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TEAF Ecofin Sustainable and Social Impact Term Fund

Filed: 2 Aug 19, 4:50pm

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 number811-23248

 

Tortoise Essential Assets Income Term Fund
(Exact name of registrant as specified in charter)

 

11550 Ash Street, Suite 300, Leawood, KS 66211
(Address of principal executive offices) (Zip code)

 

P. Bradley Adams
Diane Bono
11550 Ash Street, Suite 300, Leawood, 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:May 31, 2019


Item 1. Report to Stockholders.





Quarterly Report| May 31, 2019




2019 2nd Quarter Report
Closed-End Funds





 
 
 
 
Tortoise
2019 2nd Quarter Report to Stockholders
 

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





 

Table of contents

 
Letter to Stockholders2TPZ: Fund Focus17
TYG:Fund Focus 5TEAF: Fund Focus20
NTG: Fund Focus8Financial Statements24
TTP:Fund Focus11Notes to Financial Statements60
NDP:Fund Focus14Additional Information78




 

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 distribution policy (the “Policy”) with the purpose of distributing over the course of each year, through periodic distributions as nearly equal as practicable and any required special distributions, an amount closely approximating the total taxable income of TTP and TPZ during such year and, if so determined by the Board, all or a portion of the return of capital paid by portfolio companies to TTP and TPZ during such year. In accordance with its Policy, TTP distributes a fixed amount per common share, currently $0.4075, each quarter to its common shareholders and TPZ distributes a fixed amount per common share, currently $0.125, 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 the remainder of 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.

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2019 2nd Quarter Report| May 31, 2019

Closed-end fund comparison

PrimaryTotal assets

Portfolio mix

Portfolio mix
Name/TickerfocusStructure($ millions)1

  by asset type2

by structure2

Tortoise Energy Infrastructure Corp.

NYSE: TYG
Inception: 2/2004

   

Midstream MLPs

   

C-corp

   

$2,152.7

   

   

Tortoise Midstream Energy Fund, Inc.

NYSE: NTG
Inception: 7/2010

Natural gas infrastructure MLPs

C-corp

$1,521.4

Tortoise Pipeline & Energy Fund, Inc.

NYSE: TTP
Inception: 10/2011

North American pipeline companies

Regulated investment company

$225.6

Tortoise Energy Independence Fund, Inc.

NYSE: NDP
Inception: 7/2012

North American oil & gas producers

Regulated investment company

$129.3

Tortoise Power and Energy Infrastructure Fund, Inc.

NYSE: TPZ
Inception: 7/2009

Power & energy infrastructure companies (Fixed income & equity)

Regulated investment company

$196.5

Tortoise Essential Assets Income Term Fund

NYSE: TEAF
Inception: 3/2019

Essential assets

Regulated investment company

$293.6


1

As of 6/30/2019

2

As of 5/31/2019


(unaudited)
  
Tortoise1



 
 
 
 
Tortoise
Second quarter 2019 report to closed-end fund stockholders
 

Dear stockholders,

For 17 years, you have known us as a market leader and pioneer in energy investing. We have offered energy closed-end funds that help fund the extensive U.S. energy infrastructure network that is indispensable to our economy and society while delivering predictable cash flows that have benefitted our stockholders.

More recently, we have broadened our focus to other essential assets that we believe share those same characteristics. We define essential assets as energy infrastructure, that heats and powers homes and businesses, sustainable infrastructure, that lays the foundation for cleaner energy and social infrastructure, that educates children and provides affordable housing and care for seniors. We have a deep conviction that the essential nature of these assets make them particularly relevant in any market environment and fill an investment void where capital imbalance or structural constraints exist. These investments are also making a positive social and economic impact in our communities. Over the last few years, a key part of setting course with our essential assets strategy has been to add experienced investment professionals to our team, deepen and add adjacent capabilities across both essential assets and capital structures.

On March 27, 2019, we launched Tortoise Essential Assets Income Term Fund (NYSE: TEAF), a representation of this evolution. The fund draws on our expertise across essential assets and provides a vehicle for owning a unique portfolio of both public securities and uncorrelated direct investments in energy infrastructure, sustainable infrastructure and social infrastructure in a fund that offers daily liquidity on the NYSE and a daily NAV.

We hope you enjoy this second quarter report, introducing our essential assets strategy and TEAF, our newest closed end fund.

Energy infrastructure

The broader energy sector, as represented by the S&P Energy Select Sector®Index, fell considerably during the second fiscal quarter ending May 31, 2019, returning -9.1%, bringing fiscal year to date performance to -9.5%.

Upstream

The downward trend in upstream performance during the second fiscal quarter mirrored the decline in crude oil prices with poor market sentiment, driven by recessionary fears, building Organisation for Economic Co-operation and Development (OECD) inventories, and downward revisions to demand growth estimates, overwhelming elevated geopolitical risk considerations and mounting worldwide supply outages. The Tortoise North American Oil and Gas Producers IndexSMreturned -8.2%, bringing fiscal year to date performance to -11.3%. Crude oil prices, represented by West Texas Intermediate (WTI), ended the fiscal quarter at the low price of $53.50 after beginning the fiscal quarter on Mar. 1, 2019 at $57.22 and peaking at $66.40 in mid-April.

2019 U.S. production is expected to be back-half weighted with numerous Permian pipeline projects to the Gulf Coast coming online in the latter part of the year and is projected to average 12.4 MMbbl/d in 2019 and 13.3 MMbbl/d in 20201. The continued growth in production is predicted to transform the U.S. into a net exporter of oil and petroleum products by the end of 2020, according to the U.S. Energy Information Administration.

Natural gas prices remained under pressure during the second fiscal quarter, opening the period at $2.81 per million British thermal units (MMBtu) before closing the quarter at $2.59. Prices peaked at $4.25 on March 4, 2019 and troughed at $2.53 on April 23, 2019. Moderating demand due to mild weather resulted in an elevated pace of inventory builds. With natural gas production expected to grow again and average 90.1 billion cubic feet per day (bcf/d) in 2019 and 92.9 bcf/d in 20202, we believe production may be poised to outgrow domestic demand and LNG export needs, with prices likely to remain pressured in the medium term as a result. The U.S. became a net exporter of natural gas in 2017, the trend continued in 2018, and with more LNG liquefaction additions this year and next, net exports are set to increase.

Midstream

Performance in the midstream sector deviated from broader energy as represented by the Tortoise North American Pipeline IndexSMreturn of 1.5% and the Tortoise MLP Index®return of 1.6% for the second fiscal quarter, bringing fiscal year to date performance to 8.3% and 4.9%, respectively. Divergence in performance from the overall energy market highlighted strong midstream fundamentals indicative of growing production volumes, stable cash flows, healthy coverage and balance sheets, and a near completion of the simplification trend.

Private equity interest in midstream continues to be an evolving theme emphasizing the strategic value and attractive valuation of midstream assets. IFM Investors, an Australian global institutional funds manager, announced plans to acquire Buckeye Partners in an all-cash transaction at a 27.5% premium to the prior day’s closing price. The transaction, valued at an approximate 12x cash flow multiple, illustrates the higher valuations private equity is ascribing to energy infrastructure companies when compared to public investors.

(unaudited)
 
2Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 

Looking forward, in large part due to greater need to debottleneck other productive basins and to export crude oil and natural gas, the organic growth opportunity for midstream companies is healthy. Our outlook for capital investments remains at approximately $130 billion for 2019 to 2021 in MLPs, pipelines and related organic projects.

Capital markets activity remained slow during the second fiscal quarter with MLPs and other pipeline companies raising approximately $9.1 billion in total capital, with most of the issuance in debt. Rattler Midstream LP raised $665 million in their initial public offering. Merger and acquisition activity among MLPs and other pipeline companies remained light save for MPLX LP acquiring Andeavor Logistics LP for $13.5 billion, with $16.7 billion total for the fiscal quarter.

Downstream

After a tumultuous start to the year marked by numerous, heavy planned and unplanned refinery outages, squeezed heavy crude oil supply due to sanctions on Iran and Venezuela, and refined products demand concerns tied to the U.S. and China trade war, refiner performance suffered during the second fiscal quarter. With the upcoming International Maritime Organization’s (IMO) Jan. 1, 2020 sulfur reduction regulations on the shipping industry, a large upheaval in the global refining industry is quickly approaching. U.S. refiners are well positioned to take advantage of higher distillate pricing and more heavily discounted medium-heavy sour crudes, thanks in large part to their more complex nature and ability to use a wide range of crude feed-stocks. As a result, refiner performance is expected to improve in the second half of the year. New petrochemical facilities are due to come online later in the year, which should improve NGL prices.

Sustainable infrastructure

Solar

The U.S. solar industry continues to experience high growth from a low starting point. In 2018, solar contributed a modest 2.3% of electricity generation1. According to Wood Mackenzie, this will continue to grow in 2019 as an expected 13 gigawatts (GWs) are installed, representing 25% year-over-year growth and the second highest annual installations on record. By geography, Florida, California, and Nevada installed the most solar in Q1 2019. As solar penetration continues to grow, we expect a growing amount of solar projects to include a storage component. As an example, in June 2019, NV Energy announced plans to install 1,200 megawatts (MWs) of solar and 590 MWs of battery storage by the end of 2023, representing enough power to supply a city the size of Newark, NJ3. Over the long-term, storage remains a critical component to enabling higher levels of renewable penetration.

Wind

Wind installations totaled 841 MW in the first calendar quarter of 2019 reaching a total installed capacity of 97,223 MW with an additional 39,161 MW of capacity currently under construction or in advanced development3. Projects continue to largely be located in the wind corridor that spans across the central U.S. with new projects being commission on both coasts enabled by declining unsubsidized costs that have fallen 69% since 2009. Wind supplied 6.5% of US electricity in 2018 and is forecasted to continue to grow its market share of the generation mix4. New to the U.S. are goals set in Massachusetts, New Jersey, New York, and Virginia that target a combined 17,000 MW of offshore wind by 2030 with developers expecting 2,000 MW of offshore projects will be online by 2023.

Social infrastructure

Education

The tax-exempt public bond market for charter school facilities has been very robust in the first two quarters of 2019 with approximately $750 million of new issuance to date, which includes the $33.9 million MaST III offering (Philadelphia) which Tortoise purchased as the sole investor. Tortoise also closed an $18.4 million transaction for Athenian Academy in Lee County, Florida. The public market tends to be very heavily weighted to the second half of the year, so we expect approximately $2.5 billion in new issuance for 2019. Less than 10% of charter schools have ever accessed the public bond market, as such, we believe the demand for single investor/private placement tax-exempt facility debt to be at least twice this size with less than $1 billion in available capital to support it. Tortoise continues to see a plethora of opportunity and currently has another $50 million plus in executed term sheets.

Healthcare

Senior housing occupancy rate for independent and assisted living combined was largely unchanged at 88%. Specifically, assisted living occupancy levels remain historically low and was up only 30 basis points from the all-time low reported in the second quarter of 2018, but still above breakeven for many projects. Additionally, significant market supply and demand variation persists, while units under construction continue to trend downward.

(unaudited)
 
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Project Finance

Demand for energy-related projects within the project finance sector remains strong as efforts continue to de-carbonize power generation and fuel production throughout the U.S. The combination of federal, state and local legislation provides foundational support. For example, the 2015 overhaul of the federal USDA Section 9003 Biorefinery program has prompted large increases in applications for new projects that produce clean-burning electricity or biofuels which help meet state mandates for Renewable Portfolio Standards, Low Carbon Fuel Standards (LCFS), and Alternative Fuel Standards. At the local level, a group of four counties in the State of Washington is moving forward with a regional LCFS plan after a statewide LCFS effort failed to pass the Washington senate. We believe these types of legislative action will continue to support the Project Finance Sector.

Concluding thoughts

As part of our emphasis on essential assets, we focus on investments that positively impact our society and deliver sustainable value that you have come to expect from us. Our outlook on essential assets is compelling. The U.S. energy fundamental backdrop is strongly supported by rising U.S. energy exports and cash flow growth positioning companies to increase dividends, buyback shares and/or reduce debt. Natural gas and renewable energy sources continue to become a more significant player in global electricity generation. We see strong demographic trends driving value in social infrastructure. We appreciate your continued support and feedback. It challenges us to do better and drives our evolution and innovation.


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 Oil and Gas Producers IndexSMis a float-adjusted, capitalization-weighted index of North American energy companies engaged primarily in the production of crude oil, condensate, natural gas or natural gas liquids (NGLs). The Tortoise North American Pipeline IndexSMis 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®, Tortoise North American Pipeline IndexSMand Tortoise North American Oil and Gas Producers 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 Energy Information Administration, Short-Term Energy Outlook, July 2019
2 PIRA, May 2019
3 Bloomberg New Energy Finance
4 AWEA U.S. Wind Industry First Quarter 2019 Market Report

(unaudited)
 
4Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
Tortoise
Energy Infrastructure Corp. (TYG)
 

Fund description

TYG seeks a high level of total return with an emphasis on current distributions paid to stockholders. TYG invests primarily in equity securities of master limited partnerships (MLPs) and their affiliates that transport, gather, process or store natural gas, natural gas liquids (NGLs), crude oil and refined petroleum products.

Fund performance review

Performance in the midstream sector deviated from broader energy during the second fiscal quarter, driven by strong fundamentals indicative of growing production volumes, stable cash flows, healthy coverage and balance sheets, and a near completion of the simplification trend. Average coverage ratios for the fund’s portfolio companies has increased from 1.38x in 3Q2018 to 1.41x in 1Q19 while average leverage decreased from 3.86x in 3Q2018 to 3.73x in 1Q19. With lower leverage and improved distribution coverage, the equity portion of projects can confidently be funded with discretionary cash flow. Since the fund’s inception, it has paid out more than $34 in cumulative distributions to stockholders. The fund’s market-based and NAV-based returns for the fiscal quarter ending May 31, 2019 were -1.6% and 0.9%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise MLP Index®returned 1.6% for the same period.

Second fiscal quarter highlights     
Distributions paid per share$0.6550
Distribution rate (as of 5/31/2019)12.0%
Quarter-over-quarter distribution increase0.0%
Year-over-year distribution increase0.0%
Cumulative distributions paid per share to
       stockholders Since inception in February 2004$34.3925
Market-based total return(1.6)%
NAV-based total return0.9%
Premium (discount) to NAV (as of 5/31/2019)(3.8)%

Key asset performance drivers

Top five contributors     Company type     Performance driver
Buckeye Partners, L.P.Midstream refined product pipeline MLPAnnounced to be acquired by IFM Investors at a 27.5% premium
EQM Midstream
Partners, LP
Midstream natural gas/natural gas liquids pipeline companyCompleted bolt-on acquisition for Marcellus gathering assets and rebounded from poor performance following simplification transaction
Shell Midstream
Partners, L.P.
Midstream crude oil pipeline MLPAnnounced accretive dropdown transaction
Tallgrass Energy, LPMidstream natural gas/natural gas liquids pipeline companyMarket expectations for potential acquisition
Magellan Midstream
Partners, L.P.
Midstream refined product pipeline MLPStrong 1Q earnings results and increased 2019 financial guidance
Bottom five contributorsCompany typePerformance driver
Western Midstream
Partners, LP
Midstream gathering and processing companyUncertain ownership following acquisition of parent company, Anadarko, by Occidental Petroleum
Energy Transfer LPMidstream natural gas/natural gas liquids pipeline companyLeverage levels remain relatively high
MPLX LPRefined products pipelinesHigher competition for Permian volumes
EnLink Midstream, LLCMidstream gathering and processing companyConcern around producers slowing drilling activity in Oklahoma
Antero Midstream
Partners LP
Midstream gathering and processing companyConcern around parent (AR) reducing drilling activity due to weaker NGL and natural gas prices

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)
 
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Tortoise
Energy Infrastructure Corp. (TYG)(continued)
 

Fund structure and distribution policy

The fund is structured as a corporation and is subject to federal and state income tax on its taxable income. The fund has adopted a distribution policy in which the Board of Directors considers many factors in determining distributions to stockholders. Over the long term, the fund expects to distribute substantially all of its distributable cash flow (DCF) to holders of common stock. The fund’s Board of Directors reviews the distribution rate quarterly, and may adjust the quarterly distribution throughout the year. Although the level of distributions is independent of the funds’ performance in the short term, the fund expects such distributions to correlate with its performance over time.

Distributable cash flow and distributions

DCF is distributions received from investments less expenses. The total distributions received from investments include the amount received as cash distributions from investments, paid-in-kind distributions, and dividend and interest payments. Income also includes the premiums received from sales of covered call options, net of amounts paid to buy back out-of-the-money options. The total expenses include current or anticipated operating expenses, leverage costs and current income taxes. Current income taxes include taxes paid on net investment income, in addition to foreign taxes, if any. Taxes incurred from realized gains on the sale of investments, expected tax benefits and deferred taxes are not included in DCF.

Income from investments increased approximately 3.9% as compared to 1st quarter 2019 primarily due to the impact of increased distributions from investments within the fund’s portfolio. Operating expenses, consisting primarily of fund advisory fees, increased approximately 7.0% during the quarter due to higher asset-based fees. Overall leverage costs increased approximately 4.3% as compared to 1st quarter 2019 due to higher average leverage utilization during the quarter. As a result of the changes in income and expenses, DCF increased approximately 3.3% as compared to 1st quarter 2019. The fund paid a quarterly distribution of $0.655 per share, which was equal to the distribution paid in the prior quarter and 2nd quarter 2018. The fund has paid cumulative distributions to stockholders of $34.3925 per share since its inception in Feb. 2004.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between distributions received from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows: the Statement of Operations, in conformity with U.S. generally accepted accounting principles (GAAP), recognizes distribution income from MLPs and other investments on their ex-dates, whereas the DCF calculation may reflect distribution income on their pay dates; GAAP recognizes that a significant portion of the cash distributions received from MLPs and other investments are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital (net of any distributions deemed to be return of principal); and distributions received from investments in the DCF calculation include the value of dividends paid-in-kind (additional stock or MLP units), whereas such amounts may not be included as income for GAAP purposes and includes distributions related to direct investments when the purchase price is reduced in lieu of receiving cash distributions. Net premiums on options written (premiums received less amounts paid to buy back out-of-the-money options) with expiration dates during the fiscal quarter are included in the DCF calculation, whereas GAAP recognizes the net effect of options written as realized and unrealized gains (losses). Income for DCF purposes is reduced by amortizing the cost of certain investments that may not have a residual value after a known time period and by distributions received from investments deemed to be return of principal. The treatment of expenses in the DCF calculation also differs from what is reported in the Statement of Operations. In addition to the total operating expenses, including fee waiver, as disclosed in the Statement of Operations, the DCF calculation reflects interest expense, realized and unrealized gains (losses) on interest rate swap settlements, distributions to preferred stockholders, other recurring leverage expenses, as well as taxes paid on net investment income.

