Quarterly Report | August 31, 2017

 
 
 
 
 

2017 3rd Quarter Report
Closed-End Funds


 




 


Tortoise Capital Advisors
2017 3rd Quarter Report to Stockholders



This combined report provides you with a comprehensive review of our funds that span the entire energy value chain.

Tortoise Capital Advisors specializes in essential assets investing, including closed-end funds, open end funds, private funds and separate accounts.



Table of contents

Letter to Stockholders 2            TPZ: Fund Focus 16
TYG:  Fund Focus 4 Financial Statements 19
NTG: Fund Focus 7 Notes to Financial Statements 50
TTP: Fund Focus 10 Additional Information 65
NDP: Fund Focus 13  





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.

Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017







Closed-end fund comparison
    Primary   Total assets                                Portfolio mix                                           Portfolio mix            
Name/Ticker       focus       Structure       ($ millions)1       by asset type2               by structure2         

Tortoise Energy
Infrastructure Corp.

NYSE: TYG
Inception: 2/2004

Midstream
MLPs

C-corp

 

$2,450.7

Tortoise MLP
Fund, Inc.

NYSE: NTG
Inception: 7/2010

Natural gas
infrastructure
MLPs

C-corp

$1,420.4

Tortoise Pipeline
& Energy Fund, Inc.

NYSE: TTP
Inception: 10/2011

North
American
pipeline
companies

Regulated
investment
company

  $278.3

Tortoise Energy
Independence
Fund, Inc.

NYSE: NDP
Inception: 7/2012

North
American
oil & gas
producers

Regulated
investment
company

  $257.3

Tortoise Power and
Energy Infrastructure
Fund, Inc.

NYSE: TPZ
Inception: 7/2009

Power
& energy
infrastructure
companies
(Fixed income
& equity)

Regulated
investment
company

 $209.6


1 As of 9/30/2017
2 As a percentage of total long-term investments as of 8/31/2017

Tortoise Capital Advisors 1



 


Tortoise Capital Advisors
Third quarter 2017 report to closed-end fund stockholders

Dear fellow stockholders,

Crude oil prices stabilized throughout the third fiscal quarter ending August 31, 2017 as inventories meaningfully declined through the period. On the supply side, production curtailment compliance among the Organization of Petroleum Exporting Countries (OPEC) was high and U.S. rig counts leveled off near the end of the period. The summer driving season resulted in strong demand for refined products. Nonetheless, the broad energy sector, as measured by the S&P Energy Select Sector® Index, returned -3.0% for the fiscal quarter as sentiment across energy remained poor following doubt about sustained supply and demand balance. Notably, while Hurricane Harvey wreaked havoc on the Houston area at the end of August resulting in community devastation, energy assets proved remarkably durable during the storm, incurring minimal downtime and little physical damage.

Upstream

Upstream oil and gas producers, as represented by the Tortoise North American Oil and Gas Producers IndexSM returned -7.2% for the fiscal quarter. Crude oil prices were relatively stable; however, there were basin-specific headwinds. For example, some Permian producers reported a lower-than-expected crude oil production percentage relative to natural gas production percentage and this surprised investors. We think the change in percentage resulted from an increase in the absolute level of natural gas production and not from a decline in crude oil production, and believe fears of a sharp decline in the crude oil ‘cut’ are unfounded.

We believe that the Permian basin will remain a key, growing oil supply basin. In fact, 50% of the U.S. oil rig count is operating in the Permian basin. The Energy Information Administration forecasts 2018 production to grow by 500,000 barrels per day with the largest contribution of growth coming from the Permian1. Longer term, we believe the Permian will remain the lowest cost oil basin in the U.S. Some parts of the Permian can even produce oil at a lower cost than some OPEC countries, which positions it as one of the low cost suppliers of crude oil to the rest of the world. We expect higher absolute volumes of oil, natural gas and natural gas liquids, driving a need for additional energy infrastructure to gather, process and transport the higher volumes. More broadly, U.S. crude oil production is expected to average 9.3 million barrels per day (MMbbl/d)1 in 2017. The 2018 forecast is for 9.8 MMbbl/d. If reached, it would be a record high1.

As mentioned previously, prices were steadier as inventories declined. Specifically, crude oil prices started the fiscal quarter with West Texas Intermediate (WTI) at $48.36 per barrel, and ended at $47.23 per barrel.

