounts with proprietary interests and nonproprietary client accounts may create an incentive
to favor the proprietary accounts in the allocation of investment opportunities, and the timing and aggregation of investments. The Adviser’s
proprietary seed accounts may include long-short strategies, and certain client strategies may permit short sales. A conflict of interest
arises if a security is sold short at the same time as a long position, and continuously short selling in a security may adversely affect
the stock price of the same security held long in client accounts. The Adviser has adopted various policies to mitigate these conflicts,
including policies that require the Adviser to avoid favoring any account, and that prohibit client and proprietary accounts from engaging
in short sales with respect to individual stocks held long in client accounts. The Adviser’s policies also require transactions
in proprietary accounts to be placed after client transactions.
Situations may occur when the Registrant could be
disadvantaged because of the investment activities conducted by the Adviser and its affiliates for their other accounts. Such situations
may be based on, among other things, the following: (1) legal or internal restrictions on the combined size of positions that may be
taken for the Registrant or the other accounts, thereby
limiting the size of the Registrant’s position; (2) the difficulty of liquidating an investment for the Registrant or the other
accounts where the market cannot absorb the sale of the combined position; or (3) limits on co-investing in negotiated transactions under
the Investment Company Act of 1940.
The 1940 Act limits our ability to co-invest in negotiated
private placements of securities with our affiliates, including other funds managed by the Adviser. We and our Adviser have received exemptive
relief from the SEC that permits certain co-investment transactions. In this regard, our Adviser has the ability to allocate investment
opportunities of certain negotiated transactions between us, other funds registered under the 1940 Act and other accounts managed by our
Adviser pro rata based on available capital, up to the amount proposed to be invested by each. All accounts generally are required to
participate on the same terms. Pursuant to the exemptive order, our Adviser will be required to provide the board of directors of each
participating registered fund with certain information concerning the relevant investment. A majority (as defined in section 57(o)
of the 1940 Act) of the directors eligible to consider the co-investment transaction of each participating registered fund must approve
such registered fund’s participation in the co-investment transaction.
To the extent that the Adviser sources and structures
private investments in master limited partnerships (“MLPs”), certain employees of the Adviser may become aware of actions
planned by MLPs, such as acquisitions, which may not be announced to the public. It is possible that the Registrant could be
precluded from investing in or selling securities of an MLP about which the Adviser has material, non-public information; however, it
is the Adviser’s intention to ensure that any material, non-public information available to certain employees of the Adviser is
not shared with the employees responsible for the purchase and sale of publicly traded MLP securities or to confirm prior to receipt of
any material non-public information that the information will shortly be made public. The Registrant’s investment opportunities
also may be limited by affiliations of the Adviser or its affiliates with energy infrastructure companies.
The Adviser and its principals, officers, employees,
and affiliates may buy and sell securities or other investments for their own accounts and may have actual or potential conflicts of interest
with respect to investments made on the Registrant’s behalf. As a result of differing trading and investment strategies
or constraints, positions may be taken by principals, officers, employees, and affiliates of the Adviser that are the same as, different
from, or made at a different time than positions taken for the Registrant. Further, the Adviser may at some time in the future,
manage additional investment funds with the same investment objective as the Registrant’s.
Compensation
None of Messrs. Kessens,
Mick, Sallee, Thummel, or Pang receives any direct compensation from the Registrant or any other of the managed accounts reflected in
the table above. All such accounts are managed by the Adviser. The team is motivated and retained through a market-based compensation
structure. Each of Messrs. Kessens, Mick, Sallee, Thummel, and Pang has entered into an employment agreement with the Adviser. Under these
employment-related contracts, they receive base salary compensation and are eligible for an annual bonus. A portion of the bonus amount
may be deferred for certain key employees and may increase over a defined vesting period based on a measured rate of return tied to the
firm’s performance. Additional benefits received by Messrs. Kessens, Mick, Sallee, Thummel, and Pang are normal and customary employee
benefits generally available to all full-time employees. Each of Messrs. Kessens, Mick, Sallee, Thummel, and Pang owns an equity interest
in TortoiseEcofin Investments, LLC that is a minority owner of the Adviser, and each thus benefits from increases in the net income of
the Adviser.
Securities Owned in the Registrant by Portfolio
Managers
The following table provides information about the
dollar range of equity securities in the Registrant beneficially owned by each of the portfolio managers as of November 30, 2023:
Portfolio Manager |
Aggregate Dollar Range of
Holdings in the Registrant |
|
|
Brian A. Kessens |
$10,001 - $50,000 |
James R. Mick |
None |
Matthew G.P. Sallee |
$1 - $10,000 |
Robert J. Thummel, Jr. |
None |
Stephen Pang |
None |
Item 9. Purchases of Equity Securities by Closed-End
Management Investment Company and Affiliated Purchasers.
Period |
(a)
Total Number of
Shares (or Units)
Purchased |
(b)
Average Price Paid
per Share (or Unit) |
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs |
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet
Be Purchased Under
the Plans or Programs |
Month #1
6/1/23-6/30/23 |
0 |
$0 |
0 |
$0 |
Month #2
7/1/23-7/31/23 |
0 |
$0 |
0 |
$0 |
Month #3
8/1/23-8/31/23 |
0 |
$0 |
0 |
$0 |
Month #4
9/1/23-9/30/23 |
0 |
$0 |
0 |
$0 |
Month #5
10/1/23-10/31/23 |
0 |
$0 |
0 |
$0 |
Month #6
11/1/23-11/30/23 |
310,008 |
$15.11 |
310,008 |
$0 |
Total |
310,008 |
$15.11 |
310,008 |
$0 |
The purchases above were made pursuant to the conditional tender offer
approved by the Board of Directors of the Registrant. Pursuant to the offer, the Fund offered to purchase up to 5% of the Fund’s
outstanding shares of common stock for cash at a price equal to 98% of net asset value (NAV), as determined on expiration date of the
tender offer if the shares traded at an average discount to NAV of more than 10% during the designated measurement periods. The measurement
period for year 2023 ended on July 31, 2023, and it was determined that a tender offer would be executed in the Fund. On November 7, 2023,
Tortoise announced the final results of the cash tender offer, which commenced on October 2, 2023, and expired on November 1, 2023. TPZ
purchased 310,008 shares on a pro-rated basis at purchase price of $15.11 per share.