“Net Investment Income (Loss), before Income Taxes” on the Statement of Operations is adjusted as follows to reconcile to DCF for YTD and 2nd quarter 2019 (in thousands):

      YTD 2019     2nd Qtr 2019
Net Investment Loss,        
       before Income Taxes$(9,507)$(2,328)
Adjustments to reconcile to DCF:
       Distributions characterized as
              return of capital, net73,65434,752
       Other1,7811,077
              DCF$   65,928$   33,501

Leverage

The fund’s leverage utilization increased $4.6 million during 2nd quarter 2019 and represented 32.4% of total assets at May 31, 2019. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, including the impact of interest rate swaps, approximately 74% of the leverage cost was fixed, the weighted-average maturity was 3.4 years and the weighted-average annual rate on leverage was 3.77%. These rates will vary in the future as a result of changing floating rates, utilization of the fund’s credit facilities and as leverage and swaps mature or are redeemed.

Income taxes

During 2nd quarter 2019, the fund’s deferred tax liability increased by $3.4 million to $192.4 million, primarily as a result of an increase in value of its investment portfolio. The fund had net realized gains of $10.9 million during the quarter. To the extent that the fund has taxable income, it will owe federal and state income taxes. Tax payments can be funded from investment earnings, fund assets, or borrowings.

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 calculation of distributable cash flow and distributions to stockholders, as well as a discussion of the tax impact on distributions and results and recent tax reform, please visit www.tortoiseadvisors.com.

(unaudited)
 
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2019 2nd Quarter Report| May 31, 2019
 
TYG Key Financial Data(supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)
 

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which the fund believes is meaningful to understanding operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and the fund believes they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

20182019
    Q2(1)    Q3(1)    Q4(1)    Q1(1)    Q2(1)
Total Income from Investments
       Distributions and dividends from investments$44,308$46,231$44,214$43,148$44,564
       Dividends paid in kind850879113115117
       Premiums on options written51,2587931,092
              Total from investments45,15847,11545,58544,05645,773
Operating Expenses Before Leverage
       Costs and Current Taxes
       Advisory fees5,0915,4965,3924,8495,215
       Other operating expenses431442438415420
5,5225,9385,8305,2645,635
       Distributable cash flow before leverage costs and current taxes39,63641,17739,75538,79240,138
       Leverage costs(2)6,5326,6066,5616,3656,637
       Current income tax expense(3)
              Distributable Cash Flow(4)$33,104$34,571$33,194$32,427$33,501
Net realized gain (loss), net of income taxes,
       for the period$25,214$55,082$(45,158)$(10,210)$10,905
As a percent of average total assets(5)
       Total from investments8.11%7.83%7.91%8.61%8.42%
       Operating expenses before leverage costs and current taxes0.99%0.99%1.01%1.03%1.04%
       Distributable cash flow before leverage costs and current taxes7.12%6.84%6.90%7.58%7.38%
As a percent of average net assets(5)
       Total from investments13.80%12.84%12.90%14.36%14.01%
       Operating expenses before leverage costs and current taxes1.69%1.62%1.65%1.72%1.72%
       Leverage costs and current taxes2.00%1.80%1.86%2.08%2.03%
       Distributable cash flow10.11%9.42%9.39%10.56%10.26%
 
Selected Financial Information
Distributions paid on common stock$34,474$35,089$35,131$35,131$35,131
Distributions paid on common stock per share0.65500.65500.65500.65500.6550
Total assets, end of period(6)2,328,5732,461,3432,136,3392,129,1742,110,273
Average total assets during period(6)(7)2,208,8942,387,9152,311,2562,074,9012,157,919
Leverage(8)686,800695,800652,100679,100683,700
Leverage as a percent of total assets29.5%28.3%30.5%31.9%32.4%
Net unrealized depreciation, end of period(239,363)(170,043)(338,892)(302,159)(300,530)
Net assets, end of period1,396,1041,499,9671,260,3001,245,7661,220,946
Average net assets during period(9)1,298,2631,455,2991,417,5811,243,9811,296,336
Net asset value per common share26.4927.9723.5023.2322.76
Market value per share28.6728.1222.5922.9121.90
Shares outstanding (000’s)52,69853,63553,63553,63553,635

(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)

Leverage costs include interest expense, distributions to preferred stockholders, interest rate swap expenses and other recurring leverage expenses.

(3)

Includes taxes paid on net investment income and foreign taxes, if any. Taxes related to realized gains are excluded from the calculation of Distributable Cash Flow (“DCF”).

(4)

“Net investment income (loss), before income taxes” on the Statement of Operations is adjusted as follows to reconcile to DCF: increased by the return of capital on distributions, the dividends paid in stock and increased liquidation value, the premium on dividends paid in kind, the net premiums on options written and amortization of debt issuance costs; and decreased by realized and unrealized gains (losses) on interest rate swap settlements, distributions received that are excluded for DCF purposes and amortization on certain investments.

(5)

Annualized.

(6)

Includes deferred issuance and offering costs on senior notes and preferred stock.

(7)

Computed by averaging month-end values within each period.

(8)

Leverage consists of senior notes, preferred stock and outstanding borrowings under credit facilities.

(9)

Computed by averaging daily net assets within each period.


Tortoise7



 
 
  
 
Tortoise
Midstream Energy Fund, Inc. (NTG)
 

Fund description

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 review

Performance in the midstream sector deviated from broader energy during the second fiscal quarter, driven by strong fundamentals indicative of growing production volumes, stable cash flows, healthy coverage and balance sheets, and a near completion of the simplification trend. Average coverage ratios for the fund’s portfolio companies has increased from 1.38x in 3Q2018 to 1.41x in 1Q19 while average leverage decreased from 3.86x in 3Q2018 to 3.77x in 1Q19. With lower leverage and improved distribution coverage, the equity portion of projects can confidently be funded with discretionary cash flow. The fund’s market-based and NAV-based returns for the fiscal quarter ending May 31, 2019 were -0.3% and 0.9%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise MLP Index®returned 1.6% for the same period.

Second fiscal quarter highlights      
Distributions paid per share$0.4225
Distribution rate (as of 05/31/2019)12.8%
Quarter-over-quarter distribution increase0.0%
Year-over-year distribution increase0.0%
Cumulative distributions paid per share to
       stockholders since inception in July 2010
$14.6150
Market-based total return(0.3)%
NAV-based total return0.9%
Premium (discount) to NAV (as of 5/31/2019)(5.8)%

Key asset performance drivers

Top five contributors       Company type       Performance driver
Buckeye Partners, L.P.Midstream refined product pipeline MLPAnnounced to be acquired by IFM Investors at a 27.5% premium
EQM Midstream
Partners, LP
Midstream natural gas/natural gas liquids pipeline companyCompleted bolt-on acquisition for Marcellus gathering assets and rebounded from poor performance following simplification transaction
Shell Midstream
Partners, L.P.
Midstream crude oil pipeline MLPAnnounced accretive dropdown transaction
Tallgrass Energy, LPMidstream natural gas/natural gas liquids pipeline companyMarket expectations for potential acquisition
Enterprise Products
Partners, L.P.
Midstream natural gas/natural gas liquids pipeline MLPStrong 1Q earnings and solid downstream fundamentals supporting new project announcements
Bottom five contributorsCompany typePerformance driver
Western Midstream
Partners, LP
Midstream gathering and processing companyUncertain ownership following acquisition of parent company, Anadarko, by Occidental Petroleum
Energy Transfer LPMidstream natural gas/natural gas liquids pipeline companyLeverage levels remain relatively high
MPLX LPRefined products pipeline companyHigher competition for Permian volumes
Holly Energy
Partners, L.P.
Refined products pipeline companyUnclear path to distribution growth with exhaustion of dropdown opportunities
EnLink Midstream, LLCMidstream gathering and processing MLPConcern around producers slowing drilling activity in Oklahoma

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)
  
8Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 

Fund structure and distribution policy

The fund is structured as a corporation and is subject to federal and state income tax on its taxable income. The fund has adopted a distribution policy in which the Board of Directors considers many factors in determining distributions to stockholders. Over the long term, the fund expects to distribute substantially all of its distributable cash flow (DCF) to holders of common stock. The fund’s Board of Directors reviews the distribution rate quarterly, and may adjust the quarterly distribution throughout the year. Although the level of distributions is independent of the funds’ performance in the short term, the fund expects such distributions to correlate with its performance over time.

Distributable cash flow and distributions

DCF is distributions received from investments less expenses. The total distributions received from investments include the amount received as cash distributions from MLPs, paid-in-kind distributions, and dividend and interest payments. Income also includes the premiums received from sales of covered call options, net of amounts paid to buy back out-of-the-money options. The total expenses include current or anticipated operating expenses, leverage costs and current income taxes. Current income taxes include taxes paid on net investment income in addition to foreign taxes, if any. Taxes incurred from realized gains on the sale of investments, expected tax benefits and deferred taxes are not included in DCF.

Income from investments increased approximately 2.4% as compared to 1st quarter 2019 due primarily to the impact of increased distributions from investments within the fund’s portfolio as well as increased premiums received on written covered call options. Operating expenses, consisting primarily of fund advisory fees, increased approximately 16.1% during the quarter due to higher asset-based fees. Leverage costs increased approximately 3.5% as compared to 1st quarter 2019 due to increased average leverage utilization during the quarter. As a result of the changes in income and expenses, DCF increased slightly as compared to 1st quarter 2019. The fund paid a quarterly distribution of $0.4225 per share, which was equal to the distribution paid in the prior quarter and 2nd quarter 2018. The fund has paid cumulative distributions to stockholders of $14.615 per share since its inception in July 2010.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between distributions received from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows: the Statement of Operations, in conformity with U.S. generally accepted accounting principles (GAAP), recognizes distribution income from MLPs, common stock and other investments on their ex-dates, whereas the DCF calculation may reflect distribution income on their pay dates; GAAP recognizes that a significant portion of the cash distributions received from MLPs, common stock and other investments are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital; and distributions received from investments in the DCF calculation include the value of dividends paid-in-kind (additional stock or MLP units), whereas such amounts may not be included as income for GAAP purposes, and includes distributions related to direct investments when the purchase price is reduced in lieu of receiving cash distributions. Net premiums on options written (premiums received less amounts paid to buy back out-of-the-money options) with expiration dates during the fiscal quarter are included in the DCF calculation, whereas GAAP recognizes the net effect of options written as realized and unrealized gains (losses). The treatment of expenses in the DCF calculation also differs from what is reported in the Statement of Operations. In addition to the total operating expenses, including fee waiver, as disclosed in the Statement of Operations, the DCF calculation reflects interest expense, distributions to preferred stockholders, other recurring leverage expenses, as well as taxes paid on net investment income.

“Net Investment Income (Loss), before Income Taxes” on the Statement of Operations is adjusted as follows to reconcile to DCF for YTD and 2nd quarter 2019 (in thousands):

YTD 2019     2nd Qtr 2019
Net Investment Loss,
       before Income Taxes
$(11,298)$(5,228)
Adjustments to reconcile to DCF:
       Distributions characterized
              as return of capital
56,70427,775
       Other1,6961,023
              DCF$      47,102$       23,570

Leverage

The fund’s leverage utilization increased by $4.7 million during 2nd quarter 2019 and represented 35.2% of total assets at May 31, 2019. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, approximately 74% of the leverage cost was fixed, the weighted-average maturity was 3.1 years and the weighted-average annual rate on leverage was 3.91%. 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.

Income taxes

During 2nd quarter 2019, the fund’s deferred tax liability increased by $2.5 million to $77.8 million, primarily as a result of the increase in value of its investment portfolio. The fund had net realized losses of $6.3 million during the quarter. As of November 30, 2018, the fund had net operating losses of $55 million for federal income tax purposes. To the extent that the fund has taxable income in the future that is not offset by net operating losses, it will owe federal and state income taxes. Tax payments can be funded from investment earnings, fund assets, or borrowings.

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 calculation of distributable cash flow and distributions to stockholders, as well as a discussion of the tax impact on distributions and results and recent tax reform, please visit www.tortoiseadvisors.com.

(unaudited)
  
Tortoise9



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

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which the fund believes is meaningful to understanding operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and the fund believes they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

20182019
   Q2(1)   Q3(1)   Q4(1)   Q1(1)   Q2(1)   
Total Income from Investments
       Distributions and dividends from investments$26,236$31,413$31,874$31,399$31,824
      Dividends paid in kind621644686970
      Premiums on options written1,254542890
             Total from investments26,85732,05733,19632,01032,784
Operating Expenses Before Leverage
      Costs and Current Taxes
      Advisory fees, net of fees waived3,0543,2513,2643,1453,715
      Other operating expenses321330352334324
3,3753,5813,6163,4794,039
      Distributable cash flow before leverage costs and current taxes23,48228,47629,58028,53128,745
      Leverage costs(2)4,1974,2314,7494,9995,175
      Current income tax expense(3)
             Distributable Cash Flow(4)$19,285$24,245$24,831$23,532$23,570
Net realized gain (loss), net of income taxes,
      for the period$9,963$41,385$(4,243)$(29,889)$(6,278)
As a percent of average total assets(5)
      Total from investments8.29%8.60%8.38%8.81%8.46%
      Operating expenses before leverage costs and current taxes1.04%0.96%0.91%0.96%1.04%
      Distributable cash flow before leverage costs and current taxes7.25%7.64%7.47%7.85%7.42%
As a percent of average net assets(5)
      Total from investments13.99%13.86%13.08%14.36%13.79%
      Operating expenses before leverage costs and current taxes1.76%1.55%1.42%1.56%1.70%
      Leverage costs and current taxes2.19%1.83%1.87%2.24%2.18%
      Distributable cash flow10.04%10.48%9.79%10.56%9.91%
 
Selected Financial Information
Distributions paid on common stock$19,997$20,029$26,705$26,706$26,705
Distributions paid on common stock per share0.42250.42250.42250.42250.4225
Total assets, end of period(6)1,338,6641,651,9731,506,7451,508,6431,498,278
Average total assets during period(6)(7)1,284,8521,479,3651,588,1971,472,9551,536,794
Leverage(8)443,100457,000517,100522,600527,300
Leverage as a percent of total assets33.1%27.7%34.3%34.6%35.2%
Net unrealized appreciation, end of period114,138150,76223,42475,85393,595
Net assets, end of period802,4401,077,585915,033905,859886,270
Average net assets during period(9)761,577917,4091,018,337903,917943,080
Net asset value per common share16.9317.0514.4814.3314.02
Market value per common share18.4016.2713.7213.6613.21
Shares outstanding (000’s)47,40663,20863,20863,20863,208

(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)Leverage costs include interest expense, distributions to preferred stockholders and other recurring leverage expenses.
(3)Includes taxes paid on net investment income and foreign taxes, if any. Taxes related to realized gains are excluded from the calculation of Distributable Cash Flow (“DCF”).
(4)“Net investment income (loss), before income taxes” on the Statement of Operations is adjusted as follows to reconcile to DCF: increased by the return of capital on distributions, the dividends paid in stock and increased liquidation value, the premium on dividends paid in kind and amortization of debt issuance costs.
(5)Annualized.
(6)Includes deferred issuance and offering costs on senior notes and preferred stock.
(7)Computed by averaging month-end values within each period.
(8)Leverage consists of senior notes, preferred stock and outstanding borrowings under the credit facility.
(9)Computed by averaging daily net assets within each period.

10Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
Tortoise
Pipeline & Energy Fund, Inc. (TTP)
 

Fund description

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 review

Performance in the midstream sector deviated from broader energy during the second fiscal quarter, driven by strong fundamentals indicative of growing production volumes, stable cash flows, healthy coverage and balance sheets, and a near completion of the simplification trend. The fund’s market-based and NAV-based returns for the fiscal quarter ending May 31, 2019 were -1.4% and -1.0%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise North American Pipeline IndexSMreturned 1.5% for the same period.

Second fiscal quarter highlights     
Distributions paid per share$0.4075
Distribution rate (as of 05/31/2019)11.6%
Quarter-over-quarter distribution increase0.0%
Year-over-year distribution increase0.0%
Cumulative distributions paid per share to
       stockholders since inception in October 2011
$12.5425
Market-based total return(1.4)%
NAV-based total return(1.0)%
Premium (discount) to NAV (as of 05/31/2019)(10.6)%

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

The fund’s covered call strategy, which focuses on independent energy companies that are key pipeline transporters, enabled the fund to generate current income. The notional amount of the fund’s covered calls averaged approximately 7% of total assets, and their out-of-the-money percentage at the time written averaged approximately 6% during the fiscal quarter.

Key asset performance drivers

Top five contributors       Company type       Performance driver
Buckeye Partners, L.P.Midstream refined product pipeline MLPAnnounced to be acquired by IFM Investors at a 27.5% premium
Tallgrass Energy, LPMidstream natural gas/natural gas liquids pipeline companyMarket expectations for potential acquisition
Equitrans Midstream
Corporation
Midstream natural gas/natural gas liquids pipeline companyAnnounced acquisition of third party midstream business
TC Energy CorporationMidstream natural gas/natural gas liquids pipeline companyAsset sales leading to reduced leverage
Shell Midstream
Partners, L.P.
Midstream crude oil pipeline MLPAnnounced accretive dropdown transaction
Bottom five contributorsCompany typePerformance driver
Energy Transfer LPMidstream natural gas/natural gas liquids pipeline companyLeverage levels remain relatively high
SemGroup CorporationMidstream crude oil pipeline companyLeverage levels remain relatively high
Viper Energy
Partners LP
Upstream oil and natural gas producerWeaker prices for crude oil
MPLX LPRefined products pipeline companyHigher competition for Permian volumes
Antero Midstream
Corp.
Natural gas pipeline companyWeaker prices for natural gas leading to potentially lower volume growth

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)
 
Tortoise11



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

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 intends to distribute an amount closely approximating the total taxable income for the year and, if so determined by the Board, distribute all or a portion of the return of capital paid by portfolio companies during the year. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last calendar quarter of the year to meet annual excise distribution requirements. The fund distributes a fixed amount per common share, currently $0.4075, each quarter to its common shareholders. This amount is subject to change from time to time at the discretion of the Board. Although the level of distributions is independent of the funds’ performance in the short term, the fund expects such distributions to correlate with its performance over time.