Natural gas prices were relatively flat during the fiscal quarter, opening at $2.93 per million British thermal units (MMBtu) and closing at $2.89. Because of new export capabilities largely through LNG as well as an increase in domestic consumption, we believe the demand outlook is strong. On the supply side, we think increased takeaway capacity coming online over the next year will enable significant production growth, with expected production to average 72.4 billion cubic feet per day in 2017, rising to 78.6 in 20182.

Midstream

Midstream fundamentals remained steady during the third fiscal quarter, supported by strong second quarter earnings reports. More than half of the companies in the Tortoise North American Pipeline IndexSM surpassed expectations. In addition, average EBITDA growth on a year-over-year basis was 21% for midstream companies3. We believe these positive fundamental results were misrepresented in the markets as stock performance lagged.

Pipeline companies returned 1.7% over the fiscal quarter, as measured by the Tortoise North American Pipeline IndexSM. MLPs were worse, returning -3.4% for the fiscal quarter, as represented by the Tortoise MLP Index®. Company-specific issues weighed on MLPs casting doubt on the entire midstream segment. Most notable to the market, Plains All American Pipeline, L.P. (PAA) revised down 2017 and 2018 guidance despite an in-line quarter. In conjunction, Plains announced a reevaluation of its distribution policy to enhance distribution coverage and leverage metrics.

Despite the aforementioned, performance varied among pipeline companies based on the commodities transported. Local gas distribution companies were strong performers during the period as interest rates remained low. Our long-term outlook for the midstream sector remains positive with a projection for capital investments in MLPs, pipeline and related organic projects at approximately $125 billion for 2017 to 2019, driving an expected 5% to 7% distribution growth over the next twelve months.

Downstream

Hurricane Harvey most acutely impacted the refining sector in Houston and Corpus Christi. The expectation was for capacity to potentially remain offline for weeks, yet operational impact on key assets was minimal. As expected, refining margins widened as gasoline prices increased due to production being taken offline.

Even with international and state level rhetoric toward electric vehicles, we don’t expect electric vehicles to materially displace refined product demand in the near future. Even assuming exponential electric vehicle sales growth, the vast majority of automobiles will continue to be powered by the internal combustion engine over the next decade. We do believe renewables will continue to play an increasing role in electricity generation, as solar generation is expected to increase by more than 50% from the end of 2016 to the end of 20181.

(unaudited)

2 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017



Capital markets

In general, debt markets were more supportive than equity. This trend was seen as MLPs and other pipeline companies raised more than $13 billion, with about two thirds raised through debt offerings. There were no midstream MLP initial public offerings during the fiscal quarter.

Merger and acquisition activity among MLPs and other pipeline companies continued to slow totaling approximately $7 billion, about half of the total activity during the second fiscal quarter. Andeavor Logistics LP had the largest announced transaction of the fiscal quarter, in a deal valued at about $2.4 billion.

Concluding thoughts

The favorable crude oil inventory trend took center stage in the fiscal quarter. We think better supply and demand balance and price stability should lead to improved energy sector investor sentiment. We believe macro improvements, growing U.S. crude oil and natural gas production, and solid midstream fundamentals lead to compelling investment opportunities across the energy value chain. As we celebrate our 15 year anniversary we are appreciative that you have placed your trust in us. Thank you for your continued confidence.

Sincerely,

The Managing Directors
Tortoise Capital Advisors, L.L.C.


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 IndexSM is 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 IndexSM is a float adjusted, capitalization-weighted index of energy pipeline companies domiciled in the United States and Canada. The Tortoise MLP Index® is a float-adjusted, capitalization-weighted index of energy master limited partnerships.

The Tortoise indices are the exclusive property of Tortoise Index Solutions, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Tortoise MLP Index®, Tortoise North American Pipeline IndexSM and 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, September 2017
2 Bentek, June 2017
3 Company filings

(unaudited)

Tortoise Capital Advisors 3



 


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

The fund’s market-based and NAV-based returns for the fiscal quarter ending August 31, 2017 were -8.2% and -5.6%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise MLP Index® returned -3.4% for the same period. Despite solid company business fundamentals, pipeline equity performance lagged due to fickle capital markets and isolated, company-specific issues resulting in doubts over distribution growth. During the fiscal quarter the fund acquired an approximately 33 megawatt commercial and industrial (C&I) solar portfolio. We view renewable energy as an increasingly critical component of the energy value chain and we believe that our proactive approach to managing taxes through solar investment tax credits will be accretive to our stockholders.