Item 10. Submission of Matters to a Vote of Security Holders.
None.
Item 11. Controls and Procedures.
(a) The Registrant’s Chief Executive Officer,
and its Principal Financial Officer and Treasurer have concluded that the Registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective as of a date within 90 days of the
filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b) There were no changes in the Registrant’s
internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by
this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over
financial reporting.
Item 12. Disclosure of Securities Lending Activities
For Closed-End Management Investment Companies.
The Registrant does not participate in securities
lending activities.
Item 13. Exhibits.
(a)(1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the Registrant intends to satisfy Item 2 requirements through filing of an exhibit. Filed herewith.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule
23c-1 under the Act sent or given during the period covered by the report by or on behalf of the Registrant to 10 or more persons.
None.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
(c) Section 19(s) Notification of Sources of Distribution. Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
(Registrant) |
Tortoise Power and Energy Infrastructure Fund, Inc. |
|
|
|
|
By (Signature and Title) |
/s/ P. Bradley Adams |
|
|
P. Bradley Adams, Chief Executive Officer |
|
Date February 8, 2024
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By (Signature and Title) |
/s/ P. Bradley Adams |
|
|
P. Bradley Adams, Chief Executive Officer |
|
Date February 8, 2024
By (Signature and Title) |
/s/ Courtney Gengler |
|
|
Courtney Gengler, Principal Financial Officer and Treasurer |
|
Date February 8, 2024
EX-99.CERT
CERTIFICATIONS
I, P. Bradley Adams, certify that:
1. I have reviewed this report on Form N-CSR of Tortoise Power
and Energy Infrastructure Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations,
changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940)
and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant
and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 8, 2024 |
/s/ P. Bradley Adams |
|
|
P. Bradley Adams |
|
|
Chief Executive Officer |
|
EX-99.CERT
CERTIFICATIONS
I, Courtney Gengler, certify that:
1. I have reviewed this report on Form N-CSR of Tortoise Power
and Energy Infrastructure Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations,
changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940)
and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant
and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 8, 2024 |
/s/ Courtney Gengler |
|
|
Courtney Gengler |
|
|
Principal Financial Officer and Treasurer |
|
EX-99.906CERT
Certification Pursuant to Section 906 of
the Sarbanes-Oxley Act
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, the undersigned officer of Tortoise Power and Energy Infrastructure Fund, Inc. does hereby certify, to such officer’s
knowledge, that the report on Form N-CSR of Tortoise Power and Energy Infrastructure Fund, Inc. for the year ended November 30, 2023 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information
contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of Tortoise Power
and Energy Infrastructure Fund, Inc. for the stated period.
/s/ P. Bradley Adams |
|
P. Bradley Adams |
|
Chief Executive Officer |
|
Tortoise Power and Energy Infrastructure Fund, Inc. |
|
Dated: February 8, 2024
/s/ Courtney Gengler |
|
Courtney Gengler |
|
Principal Financial Officer and Treasurer |
|
Tortoise Power and Energy Infrastructure Fund, Inc. |
|
Dated: February 8, 2024
This certification is being furnished pursuant
to Item 12(b) of Form N-CSR and Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Tortoise Power and Energy
Infrastructure Fund, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934.
TORTOISE POWER AND ENERGY INFRASTRUCTURE FUND, INC.
CODE OF
ETHICS FOR principal executive officer and
PRINCIPAL FINANCIAL OFFICER (“Officer code”)
Tortoise Power and Energy
Infrastructure Fund, Inc. (the “Company”) requires the Principal Executive Officer, Principal Financial Officer or other Company
Officer performing similar functions as set forth in Exhibit A (“Covered Officers”) to maintain the highest ethical and
legal standards while performing their duties and responsibilities to the Company, with particular emphasis on those duties that relate
to the preparation and reporting of financial information of the Company. The following overriding principles govern the conduct of Covered
Officers:
| · | Covered Officers shall act with honesty and integrity, avoiding actual or apparent conflicts of interest
between personal and professional relationships and shall promptly report any potential conflicts. |
| · | Covered Officers shall not use their personal influence or personal relationships improperly to influence
investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the
Company or take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of
the Company. |
| · | Covered Officers shall promote full, fair, accurate, timely and understandable disclosure in reports and
documents that the Company files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications
made by the Company and that are within the Covered Officer’s responsibility. |
| · | Covered Officers shall promote compliance with applicable laws and governmental rules and regulations. |
| · | Covered Officers shall promptly report violations of this Code. |
Covered Officers are reminded
of their obligations under the code of ethics of the Company and Tortoise Capital Advisors, LLC adopted under Rule 17j-l of the Investment
Company Act of 1940, as amended (the “1940 Act”). The obligations under that code apply independently of this Officer Code
and are not a part of this Officer Code.
Overview. Each Covered
Officer should adhere to a high standard of business ethics and should be sensitive to and seek to avoid situations that may give rise
to actual as well as apparent conflicts of interest. A “conflict of interest” occurs when a Covered Officer’s other
interests interfere with the interests of, or his or her service to, the Company. For example, a conflict of interest would arise if a
Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company.