Distributable cash flow and distributions

Distributable cash flow (DCF) is income from investments less expenses. Income from investments includes the amount received as cash or paid-in-kind distributions from common stock, master limited partnerships (MLPs), affiliates of MLPs, and pipeline and other energy companies in which the fund invests, and dividend payments on short-term investments. Income also includes the premiums received from sales of covered call options, net of amounts paid to buy back out-of-the-money options. The total expenses include current or anticipated operating expenses and leverage costs.

Income from investments increased approximately 6.7% as compared to 1st quarter 2019, primarily due to increased distributions from investments within the fund’s portfolio. Operating expenses, consisting primarily of fund advisory fees, increased approximately 5.3% during the quarter, primarily due to higher asset-based fees. Leverage costs decreased 1.2% as compared to 1st quarter 2019 primarily as a result of a decrease in interest rates during the quarter. As a result of the changes in income and expenses, DCF increased approximately 8.5% as compared to 1st quarter 2019. In addition, the fund had net realized losses on investments of $5.5 million during 2nd quarter 2019. The fund paid a quarterly distribution of $0.4075 per share, which was unchanged over the prior quarter and 2nd quarter 2018. The fund has paid cumulative distributions to stockholders of $12.5425 per share since its inception in October 2011.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between income from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows: (1) the Statement of Operations, in conformity with U.S. generally accepted accounting principles (GAAP), recognizes distributions and dividend income from MLPs, common stock and other investments on their ex-dates, whereas the DCF calculation may reflect distributions and dividend income on their pay dates; (2) GAAP recognizes that a significant portion of the cash distributions received from MLPs, common stock and other investments are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital; (3) income from investments in the DCF calculation includes the value of dividends paid-in-kind (additional stock or units), whereas such amounts may not be included as income for GAAP purposes; and (4) net premiums on options written (premiums received less amounts paid to buy back out-of-the-money options) with expiration dates during the fiscal quarter are included in the DCF calculation, whereas GAAP recognizes the net effect of options written as realized and unrealized gains (losses).

“Net Investment Income (Loss)” on the Statement of Operations is adjusted as follows to reconcile to DCF for YTD and 2nd quarter 2019 (in thousands):

      YTD 2019      2nd Qtr 2019
Net Investment Loss$(982)$(691)
Adjustments to reconcile to DCF:
       Net premiums on options written2,1721,039
      Distributions characterized
             as return of capital
5,7923,287
      Other12865
             DCF$        7,110$       3,700

Leverage

The fund’s leverage utilization increased by $1.3 million during 2nd quarter 2019 and represented 28.3% of total assets at May 31, 2019. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, approximately 70% of the leverage cost was fixed, the weighted-average maturity was 3.3 years and the weighted-average annual rate on leverage was 3.99%. 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 calculation of distributable cash flow and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseadvisors.com.

(unaudited)
 
12Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
TTP Key Financial Data(supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)
 

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which the fund believes is meaningful to understanding operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and the fund believes they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

20182019
Q2(1)Q3(1)Q4(1)Q1(1)Q2(1)
Total Income from Investments
       Dividends and distributions from investments,               
              net of foreign taxes withheld$3,875$3,716$3,649$3,617$4,032
        Dividends paid in kind4804974225354
        Net premiums on options written1,2941,2351,1541,1331,039
                Total from investments5,6495,4485,2254,8035,125
Operating Expenses Before Leverage Costs
        Advisory fees, net of fees waived683734696606643
        Other operating expenses150159147146149
 833893843752792
        Distributable cash flow before leverage costs4,8164,5554,3824,0514,333
        Leverage costs(2)636658668641633
                Distributable Cash Flow(3)$4,180$3,897$3,714$3,410$3,700
Net realized gain (loss) on investments and foreign
        currency translation, for the period$(1,118)$826$(596)$(6,959)$(5,479)
As a percent of average total assets(4)
        Total from investments9.03%8.16%8.29%8.73%8.84%
        Operating expenses before leverage costs1.33%1.34%1.34%1.37%1.37%
        Distributable cash flow before leverage costs7.70%6.82%6.95%7.36%7.47%
As a percent of average net assets(4)
        Total from investments12.65%11.09%11.43%12.16%11.97%
        Operating expenses before leverage costs1.87%1.82%1.84%1.90%1.85%
        Leverage costs1.42%1.34%1.46%1.62%1.48%
        Distributable cash flow9.36%7.93%8.13%8.64%8.64%
 
Selected Financial Information
Distributions paid on common stock$4,081$4,082$4,082$4,082$4,081
Distributions paid on common stock per share0.40750.40750.40750.40750.4075
Total assets, end of period(5)   258,764   268,532   235,259   227,676   222,673
Average total assets during period(5)(6)248,147264,986252,876223,114229,950
Leverage(7)70,10070,80069,80061,80063,100
Leverage as a percent of total assets27.1%26.4%29.7%27.1%28.3%
Net unrealized depreciation, end of period(17,798)(6,280)(34,897)(23,375)(19,404)
Net assets, end of period187,444196,073163,202163,313157,061
Average net assets during period(8)177,138194,846183,386160,184169,837
Net asset value per common share18.7119.5816.2916.3015.68
Market value per common share17.3617.7314.3314.6314.02
Shares outstanding (000’s)10,01610,01610,01610,01610,016

(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)Leverage costs include interest expense, distributions to preferred stockholders and other recurring leverage expenses.
(3)“Net investment income (loss)” on the Statement of Operations is adjusted as follows to reconcile to Distributable Cash Flow (“DCF”): increased by net premiums on options written, the return of capital on distributions, the dividends paid in stock and increased liquidation value, the premium on dividends paid in kind and amortization of debt issuance costs.
(4)Annualized.
(5)

Includes deferred issuance and offering costs on senior notes and preferred stock.

(6)

Computed by averaging month-end values within each period.

(7)

Leverage consists of senior notes, preferred stock and outstanding borrowings under the revolving credit facility.

(8)

Computed by averaging daily net assets within each period.


Tortoise13



 
 
 
 
Tortoise
Energy Independence Fund, Inc. (NDP)
 

Fund description

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 review

The downward trend in upstream performance during the second fiscal quarter mirrored the decline in crude oil prices with poor market sentiment, driven by recessionary fears, building OECD inventories, and downward revisions to demand growth estimates, overwhelming elevated geopolitical risk considerations and mounting worldwide supply outages. Crude oil prices, represented by West Texas Intermediate (WTI), ended the fiscal quarter at the low price of $53.50 after beginning the fiscal quarter on Mar. 1, 2019 at $57.22 and peaking at $66.40 in mid-April. The fund’s market-based and NAV-based returns for the fiscal quarter ending May 31, 2019 were -2.7% and -16.6%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise North American Oil and Gas Producers IndexSMreturned -8.2% for the same period.

Second fiscal quarter highlights
Distributions paid per share$0.4375
Distribution rate (as of 05/31/2019)          23.6%
Quarter-over-quarter distribution increase0.0%
Year-over-year distribution increase0.0%
Cumulative distributions paid per share to
       stockholders since inception in July 2012$11.8125
Market-based total return(2.7)%
NAV-based total return(16.6)%
Premium (discount) to NAV (as of 05/31/2019)24.6%

The fund utilizes a covered call strategy, which seeks to generate income while reducing overall volatility. The premium income generated from this strategy helped to lower NAV volatility during the quarter. The notional amount of the fund’s covered calls averaged approximately 97% of total assets and their out-of-the-money percentage at the time written averaged approximately 10% during the fiscal quarter.

Key asset performance drivers

Top five contributorsCompany typePerformance driver
Anadarko Petroleum
Corp
       Upstream oil and natural gas producer       Occidental Petroleum offered premium to acquire all of the outstanding shares
Targa Resources Corp. –
Preferred Stock
Midstream gathering and processing companyPreferred security that experienced less volatility than common stocks
Cabot Oil & Gas
Corporation
Upstream natural gas producerDefensive energy stocks given high quality asset base and low debt
Tallgrass Energy, LPMidstream natural gas/natural gas liquids pipeline companyMarket expectations for potential acquisition
PBF Logistics LPMidstream crude oil pipeline companyDecline in 10-year Treasury rate made high yield equities more attractive
Bottom five contributorsCompany typePerformance driver
Continental
Resources, Inc.
Upstream crude oil producerLevered to oil prices that declined sharply after U.S./China trade negotiations fell apart
Encana CorporationUpstream oil and natural gas producerWeaker debt ratios due to falling commodity prices
Concho Resources Inc.Upstream liquids producerLevered to oil prices that declined sharply after U.S./China trade negotiations deteriorated
Devon Energy
Corporation
Upstream oil and natural gas producerLevered to oil prices that declined sharply after U.S./China trade negotiations deteriorated
Range Resources
Corporation
Upstream natural gas producerWeaker debt ratios due to falling natural gas and NGL prices

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)
 
14Tortoise



 
 
2019 2nd Quarter Report| May 31, 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’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 intends to distribute an amount closely approximating the total taxable income for the year and, if so determined by the Board, distribute all or a portion of the return of capital paid by portfolio companies during the year. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last calendar 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. Although the level of distributions is independent of the funds’ performance in the short term, the fund expects such distributions to correlate with its performance over time.

Distributable cash flow and distributions

Distributable cash flow (DCF) is income from investments less expenses. Income from investments includes the amount received as cash or paid-in-kind distributions from investments and dividend payments on short-term investments. Income also includes the premiums received from sales of covered call options, net of amounts paid to buy back out-of-the-money options. The total expenses include current or anticipated operating expenses and leverage costs.

Income from investments decreased approximately 8.7% as compared to 1st quarter 2019, primarily due to trading activity within the fund’s portfolio, partially offset by increased premiums received on written covered call options. Operating expenses, consisting primarily of fund advisory fees, decreased approximately 2.8% during the quarter due primarily to lower asset-based fees. Total leverage costs decreased approximately 5.7% as compared to 1st quarter 2019, primarily due to lower average leverage utilization during the quarter. As a result of the changes in income and expenses, DCF decreased by approximately 9.6% as compared to 1st quarter 2019. In addition, the fund had net realized losses on investments of $17.4 million during 2nd quarter 2019.

The fund maintained its quarterly distribution of $0.4375 per share during 2nd quarter 2019, which was equal to the distribution paid in the prior quarter and 2nd quarter 2018. The fund has paid cumulative distributions to stockholders of $11.8125 per share since its inception in July 2012.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between income from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows: (1) the Statement of Operations, in conformity with U.S. generally accepted accounting principles (GAAP), recognizes distributions and dividend income from MLPs, common stock and other investments on their ex-dates, whereas the DCF calculation may reflect distributions and dividend income on their pay dates; (2) GAAP recognizes that a significant portion of the cash distributions received from MLPs, common stock and other investments are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital; (3) income from investments in the DCF calculation includes the value of dividends paid-in-kind (additional stock or units), whereas such amounts may not be included as income for GAAP purposes; and (4) net premiums on options written (premiums received less amounts paid to buy back out-of-the-money options) with expiration dates during fiscal quarter are included in the DCF calculation, whereas GAAP recognizes the net effect of options written as realized and unrealized gains (losses).

“Net Investment Income (Loss)” on the Statement of Operations is adjusted as follows to reconcile to DCF for YTD and 2nd quarter 2019 (in thousands):

YTD 20192nd Qtr 2019
Net Investment Loss     $(1,311)     $(716)
Adjustments to reconcile to DCF:
       Net premiums on options written10,245         5,279
       Distributions characterized
              as return of capital         1,110206
              DCF$10,044$4,769

Leverage

The fund’s leverage utilization decreased $7.8 million as compared to 1st quarter 2019. The fund utilizes all floating rate leverage that had an interest rate of 3.23% and represented 28.1% of total assets at quarter-end. The fund has 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 calculation of distributable cash flow and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseadvisors.com.

(unaudited)
 
Tortoise15



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

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which the fund believes is meaningful to understanding operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and the fund believes they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

20182019
    Q2(1)    Q3(1)    Q4(1)    Q1(1)    Q2(1)
Total Income from Investments
       Distributions and dividends from investments,
              net of foreign taxes withheld$1,363$1,139$1,167$1,250$394
       Dividends paid in stock221229152
       Net premiums on options written5,9236,8706,4004,9665,279
              Total from investments7,5078,2387,7196,2165,673
Operating Expenses Before Leverage Costs
       Advisory fees, net of fees waived662671613437421
       Other operating expenses144147134133133
806818747570554
       Distributable cash flow before leverage costs6,7017,4206,9725,6465,119
       Leverage costs(2)435462486371350
              Distributable Cash Flow(3)$6,266$6,958$6,486$5,275$4,769
Net realized gain (loss) on investments and foreign
       currency translation, for the period$(16,976)$6,433$(2,031)$(37,544)$(17,350)
As a percent of average total assets(4)
       Total from investments12.33%13.23%13.91%15.48%15.12%
       Operating expenses before leverage costs1.32%1.31%1.35%1.42%1.48%
       Distributable cash flow before leverage costs11.01%11.92%12.56%14.06%13.64%
As a percent of average net assets(4)
       Total from investments17.01%18.25%19.29%21.38%20.05%
       Operating expenses before leverage costs1.83%1.81%1.87%1.96%1.96%
       Leverage costs0.99%1.02%1.21%1.28%1.24%
       Distributable cash flow14.19%15.42%16.21%18.14%16.85%
                          
Selected Financial Information
Distributions paid on common stock$6,391$6,402$6,414$6,430$6,445
Distributions paid on common stock per share0.43750.43750.43750.43750.4375
Total assets, end of period   245,593    242,150191,285   156,648   123,229
Average total assets during period(5)241,582246,956   222,541162,807148,821
Leverage(6)65,80065,20057,10042,40034,600
Leverage as a percent of total assets26.8%26.9%29.9%27.1%28.1%
Net unrealized depreciation, end of period(4,811)(15,314)(50,328)(28,074)(27,092)
Net assets, end of period176,262172,423132,488111,49087,720
Average net assets during period(7)175,128179,054160,534117,918112,274
Net asset value per common share12.1811.769.027.575.94
Market value per common share12.4712.699.008.087.40
Shares outstanding (000’s)14,63314,66014,69614,73314,768

(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)Leverage costs include interest expense and other recurring leverage expenses.
(3)“Net investment income (loss)” on the Statement of Operations is adjusted as follows to reconcile to Distributable Cash Flow (“DCF”): increased by net premiums on options written, the return of capital on distributions the distributions paid in stock and the premium on dividends paid in kind.
(4)Annualized.
(5)

Computed by averaging month-end values within each period.

(6)

Leverage consists of outstanding borrowings under the revolving credit facility.

(7)

Computed by averaging daily net assets within each period.


16Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
Tortoise
Power and Energy Infrastructure Fund, Inc. (TPZ)
 

Fund description

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 review

Performance in the midstream sector deviated from broader energy during the second fiscal quarter, driven by strong fundamentals indicative of growing production volumes, stable cash flows, healthy coverage and balance sheets, and a near completion of the simplification trend. The fund’s market-based and NAV-based returns for the fiscal year ending May 31, 2019 were 3.6% and 1.3%, respectively (including the reinvestment of distributions). Comparatively, the TPZ Benchmark Composite* returned 4.0% for the same period. The fund’s equity holdings outperformed its midstream fixed income holdings on a total return basis.

Second fiscal quarter highlights
Monthly distributions paid per share     $0.1250
Distribution rate (as of 05/31/2019)8.2%
Quarter-over-quarter distribution increase0.0%
Year-over-year distribution increase0.0%
Cumulative distribution to stockholders
       since inception in July 2009$16.0250
Market-based total return3.6%
NAV-based total return1.3%
Premium (discount) to NAV (as of 05/31/2019)(9.2)%

*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 contributorsCompany typePerformance driver
Buckeye Partners, L.P.     Midstream refined product pipeline MLP     Announced to be acquired by IMF Investors at a 27.5% premium
Tallgrass Energy, LPMidstream natural gas/natural gas liquids pipeline companyMarket expectations for potential acquisition
Enbridge Inc.
(fixed income)
Midstream crude oil pipeline companySuccessful efforts to reduce leverage
Shell Midstream
Partners, L.P.
Midstream crude oil pipeline MLPAnnounced accretive dropdown transaction
NextEra Energy, Inc.
(fixed income)
PowerStable renewable business with visible growth through dropdowns
Bottom five contributorsCompany typePerformance driver
Western Midstream
Partners, LP
Midstream gathering and processing companyUncertain ownership following acquisition of parent company, Anadarko, by Occidental Petroleum
Energy Transfer LPMidstream natural gas/natural gas liquids pipeline companyLeverage levels remain relatively high
Antero Midstream
Corp.
Natural gas pipeline companyWeaker prices for natural gas leading to potentially lower volume growth
Holly Energy
Partners, L.P.
Refined products pipeline companyUnclear path to distribution growth with exhaustion of dropdown opportunities
MPLX LPRefined products pipelines companyHigher competition for Permian volumes

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)
 
Tortoise17
 


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

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 intends to distribute an amount closely approximating the total taxable income for the year and, if so determined by the Board, distribute all or a portion of the return of capital paid by portfolio companies during the year. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last calendar quarter of the year to meet annual excise distribution requirements. The fund distributes a fixed amount per common share, currently $0.125, each month to its common shareholders. This amount is subject to change from time to time at the discretion of the Board. Although the level of distributions is independent of the funds’ performance in the short term, the fund expects such distributions to correlate with its performance over time.