Third fiscal quarter highlights      
Distributions paid per share $0.6550
Distribution rate (as of 8/31/2017) 9.2%
Quarter-over-quarter distribution increase 0.0%
Year-over-year distribution increase 0.0%
Cumulative distributions paid per share to stockholders
       since inception in February 2004 $29.8075
Market-based total return (8.2)%
NAV-based total return (5.6)%
Premium (discount) to NAV (as of 8/31/2017) 8.3%

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.

Key asset performance drivers

Top five contributors         Company type         Performance driver
ONEOK Partners, L.P. Midstream natural gas/natural gas liquids pipeline MLP Acquisition by parent company ONEOK, Inc.
EQT Midstream
Partners, LP
Midstream natural gas/natural gas liquids pipeline MLP Parent’s acquisition of Rice Energy Inc. will potentially generate enhanced growth
ONEOK, Inc. Midstream natural gas/natural gas liquids pipeline company Improved outlook for ethane recoveries and higher natural gas liquids (NGL) prices
MPLX LP Midstream gathering and processing MLP Greater strategic clarity on dropdowns and incentive distribution rights restructuring
Spectra Energy
Partners, LP
Midstream natural gas/natural gas liquids pipeline MLP Growing Northeast natural gas production supported infrastructure buildout
 
Bottom five contributors Company type Performance driver
Plains All American
Pipeline, L.P.
Midstream crude oil pipeline MLP Reduced distribution on weaker supply & logistics outlook
Energy Transfer
Partners, L.P.
Midstream natural gas/natural gas liquids pipeline MLP Concerns about equity funding for project backlog
Buckeye Partners, L.P. Midstream refined product pipeline MLP Equity overhang around VTTI acquisition
Magellan Midstream
Partners, L.P.
Midstream refined product pipeline MLP Large weight in declining market
Western Gas
Partners, LP
Midstream gathering and processing MLP Concerns about Colorado drilling and regulatory outlook

(unaudited)

4 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017





Distributable cash flow and distributions

Distributable cash flow (“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.

Distributions received from investments increased approximately 2.0% as compared to 2nd quarter 2017 due primarily to the impact of increased distribution rates on the fund’s investments. Operating expenses, consisting primarily of fund advisory fees, decreased approximately 8.4% during the quarter due to lower asset-based fees. Overall leverage costs increased slightly as compared to 2nd quarter 2017 due primarily to an increase in interest rates during the quarter.

As a result of the changes in income and expenses, DCF increased approximately 4.3% as compared to 2nd quarter 2017. The fund paid a quarterly distribution of $0.655 per share, which was equal to the distribution paid in the prior quarter and 3rd quarter 2016. The fund has paid cumulative distributions to stockholders of $29.8075 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; 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 are not 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, 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 3rd quarter 2017 (in thousands):

      YTD 2017       3rd Qtr 2017
Net Investment Loss,
       before Income Taxes    $ (42,426 )          $ (6,339 )
Adjustments to reconcile to DCF:
       Distributions characterized
              as return of capital 139,512 39,105
       Net premiums on options written 892 414
       Amortization of debt issuance costs 350 118
       Interest rate swap expenses (567 ) (180 )
              DCF $ 97,761 $ 33,118

Leverage

The fund’s leverage utilization was relatively unchanged during 3rd quarter 2017 and represented 28.4% of total assets at August 31, 2017. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, including the impact of interest rate swaps, approximately 78% of the leverage cost was fixed, the weighted-average maturity was 4.5 years and the weighted-average annual rate on leverage was 3.49%. 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. Subsequent to quarter end, the fund issued $25 million Senior Notes with a fixed interest rate of 3.33%. The notes were issued to replace $25 million of maturing Senior Notes with a fixed interest rate of 2.75%.

Income taxes

During 3rd quarter 2017, the fund’s deferred tax liability decreased by $76.4 million to $405.4 million, primarily as a result of the decrease in value of its investment portfolio. The fund had net realized gains of $35.4 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, please visit www.tortoiseadvisors.com.

(unaudited)

Tortoise Capital Advisors 5



 


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.