Certain conflicts of interest
arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in
the 1940 Act and the Investment Advisers Act of 1940, as amended (the “Advisers Act”). For example, Covered Officers may not
individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of
their status as “affiliated persons” of the Company. The Company and its investment adviser have adopted compliance programs
and procedures designed to prevent, or identify and correct, violations of these provisions. This Officer Code does not, and is not intended
to, duplicate or replace these programs and procedures, and such conflicts fall outside of the parameters of this Officer Code.
Although typically not presenting
an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationships between the Company
and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Officer Code recognizes that
Covered Officers will, in the normal course of their duties (whether formally for the Company or for the investment adviser, or for both),
be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation
of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the investment adviser
and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity
with the provisions of the 1940 Act and the Advisers Act, such activities will be deemed to have been handled ethically.
Other conflicts of interest
are covered by this Officer Code, even if such conflicts of interest are not subject to provisions in the 1940 Act and the Advisers Act.
The following list provides examples of conflicts of interest under this Officer Code, but Covered Officers should keep in mind that these
examples are not exhaustive.
Disclosure of Potential
Conflicts. Each Covered Officer shall provide prompt and full disclosure to the Code Compliance Officer (as defined below), in writing,
prior to entering into any material transaction or relationship which may reasonably be expected to give rise to a conflict (other than
conflicts arising from the advisory relationship). This includes, but is not limited to, the following:
| · | service as a director, officer, partner, consultant or in any other key role with any company with which
the Company has current or prospective business dealings; |
| · | the receipt by a Covered Officer and his or her family members of any gifts from any company with which
the Company has current or prospective business dealings if it influences or gives the appearance of influencing the recipient; |
| · | the receipt of customary business amenities from any company with which the Company has current or prospective
business dealings unless such amenity is business-related, reasonable in cost, appropriate as to time and place, and neither so frequent
nor so costly as to raise any question of impropriety; |
| · | any ownership by a Covered Officer and his or her family members of significant financial interest in
any company with which the Company has current or prospective business dealings, other than its investment adviser, principal underwriter,
transfer agent or any affiliated person thereof; and |
| · | a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company
for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s
employment, such as compensation or equity ownership. |
DISCLOSURE AND COMPLIANCE |
| · | Each Covered Officer should familiarize himself or herself with the disclosure requirements generally
applicable to the Company. |
| · | Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult
with other officers and employees of the Company and the adviser or its affiliates with the goal of promoting full, fair, accurate, timely
and understandable disclosure in such reports and documents the Company files with, or submits to, the SEC. |
| · | Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the
Company to others, whether within or outside the Company, including to the trustees and auditors of the Company, and to governmental regulators
and self-regulatory organizations. |
| · | It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions
imposed by laws, rules and regulations applicable to the Company. |
REPORTING AND ACCOUNTABILITY |
| · | Upon adoption of the Officer Code (or thereafter as applicable, upon becoming a Covered Officer), each
Covered Officer shall affirm in writing to the Code Compliance Officer that he or she has received, read and understands the Officer Code.
Annually thereafter each Covered Officer shall affirm that he or she has complied with the requirements of the Officer Code. |
| · | Each Covered Officer shall notify the Code Compliance Officer promptly if he or she knows of any violation
of this Officer Code. Failure to do so is itself a violation of this Officer Code. |
| · | A Covered Officer must not retaliate against any officer or employee of the Company or its affiliated
persons for reports of potential violations that are made in good faith. |
| · | The provisions of this Officer Code, other than amendments to Exhibit A, and any waivers, including
implicit waivers, shall be disclosed in accordance with SEC rules and regulations. |
Except as described below,
the Code Compliance Officer is responsible for applying this Officer Code to specific situations in which questions may arise and has
the authority to interpret this Officer Code in any particular situation. The Directors of the Company hereby designate the Company’s
Chief Compliance Officer as the Code Compliance Officer. The Code Compliance Officer (or his designee) shall take all action he considers
appropriate to investigate any actual or potential conflicts or violations reported to him.
Any matters that the Code
Compliance Officer believes are a conflict or violation will be reported to the Audit Committee, which shall determine sanctions or other
appropriate action. No Covered Officer who is a member of such committee may participate in any determination under this Officer Code.
The Audit Committee shall be responsible for reviewing any requests for waivers from the provisions of this Officer Code. Any violations
of this Officer Code, any waivers granted from the Officer Code and any potential conflicts and their resolution shall be reported to
the Directors of the Company at the next regular meeting.
Any amendments to this Officer
Code, other than amendments to Exhibit A and clerical or administrative corrections, must be approved or ratified by a majority vote
of the Directors, including a majority of independent Directors.
All reports and records prepared
or maintained pursuant to this Officer Code will be considered confidential and shall be maintained and protected accordingly. Except
as otherwise required by law or this Officer Code, such matters shall not be disclosed to anyone other than the Directors, counsel to
the Company and the investment adviser of the Company.
The Officer Code is intended
solely for the internal use by the Company and does not constitute an admission, by or on behalf of the Company, as to any fact, circumstance
or legal conclusion.
* * * * *
Exhibit A
Persons Covered by this Code of Ethics
Name |
|
Title |
|
|
|
P. Bradley Adams |
|
Principal Executive Officer |
|
|
|
Courtney Gengler |
|
Principal Financial Officer |
Exhibit A amended effective July 14, 2021
PROXY VOTING
POLICIES AND PROCEDURES
Each investment company
listed on Exhibit A hereto (each referred to as the “Company”) has adopted and implemented the following policies and procedures,
which it believes are reasonably designed to ensure that proxies are voted in the best interests of the Company and its shareholders.
In pursuing this policy, proxies should be voted in a manner that is intended to maximize shareholder value and all conflicts of interests
should be resolved exclusively in favor of the Company.