Distributable cash flow and distributions

Distributable cash flow (DCF) is income from investments less expenses. Income from investments includes the accrued interest from corporate bonds, cash distributions and paid-in-kind distributions from master limited partnerships (MLPs) and other equity investments and dividends earned from short-term investments. The total expenses include current or anticipated operating expenses and leverage costs.

Income from investments increased approximately 2.9% as compared to 1st quarter 2019 due primarily to trading activity and increased distributions from investments within the fund’s portfolio. Operating expenses, consisting primarily of fund advisory fees, increased approximately 5.1% during the quarter due primarily to higher asset-based fees. Total leverage costs increased approximately 5.3% as compared to 1st quarter 2019, primarily due to increased average leverage utilization during the quarter. As a result of the changes in income and expenses, DCF increased approximately 1.8% as compared to 1st quarter 2019. In addition, the fund had net realized gains on investments of $0.9 million during 2nd quarter 2019.

The fund paid monthly distributions of $0.125 per share during 2nd quarter 2019, which was unchanged over the prior quarter and 2nd quarter 2018. The fund’s Board of Directors has declared monthly distributions of $0.125 per share to be paid during3rd quarter 2019. The fund has paid cumulative distributions to stockholders of $16.025 per share since its inception in July 2009.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between income from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows: (1) U.S. generally accepted accounting principles (GAAP), recognizes distribution income from MLPs, common stock and other investments on their ex-dates, whereas the DCF calculation may reflect distribution income on their pay dates; (2) GAAP recognizes that a significant portion of the cash distributions received from MLPs, common stock and other investments are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital; (3) income from investments in the DCF calculation includes the value of dividends paid-in-kind (additional stock or units), whereas such amounts may not be included as income for GAAP purposes; and (4) amortization of premium or discount for all securities is calculated using the yield to worst methodology for GAAP purposes while yield to call is used in calculating amortization for long-dated hybrid securities in the DCF calculation. The treatment of expenses in the DCF calculation also differs from what is reported in the Statement of Operations. In addition to the total operating expenses, including fee waiver, as disclosed in the Statement of Operations, the DCF calculation reflects interest expense and realized and unrealized gains (losses) on interest rate swap settlements as leverage costs.

“Net Investment Income (Loss)” on the Statement of Operations is adjusted as follows to reconcile to DCF for YTD and 2nd quarter 2019 (in thousands):

      YTD 2019      2nd Qtr 2019
Net Investment Income$1,284$638
Adjustments to reconcile to DCF:
       Distributions characterized
       
      as return of capital
3,1041,576
      Other12764
             DCF$       4,515$           2,278

Leverage

The fund’s leverage utilization increased $2.8 million as compared to 1st quarter 2019 and represented 28.6% of total assets at May 31, 2019. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, including the impact of interest rate swaps, approximately 69% of the leverage cost was fixed, the weighted-average maturity was 2.4 years and the weighted-average annual rate on leverage was 3.13%. These rates will vary in the future as a result of changing floating rates and as swaps mature or are 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 calculation of distributable cash flow and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseadvisors.com.

(unaudited)

 
18Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
TPZ Key Financial Data (supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)
 

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which the fund believes is meaningful to understanding operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and the fund believes they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

     2018     2019
Q2(1)     Q3(1)     Q4(1) Q1(1)     Q2(1) 
Total Income from Investments
       Interest earned on corporate bonds$1,345$1,342$1,369$1,357$1,381
      Distributions and dividends from investments,
             net of foreign taxes withheld1,7271,7131,6541,8411,909
      Dividends paid in kind3333482843940
              Total from investments3,4053,4033,3073,2373,330
Operating Expenses Before Leverage Costs
      Advisory fees463481473447476
      Other operating expenses137142137140141
 600623610587617
      Distributable cash flow before leverage costs2,8052,7802,6972,6502,713
      Leverage costs(2)343358373413435
             Distributable Cash Flow(3)$2,462$2,422$2,324$2,237$2,278
Net realized gain (loss) on investments and foreign
      currency translation, for the period$2,220$1,024$3,996$(520)$878
As a percent of average total assets(4)
      Total from investments6.95%6.68%6.55%6.85%6.66%
      Operating expenses before leverage costs1.23%1.22%1.21%1.24%1.23%
      Distributable cash flow before leverage costs5.72%5.46%5.34%5.61%5.43%
As a percent of average net assets(4)
      Total from investments9.51%9.06%8.93%9.54%9.20%
      Operating expenses before leverage costs1.68%1.66%1.65%1.73%1.70%
      Leverage costs0.96%0.95%1.01%1.22%1.20%
      Distributable cash flow6.87%6.45%6.27%6.59%6.30%
 
Selected Financial Information
Distributions paid on common stock$2,607$2,606$2,607$2,607$2,607
Distributions paid on common stock per share0.37500.37500.37500.37500.3750
Total assets, end of period198,541206,430191,906195,308197,731
Average total assets during period(5)194,244201,985200,269191,512198,360
Leverage(6)51,20053,20053,40053,80056,600
Leverage as a percent of total assets25.8%25.8%27.8%27.5%28.6%
Net unrealized appreciation, end of period14,17120,9173,9569,8509,939
Net assets, end of period146,649152,418137,325140,763139,785
Average net assets during period(7)       142,041      149,026      146,848      137,573      143,596
Net asset value per common share21.1021.9319.7620.2520.11
Market value per common share19.0419.4017.1717.9718.25
Shares outstanding (000’s)6,9516,9516,9516,9516,951

(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)

Leverage costs include interest expense, interest rate swap expenses and other recurring leverage expenses.

(3)

“Net investment income (loss)” on the Statement of Operations is adjusted as follows to reconcile to Distributable Cash Flow (“DCF”): increased by the return of capital on distributions, the dividends paid in stock and increased liquidation value and the premium on dividends paid in kind; and decreased by realized and unrealized gains (losses) on interest rate swap settlements.

(4)

Annualized.

(5)

Computed by averaging month-end values within each period.

(6)

Leverage consists of outstanding borrowings under the revolving credit facility.

(7)

Computed by averaging daily net assets within each period.


Tortoise19



 
 
 
 
Tortoise
Essential Assets Income Term Fund (TEAF)
 

Fund description

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

We are very pleased with the progress of the fund’s investments since the IPO as there are now direct investments in each of the investment verticals. We were able to invest the initial proceeds efficiently, achieving our yield, liquidity and diversification targets. Our goal is to allocate approximately 60% of the portfolio into direct investments within the first year. We have made good progress and see a strong path ahead in our pipeline of future direct investments. The fund declared its initial monthly distribution ahead of schedule achieving the fund’s distribution rate target.

Energy Infrastructure

Public
Energy infrastructure equities were under pressure during the fiscal quarter as natural gas and natural gas liquids (NGL) prices sold off due to increasing supply resulting in inventory builds.
Additionally, all energy equities were pressured during the period due to uncertainty surrounding global demand for energy as U.S. and China trade negotiations broke down in May.
Midstream infrastructure equities have rebounded in June following resumption of trade talks and a potentially more favorable economic picture as central banks across the globe have taken a dovish stance.

Private
The fund invested approximately $9 million in private energy infrastructure deals.
A PIPE offering from Enviva Partners (EVA) to help finance an asset acquisition. EVA was the top performance contributor in the portfolio during the second fiscal quarter.
A $4.1 million preferred equity investment in a natural gas midstream operator in the Permian Basin.

Sustainable Infrastructure

Public
The fund’s global listed sustainable infrastructure securities were slightly negative during the fiscal quarter.
Generally, the fund’s water infrastructure investments performed well during the period, driven by robust growth drivers in the municipal sector.
European utility investments lagged due to weakening power prices during the fiscal quarter.

Private
The fund committed to a $10.8 million investment in an 8 MW-DC ground mounted utility scale solar PV project located on the Island of Bermuda.
The project is contracted with a utility for 20 years with a fixed price.

Social Infrastructure
The fund directly originated a $3.4 million loan to refinance an acquisition bridge loan to the MaST Community Charter School III (MaST III) in Philadelphia, Pennsylvania.
We expect MaST III to be open in the fall of 2019 and is projected to enroll approximately 900 students during the first year and to grow over the next several years to serve approximately 1,300 students.
Following the second fiscal quarter, the social infrastructure team has continued to execute on its stated strategy to directly originate loans in the senior housing and education sectors.

Second fiscal quarter highlights
Distributions paid per share$0.1085
Distribution rate (as of 05/31/2019)7.1%
Quarter-over-quarter distribution increaseN/A
Year-over-year distribution increaseN/A
Cumulative distributions paid per share to
       stockholders since inception in March 2019
$0.1085
Market-based total return(7.2)%
NAV-based total return(4.9)%
Premium (discount) to NAV (as of 05/31/2019)(2.6)%

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)

 
20Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 

Introduction

We include the Fund Focus section in each quarterly report to provide you transparency and insight into the results of operations including comparative information to prior periods and trends. We also include a “Key Financial Data” page which provides quarterly and annual detail of our distributable cash flow (DCF) and other important metrics, including leverage and selected operating ratios. We hope that you find this discussion and financial data a useful supplement to the GAAP financial information included in this report. As this quarterly report is only for the initial stub period from the Initial Public Offering (IPO) through May 31, 2019, the financial results to discuss are limited. The quarterly report as of August 31, 2019, will include a complete discussion for the quarter ended August 31st.

Overview

Tortoise Essential Assets Income Term Fund commenced operations on March 29, 2019. In the IPO the fund issued 13,000,000 shares at $20.00 per share for net proceeds of $260 million. The initial proceeds were fully invested within several weeks of the IPO including $27.5 million in leverage. In May the fund issued an additional 486,127 shares at $20.00 per share in over allotment issuances for net proceeds of approximately $9.7 million and increased leverage to $31.5 million.

The fund’s primary investment objective is to provide a high level of total return with an emphasis on current distributions. The fund seeks to provide its stockholders: attractive total return potential emphasizing current income and uncorrelated sources of return; access to differentiated essential assets investments across the capital structure in both public and direct markets; investments in tangible, long-lived assets and services that have historically generated predictable cash flows; the ability to make a positive social and economic impact in our communities; investor simplicity through one 1099 (no K-1s or unrelated business taxable income); expertise of Tortoise, an industry leader and pioneer in essential assets investing.

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 intends to distribute an amount closely approximating the total taxable income for the year and, if so determined by the Board, distribute all or a portion of the return of capital paid by portfolio companies during the year. The fund may designate a portion of its distributions as capital gains and may also distribute additional capital gains in the last calendar 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. Although the level of distributions is independent of the funds’ performance in the short term, the fund expects such distributions to correlate with its performance over time.

(unaudited)

 
Tortoise21



 
 
 
 
Tortoise
Essential Assets Income Term Fund (TEAF) (continued)
 

Distributable cash flow and distributions

DCF is income from investments less expenses. Income from investments includes the accrued interest from bonds, the amount received as cash or paid-in-kind distributions from investments and dividend payments on short-term investments. Income also includes the premiums received from sales of covered call options, net of amounts paid to buy back out-of-the-money options. The total expenses include current or anticipated operating expenses and leverage costs.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between income from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows: (1) the Statement of Operations, in conformity with U.S. generally accepted accounting principles (GAAP), recognizes distributions and dividend income from MLPs, common stock and other investments on their ex-dates, whereas the DCF calculation may reflect distributions and dividend income on their pay dates; (2) GAAP recognizes that a significant portion of the cash distributions received from MLPs, common stock and other investments are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital; (3) income from investments in the DCF calculation includes the value of dividends paid-in-kind (additional stock or units), whereas such amounts may not be included as income for GAAP purposes; and (4) net premiums on options written (premiums received less amounts paid to buy back out-of-the-money options) with expiration dates during fiscal quarter are included in the DCF calculation, whereas GAAP recognizes the net effect of options written as realized and unrealized gains (losses).

“Net Investment Income (Loss)” on the Statement of Operations is adjusted as follows to reconcile to DCF for YTD 2019 (in thousands):

     YTD 2019
Net Investment Income$1,810
Adjustments to reconcile to DCF:
       Distributions characterized as return of capital1,757
      Net premiums on options written      1,136
             DCF$4,703

As outlined above, DCF is simply income from investments less expenses. In future reports, this section will report DCF as compared to prior periods.

On April 29, 2019, the fund’s Board of Directors declared initial monthly distributions through the third fiscal quarter of $0.1085 per share as set forth below. Based upon the offering price of $20.00 per share, the annualized distribution rate is 6.51%.

Month     Record Date     Payable Date     Per Share Amount
May5/24/195/31/19$0.1085
June6/21/196/28/19$0.1085
July7/24/197/31/19$0.1085
August8/23/198/30/19$0.1085

Leverage

The fund entered into a $45 million margin loan facility with The Bank of Nova Scotia. The margin loan facility has a variable annual interest rate equal to one-month LIBOR plus 0.80 percent and non-use fee equal to an annual rate of 0.20 percent. The non-use fee is waived when the outstanding balance on the facility is at least $31.5 million. At quarter-end, the balance on the facility was $31.5 million, which represented 10.9% of total assets and the applicable interest rate was 3.23%. The fund has 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 calculation of distributable cash flow and distributions to stockholders, as well as a discussion of the tax impact on distributions, please visit www.tortoiseadvisors.com.

(unaudited)

 
22Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
TEAF Key Financial Data(supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)
 

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which the fund believes is meaningful to understanding operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and the fund believes they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with the full financial statements.

 2019
     Q2(1)
Total Income from Investments
       Interest earned on corporate bonds$548
       Distributions and dividends from investments, net of foreign taxes withheld3,805
       Net premiums on options written1,137
              Total from investments5,490
Operating Expenses Before Leverage Costs
       Advisory fees546
       Other operating expenses102
648
       Distributable cash flow before leverage costs4,842
       Leverage costs(2)139
              Distributable Cash Flow(3)$4,703
Net realized loss on investments and foreign currency translation, for the period$(71)
As a percent of average total assets(4)
       Total from investments11.25%
       Operating expenses before leverage costs1.33%
       Distributable cash flow before leverage costs9.92%
As a percent of average net assets(4)
       Total from investments12.01%
       Operating expenses before leverage costs1.42%
       Leverage costs0.30%
       Distributable cash flow10.29%
 
Selected Financial Information
Distributions paid on common stock$1,464
Distributions paid on common stock per share0.1085
Total assets, end of period    288,040
Average total assets during period(5)278,413
Leverage(6)31,500
Leverage as a percent of total assets10.9%
Net unrealized depreciation, end of period(15,131)
Net assets, end of period255,534
Average net assets during period(7)260,772
Net asset value per common share18.94
Market value per common share18.45
Shares outstanding (000’s)13,491

(1)

Represents the period from March 29, 2019 (commencement of operations) through May 31, 2019.

(2)

Leverage costs include interest expense and other recurring leverage expenses.

(3)

“Net investment income (loss)” on the Statement of Operations is adjusted as follows to reconcile to Distributable Cash Flow (“DCF”): increased by the return of capital on distributions and the net premiums on options written.

(4)

Annualized.

(5)

Computed by averaging month-end values within each period.

(6)

Leverage consists of outstanding borrowings under the margin loan facility.

(7)

Computed by averaging daily net assets within each period.


Tortoise23



 
 
 
 
TYG Consolidated Schedule of Investments(unaudited)
May 31, 2019
 

    Shares    Fair Value
Master Limited Partnerships — 124.1%(1)  
Crude Oil Pipelines — 25.0%(1)
United States — 25.0%(1)
Andeavor Logistics LP(2)2,822,546$98,450,404
BP Midstream Partners LP(2)248,2583,619,602
PBF Logistics LP850,49817,095,010
Plains All American Pipeline, L.P.(2)5,193,315117,420,852
Shell Midstream Partners, L.P.3,278,54868,947,864
305,533,732
Natural Gas/Natural Gas Liquids Pipelines — 40.7%(1)     
United States — 40.7%(1)
Energy Transfer LP(3)14,035,669192,850,089
Enterprise Products Partners L.P.6,266,105174,761,668
EQM Midstream Partners, LP2,994,938129,081,828
496,693,585
Natural Gas Gathering/Processing — 18.2%(1)  
United States — 18.2%(1)
CNX Midstream Partners LP2,266,15333,221,803
DCP Midstream, LP2,035,54461,921,249
Noble Midstream Partners LP32968
Western Midstream Partners, LP(2)4,327,823126,329,140
221,473,160
Other — 0.4%(1)
United States — 0.4%(1)
Westlake Chemical Partners206,8374,666,243
Refined Product Pipelines — 39.8%(1)  
United States — 39.8%(1)
Buckeye Partners, L.P.586,83023,919,191
Holly Energy Partners, L.P.2,317,51661,622,750
Magellan Midstream Partners, L.P.2,463,844151,526,406
MPLX LP3,714,777113,597,881
NuStar Energy L.P.2,511,39067,707,074
Phillips 66 Partners LP(2)1,422,47068,250,111
486,623,413
Total Master Limited Partnerships
       (Cost $1,359,703,657)1,514,990,133
 
Common Stock — 38.1%(1)
Marine Transportation — 1.8%(1)
Monaco — 1.8%(1)
GasLog Partners LP1,039,95921,974,334
Natural Gas Gathering/Processing — 25.7%(1)  
United States — 25.7%(1)
Antero Midstream Corporation7,036,34485,984,124
EnLink Midstream, LLC7,428,71277,110,032
Rattler Midstream LP217,8344,077,853
Targa Resources Corp.(2)2,033,44478,206,256
The Williams Companies, Inc.2,624,69569,239,454
314,617,719
Natural Gas/Natural Gas Liquids Pipelines — 10.6%(1)  
United States — 10.6%(1)
ONEOK, Inc.974,50861,998,198
Tallgrass Energy, LP2,809,58666,840,051
128,838,249
Total Common Stock
       (Cost $465,737,870)465,430,302

See accompanying Notes to Financial Statements.
 
24Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
TYG Consolidated Schedule of Investments(unaudited) (continued)
May 31, 2019
 

     Shares     Fair Value
Preferred Stock — 8.1%(1)
Crude Oil Pipelines — 0.4%(1)
United States — 0.4%(1)
SemGroup Corporation, 7.000%(4)(5)(6)6,277$5,236,960
Natural Gas/Natural Gas Liquids Pipelines — 5.5%(1)
United States — 5.5%(1)
Crestwood Equity Partners LP, 9.25%7,126,64066,990,416
Natural Gas Gathering/Processing — 2.2%(1)
United States — 2.2%(1)
Targa Resources Corp., 9.500%(4)(5)21,75826,037,443
Total Preferred Stock
      (Cost $92,166,769)98,264,819
 
Private Investments — 0.9%(1)
Renewables — 0.9%(1)
United States — 0.9%(1)
TK NYS Solar Holdco, LLC(4)(5)(7)(8)
      (Cost $54,572,772)N/A10,890,608
 
Short-Term Investment — 0.0%(1)
United States Investment Company — 0.0%(1)
Invesco Government & Agency Portfolio — Institutional Class,
       2.31%(9)(Cost $171,863)171,863171,863
Total Investments — 171.2%(1)
     (Cost $1,972,352,931)2,089,747,725
Interest Rate Swap Contracts — (0.0)%(1)
$10,000,000 notional — net unrealized depreciation(10)(124,941)
Total Value of Options Written
     (Premiums received $259,996)(11)— (0.0)%(1)(178,738)
Other Assets and Liabilities — 0.6%(1)7,572,797
Deferred Tax Liability — (15.8)%(1)(192,370,487)
Credit Facility Borrowings — (11.4)%(1)(138,700,000)
Senior Notes — (31.1)%(1)(380,000,000)
Mandatory Redeemable Preferred Stock
at Liquidation Value — (13.5)%(1)(165,000,000)
Total Net Assets Applicable to
     Common Stockholders — 100.0%(1)$1,220,946,356

(1)Calculated as a percentage of net assets applicable to common stockholders.
(2)All or a portion of the security represents cover for outstanding call option contracts written.
(3)A portion of the security is segregated as collateral for the unrealized depreciation of interest rate swap contracts of $124,941.
(4)Restricted securities have a total fair value of $42,165,010, which represents 3.5% of net assets. See Note 6 to the financial statements for further disclosure.
(5)Securities have been valued by using significant unobservable inputs in accordance with fair value procedures and are categorized as level 3 investments, as more fully described in Note 2 to the financial statements.
(6)Security distributions are paid-in-kind. Cash value of the 7.0% coupon is added to the liquidation preference of the preferred stock.
(7)Deemed to be an affiliate of the fund.
(8)See Notes 7 and 13 to the financial statements for further disclosure.
(9)Rate indicated is the current yield as of May 31, 2019.
(10)See Schedule of Interest Rate Swap Contracts and Note 12 to the financial statements for further disclosure.
(11)See Schedule of Options Written and Note 12 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.
 
Tortoise25



 
 
 
 
NTG Schedule of Investments (unaudited)
May 31, 2019
 
Shares     Fair Value
Master Limited Partnerships — 119.3%(1) 
Crude Oil Pipelines — 27.9%(1)
United States — 27.9%(1)
Andeavor Logistics LP(2)2,148,431$74,937,273
BP Midstream Partners LP(2)284,1744,143,257
Delek Logistics Partners, LP287,9278,819,204
PBF Logistics LP773,83715,554,124
Plains All American Pipeline, L.P.(2)3,601,04581,419,627
Shell Midstream Partners, L.P.2,985,19962,778,735
247,652,220
Natural Gas/Natural Gas Liquids Pipelines — 41.0%(1)    
United States — 41.0%(1)
Energy Transfer LP10,119,717139,044,908
Enterprise Products Partners L.P.4,535,486126,494,705
EQM Midstream Partners, LP2,263,77797,568,789
363,108,402
Natural Gas Gathering/Processing — 18.8%(1) 
United States — 18.8%(1)
CNX Midstream Partners, LP1,527,37622,391,332
DCP Midstream, LP1,508,13545,877,467
Noble Midstream Partners LP15454
Western Midstream Partners, LP(2)3,366,73698,275,018
166,544,271
Refined Product Pipelines — 31.2%(1) 
United States — 31.2%(1)
Buckeye Partners, L.P.223,1919,097,265
Holly Energy Partners, L.P.1,601,48942,583,592
Magellan Midstream Partners, L.P.1,091,49567,126,942
MPLX LP2,300,12670,337,853
NuStar Energy L.P.1,648,35944,439,759
Phillips 66 Partners LP(2)903,05943,328,771
276,914,182
Other — 0.4%(1)
United States — 0.4%(1)
Westlake Chemical Partners147,0873,318,283
Total Master Limited Partnerships
       (Cost $998,009,933)1,057,537,358
 
Common Stock — 41.8%(1)
Marine Transportation — 1.7%(1)
Monaco — 1.7%(1)
Gaslog Partners, LP713,49015,076,044
Natural Gas Gathering/Processing — 26.7%(1) 
United States — 26.7%(1)
Antero Midstream Corp.(2)4,751,40158,062,120
EnLink Midstream, LLC5,738,92559,570,039
Rattler Midstream LP156,1082,922,342
Targa Resources Corp.(2)1,295,60349,828,891
The Williams Companies, Inc.2,520,37066,487,361
236,870,753
Natural Gas/Natural Gas Liquids Pipelines — 13.4%(1)   
United States — 13.4%(1)
ONEOK, Inc.762,56648,514,449
Tallgrass Energy, LP2,940,16469,946,502
118,460,951
Total Common Stock
       (Cost $369,697,070)370,407,748
 
Preferred Stock — 7.2%(1)
Crude Oil Pipelines — 0.3%(1)
United States — 0.3%(1)
SemGroup Corporation, 7.000%(3)(4)(5)3,7633,139,507
Natural Gas Gathering/Processing — 1.7%(1)
United States — 1.7%(1)
Targa Resources Corp., 9.500%(3)(4)12,25214,661,768
Natural Gas/Natural Gas Liquids Pipelines — 5.2%(1)
United States — 5.2%(1)
Crestwood Equity Partners LP, 9.25%4,898,61146,046,943
Total Preferred Stock
       (Cost $60,634,080)63,848,218
 
Short-Term Investment — 0.0%(1)
United States Investment Company — 0.0%(1)
First American Government Obligations Fund,
       2.32%(6)(Cost $169,636)169,636169,636
Total Investments — 168.3%(1)
     (Cost $1,428,510,719)1,491,962,960
Total Value of Options Written
       (Premiums received $373,547)(7)— (0.0)%(1)(257,093)
Other Assets and Liabilities — (0.0)%(1)(385,200)
Deferred Tax Liability — (8.8)%(1)(77,751,092)
Credit Facility Borrowings — (9.4)%(1)(83,300,000)
Senior Notes — (35.2)%(1)(312,000,000)
Mandatory Redeemable Preferred Stock
       at Liquidation Value — (14.9)%(1)(132,000,000)
Total Net Assets Applicable to
     Common Stockholders — 100.0%(1)$886,269,575

(1)

Calculated as a percentage of net assets applicable to common stockholders.

(2)

All or a portion of the security represents cover for outstanding call option contracts written.

(3)

Restricted securities have a total fair value of $17,801,275, which represents 2.0% of net assets. See Note 6 to the 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, as more fully described in Note 2 to the financial statements.

(5)

Security distributions are paid-in-kind. Cash value of the 7.0% coupon is added to the liquidation preference of the preferred stock.

(6)

Rate indicated is the current yield as of May 31, 2019.

(7)

See Schedule of Options Written and Note 12 to the financial statements for further disclosure.


See accompanying Notes to Financial Statements.
 
26Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
TTP Schedule of Investments(unaudited)
May 31, 2019
 

Shares     Fair Value
Common Stock — 100.4%(1)
Marine Transportation — 1.5%(1)
Monaco — 1.5%(1)
GasLog Partners LP111,052$2,346,529
Crude Oil Pipelines — 35.6%(1)
Canada — 22.0%(1)
Gibson Energy Inc188,1223,070,414
Enbridge Inc.491,90618,136,575
Inter Pipeline Ltd.434,0186,614,953
Pembina Pipeline Corporation187,8886,703,137
United States — 13.6%(1)
Plains GP Holdings, L.P.827,79918,642,033
SemGroup Corporation222,0972,800,643
55,967,755
Natural Gas Gathering/Processing — 23.4%(1)
United States — 23.4%(1)
Antero Midstream Corporation525,7426,424,567
EnLink Midstream, LLC818,4788,495,800
Rattler Midstream LP24,180452,650
Targa Resources Corp.280,24910,778,377
The Williams Companies, Inc.402,88010,627,974
36,779,368
Natural Gas/Natural Gas Liquids Pipelines — 30.6%(1)
Canada — 4.3%(1)
TC Energy Corporation137,6056,698,611
United States — 26.3%(1)
Equitrans Midstream Corporation269,8565,359,340
ONEOK, Inc.316,11820,111,427
Tallgrass Energy LP670,93515,961,544
48,130,922
Oil and Gas Production — 9.3%(1)
United States — 9.3%(1)
Antero Resources Corporation(2)(3)51,800340,326
Cabot Oil & Gas Corporation(2)38,300958,266
Carrizo Oil & Gas, Inc.(2)(3)34,800354,264
Cimarex Energy Co.(2)14,400823,536
Concho Resources Inc.(2)(3)14,4001,411,344
Continental Resources, Inc.(2)(3)15,900556,500
Diamondback Energy, Inc.(2)5,800568,748
Encana Corporation(2)74,850394,460
EOG Resources, Inc.(2)19,3001,580,284
EQT Corporation(2)29,800545,340
Noble Energy, Inc.(2)24,700528,580
Parsley Energy, Inc.(2)(3)20,800370,864
PDC Energy, Inc.(2)(3)7,600231,952
Pioneer Natural Resources Company(2)5,100723,996
Range Resources Corporation(2)64,000500,480
Viper Energy Partners LP(2)107,6003,012,800
WPX Energy, Inc.(2)(3)150,5001,619,380
14,521,120
Total Common Stock
        (Cost $177,394,009)157,745,694
 
Master Limited
     Partnerships — 35.1%(1)
Crude Oil Pipelines — 5.0%(1)
United States — 5.0%(1)
Andeavor Logistics LP58,0532,024,889
BP Midstream Partners LP33,891494,131
Genesis Energy L.P.46,5311,015,306
PBF Logistics LP78,2781,573,388
Shell Midstream Partners, L.P.132,0892,777,832
7,885,546
Natural Gas/Natural Gas Liquids Pipelines — 11.4%(1)
United States — 11.4%(1)
Energy Transfer LP958,09213,164,189
Enterprise Products Partners L.P.145,2094,049,879
EQM Midstream Partners, LP16,045691,540
17,905,608
Natural Gas Gathering/Processing — 4.6%(1)
United States — 4.6%(1)
CNX Midstream Partners LP60,605888,469
DCP Midstream, LP89,1852,713,008
Western Midstream Partners, LP120,4623,516,279
7,117,756
Other — 0.2%(1)
United States — 0.2%(1)
Westlake Chemical Partners11,004248,250
Refined Product Pipelines — 13.9%(1)
United States — 13.9%(1)
Holly Energy Partners, L.P.168,4764,479,777
Magellan Midstream Partners, L.P.57,1083,512,142
MPLX LP245,6477,511,885
NuStar Energy L.P.135,0213,640,166
Phillips 66 Partners LP56,9332,731,645
21,875,615
Total Master Limited Partnerships
       (Cost $55,606,128)55,032,775

See accompanying Notes to Financial Statements.
 
Tortoise27



 
 
 
 
TTP Schedule of Investments(unaudited) (continued)
May 31, 2019
 

     Shares     Fair Value
Preferred Stock — 5.1%(1) 
Crude Oil Pipelines — 1.5%(1)
United States — 1.5%(1)
SemGroup Corporation., 7.000%(4)(5)(6)2,877$2,400,308
Natural Gas Gathering/Processing — 1.6%(1) 
United States — 1.6%(1)
Targa Resources Corp., 9.500%(4)(5)2,1082,522,609
Power — 2.0%(1)
United States — 2.0%(1)
Sempra Energy,
       6.000%, 01/15/202128,8113,138,094
Total Preferred Stock
       (Cost $7,583,290)8,061,011
 
Short-Term Investment — 0.1%(1) 
United States Investment Company — 0.1%(1) 
Invesco Government & Agency Portfolio — Institutional Class,   
       2.31%(7)(Cost $125,588)125,588125,588
Total Investments — 140.7%(1)
       (Cost $240,709,015)220,965,068
Total Value of Options Written
       (Premiums received $362,587)(8)— (0.0)%(1) (35,754)
Other Assets and Liabilities — (0.5)%(1) (767,935)
Credit Facility Borrowings — (8.3)%(1) (13,100,000)
Senior Notes — (21.7)%(1)(34,000,000)
Mandatory Redeemable Preferred Stock 
       at Liquidation Value — (10.2)%(1) (16,000,000)
Total Net Assets Applicable to
       Common Stockholders — 100.0%(1) $157,061,379

(1)Calculated as a percentage of net assets applicable to common stockholders.
(2)All or a portion of the security represents cover for outstanding call option contracts written.
(3)Non-income producing security.
(4)Restricted securities have a total fair value of $4,922,917, which represents 3.1% of net assets. See Note 6 to the financial statements for further disclosure.
(5)Securities have been valued by using significant unobservable inputs in accordance with fair value procedures and are categorized as level 3 investments, as more fully described in Note 2 to the financial statements.
(6)Security distributions are paid-in-kind. Cash value of the 7.0% coupon is added to the liquidation preference of the preferred stock.
(7)Rate indicated is the current yield as of May 31, 2019.
(8)See Schedule of Options Written and Note 12 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.
 
28Tortoise



 
 

2019 2nd Quarter Report| May 31, 2019

 
NDP Schedule of Investments(unaudited)
May 31, 2019
 

     Shares     Fair Value
Common Stock — 137.3%(1)
Oil and Gas Production — 137.3%(1)
United States — 137.3%(1)
Antero Resources Corporation(2)(3)756,900$4,972,833
Apache Corp.(2)96,8002,523,576
Cabot Oil & Gas Corporation(2)486,20012,164,724
Carrizo Oil & Gas, Inc.(2)(3)389,8003,968,164
Centennial Resource
       Development, Inc.(2)(3)173,0001,366,700
Cimarex Energy Co.(2)53,5003,059,665
Concho Resources Inc.(2)67,4006,605,875
Continental Resources, Inc.(2)(3)186,6006,531,000
Devon Energy Corporation(2)216,4005,444,624
Diamondback Energy, Inc.(2)69,7006,834,782
Encana Corporation(2)947,9004,995,433
EOG Resources, Inc.(2)70,0005,731,600
EQT Corporation(2)520,1009,517,830
Marathon Oil Corporation(2)106,1001,395,215
Noble Energy, Inc.(2)154,6003,308,440
Occidental Petroleum Corporation(2)142,3007,082,271
Parsley Energy, Inc.(2)(3)319,7005,700,251
PDC Energy, Inc.(2)(3)85,2002,600,304
Pioneer Natural Resources Company(2)67,5009,582,300
Range Resources Corporation(2)614,9004,808,518
SM Energy Company(2)60,600704,778
Viper Energy Partners LP(2)142,0003,976,000
Whiting Petroleum Corporation(2)(3)131,3002,413,294
WPX Energy, Inc.(2)(3)477,5005,137,900
120,426,077
Total Common Stock
       (Cost $149,692,911)120,426,077
 
Preferred Stock — 2.7%(1)
Natural Gas Gathering/Processing — 2.7%(1) 
United States — 2.7%(1)
Targa Resources Corp., 9.500%(4)(5)
       (Cost $1,688,542)1,9972,389,777
  
Short-Term Investment — 0.3%(1) 
United States Investment Company — 0.3%(1) 
Invesco Government & Agency Portfolio — Institutional Class,   
       2.31%(6)(Cost $295,982)295,982295,982
Total Investments — 140.3%(1)
       (Cost $151,677,435)123,111,836
Total Value of Options Written
       (Premiums received $1,665,649)(7)— (0.2)%(1) (205,291)
Other Assets and Liabilities — (0.7)%(1) (586,887)
Credit Facility Borrowings — (39.4)%(1) (34,600,000)
Total Net Assets Applicable to
       Common Stockholders — 100.0%(1)  $87,719,658

(1)Calculated as a percentage of net assets applicable to common stockholders.
(2)All or a portion of the security represents cover for outstanding call option contracts written.
(3)Non-income producing security.
(4)Restricted securities have a total fair value of $2,389,777, which represents 2.7% of net assets. See Note 6 to the financial statements for further disclosure.
(5)Securities have been valued by using significant unobservable inputs in accordance with fair value procedures and are categorized as level 3 investments, as more fully described in Note 2 to the financial statements.
(6)Rate indicated is the current yield as of May 31, 2019.
(7)See Schedule of Options Written and Note 12 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.
 