The Company hereby delegates
responsibility for voting proxies for which it is entitled to vote to Tortoise Capital Advisors, L.L.C. (the “Adviser”) and
the Adviser hereby accepts such delegation and agrees to vote proxies in accordance with these Policies and Procedures. The Adviser may
delegate its responsibilities under these Policies and Procedures to a third party, including any sub-adviser to the Adviser with respect
to the Company (a “Sub-Adviser”), provided that no such delegation shall relieve the Adviser of its responsibilities hereunder
and the Adviser shall retain final authority and fiduciary responsibility for such proxy voting.
| 3. | Proxy Voting Guidelines |
| a. | The Adviser utilizes Glass Lewis to provide independent research on corporate governance, proxy and corporate
responsibility issues. The Adviser reviews these voting recommendations and proxies are generally voted in accordance with such recommendations.
The Adviser has adopted Glass Lewis’ proxy voting guidelines, which are applied to all Adviser proxy votes at the time proxy votes
are submitted. The Adviser will consider additional information that may become available regarding a particular proposal. This additional
information may include an issuer’s or a shareholder proponent’s subsequently filed additional definitive proxy materials.
Proxies are generally voted in accordance with the Adviser’s proxy voting guidelines; however, the Adviser may opt to override the
guidelines if it is decided to be the best interest of its clients, including the Company and its shareholders. |
| b. | The Chief Executive Officer or their designee is responsible for monitoring Company actions and ensuring
that proxies are voted in a timely manner. None of the Company, the Adviser or any Sub-Adviser is responsible for voting proxies it does
not receive, but will make reasonable efforts to obtain missing proxies. |
| c. | The Chief Executive Officer, or their designee, shall implement procedures to identify and monitor potential
conflicts of interest that could affect the proxy voting process, including (i) significant client relationships of the Adviser; (ii)
other potential material business relationships of the Adviser or the Company; and (iii) material personal and family relationships. |
| d. | In the absence of contrary instructions received from the applicable Investment Committee of the Adviser,
or a Managing Director of the Adviser designated by the Investment Committee, or any Sub-Adviser to whom proxy voting responsibilities
have been delegated, all proxies will be voted in accordance with the Guidelines referenced in Exhibit B. |
| e. | The Company, the Adviser, or any Sub-Adviser to whom proxy voting responsibilities have been delegated,
may determine not to vote a particular proxy, if the costs and burdens exceed the benefits of voting (e.g., when securities are subject
to loan or to share blocking restrictions). |
| f. | In certain limited circumstances, particularly in the area of structured finance, the Adviser may enter
into voting agreements or other contractual obligations that govern the voting of shares or other interests and, in such cases, will vote
any shares or other interests by proxy in accordance with such agreement or obligation. In addition, where the Adviser or Sub-Adviser
determines that there are unusual costs and/or difficulties associated with voting a particular security, which more typically might be
the case with respect to securities of non-U.S. issuers, the Adviser or Sub-Adviser reserves the right not to vote a security by proxy
unless it determines that the potential benefits of voting the security exceed the expected cost. Other factors that may influence the
Adviser’s or Sub-Adviser’s determination not to vote a debt or equity security include if: (1) the effect on the applicable
client’s economic interests or the value of the account’s holding is insignificant in relation to the client’s account
as a whole; (2) the cost of voting the security outweighs the possible benefit to the applicable client, including, without limitation,
situations where a jurisdiction imposes share blocking restrictions which may affect the ability of the account managers to effect trades
in the related security; or (3) the Adviser or Sub-Adviser otherwise determines that it is consistent with it’s fiduciary obligations
not to vote the security. |
The Adviser shall use commercially
reasonable efforts to determine whether a potential conflict may exist, and a potential conflict shall be deemed to exist only if one
or more of the members of the applicable Investment Committee or any portfolio manager of the Adviser or any Sub-Adviser actually knew
or should have known of the conflict. The Company is sensitive to conflicts of interest that may arise in the proxy decision-making process
and has identified the following potential conflicts of interest:
| · | A principal of the Company or any person involved in the proxy decision-making process currently serves
on the Board of the portfolio company. |
| · | An immediate family member of a principal of the Company or any person involved in the proxy decision-making
process currently serves as a director or executive officer of the portfolio company. |
| · | The Company, any venture capital fund managed by the Adviser or any Sub-Adviser, or any affiliate holds
a significant ownership interest in the portfolio company. |
This list is not intended
to be exclusive. All employees are obligated to disclose any potential conflict to the Chief Compliance Officer.
If a material conflict
is identified, including a conflict of interest between the Company’s stockholders on the one hand, and the Adviser, any Sub-Adviser,
the Company’s principal underwriters, or any of the Company’s affiliated persons, on the other hand, Company management may
(i) disclose the potential conflict to the Board of Directors and obtain consent; (ii) establish an ethical wall or other informational
barriers between the person(s) that are involved in the conflict and the persons making the voting decisions, (iii) abstain from voting
the proxies, or (iv) use an independent third party recommendation. The Adviser will document the rationale for any proxy voted contrary
to the proxy voting guidelines. Such information will be maintained as part of the recordkeeping requirements.
The Chief Compliance Officer
or designee will periodically perform a due diligence review of Glass Lewis to help ensure that any and all conflicts have been disclosed
to the Company.
| a. | The Adviser shall submit a report at the next regularly scheduled meeting, but no less frequently than
annually to the Board regarding any issues arising under the Policy, including any issues arising under these Policies and Procedures
since the last report to the Board and the resolution of such issues, including information about conflicts. |
| b. | The Adviser shall submit a report at the next regularly scheduled meeting, but no less frequently than
annually, identifying any recommended changes in practices. |
The Chief Executive Officer
is responsible for ensuring maintenance of the following records:
| · | proxy voting policies and procedures; |
| · | proxy statements (provided, however, that the Company may rely on the Securities and Exchange Commission’s
EDGAR system if the Company filed its proxy statements via EDGAR or may rely on a third party as long as the third party has provided
the Company with an undertaking to provide a copy of the proxy statement promptly upon request); |
| · | records of votes cast; and |
| · | any records prepared by the Company that were material to a proxy voting decision or that memorialized
a decision. |
* * * * *
Adopted December 12, 2003; Revised May 21, 2010; Revised
May 28, 2014; Revised effective March 24, 2022; Revised effective June 13, 2023
Exhibit A
Tortoise
Energy Infrastructure Corporation (“TYG”)
Tortoise
Power and Energy Infrastructure Fund, Inc. (“TPZ”)
Tortoise
Midstream Energy Fund, Inc. (“NTG”)
Tortoise
Pipeline & Energy Fund, Inc. (“TTP”)
Tortoise
Energy Independence Fund, Inc. (“NDP”)
Ecofin Sustainable and Social Impact Term Fund (“TEAF”)
Exhibit B
Glass Lewis standard guidelines for
the various relevant local markets, including the U.S., are available upon request.