Tortoise29



 
 
 
 
TPZ Schedule of Investments(unaudited)
May 31, 2019
 

Principal
     Amount     Fair Value
Corporate Bonds — 72.3%(1) 
Crude Oil Pipelines — 11.2%(1) 
Canada — 5.8%(1)
Enbridge Inc.,
       5.500%, 07/15/2077$8,500,000$8,075,000
United States — 5.4%(1)
SemGroup Corp.,
       6.375%, 03/15/20256,000,0005,760,000
SemGroup Corp.,
       5.625%, 11/15/20232,000,0001,900,000
15,735,000
Natural Gas/Natural Gas Liquids Pipelines — 31.2%(1)   
Canada — 5.6%(1)
TC Energy Corporation,
       5.625%, 05/20/20757,000,0006,860,000
TC Energy Corporation,
       5.300%, 03/15/20771,000,000932,820
United States — 25.6%(1)
Antero Midstream Corporation,
       5.750%, 03/01/2027(2)2,000,0002,015,000
Cheniere Corp.,
       7.000%, 06/30/20244,000,0004,458,800
Cheniere Corp.,
       5.875%, 03/31/20252,000,0002,150,000
Florida Gas Transmission Co., LLC,  
       5.450%, 07/15/2020(2)1,500,0001,540,422
Kinder Morgan, Inc.,
       6.500%, 09/15/20204,000,0004,187,772
Midcontinent Express Pipeline LLC,  
       6.700%, 09/15/2019(2)2,000,0002,010,292
NGPL PipeCo LLC,
       4.875%, 08/15/2027(2)2,000,0002,055,000
ONEOK, Inc.,
       4.250%, 02/01/20224,500,0004,636,773
ONEOK, Inc.,
       7.500%, 09/01/20232,000,0002,322,926
Rockies Express Pipeline LLC,
       4.950%, 07/15/2029(2)3,000,0002,978,052
Ruby Pipeline, LLC,
       6.000%, 04/01/2022(2)1,181,8181,201,029
Southern Star Central Corp.,
       5.125%, 07/15/2022(2)3,000,0003,029,100
Tallgrass Energy LP,
       5.500%, 01/15/2028(2)3,250,0003,233,750
43,611,736
Natural Gas Gathering/Processing — 15.0%(1)   
United States — 15.0%(1)
Blue Racer Midstream, LLC,
       6.625%, 07/15/2026(2)5,900,0005,929,500
EnLink Midstream LLC,
       5.375%, 06/01/20292,000,0001,985,440
Hess Corporation,
       5.625%, 02/15/2026(2)4,160,000`4,284,800
The Williams Companies, Inc.,
       7.875%, 09/01/20215,000,0005,536,410
The Williams Companies, Inc.,
       4.550%, 06/24/20243,000,0003,181,704
20,917,854
Oil and Gas Production — 3.8%(1)  
United States — 3.8%(1)
Ascent Resources Utica Holdings, LLC,  
       10.000%, 04/01/2022(2)1,302,0001,381,604
Ascent Resources Utica Holdings, LLC,  
       7.000%, 11/01/2026(2)2,000,0001,874,400
EQT Corporation,
       8.125%, 06/01/20192,000,0002,000,000
5,256,004
Power/Utility — 11.1%(1)
United States — 11.1%(1)
The AES Corporation,
       5.500%, 04/15/20254,000,0004,130,800
Duquesne Light Holdings, Inc.,
       6.400%, 09/15/2020(2)3,000,0003,129,747
Duquesne Light Holdings, Inc.,
       5.900%, 12/01/2021(2)2,000,0002,130,166
NextEra Energy, Inc.,
       4.800%, 12/01/20774,500,0004,148,550
NV Energy Inc.,
       6.250%, 11/15/20201,000,0001,051,435
Pattern Energy Group Inc.,
       5.875%, 02/01/2024(2)1,000,0001,007,500
15,598,198
Total Corporate Bonds
       (Cost $100,016,532)101,118,792

See accompanying Notes to Financial Statements.
 
30Tortoise



 
 

2019 2nd Quarter Report| May 31, 2019

 
TPZ Schedule of Investments (unaudited) (continued)
May 31, 2019
 

     Shares     Fair Value
Master Limited 
     Partnerships — 32.1%(1) 
Crude Oil Pipelines — 4.5%(1)
United States — 4.5%(1)
Andeavor Logistics LP68,526$2,390,187
BP Midstream Partners LP25,000364,500
PBF Logistics LP85,8681,725,947
Shell Midstream Partners, L.P.89,0441,872,595
6,353,229
Natural Gas/Natural Gas Liquids Pipelines — 9.3%(1) 
United States — 9.3%(1)
Energy Transfer LP717,7879,862,392
Enterprise Products Partners L.P.98,6822,752,241
EQM Midstream Partners, LP8,010345,231
12,959,864
Natural Gas Gathering/Processing — 6.3%(1) 
United States — 6.3%(1)
CNX Midstream Partners, LP47,302693,447
DCP Midstream, LP96,7582,943,378
Western Midstream Partners, LP177,6485,185,546
8,822,371
Other — 0.2%(1)
United States — 0.2%(1)
Westlake Chemical Partners LP9,289209,560
Refined Product Pipelines — 11.8%(1)
United States — 11.8%(1)
Holly Energy Partners, L.P.147,5853,924,285
Magellan Midstream Partners, L.P.56,1193,451,319
MPLX LP140,9924,311,535
NuStar Energy L.P.102,3382,759,032
Phillips 66 Partners LP41,6541,998,559
16,444,730
Total Master Limited Partnerships
       (Cost $39,333,628) 44,789,754
 
Common Stock — 29.2%(1)
Crude Oil Pipelines — 6.1%(1)
United States — 6.1%(1)
Enbridge Inc.50,7061,869,531
Plains GP Holdings, L.P.292,5496,588,203
8,457,734
Marine Transportation — 1.3%(1)
Monaco — 1.3%(1)
GasLog Partners LP86,6751,831,443
Natural Gas/Natural Gas Liquids Pipelines — 11.4%(1)  
United States — 11.4%(1)
Equitrans Midstream Corporation89,5601,778,662
ONEOK, Inc.69,1174,397,223
Tallgrass Energy LP408,7829,724,924
15,900,809
Natural Gas Gathering/Processing — 10.4%(1)  
United States — 10.4%(1)
Antero Midstream Corp.444,9315,437,057
EnLink Midstream LLC273,2242,836,066
Rattler Midstream LP21,082394,655
Targa Resources Corp.154,5835,945,262
14,613,040
Total Common Stock
       (Cost $38,067,437)40,803,026
 
Preferred Stock — 5.9%(1)
Crude Oil Pipelines — 1.3%(1)
United States — 1.3%(1)
SemGroup Corporation, 7.000%(2)(3)(4)2,1201,768,736
Natural Gas Gathering/Processing — 1.4%(1)  
United States — 1.4%(1)
Targa Resources Corp., 9.500%(2)(3)1,6852,016,412
Power/Utility — 3.2%(1)
United States — 3.2%(1)
DTE Energy,
       6.500%, 10/01/201939,6002,206,116
Sempra Energy,
       6.000%, 01/15/202121,1892,307,906
4,514,022
Total Preferred Stock
       (Cost $7,697,631)8,299,170
 
Short-Term Investment — 0.1%(1)
United States Investment Company — 0.1%(1)  
Invesco Government & Agency Portfolio — Institutional Class,     
       2.31%(5)(Cost $189,281)189,281189,281
Total Investments — 139.6%(1)
     (Cost $185,304,509)195,200,023
Interest Rate Swap Contracts — 0.0%(1)
$9,000,000 notional — net unrealized appreciation(6)  32,375
Other Assets and Liabilities — 0.9%(1)1,152,170
Credit Facility Borrowings — (40.5)%(1)(56,600,000)
Total Net Assets Applicable to
     Common Stockholders — 100.0%(1)  $139,784,568

(1)Calculated as a percentage of net assets applicable to common stockholders.
(2)Restricted securities have a total fair value of $41,585,510 which represents 29.7% of net assets. See Note 6 to the financial statements for further disclosure.
(3)Securities have been valued by using significant unobservable inputs in accordance with fair value procedures and are categorized as level 3 investments, as more fully described in Note 2 to the financial statements.
(4)Security distributions are paid-in-kind. Cash value of the 7.0% coupon is added to the liquidation preference of the preferred stock.
(5)Rate indicated is the current yield as of May 31, 2019.
(6)See Schedule of Interest Rate Swap Contracts and Note 12 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.
 
Tortoise31



 
 

 

 
TEAF Consolidated Schedule of Investments (unaudited)
May 31, 2019
 

     Shares     Fair Value
Common Stock — 53.3%(1)
Natural Gas/Natural Gas Liquids Pipelines — 8.0%(1)  
Italy — 1.6%(1)
Snam SpA774,889$3,898,987
United States — 6.4%(1)
Cheniere Energy Inc.(2)(3)85,9005,427,162
ONEOK, Inc.(4)47,8263,042,690
Tallgrass Energy LP(4)332,9017,919,715
20,288,554
Natural Gas Gathering/Processing — 9.4%(1) 
United States — 9.4%(1)
Antero Midstream Corp.(4)484,2665,917,731
EnLink Midstream LLC(4)593,3736,159,212
Rattler Midstream LP31,779594,903
Targa Resources Corp.(2)136,0005,230,560
The Williams Companies, Inc.(4)232,7676,140,393
24,042,799
Oil and Gas Production — 8.7%(1)
United States — 8.7%(1)
Antero Resources Corporation(2)(3)302,6001,988,082
Cabot Oil & Gas Corporation(2)215,6005,394,312
Cimarex Energy Co.(2)53,7003,071,103
EQT Corporation(2)273,3005,001,390
Noble Energy, Inc.(2)224,0004,793,600
Range Resources Corporation(2)255,5001,998,010
22,246,497
Power — 18.9%(1)
Australia — 0.9%(1)
APA Group340,9692,398,408
Canada — 1.0%(1)
Algonquin Power & Utilities Corp212,4402,478,676
France — 3.3%(1)
Engie SA348,4114,845,907
Suez267,9153,584,152
Germany — 0.9%(1)
E.ON SE223,0762,329,871
Italy — 2.1%(1)
Enel SpA876,9425,456,824
Portugal — 3.6%(1)
EDP — Energias de Portugal SA1,495,4105,444,507
REN — Redes Energeticas Nacionais
       SGPS SA1,390,8883,783,598
Spain — 1.7%(1)
Iberdrola SA454,8584,224,738
United States — 1.5%(1)
Covanta Holding Corp228,0923,845,631
United Kingdom — 3.9%(1)
National Grid PLC504,6045,057,651
SSE PLC350,0044,772,299
48,222,262
Renewables — 7.1%(1)
Canada — 2.4%(1)
Innergex Renewable Energy Inc225,3612,354,319
TransAlta Renewables Inc389,0603,885,994
Germany — 0.6%(1)
Encavis AG218,2961,553,457
Thailand — 0.3%(1)
SPCG PCL1,456,100828,179
United States — 3.8%(1)
Atlantica Yield PLC(2)122,9582,637,449
NextEra Energy Partners LP(2)34,0691,507,553
TerraForm Power Inc(2)404,4035,459,441
18,226,392
Water Infrastructure — 1.2%(1)
United Kingdom — 1.2%(1)
Pennon Group PLC243,5342,258,058
Pentair PLC(5)(6)23,375813,917
3,071,975
Total Common Stock
       (Cost $146,786,036)136,098,479

See accompanying Notes to Financial Statements.
 
32Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
TEAF Consolidated Schedule of Investments(unaudited) (continued)
May 31, 2019
 

     Shares     Fair Value
Master Limited Partnerships — 21.5%(1)
Natural Gas/Natural Gas Liquids Pipelines — 21.5%(1)
United States — 10.7%(1)
Energy Transfer LP(4)677,988$9,315,555
Enterprise Products Partners L.P.(4)329,3979,186,882
EQM Midstream Partners, LP(4)204,6018,818,303
27,320,740
Natural Gas Gathering/Processing — 7.1%(1)
United States — 7.1%(1)
DCP Midstream, LP(4)226,8006,899,256
Noble Midstream Partners LP(4)113,2183,424,845
Western Midstream Partners, LP271,8097,934,105
18,258,206
Other — 2.1%(1)
United States — 2.1%(1)
Enviva Partners LP(4)175,4395,350,889
Renewables — 1.6%(1)
Canada — 1.6%(1)
Brookfield Renewable Partners LP125,3454,034,113
Total Master Limited Partnerships
       (Cost $57,992,548)
54,963,948
  
Exchange-Traded Funds — 16.1%(1)
Bonds — 16.1%(1)
United States — 16.1%(1)
SPDR Bloomberg Barclays Short Term
       High Yield Bond ETF(4)
509,80413,693,335
SPDR Bloomberg Barclays High Yield
       Bond ETF(4)
128,96813,689,940
iShares iBoxx High Yield Corporate
       Bond ETF(4)
160,97813,667,032
Total Exchange-Traded Funds
       (Cost $41,726,274)
41,050,307
  
     Principal
Amount
     
Corporate Bonds — 11.7%(1)
Crude Oil Pipelines — 2.7%(1)
Canada — 1.6%(1)
Enbridge Inc,
       6.250%, 03/01/2078(4)
$4,000,0003,950,000
United States — 1.1%(1)
SemGroup Corp.,
       6.375%, 03/15/2025(4)
1,500,0001,440,000
SemGroup Corp.,
       7.250%, 03/15/2026(4)
1,500,0001,462,500
6,852,500
Natural Gas/Natural Gas Liquids Pipelines — 1.4%(1)
Canada — 1.4%(1)
TransCanada Corporation,
       5.300%, 03/15/2077(4)
4,000,0003,731,280
Natural Gas Gathering/Processing — 1.2%(1)
United States — 1.2%(1)
Blue Racer Midstream, LLC,
       6.625%, 07/15/2026(4)3,000,0003,015,000
Oil and Gas Production — 5.3%(1)
United States — 5.3%(1)
Ascent Resources Utica Holdings, LLC,
      7.000%, 11/01/2026(4)3,500,0003,280,200
Chesapeake Energy Corp,
      8.000%, 06/15/2027(4)3,500,0003,097,500
Gulfport Energy Corp,
      6.375%, 01/15/20261,500,0001,222,500
SM Energy Co,
      6.750%, 09/15/2026(4)3,500,0003,125,500
Southwestern Energy Co,
      7.500%, 04/01/2026(4)3,000,0002,880,000
13,605,700
Other — 1.1%(1)
United States — 1.1%(1)
Genesis Energy LP /
      Genesis Energy Finance Corp,
      6.250%, 05/15/2026(4)3,000,0002,771,250
Total Corporate Bonds
      (Cost $31,170,820)29,975,730

See accompanying Notes to Financial Statements.
 
Tortoise33



 
 
  
 
TEAF Consolidated Schedule of Investments(unaudited) (continued)
May 31, 2019
 

     Principal
Amount/Shares
     Fair Value
Preferred Bonds — 5.0%(1)
Natural Gas Gathering/Processing — 2.8%(1)
United States — 2.8%(1)
DCP Midstream LP,
       7.375% Perpetuity(4)$5,000,000$4,850,000
EnLink Midstream Partners LP,
      6.000%, Perpetuity(4)3,000,0002,460,000
7,310,000
Natural Gas/Natural Gas Liquids Pipelines — 2.2%(1)
United States — 2.2%(1)
Energy Transfer Operating LP,
      6.250%, Perpetuity(4)6,000,0005,520,000
Total Preferred Bond
      (Cost $13,064,013)12,830,000
 
Preferred Stock — 1.7%(1)
Natural Gas/Natural Gas Liquids Pipelines — 0.6%(1)
United States — 0.6%(1)
Crestwood Equity Partners LP, 9.25%(4)161,1201,514,528
Power/Utility — 1.1%(1)
United States — 1.1%(1)
Aqua America Inc.,
      6.000%, 04/30/202250,0002,772,000
Total Preferred Stock
      (Cost $3,999,995)4,286,528
 
Municipal Bond — 1.2%(1)
Other — 1.2%(1)
United States — 1.2%(1)
Philadelphia Authority
      for Industrial Development,
      10.000%, 06/15/2030
      (Cost $3,135,000)3,135,0003,143,621
 
Construction Note — 1.2%(1)
Renewables — 1.2%(1)
Bermuda — 1.2%(1)
Saturn Solar Bermuda 1 Ltd.,
      6.000%, 02/28/2020
      (Cost $3,252,410)(7)(8)2,995,0003,008,629
 
 Shares
Short-Term Investment — 0.2%(1)
United States Investment Company — 0.2%(1)
First American Government Obligations Fund,
      2.32%(9)(Cost $644,780)644,780644,780
Total Investments — 111.9%(1)
      (Cost $301,771,876)286,002,022
Total Value of Options Written
      (Premiums received $474,390)(10)— (0.0)%(1)(128,851)
Forward Currency Contracts — 0.1%(1)
$7,878,796 notional — net unrealized appreciation(6)293,000
Other Assets and Liabilities — 0.3%(1)867,872
Credit Facility Borrowings — (12.3)%(1)(31,500,000)
Total Net Assets Applicable to Common
      Stockholders — 100.0%(1)$255,534,043

(1)Calculated as a percentage of net assets applicable to common stockholders.
(2)All or a portion of the security represents cover for outstanding call option contracts written.
(3)Non-income producing security.
(4)All or a portion of the security is segregated as collateral for the margin borrowing facility. See Note 11 to the financial statements for further disclosure.
(5)All or a portion of the security is segregated as collateral for forward currency contracts.
(6)See Schedule of Forward Currency Contracts and Note 12 to the financial statements for further disclosure.
(7)Restricted securities have a total fair value of $3,008,629, which represents 1.2% of net assets. See Note 6 to the financial statements for further disclosure.
(8)Securities have been valued by using significant unobservable inputs in accordance with fair value procedures and are categorized as level 3 investments, as more fully described in Note 2 to the financial statements.
(9)Rate indicated is the current yield as of May 31, 2019.
(10)See Schedule of Options Written and Note 12 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.
 
34Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
Schedule of Interest Rate Swap Contracts(unaudited)
May 31, 2019
 

TYG                         
CounterpartyMaturity
Date
Notional
Amount
Fixed Rate
Paid by
TYG
Floating Rate
Received by
TYG
Unrealized
Depreciation
The Bank of Nova Scotia09/02/2021$10,000,000   2.381%   1-month U.S. Dollar LIBOR$     (124,941)
 
TPZ
CounterpartyMaturity
Date
Notional
Amount
Fixed Rate
Paid by
TPZ
Floating Rate
Received by
TPZ
Unrealized
Appreciation
(Depreciation)
Wells Fargo Bank, N.A.11/29/2019$6,000,0001.330%3-month U.S. Dollar LIBOR$32,774
Wells Fargo Bank, N.A.08/06/20203,000,0002.180%3-month U.S. Dollar LIBOR(399)
$9,000,000$32,375

Schedule of Forward Currency Contracts(unaudited)
May 31, 2019      

TEAFContract Amount
Counterparty     Settlement Date     Purchases (000’s)     Sales (000’s)     Unrealized
Appreciation
Morgan Stanley & Co. LLC6/19/19USD4,267GBP3,250$157,559
Morgan Stanley & Co. LLC6/19/19USD2,132GBP1,62577,886
Morgan Stanley & Co. LLC6/19/19USD1,480GBP1,12557,555
$293,000

USD = U.S. Dollars
GBP = British Pounds

See accompanying Notes to Financial Statements.
 