Amended effective as of June 13, 2023
tortoise Capital Advisors,
L.L.C.
(THE “adviser”)
PROXY VOTING
POLICIES AND PROCEDURES
Unless a client is a registered
investment company under the Investment Company Act of 1940 or a client requests the Adviser to do so in writing, the Adviser does not
vote proxy materials for its clients. In the event the Adviser receives any proxies intended for clients who have not delegated proxy
voting responsibilities to the Adviser, the Adviser will promptly forward such proxies to the client for the client to vote. When requested
by the client, the Adviser may provide advice to the client regarding proposals submitted to the client for voting. In the event an employee
determines that the Adviser has a conflict of interest due to, for example, a relationship with a company or an affiliate of a company,
or for any other reason which could influence the advice given, the employee will advise the Chief Compliance Officer who will advise
the applicable Investment Committee, and the Investment Committee will decide which of the procedures set forth in Section 3 below the
Adviser will use.
In cases in which the client
is a registered investment company under the Investment Company Act of 1940 or in cases where the client has delegated proxy voting responsibility
and authority to the Adviser, the Adviser has adopted and implemented the following policies and procedures, which it believes are reasonably
designed to ensure that proxies are voted in the best interests of its clients. In pursuing this policy, proxies should be voted in a
manner that is intended to maximize value to the client. In situations where Adviser accepts such delegation and agrees to vote proxies,
Adviser will do so in accordance with these Policies and Procedures. The Adviser may delegate its responsibilities under these Policies
and Procedures to a third party, provided that no such delegation shall relieve the Adviser of its responsibilities hereunder and the
Adviser shall retain final authority and fiduciary responsibility for such proxy voting. If there are any differences between these policies
and procedures and the proxy voting policies and procedures adopted by a registered investment company client, the policies and procedures
of the registered investment company client will supersede these policies and procedures.
| 2. | Proxy Voting Guidelines |
| a. | The Adviser utilizes Glass Lewis to provide independent research on corporate governance, proxy and corporate
responsibility issues. The Adviser reviews these voting recommendations and proxies are generally voted in accordance with such recommendations. |
| b. | The Adviser has adopted Glass Lewis’ proxy voting guidelines, which are applied to all Adviser proxy
votes at the time proxy votes are submitted. The Adviser will consider additional information that may become available regarding a particular
proposal. This additional information may include an issuer’s or a shareholder proponent’s subsequently filed additional definitive
proxy materials. |
| c. | Proxies are generally voted in accordance with the Adviser’s proxy voting guidelines; however, the
Adviser may opt to override the guidelines if it is decided to be the best interest of its clients. |
| d. | The applicable Investment Committee of the Adviser, or a Managing Director of the Adviser designated by
the Investment Committee as listed on Exhibit A hereto (the “Designated Managing Director”), is responsible for monitoring
the Adviser’s proxy voting actions and ensuring proxies are voted in a timely manner. The Adviser is not responsible for voting
proxies it does not receive, but will make reasonable efforts to obtain missing proxies. |
| e. | The applicable Investment Committee of the Adviser, or the Designated Managing Director, shall implement
procedures to identify and monitor potential conflicts of interest that could affect the proxy voting process, including (i) significant
client relationships; (ii) other potential material business relationships; and (iii) material personal and family relationships. |
| f. | In the absence of contrary instructions received from the applicable Investment Committee of the Adviser,
or the Designated Managing Director, all proxies will be voted in in accordance with the Guidelines referenced in Exhibit B. |
| g. | The Adviser may determine not to vote a particular proxy, if the costs and burdens exceed the benefits
of voting (e.g., when securities are subject to loan or to share blocking restrictions). |
The Adviser shall use commercially
reasonable efforts to determine whether a potential conflict may exist, and a potential conflict shall be deemed to exist only if one
or more of the members of the applicable Investment Committee of the Adviser actually knew or should have known of the conflict. The Adviser
is sensitive to conflicts of interest that may arise in the proxy decision-making process and has identified the following potential conflicts
of interest:
| · | A principal of the Adviser or any person involved in the proxy decision-making process currently serves
on the Board of the portfolio company. |
| · | An immediate family member of a principal of the Adviser or any person involved in the proxy decision-making
process currently serves as a director or executive officer of the portfolio company. |
| · | The Adviser, any venture capital fund managed by the Adviser, or any affiliate holds a significant ownership
interest in the portfolio company. |
This list is not intended
to be exclusive. All employees are obligated to disclose any potential conflict to the Adviser’s Chief Compliance Officer.
If a material conflict
is identified, Adviser management may (i) disclose the potential conflict to the client and obtain consent; (ii) establish an ethical
wall or other informational barriers between the person(s) that are involved in the conflict and the persons making the voting decisions,
(iii) abstain from voting the proxies; or (iv) forward the proxies to clients so the clients may vote the proxies themselves, or (v) use
an independent third party recommendation. The Adviser will document the rationale for any proxy voted contrary to the proxy voting guidelines.
Such information will be maintained as part of the recordkeeping requirements.
The CCO or designee will
periodically perform a due diligence review of Glass Lewis to help ensure that any and all conflicts have been disclosed to the Adviser,
The applicable Investment
Committee of the Adviser, or personnel of the Adviser designated by the Investment Committee as listed on Exhibit A hereto, are responsible
for maintaining the following records:
| · | proxy voting policies and procedures; |
| · | proxy statements (provided, however, that the Adviser may rely on the Securities and Exchange Commission’s
EDGAR system if the issuer filed its proxy statements via EDGAR or may rely on a third party as long as the third party has provided the
Adviser with an undertaking to provide a copy of the proxy statement promptly upon request); |
| · | records of votes cast and abstentions; and |
| · | any records prepared by the Adviser that were material to a proxy voting decision or that memorialized
a decision. |
| · | A copy of each written client request for information on how the Adviser voted proxies on behalf of the
requesting client, and a copy of any written response by the Adviser to any (written or oral) client request for information on how the
Adviser voted proxies on behalf of the requesting client. |
Revised effective as of June
13, 2023
Exhibit A
Managing Director of
the Adviser Designated by Investment Committee (“Designated Managing Director”)
Each of the following
is a “Designated Managing Director” and may act individually as such for purposes of these Proxy Voting Policies and Procedures
Brian Kessens
James Mick
Matt Sallee
Rob Thummel
Stephen Pang
Any other individual
designated by one or more of the Designated Managing Directors
Designees for Electronic
Voting of Proxies
SMA Operations team
Any other individual
designated by one or more of the Designated Managing Directors
Designated Personnel
for Record Keeping
Chief Compliance Officer,
or his or her designee
SMA Operations team
Exhibit
A amended effective as of November 30, 2022
Exhibit B
Glass Lewis standard guidelines for
the various relevant local markets, including the U.S., are available upon request.
Exhibit B amended effective
as of June 13, 2023
Tortoise
Power and Energy Infrastructure Fund, Inc.
(NYSE: TPZ)
Section 19(a) Notification of Sources of Distribution
Distribution Period |
June 2023 |
|
|
Distribution Amount per Share |
$0.1050 |
The following table sets forth the estimated amounts
of the current distribution, paid on June 30, 2023, and the cumulative distributions paid this fiscal year to date from the following
sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital. All
amounts are expressed per common share.
Estimated Sources of Distributions
| |
($)
Current Distribution | |
%
Breakdown of the Current Distribution | |
($)
Total Cumulative Distributions for the Fiscal Year to Date | |
%
Breakdown of the Total Cumulative Distributions for the Fiscal Year to Date |
Net
Investment Income | |
| 0.0246 | | |
| 23% | | |
| 0.1795 | | |
| 24% | |
Net
Realized Short-Term Capital Gains | |
| 0.0002 | | |
| 0% | | |
| 0.0018 | | |
| 0% | |
Net
Realized Long-Term Capital Gains | |
| 0.0009 | | |
| 1% | | |
| 0.2006 | | |
| 27% | |
Return
of Capital | |
| 0.0793 | | |
| 76% | | |
| 0.3531 | | |
| 49% | |
Total
(per common share) | |
| 0.1050 | | |
| 100% | | |
| 0.7350 | | |
| 100% | |
| |
| | | |
| | | |
| | | |
| | |
Average annual total return (in relation to NAV) for the 5 years ending on 5/31/2023 | |
| 1.25% | |
Annualized current distribution rate expressed as a percentage of NAV as of 5/31/2023 | |
| 8.42% | |
| |
| | | |
| | | |
| | | |
| | |
Cumulative total return (in relation to NAV) for the fiscal year through 5/31/2023 | |
| -0.89% | |
Cumulative fiscal year distributions as a percentage of NAV as of 5/31/2023 | |
| 4.91% | |
You should not draw any conclusions about TPZ's investment performance from
the amount of this distribution or from the terms of TPZ's distribution policy.
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 TPZ is paid back to you. A return of capital distribution does not necessarily reflect 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 TPZ's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. 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.
TPZ invests in a portfolio of fixed income and equity
securities issued by power and energy infrastructure companies. TPZ’s objective is to provide stockholders a high level of current
income, with a secondary objective of capital appreciation. For more information, visit TPZ's website at cef.tortoiseecofin.com
or call (866) 362-9331.
6363 College Boulevard, Suite 100A, Overland Park, KS 66211 | Main
1-913-981-1020 | Fax 1-913-981-1021 | www.TortoiseEcofin.com
Tortoise
Power and Energy Infrastructure Fund, Inc.
(NYSE: TPZ)
Section 19(a) Notification of Sources of Distribution
Distribution Period |
July 2023 |
|
|
Distribution Amount per Share |
$0.1050 |
The following table sets forth the estimated amounts
of the current distribution, paid on July 31, 2023, and the cumulative distributions paid this fiscal year to date from the following
sources: net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital. All
amounts are expressed per common share.
Estimated Sources of Distributions
| |
($) Current Distribution | |
% Breakdown of the Current Distribution | |
($) Total Cumulative Distributions for the Fiscal Year to Date | |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year to Date |
Net Investment Income | |
| 0.0292 | | |
| 28% | | |
| 0.2133 | | |
| 25% | |
Net Realized Short-Term Capital Gains | |
| 0.0002 | | |
| 0% | | |
| 0.0020 | | |
| 0% | |
Net Realized Long-Term Capital Gains | |
| 0.0474 | | |
| 45% | | |
| 0.2945 | | |
| 35% | |
Return of Capital | |
| 0.0282 | | |
| 27% | | |
| 0.3302 | | |
| 40% | |
Total (per common share) | |
| 0.1050 | | |
| 100% | | |
| 0.8400 | | |
| 100% | |
| |
| | | |
| | | |
| | | |
| | |
Average annual total return (in relation to NAV) for the 5 years ending on 6/30/2023 | |
| 2.33% | |
Annualized current distribution rate expressed as a percentage of NAV as of 6/30/2023 | |
| 8.09% | |
| |
| | | |
| | | |
| | | |
| | |
Cumulative total return (in relation to NAV) for the fiscal year through 6/30/2023 | |
| 3.90% | |
Cumulative fiscal year distributions as a percentage of NAV as of 6/30/2023 | |
| 5.39% | |
You should not draw any conclusions about TPZ's investment performance from
the amount of this distribution or from the terms of TPZ's distribution policy.