Tortoise35



 
 
  
 
Schedule of Options Written(unaudited)
May 31, 2019
 

TYG                         
Call Options WrittenExpiration DateStrike PriceContractsNotional ValueFair Value
Andeavor Logistics LPJune 2019$37.501,513$5,673,750$(94,562)
BP Midstream Partners LPJune 201915.50400620,000(7,696)
Phillips 66 Partners LPJune 201950.802751,397,000(4,487)
Phillips 66 Partners LPJune 201950.902751,399,750(4,161)
Plains All American Pipeline, L.P.June 201925.302,2855,781,050(6,665)
Targa Resources Corp.June 201945.702,64512,087,650(6,387)
Western Midstream Partners, LPJune 201933.003,65212,051,600(54,780)
Total Value of Call Options Written(Premiums received $259,996)$39,010,800$(178,738)
 
NTG
Call Options WrittenExpiration DateStrike PriceContractsNotional ValueFair Value
Andeavor Logistics LPJune 2019$37.502,174$8,152,500$(135,875)
Antero Midstream Partners LPJune 201915.00913,500(67)
BP Midstream Partners LPJune 201915.50600930,000(11,544)
Plains All American Pipeline LPJune 201925.303,2808,298,400(9,568)
Phillips 66 Partners LPJune 201950.803952,006,600(6,445)
Phillips 66 Partners LPJune 201950.903952,010,550(5,977)
Targa Resources Corp.June 201945.703,78417,292,880(9,137)
Western Gas Equity PartnersJune 201933.005,23217,265,600(78,480)
Total Value of Call Options Written(Premiums received $373,547)$55,970,030$(257,093)
 
TTP
Call Options WrittenExpiration DateStrike PriceContractsNotional ValueFair Value
Antero Resources CorporationJune 2019$8.50518$440,300$(560)
Cabot Oil & Gas CorporationJune 201927.503831,053,250(3,725)
Carrizo Oil & Gas, Inc.June 201913.45194260,930(661)
Carrizo Oil & Gas, Inc.June 201913.80154212,520(391)
Cimarex Energy Co.June 201972.751441,047,600(439)
Concho Resources Inc.June 2019120.001441,728,000(2,160)
Continental Resources, Inc.June 201945.00159715,500(1,192)
Diamondback Energy, Inc.June 2019116.5058675,700(1,010)
EOG Resources, Inc.June 2019100.001661,660,000(996)
EOG Resources, Inc.June 201998.5027265,950(405)
Encana CorporationJune 20197.20748538,560(678)
EQT CorporationJune 201922.20298661,560(1,152)
Noble Energy, Inc.June 201924.50247605,150(1,392)
Parsley Energy, Inc.June 201922.00208457,600(1,207)
PDC Energy, Inc.June 201940.0076304,000(2,090)
Pioneer Natural Resources CompanyJune 2019162.5051828,750(4,080)
Range Resources CorporationJune 20199.90637630,630(2,223)
Viper Energy Partners LPJune 201933.007702,541,000(5,390)
WPX Energy, Inc.June 201913.00203263,900(2,030)
WPX Energy, Inc.June 201913.501,3021,757,700(3,973)
Total Value of Call Options Written(Premiums received $362,586)$16,648,600$(35,754)

See accompanying Notes to Financial Statements.
 
36Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
Schedule of Options Written(unaudited) (continued)
May 31, 2019
 

NDP                         
Call Options WrittenExpiration DateStrike PriceContractsNotional ValueFair Value
Antero Resources CorporationJune 2019$8.557,569$6,471,495$(7,431)
Apache Corp.June 201933.709683,262,160(2,378)
Cabot Oil & Gas CorporationJune 201928.504,86213,856,700(21,494)
Carrizo Oil & Gas, Inc.June 201914.00549768,600(1,647)
Carrizo Oil & Gas, Inc.June 201914.153,3494,738,835(6,422)
Centennial Resource Development, Inc.June 201911.351,7301,963,550(6,951)
Cimarex Energy Co.June 201976.405354,087,400(645)
Concho Resources Inc.June 2019125.006748,425,000(6,066)
Continental Resources, Inc.June 201947.151,8668,798,190(1,042)
Devon Energy CorporationJune 201934.502,1647,465,800(7,574)
Diamondback Energy, Inc.June 2019121.506978,468,550(5,902)
Encana CorporationJune 20197.409,4797,014,460(6,486)
EOG Resources, Inc.June 2019102.007007,140,000(6,650)
EQT CorporationJune 201923.305,20112,118,330(8,299)
Marathon Oil CorporationJune 201917.301,0611,835,530(510)
Noble Energy, Inc.June 201926.801,5464,143,280(3,552)
Occidental Petroleum CorporationJune 201958.006803,944,000(5,100)
Occidental Petroleum CorporationJune 201958.507434,346,550(5,573)
Parsley Energy, Inc.June 201923.153,1977,401,055(9,975)
PDC Energy, Inc.June 201941.808523,561,360(1,024)
Pioneer Natural Resources CompanyJune 2019170.0067511,475,000(23,625)
Range Resources CorporationJune 20199.356,1495,749,315(39,737)
SM Energy CompanyJune 201917.506061,060,500(10,605)
Viper Energy Partners LPJune 201934.451,4204,891,900(2,760)
Whiting Petroleum CorporationJune 201925.00301752,500(2,408)
Whiting Petroleum CorporationJune 201927.501,0122,783,000(6,072)
WPX Energy, Inc.June 201914.504,7756,923,750(5,363)
Total Value of Call Options Written(Premiums received $1,665,649)$153,446,810$(205,291)
 
TEAF
Call Options WrittenExpiration DateStrike PriceContractsNotional ValueFair Value
Antero Resources CorporationJune 2019$8.303,026$2,511,580$(4,828)
Atlantica Yield PLCJune 201922.501,2292,765,250(6,145)
Cabot Oil & Gas CorporationJune 201928.502,1566,144,600(9,531)
Cheniere Energy Inc.June 201973.008596,270,700(7,301)
Cimarex Energy Co.June 201974.755374,014,075(970)
EQT CorporationJune 201923.002,7336,285,900(27,330)
NextEra Energy Partners LPJune 201947.503401,615,000(7,594)
Noble Energy, Inc.June 201925.802,2405,779,200(9,629)
Range Resources CorporationJune 20199.652,5552,465,575(11,697)
Targa Resources Corp.June 201945.001,3606,120,000(23,800)
TerraForm Power IncJune 201914.401,0001,440,000(20,026)
Total Value of Call Options Written(Premiums received $474,390)$45,411,880$(128,851)

See accompanying Notes to Financial Statements.
 
Tortoise37



 
 
 
 
Statements of Assets & Liabilities (unaudited)
May 31, 2019

 
Tortoise EnergyTortoise
     Infrastructure     Midstream Energy
Corp.(1)Fund, Inc.
Assets
       Investments in unaffiliated securities at fair value(2)$  2,078,857,117$     1,491,962,960
      Investments in affiliated securities at fair value(3)10,890,608
      Cash
      Receivable for Adviser fee waiver
      Receivable for investments sold751,1473,142,882
      Unrealized appreciation of interest rate swap contracts, net
      Unrealized appreciation of forward currency contracts
      Dividends, distributions and interest receivable from investments522,888311,051
      Tax reclaims receivable
      Escrow receivable1,629,107
      Current tax asset15,384,8551,885,357
      Prepaid expenses and other assets728,576190,224
             Total assets2,108,764,2981,497,492,474
Liabilities
      Call options written, at fair value(4)178,738257,093
      Payable to Adviser3,479,2612,474,641
      Accrued directors’ fees and expenses88,38876,334
      Payable for investments purchased868,963
      Accrued expenses and other liabilities8,515,7044,149,660
      Unrealized depreciation of interest rate swap contracts124,941
      Deferred tax liability192,370,48777,751,092
      Credit facility borrowings138,700,00083,300,000
      Senior notes, net(5)379,492,716311,683,241
      Mandatory redeemable preferred stock, net(6)163,998,744131,530,838
             Total liabilities887,817,942611,222,899
             Net assets applicable to common stockholders$1,220,946,356$886,269,575
Net Assets Applicable to Common Stockholders Consist of:
      Capital stock, $0.001 par value per share$53,635$63,208
      Additional paid-in capital765,443,144648,282,984
      Total distributable earnings (loss)455,449,577237,923,383
             Net assets applicable to common stockholders$1,220,946,356$886,269,575
Capital shares:
      Authorized100,000,000100,000,000
      Outstanding53,635,05463,208,377
      Net Asset Value per common share outstanding (net assets applicable
             to common stock, divided by common shares outstanding)$22.76$14.02
 
(1)Consolidated Statement of Assets and Liabilities 
(See Note 13 to the financial statements for further disclosure) 
(2)Investments in unaffiliated securities at cost $1,917,780,159$1,428,510,719
(3)Investments in affiliated securities at cost $54,572,772$
(4)Call options written, premiums received$259,996$373,547
(5)Deferred debt issuance and offering costs$507,284$316,759
(6)Deferred offering costs$1,001,256$469,162

See accompanying Notes to Financial Statements.

 
38Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
Tortoise Essential Assets Income Term Fund
 

Tortoise PowerTortoise
Tortoise PipelineTortoise Energyand EnergyEssential Assets
& EnergyIndependenceInfrastructureIncome Term
Fund, Inc.         Fund, Inc.         Fund, Inc.         Fund(1)
  
$     220,965,068$    123,111,836$    195,200,023$    286,002,022
54,780
124,027
1,020,184703,028
32,375
293,000
404,04983,4221,758,3041,345,738
12,238208,614
108,940 34,162 25,379 11,785 
222,498,241123,229,420197,731,347 288,039,966
 
35,754205,291128,851
427,237277,348317,940669,782
58,18156,36355,2678,939
1,222,507510,22229,656
767,562370,760463,350168,695
13,100,00034,600,00056,600,00031,500,000
33,911,682
15,913,939
65,436,86235,509,76257,946,77932,505,923
$157,061,379$87,719,658$139,784,568$255,534,043
 
$10,016$14,768$6,951$13,491
198,097,720226,727,896128,974,298268,345,262
(41,046,357)(139,023,006)10,803,319(12,824,710)
$157,061,379$87,719,658$139,784,568$255,534,043
 
100,000,000100,000,000100,000,000100,000,000
10,016,41314,767,9686,951,33313,491,127
 
$15.68$5.94$20.11$18.94
 
 
 
$240,709,015$151,677,435$185,304,509$301,771,876
$$$$
$362,586$1,665,649$$474,390
$88,318$$$
$86,061$$$

See accompanying Notes to Financial Statements.

 
Tortoise39



 
 
 
 
Statements of Operations (unaudited)
Period from December 1, 2018 through May 31, 2019

 
Tortoise EnergyTortoise
     Infrastructure     Midstream Energy
Corp.(1)Fund, Inc.
Investment Income
       Distributions from master limited partnerships$       68,943,328$        49,571,347
      Dividends and distributions from common stock13,900,12610,996,974
      Dividends and distributions from preferred stock4,045,0862,651,791
      Dividends and distributions from electronically traded funds
      Dividends and distributions from private investments23,215,960
      Less return of capital on distributions(3)(95,770,474)(56,703,702)
      Less foreign taxes withheld
      Net dividends and distributions from investments14,334,0266,516,410
      Interest from corporate bonds
      Dividends from money market mutual funds4,5363,249
             Total Investment Income14,338,5626,519,659
Operating Expenses
      Advisory fees10,080,1457,163,766
      Administrator fees246,290230,475
      Professional fees192,739131,152
      Directors’ fees91,07877,696
      Stockholder communication expenses94,58365,141
      Custodian fees and expenses44,84032,557
      Fund accounting fees43,84239,684
      Registration fees27,16830,509
      Stock transfer agent fees7,1448,159
      Franchise fees1,920
      Other operating expenses85,04442,667
             Total Operating Expenses10,914,7937,821,806
Leverage Expenses
      Interest expense9,157,2167,429,634
      Distributions to mandatory redeemable preferred stockholders3,460,0002,684,266
      Amortization of debt issuance costs206,963125,089
      Other leverage expenses123,25960,567
             Total Leverage Expenses12,947,43810,299,556
             Total Expenses23,862,23118,121,362
      Less fees waived by Adviser (Note 4)(16,438)(303,806)
             Net Expenses23,845,79317,817,556
Net Investment Income (Loss), before Income Taxes(9,507,231)(11,297,897)
      Deferred tax benefit1,365,8821,961,830
Net Investment Income (Loss)(8,141,349)(9,336,067)
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
      Net realized gain (loss) on investments in unaffiliated securities(743,137)(48,279,912)
      Net realized gain (loss) on options1,644,3691,344,927
      Net realized gain on interest rate swap settlements3,230
      Net realized gain (loss) on foreign currency and translation
             of other assets and liabilities denominated in foreign currency
             Net realized gain (loss), before income taxes904,462(46,934,985)
                    Current tax (expense) benefit(190,240)1,413,172
                    Deferred tax (expense) benefit(19,289)9,354,850
                           Net realized gain (loss)694,933(36,166,963)
      Net unrealized appreciation (depreciation) of investments in unaffiliated securities54,258,02090,644,853
      Net unrealized depreciation of investments in affiliated securities(12,017,227)
      Net unrealized appreciation (depreciation) of options509,525419,372
      Net unrealized depreciation of interest rate swap contracts(233,824)
      Net unrealized appreciation of forward currency contracts
      Net unrealized depreciation of other assets and liabilities due to foreign currency translation
             Net unrealized appreciation (depreciation), before income taxes42,516,49491,064,225
                    Deferred tax expense(4,154,553)(20,892,339)
                           Net unrealized appreciation (depreciation)38,361,94170,171,886
Net Realized and Unrealized Gain (Loss)39,056,87434,004,923
Net Increase (Decrease) in Net Assets Applicable to Common Stockholders
      Resulting from Operations$30,915,525$24,668,856

(1)Consolidated Statement of Operations (See Note 13 to the financial statements for further disclosure).
(2)Fund commenced operations on March 29, 2019.
(3)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.

 
40Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 

Tortoise PowerTortoise
Tortoise PipelineTortoise Energyand EnergyEssential Assets
& EnergyIndependenceInfrastructureIncome Term
Fund, Inc.         Fund, Inc.         Fund, Inc.         Fund(1)(2)
 
$2,379,187$783,816$1,986,188$1,127,119
5,220,095758,4581,579,5692,373,262
247,35994,857208,41834,012
382,884
    
       (5,792,198)       (1,110,155)       (3,103,507)       (1,757,350)
(200,689)(2,666)(27,730)(200,991)
1,853,754524,310642,9381,958,936
2,737,639548,820
3,06910,3732,72189,024
1,856,823534,6833,383,2982,596,780
 
1,248,510858,277922,982669,782
51,65037,46044,86220,290
82,43881,05382,88737,986
57,97456,11755,0038,939
34,60124,45645,60112,897
9,3277,3075,0831,829
20,55321,39415,2025,621
12,42712,57112,1577,408
6,6946,3967,5522,857
    
19,61019,31212,0524,087
1,543,7841,124,3431,203,381771,696
 
895,054720,877895,575138,640
369,943
21,000
9,485
1,295,482720,877895,575138,640
2,839,2661,845,2202,098,956910,336
(124,027)
2,839,2661,845,2202,098,956786,309
(982,443)(1,310,537)1,284,3421,810,471
(982,443)(1,310,537)1,284,3421,810,471
 
(12,440,063)(54,894,052)358,252(22,966)
(49,784)546,870566,365
47,651
 
 2,430(47,560)
(12,487,417)(54,347,182)405,903495,839
(12,487,417)(54,347,182)405,903495,839
15,479,44323,348,1006,079,855(14,878,750)
13,837(111,624)345,539
(96,255)
293,000
(355)(204)(890,809)
15,492,92523,236,4765,983,396(15,131,020)
15,492,92523,236,4765,983,396(15,131,020)
3,005,508(31,110,706)6,389,299(14,635,181)
 
$2,023,065$(32,421,243)$7,673,641$(12,824,710)

See accompanying Notes to Financial Statements.

 
Tortoise41



 
 
 
 
Statements of Changes in Net Assets
 

 
   
   
Tortoise Energy Infrastructure Corp.(1)Tortoise Midstream Energy Fund, Inc.
Period fromPeriod from
December 1, 2018Year EndedDecember 1, 2018Year Ended
throughNovember 30,throughNovember 30,
     May 31, 2019     2018     May 31, 2019     2018
 (unaudited)(unaudited)
Operations
       Net investment income (loss)$(8,141,349)$(25,739,125)$(9,336,067)$(22,743,508)
      Net realized gain (loss)694,93342,564,712(36,166,963)46,530,162
      Net unrealized appreciation (depreciation)38,361,94179,528,70470,171,886(946,809)
             Net increase (decrease) in net assets applicable
                    to common stockholders resulting
                    from operations30,915,52596,354,29124,668,85622,839,845
Distributions to Common Stockholders
      From distributable earnings
      From tax return of capital         (70,261,920)        (138,297,758)        (53,411,079)        (86,693,300)
             Total distributions to common stockholders(70,261,920)(138,297,758)(53,411,079)(86,693,300)
Capital Stock Transactions
      Proceeds from issuance of common shares
             through offerings114,529,368230,973,008
      Underwriting discounts and offering expenses
             associated with the issuance of common stock(6,953)(349,970)(21,176)(8,891,735)
      Issuance of common shares from reinvestment
             of distributions to stockholders6,535,3032,720,036
             Net increase (decrease) in net assets applicable
                    to common stockholders from capital stock
                    transactions(6,953)120,714,701(21,176)224,801,309
      Total increase (decrease) in net assets applicable
             to common stockholders(39,353,348)78,771,234(28,763,399)160,947,854
Net Assets
      Beginning of period1,260,299,7041,181,528,470915,032,974754,085,120
      End of period$1,220,946,356$1,260,299,704$886,269,575$915,032,974
 
Transactions in common shares
      Shares outstanding at beginning of period53,635,05449,379,40863,208,37747,246,780
      Shares issued through offerings4,013,69315,802,094
      Shares issued through reinvestment of distributions241,953159,503
      Shares outstanding at end of period53,635,05453,635,05463,208,37763,208,377

(1)Consolidated Statement of Changes in Net Assets (See Note 13 to the financial statements for further disclosure).
(2)Commencement of operations.