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 TPZ is paid back to you. A return of capital distribution does not necessarily reflect 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 TPZ's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. 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.
TPZ invests in a portfolio of fixed income and equity
securities issued by power and energy infrastructure companies. TPZ’s objective is to provide stockholders a high level of current
income, with a secondary objective of capital appreciation. For more information, visit TPZ's website at cef.tortoiseecofin.com
or call (866) 362-9331.
6363 College Boulevard, Suite 100A, Overland Park, KS 66211 | Main
1-913-981-1020 | Fax 1-913-981-1021 | www.TortoiseEcofin.com
Tortoise
Power and Energy Infrastructure Fund, Inc.
(NYSE: TPZ)
Section 19(a) Notification of Sources of Distribution
Distribution Period |
August 2023 |
|
|
Distribution Amount per Share |
$0.1050 |
The following table sets forth the estimated amounts of the current distribution,
paid on August 31, 2023, and the cumulative distributions paid this fiscal year to date from the following sources: net investment income,
net realized short- term capital gains, net realized long-term capital gains and return of capital. All amounts are expressed per common
share.
Estimated Sources of Distributions
| |
($) Current Distribution | |
% Breakdown of the Current Distribution | |
($) Total Cumulative Distributions for the Fiscal Year to Date | |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year to Date |
Net Investment Income | |
| 0.0265 | | |
| 25% | | |
| 0.2346 | | |
| 25% | |
Net Realized Short-Term Capital Gains | |
| 0.0002 | | |
| 0% | | |
| 0.0022 | | |
| 0% | |
Net Realized Long-Term Capital Gains | |
| 0.0474 | | |
| 45% | | |
| 0.3419 | | |
| 36% | |
Return of Capital | |
| 0.0309 | | |
| 29% | | |
| 0.3663 | | |
| 39% | |
Total (per common share) | |
| 0.1050 | | |
| 100% | | |
| 0.9450 | | |
| 100% | |
| |
| | | |
| | | |
| | | |
| | |
Average annual total return (in relation to NAV) for the 5 years ending on 7/31/2023 | |
| 2.24% | |
Annualized current distribution rate expressed as a percentage of NAV as of 7/31/2023 | |
| 7.88% | |
| |
| | | |
| | | |
| | | |
| | |
Cumulative total return (in relation to NAV) for the fiscal year through 7/31/2023 | |
| 7.47% | |
Cumulative fiscal year distributions as a percentage of NAV as of 7/31/2023 | |
| 5.91% | |
You should not draw any conclusions about TPZ's investment performance
from the amount of this distribution or from the terms of TPZ's distribution policy.
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 TPZ is paid back to you. A return of capital distribution does not necessarily reflect
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 TPZ's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. 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.
TPZ invests in a portfolio of fixed income and equity
securities issued by power and energy infrastructure companies. TPZ’s objective is to provide stockholders a high level of current
income, with a secondary objective of capital appreciation. For more information, visit TPZ's website at cef.tortoiseecofin.com
or call (866) 362-9331.
6363 College Boulevard, Suite
100A, Overland Park, KS 66211 | Main 1-913-981-1020 | Fax 1-913-981-1021 | www.TortoiseEcofin.com
Tortoise
Power and Energy Infrastructure Fund, Inc.
(NYSE: TPZ)
Section 19(a) Notification of Sources of Distribution
Distribution Period |
September 2023 |
|
|
Distribution Amount per Share |
$0.1050 |
The following table sets forth the estimated amounts of the current distribution,
paid on September 29, 2023, and the cumulative distributions paid this fiscal year to date from the following sources: net investment
income, net realized short- term capital gains, net realized long-term capital gains and return of capital. All amounts are expressed
per common share.
Estimated Sources of Distributions
| |
($) Current Distribution | |
% Breakdown of the Current Distribution | |
($) Total Cumulative Distributions for the Fiscal Year to Date | |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year to Date |
Net Investment Income | |
| 0.0235 | | |
| 22% | | |
| 0.2493 | | |
| 24% | |
Net Realized Short-Term Capital Gains | |
| 0.0000 | | |
| 0% | | |
| 0.0022 | | |
| 0% | |
Net Realized Long-Term Capital Gains | |
| 0.0000 | | |
| 0% | | |
| 0.3419 | | |
| 33% | |
Return of Capital | |
| 0.0815 | | |
| 78% | | |
| 0.4566 | | |
| 43% | |
Total (per common share) | |
| 0.1050 | | |
| 100% | | |
| 1.0500 | | |
| 100% | |
| |
| | | |
| | | |
| | | |
| | |
Average annual total return (in relation to NAV) for the 5 years ending on 8/31/2023 | |
| 1.74% | |
Annualized current distribution rate expressed as a percentage of NAV as of 8/31/2023 | |
| 7.92% | |
| |
| | | |
| | | |
| | | |
| | |
Cumulative total return (in relation to NAV) for the fiscal year through 8/31/2023 | |
| 7.61% | |
Cumulative fiscal year distributions as a percentage of NAV as of 8/31/2023 | |
| 6.60% | |
You should not draw any conclusions about TPZ's investment performance
from the amount of this distribution or from the terms of TPZ's distribution policy.
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 TPZ is paid back to you. A return of capital distribution does not necessarily reflect
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 TPZ's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. 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.
TPZ invests in a portfolio of fixed income and equity
securities issued by power and energy infrastructure companies. TPZ’s objective is to provide stockholders a high level of current
income, with a secondary objective of capital appreciation. For more information, visit TPZ's website at cef.tortoiseecofin.com
or call (866) 362-9331.
6363 College Boulevard, Suite
100A, Overland Park, KS 66211 | Main 1-913-981-1020 | Fax 1-913-981-1021 | www.TortoiseEcofin.com
Tortoise
Power and Energy Infrastructure Fund, Inc.
(NYSE: TPZ)
Section 19(a) Notification of Sources of Distribution
Distribution Period |
October 2023 |
|
|
Distribution Amount per Share |
$0.1050 |
The following table sets forth the estimated amounts of the current
distribution, paid on October 31, 2023, and the cumulative distributions paid this fiscal year to date from the following sources: net
investment income, net realized short- term capital gains, net realized long-term capital gains and return of capital. All amounts are
expressed per common share.
Estimated Sources of Distributions
| |
($)
Current Distribution | |
%
Breakdown of the Current Distribution | |
($)
Total Cumulative Distributions for the Fiscal Year to Date | |
%
Breakdown of the Total Cumulative Distributions for the Fiscal Year to Date |
Net
Investment Income | |
| 0.0253 | | |
| 24% | | |
| 0.2764 | | |
| 24% | |
Net
Realized Short-Term Capital Gains | |
| 0.0000 | | |
| 0% | | |
| 0.0022 | | |
| 0% | |
Net
Realized Long-Term Capital Gains | |
| 0.0797 | | |
| 76% | | |
| 0.5964 | | |
| 52% | |
Return
of Capital | |
| 0.0000 | | |
| 0% | | |
| 0.2800 | | |
| 24% | |
Total
(per common share) | |
| 0.1050 | | |
| 100% | | |
| 1.1550 | | |
| 100% | |
| |
| | | |
| | | |
| | | |
| | |
Average
annual total return (in relation to NAV) for the 5 years ending on 9/30/23 | |
| 1.62% | |
Annualized
current distribution rate expressed as a percentage of NAV as of 9/30/2023 | |
| 8.06% | |
| |
| | | |
| | | |
| | | |
| | |
Cumulative
total return (in relation to NAV) for the fiscal year through 9/30/2023 | |
| 6.63% | |
Cumulative
fiscal year distributions as a percentage of NAV as of 9/30/2023 | |
| 7.39% | |
You should not draw any conclusions about TPZ's investment
performance from the amount of this distribution or from the terms of TPZ's distribution policy.
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 TPZ is paid back to you. A return of capital distribution does not necessarily reflect 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 TPZ's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. 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.
TPZ invests in a portfolio of fixed income and equity
securities issued by power and energy infrastructure companies. TPZ’s objective is to provide stockholders a high level of current
income, with a secondary objective of capital appreciation. For more information, visit TPZ's website at cef.tortoiseecofin.com
or call (866) 362-9331.
6363 College Boulevard, Suite 100A, Overland Park, KS 66211 | Main
1-913-981-1020 | Fax 1-913-981-1021 | www.TortoiseEcofin.com
Tortoise
Power and Energy Infrastructure Fund, Inc. (NYSE: TPZ)
Section 19(a) Notification of Sources of Distribution
Distribution Period |
November 2023 |
|
|
Distribution Amount per Share |
$0.1050 |
The following table sets forth the estimated amounts of the current distribution,
paid on November 30, 2023, and the cumulative distributions paid this fiscal year to date from the following sources: net investment income,
net realized short- term capital gains, net realized long-term capital gains and return of capital. All amounts are expressed per common
share.
Estimated Sources of Distributions
| |
($)
Current Distribution | |
%
Breakdown of the Current Distribution | |
($)
Total Cumulative Distributions for the Fiscal Year to Date | |
%
Breakdown of the Total Cumulative Distributions for the Fiscal Year to Date |
Net
Investment Income | |
| 0.0251 | | |
| 24% | | |
| 0.3009 | | |
| 24% | |
Net
Realized Short-Term Capital Gains | |
| 0.0000 | | |
| 0% | | |
| 0.0022 | | |
| 0% | |
Net
Realized Long-Term Capital Gains | |
| 0.0799 | | |
| 76% | | |
| 0.9569 | | |
| 76% | |
Return
of Capital | |
| 0.0000 | | |
| 0% | | |
| 0.0000 | | |
| 0% | |
Total
(per common share) | |
| 0.1050 | | |
| 100% | | |
| 1.2600 | | |
| 100% | |
| |
| | | |
| | | |
| | | |
| | |
Average
annual total return (in relation to NAV) for the 5 years ending on 10/31/23 | |
| 2.59% | |
Annualized
current distribution rate expressed as a percentage of NAV as of 10/31/2023 | |
| 8.20% | |
| |
| | | |
| | | |
| | | |
| | |
Cumulative
total return (in relation to NAV) for the fiscal year through 10/31/2023 | |
| 5.59% | |
Cumulative
fiscal year distributions as a percentage of NAV as of 10/31/2023 | |
| 8.20% | |
You should not draw any conclusions about TPZ's investment performance from
the amount of this distribution or from the terms of TPZ's distribution policy.
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 TPZ's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. 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.
TPZ invests in a portfolio of fixed income and equity
securities issued by power and energy infrastructure companies. TPZ’s objective is to provide stockholders a high level of current
income, with a secondary objective of capital appreciation. For more information, visit TPZ's website at cef.tortoiseecofin.com
or call (866) 362-9331.
6363 College Boulevard, Suite
100A, Overland Park, KS 66211 | Main 1-913-981-1020 | Fax 1-913-981-1021 | www.TortoiseEcofin.com
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