See accompanying Notes to Financial Statements.

 
42Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 
Tortoise
Essential Assets
Tortoise Power and EnergyIncome Term
Tortoise Pipeline & Energy Fund, Inc.Tortoise Energy Independence Fund, Inc.Infrastructure Fund, Inc.Fund(1)
Period fromPeriod fromPeriod fromPeriod from
December 1, 2018Year EndedDecember 1, 2018Year EndedDecember 1, 2018Year EndedMarch 29, 2019(2)
throughNovember 30,throughNovember 30,throughNovember 30,through
May 31, 20192018May 31, 20192018May 31, 20192018May 31, 2019
(unaudited)(unaudited)(unaudited)(unaudited)
                               
$(982,443)$(1,506,036)$(1,310,537)$(4,228,300)$1,284,342$1,683,994$1,810,471
(12,487,417)(374,310)(54,347,182)3,657,227405,9039,007,176495,839
15,492,925(7,108,381)23,236,476(30,476,293)5,983,396(11,182,556)(15,131,020)
 
 
2,023,065(8,988,727)(32,421,243)(31,047,366)7,673,641(491,386)(12,824,710)
 
(455,278)(428,639)(5,213,501)(10,427,000)
(7,708,099)(15,898,114)(12,875,238)(25,586,654)(1,463,787)
(8,163,377)(16,326,753)(12,875,238)(25,586,654)(5,213,501)(10,427,000)(1,463,787)
 
 
269,722,540
 
 
527,9051,233,701
 
 
527,9051,233,701269,722,540
 
(6,140,312)(25,315,480)(44,768,576)(55,400,319)2,460,140(10,918,386)255,434,043
 
163,201,691      188,517,171      132,488,234 187,888,553137,324,428148,242,814100,000
$      157,061,379$ 163,201,691$87,719,658$      132,488,234$      139,784,568$      137,324,428$      255,534,043
  
 
10,016,41310,016,41314,696,26014,583,6626,951,3336,951,333
13,491,127
71,708112,598
10,016,41310,016,41314,767,96814,696,2606,951,3336,951,33313,491,127

See accompanying Notes to Financial Statements.
 
Tortoise43



 
 
 
 
Statements of Cash Flows(unaudited)
Period from December 1, 2018 through May 31, 2019
 
  
Tortoise EnergyTortoise
InfrastructureMidstream Energy
Corp.(1)Fund, Inc.
Cash Flows From Operating Activities           
       Dividends, distributions and interest received from investments$110,017,285$63,157,738
       Purchases of long-term investments   (350,193,624)    (216,511,876)
       Proceeds from sales of long-term investments301,419,961212,439,175
       Sales (purchases) of short-term investments, net60,381131,419
       Increase in cash held at broker
       Call options written, net1,432,9231,367,929
       Payments on interest rate swap contracts, net3,230
       Interest received on securities sold, net
       Interest expense paid(9,018,836)(7,408,884)
       Distributions to mandatory redeemable preferred stockholders(3,460,000)(2,686,948)
       Other leverage expenses paid(2,147)
       Income taxes paid(695,516)(4,500)
       Operating expenses paid(10,896,930)(7,168,495)
              Net cash provided by (used in) operating activities38,668,87443,313,411
Cash Flows From Financing Activities
       Advances (payments) on credit facilities, net31,600,00010,200,000
       Debt issuance costs(81,156)
       Issuance of common stock
       Common stock issuance costs(6,953)(21,176)
       Distributions paid to common stockholders(70,261,921)(53,411,079)
              Net cash provided by (used in) financing activities(38,668,874)(43,313,411)
       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).
(2)Fund commenced operations on March 29, 2019.

See accompanying Notes to Financial Statements.
 
44Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 
Tortoise PowerTortoise
Tortoise PipelineTortoise Energyand EnergyEssential Assets
& EnergyIndependenceInfrastructureIncome Term
Fund, Inc.Fund, Inc.Fund, Inc.Fund(1)(2)
 
$7,834,672     $1,601,067     $6,390,827     $3,283,898
     (26,892,456)   (158,611,124)     (28,885,674)   (308,567,168)
36,929,058194,059,18726,262,3965,693,799
92,27616,00381,793(644,780)
54,780
(199,975)(194,469)1,040,755
47,651
129,682(590,981)
(868,131)(823,179)(865,465)(58,903)
(356,431)
(1,532,555)(1,200,138)(1,147,710)(15,373)
15,006,45834,847,3472,013,500(299,803,973)
 
(6,700,000)(22,500,000)3,200,00031,500,000
(143,081)
269,822,540
(8,163,377)(12,347,347)(5,213,500)(1,463,787)
(15,006,458)(34,847,347)(2,013,500)299,858,753
54,780
$$$$54,780

See accompanying Notes to Financial Statements.
 
Tortoise45



 
 
 
 
Statements of Cash Flows(unaudited) (continued)
Period from December 1, 2018 through May 31, 2019
 
 
Tortoise EnergyTortoise
InfrastructureMidstream Energy
Corp.(1)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     $30,915,525$24,668,856
       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    (327,818,404)    (216,511,876)
                     Proceeds from sales of long-term investments302,171,108215,582,057
                     Sales (purchases) of short-term investments, net60,381131,419
                     Increase in cash held at broker
                     Call options written, net1,432,9231,367,929
                     Return of capital on distributions received95,770,47456,703,702
                     Deferred tax expense2,807,9609,575,659
                     Net unrealized (appreciation) depreciation(42,516,494)(91,064,225)
                     Amortization (accretion) of market premium (discount), net
                     Net realized (gain) loss(901,232)46,934,985
                     Amortization of debt issuance costs206,963125,089
                     Changes in operating assets and liabilities:
                            (Increase) decrease in dividends, distributions and interest receivable from investments(91,751)(65,623)
                            Increase in current tax asset(505,276)(1,417,672)
                            Increase in receivable for investments sold(751,147)(3,142,882)
                            (Increase) decrease in prepaid expenses and other assets22,593(15,964)
                            Increase (decrease) in payable for investments purchased(22,375,220)
                            Increase (decrease) in payable to Adviser, net of fees waived(50,427)324,200
                            Increase (decrease) in accrued expenses and other liabilities290,898117,757
                                   Total adjustments7,753,34918,644,555
       Net cash provided by (used in) operating activities$38,668,874$43,313,411
Non-Cash Financing Activities
       Reinvestment of distributions by common stockholders in additional common shares$$

(1)Consolidated Statement of Cash Flows (See Note 13 to the financial statements for further disclosure).
(2)Fund commenced operations on March 29, 2019.

See accompanying Notes to Financial Statements.
 
46Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 
Tortoise PowerTortoise
Tortoise PipelineTortoise Energyand EnergyEssential Assets
& EnergyIndependenceInfrastructureIncome Term
Fund, Inc.     Fund, Inc.     Fund, Inc.     Fund(1)(2)     
 
 
$2,023,065$(32,421,243)$7,673,641$(12,824,710)
 
 
     (27,177,289)   (158,611,124)     (28,948,618)   (308,596,824)
37,949,242194,059,18726,768,8125,693,799
92,27616,00381,793(644,780)
54,780
(199,975)(194,469)1,040,755
5,792,1981,110,1553,103,5071,757,350
(15,492,925)(23,236,476)(5,983,396)15,131,020
177,467(34,833)
12,487,41754,347,182(358,252)(495,839)
21,000
 
185,651(43,771)(143,763)(1,626,380)
(1,020,184)(506,416)
(19,560)(21,286)(16,301)(11,785)
284,83362,94429,656
(29,183)(121,847)4,680545,755
109,892(34,964)97,402178,063
12,983,39367,268,590(5,660,141)(286,979,263)
$15,006,458$34,847,347$2,013,500$(299,803,973)
 
$$527,905$$

See accompanying Notes to Financial Statements.
 
Tortoise47



 
 
 
 
TYG Financial Highlights
 
 
Period from
December 1, 2018Year EndedYear EndedYear EndedYear EndedYear Ended
throughNovember 30,November 30,November 30,November 30,November 30,
 May 31, 2019 2018 2017 2016 2015 2014
(unaudited)
Per Common Share Data(1)
       Net Asset Value, beginning of period$   23.50$23.93$28.83$29.28$49.34$43.36
       Income (Loss) from Investment Operations
              Net investment loss(2)(0.15)(0.49)(0.65)(0.78)(0.62)(0.66)
              Net realized and unrealized gain (loss)
                     on investments and interest rate
                     swap contracts(2)0.722.59(1.64)2.94(16.85)9.01
                            Total income (loss) from investment
                                   operations0.572.10(2.29)2.16(17.47)8.35
       Distributions to Common Stockholders
              From return of capital(1.31)(2.62)(2.62)(2.62)(2.59)(2.38)
       Capital Stock Transactions
              Premiums less underwriting discounts
                     and offering costs on issuance of
                     common stock(3)(0.00)0.090.010.01(0.00)0.01
       Net Asset Value, end of period$22.76$23.50$23.93$28.83$29.28$49.34
       Per common share market value,
              end of period$21.90$22.59$25.86$30.63$26.57$46.10
       Total investment return based on
              market value(4)(5)2.63%(3.42)%(7.49)%26.21%(37.86)%(2.54)%
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s)$   1,220,946$1,260,300$   1,181,528$   1,412,274$   1,405,733$   2,369,068
       Average net assets (000’s)$1,270,446$   1,388,683$1,406,724$1,345,764$1,974,038$1,837,590
       Ratio of Expenses to Average Net Assets(6)
              Advisory fees1.59%1.58%1.74%1.74%1.76%1.65%
              Other operating expenses0.130.130.120.120.100.13
                     Total operating expenses,
                            before fee waiver1.721.711.861.861.861.78
              Fee waiver(7)(0.00)(0.04)(0.00)(0.01)(0.00)
                     Total operating expenses1.721.671.861.851.861.78
              Leverage expenses2.051.871.782.291.751.38
              Income tax expense (benefit)(8)0.47(11.02)(5.28)4.64(24.50)7.81
                     Total expenses4.24%(7.48)%(1.64)%8.78%(20.89)%10.97%

See accompanying Notes to Financial Statements.
 
48Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 
Period from
December 1, 2018Year EndedYear EndedYear EndedYear EndedYear Ended
throughNovember 30,November 30,November 30,November 30,November 30,
May 31, 2019 2018 2017 2016 2015 2014
 (unaudited)
       Ratio of net investment loss to average
              net assets before fee waiver(6)(1.29)%(1.89)%(2.27)%(2.83)%(1.50)%(1.33)%
       Ratio of net investment loss to average
              net assets after fee waiver(6)(1.29)%(1.85)%(2.27)%(2.82)%(1.50)%(1.33)%
       Portfolio turnover rate(4)14.40%17.96%20.38%24.23%12.94%15.33%
       Credit facility borrowings,
              end of period (000’s)$          138,700$   107,100$   112,700$        109,300$66,000$   162,800
       Senior notes, end of period (000’s)$380,000$380,000$412,500$442,500$   545,000$544,400
       Preferred stock, end of period (000’s)$165,000$165,000$165,000$165,000$295,000$224,000
       Per common share amount of senior
              notes outstanding, end of period$7.08$7.08$8.35$9.03$11.35$11.34
       Per common share amount of net assets,
              excluding senior notes, end of period$29.84$30.58$32.28$37.86$40.63$60.68
       Asset coverage, per $1,000 of principal
              amount of senior notes and credit
              facility borrowings(9)$3,672$3,926$3,564$3,858$3,784$4,667
       Asset coverage ratio of senior notes and
              credit facility borrowings(9)367%393%356%386%378%467%
       Asset coverage, per $10 liquidation value
              per share of mandatory redeemable
              preferred stock(10)$28$29$27$30$26$35
       Asset coverage ratio of preferred stock(10)279%293%271%297%255%354%

(1)Information presented relates to a share of common stock outstanding for the entire period.
(2)The per common share data for the years ended November 30, 2018, 2017, 2016, 2015 and 2014 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)Represents underwriting and offering costs of less than $0.01 for the period from December 1, 2018 through May 31, 2019. Represents premium on shelf offerings of $0.10 per share, less the underwriting and offering costs of $0.01 per share, for the year ended November 30, 2018. Represents the premium on the shelf offerings of $0.01 per share, less the underwriting and offering costs of less than $0.01 per share for the year ended November 30, 2017. Represents the premium on the shelf offerings of $0.02 per share, less the underwriting and offering costs of less than $0.01 per share for the year ended November 30, 2016. Represents underwriting and offering costs of less than $0.01 per share for the year ended November 30, 2015. Represents the premium on the shelf offerings of $0.02 per share, less the underwriting and offering costs of $0.01 per share for the year ended November 30, 2014.
(4)Not annualized for periods less than one full year.
(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)Annualized for periods less than one full year.
(7)Less than 0.01% for the period from December 1, 2018 through May 31, 2019 and the years ended November 30, 2017 and 2014.
(8)For the period from December 1, 2018 through May 31, 2019, TYG accrued $190,240 for current income tax expense and $2,807,960 for net deferred income tax expense. For the year ended November 30, 2018, TYG accrued $152,516,725 for net deferred income tax benefit, which included a deferred tax benefit of $125,271,378 due to the impact from the federal tax rate reduction related to the Tax Cuts and Jobs Act. For the year ended November 30, 2017, TYG accrued $35,365,364 for current income tax expense and $109,662,030 for net deferred income tax benefit. For the year ended November 30, 2016, TYG accrued $57,075,786 for current income tax expense and $5,303,392 for net deferred income tax expense. For the year ended November 30, 2015, TYG accrued $66,785,732 for net current income tax expense and $550,449,662 for net deferred income tax benefit. For the year ended November 30, 2014, TYG accrued $52,981,532 for current income tax expense and $90,477,388 for net deferred income tax expense.
(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 period divided by senior notes and credit facility borrowings outstanding at the end of the period.
(10)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 period divided by senior notes, credit facility borrowings and preferred stock outstanding at the end of the period.

See accompanying Notes to Financial Statements.
 
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NTG Financial Highlights
 
 
Period from
December 1, 2018Year EndedYear EndedYear EndedYear EndedYear Ended
throughNovember 30,November 30,November 30,November 30,November 30,
May 31, 2019 2018 2017 2016 2015 2014
 (unaudited)
Per Common Share Data(1)
       Net Asset Value, beginning of period$14.48$15.96$19.22$18.65$29.83$28.00
       Income (Loss) from Investment Operations
              Net investment loss(2)(0.15)(0.43)(0.42)(0.46)(0.32)(0.54)
              Net realized and unrealized gain (loss)
                     on investments(2)0.541.36(1.15)2.72(9.17)4.06
                            Total income (loss) from investment
                                   operations0.390.93(1.57)2.26(9.49)3.52
       Distributions to Common Stockholders
              From return of capital(0.85)(1.69)(1.69)(1.69)(1.69)(1.69)
       Capital stock transactions
              Premiums less underwriting discounts
                     and offering costs on issuance of
                     common stock(3)(0.00)(0.72)(0.00)(0.00)
       Net Asset Value, end of period$14.02$14.48$15.96$19.22$18.65$29.83
       Per common share market value,
              end of period$13.21$13.72$15.90$18.90$16.18$27.97
       Total investment return based on
              market value(4)(5)2.34%(4.10)%(7.67)%27.99%(37.08)%9.08%
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s)$         886,270$   915,033$   754,085$   904,866$876,409$   1,401,926
       Average net assets (000’s)$923,714$887,014$892,196$862,527$   1,174,085$1,404,751
       Ratio of Expenses to Average Net Assets(6)
              Advisory fees1.56%1.54%1.61%1.56%1.56%1.48%
              Other operating expenses0.140.150.140.160.120.10
                     Total operating expenses,
                            before fee waiver1.701.691.751.721.681.58
              Fee waiver(0.07)(0.09)(0.01)(0.09)(0.16)
                     Total operating expenses1.631.601.751.711.591.42
              Leverage expenses2.241.981.891.951.421.09
              Income tax expense (benefit)(7)1.77(6.09)(4.33)7.25(21.92)7.04
                     Total expenses          5.64%(2.51)%(0.69)%10.91%(18.91)%9.55%

See accompanying Notes to Financial Statements.
 
50Tortoise



 
 
2019 2nd Quarter Report| May 31, 2019
 
 
 
 
Period from
December 1, 2018Year EndedYear EndedYear EndedYear EndedYear Ended
throughNovember 30,November 30,November 30,November 30,November 30,
May 31, 2019 2018 2017 2016 2015 2014
 (unaudited)
       Ratio of net investment loss to average
              net assets before fee waiver(6)(2.09)%(2.65)%(2.22)%(2.53)%(1.36)%(1.97)%
       Ratio of net investment loss to average
              net assets after fee waiver(6)(2.02)%(2.56)%(2.22)%(2.52)%(1.27)%(1.81)%
       Portfolio turnover rate(4)14.40%13.67%20.94%35.47%17.54%18.09%
       Credit facility borrowings,
              end of period (000’s)$83,300$73,100$49,800$46,800$62,800$68,900
       Senior notes, end of period (000’s)$          312,000$   312,000$   284,000$   284,000$   348,000$   348,000
       Preferred stock, end of period (000’s)$132,000$132,000$110,000$110,000$90,000$90,000
       Per common share amount of senior
              notes outstanding, end of period$4.94$4.94$6.01$6.03$7.40$7.40
       Per common share amount of net assets,
              excluding senior notes, end of period$18.96$19.42$21.97$25.25$26.05$37.23
       Asset coverage, per $1,000 of principal
              amount of senior notes and credit
              facility borrowings(8)$3,576$3,719$3,589$4,068$3,353$4,579
       Asset coverage ratio of senior notes and
              credit facility borrowings(8)358%372%359%407%335%458%
       Asset coverage, per $25 liquidation value