2016 2017
      Q3(1)       Q4(1)       Q1(1)       Q2(1)       Q3(1)
Total Income from Investments
       Distributions and dividends from investments $ 45,694 $ 44,714 $ 46,007 $ 44,556 $ 45,456
       Premiums on options written 478 415
              Total from investments 45,694 44,714 46,007 45,034 45,871
Operating Expenses Before Leverage
       Costs and Current Taxes
       Advisory fees 6,215 6,067 6,380 6,533 5,950
       Other operating expenses 459 229 437 443 441
6,674 6,296 6,817 6,976 6,391
       Distributable cash flow before leverage costs and current taxes 39,020 38,418 39,190 38,058 39,480
       Leverage costs(2) 6,433 6,467 6,286 6,319 6,362
       Current income tax expense(3)
              Distributable Cash Flow(4) $ 32,587 $ 31,951 $ 32,904 $ 31,739 $ 33,118
 
As a percent of average total assets(5)
       Total from investments 6.85 % 6.90 % 6.83 % 6.49 % 7.13 %
       Operating expenses before leverage costs and current taxes 1.00 % 0.97 % 1.01 % 1.01 % 0.99 %
       Distributable cash flow before leverage costs and current taxes 5.85 % 5.93 % 5.82 % 5.48 % 6.14 %
As a percent of average net assets(5)
       Total from investments 12.45 % 12.58 % 12.32 % 11.88 % 13.48 %
       Operating expenses before leverage costs and current taxes 1.82 % 1.77 % 1.83 % 1.84 % 1.88 %
       Leverage costs and current taxes 1.75 % 1.82 % 1.68 % 1.67 % 1.87 %
       Distributable cash flow 8.88 % 8.99 % 8.81 % 8.37 % 9.73 %
 
Selected Financial Information
Distributions paid on common stock $ 31,961 $ 32,045 $ 32,082 $ 32,115 $ 32,299
Distributions paid on common stock per share 0.6550 0.6550 0.6550 0.6550 0.6550
Distribution coverage percentage for period(6) 102.0 % 99.7 % 102.6 % 98.8 % 102.5 %
Net realized gain, net of income taxes, for the period 13,034 15,215 71,641 7,226 35,440
Total assets, end of period(7) 2,628,678 2,593,722 2,842,641 2,596,302 2,467,104
Average total assets during period(7)(8) 2,654,126 2,607,027 2,733,122 2,751,522 2,552,438
Leverage(9) 720,200 716,800 701,900 700,700 700,000
Leverage as a percent of total assets 27.4 % 27.6 % 24.7 % 27.0 % 28.4 %
Net unrealized depreciation, end of period (204,786 ) (217,646 ) (109,826 ) (223,262 ) (330,549 )
Net assets, end of period 1,443,397 1,412,274 1,556,125 1,400,652 1,296,782
Average net assets during period(10) 1,460,638 1,429,146 1,513,999 1,504,136 1,349,973
Net asset value per common share 29.54 28.83 31.74 28.53 26.30
Market value per share 30.48 30.63 34.63 31.76 28.47
Shares outstanding (000’s) 48,859 48,980 49,031 49,093 49,311

(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 net premiums on options written, the premium on redemptions of senior notes and MRP stock and amortization of debt issuance costs; and decreased by realized and unrealized gains (losses) on interest rate swap settlements and current taxes paid on net investment income.
(5) Annualized.
(6) Distributable Cash Flow divided by distributions paid.
(7) Includes deferred issuance and offering costs on senior notes and preferred stock.
(8) Computed by averaging month-end values within each period.
(9) Leverage consists of senior notes, preferred stock and outstanding borrowings under credit facilities.
(10) Computed by averaging daily net assets within each period.

6 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Tortoise
MLP 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 master limited partnerships (MLPs) and their affiliates 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 MLPs benefiting from U.S. natural gas production and consumption expansion with minimal direct commodity exposure.

Fund performance review

The fund’s market-based and NAV-based returns for the fiscal quarter ending August 31, 2017 were -4.5% and -5.0%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise MLP Index® returned -3.4% for the same period. Despite solid company business fundamentals, pipeline equity performance lagged due to fickle capital markets and isolated, company-specific issues resulting in doubts over distribution growth.

Third fiscal quarter highlights      
Distributions paid per share $0.4225
Distribution rate (as of 8/31/2017) 9.5%
Quarter-over-quarter distribution increase 0.0%
Year-over-year distribution increase 0.0%
Cumulative distributions paid per share to stockholders
       since inception in July 2010 $11.6575
Market-based total return (4.5)%
NAV-based total return (5.0)%
Premium (discount) to NAV (as of 8/31/2017) 1.5%

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.

Key asset performance drivers

Top five contributors         Company type         Performance driver
ONEOK Partners, L.P. Midstream natural gas/natural gas liquids pipeline MLP Acquisition by parent company ONEOK, Inc.
ONEOK, Inc. Midstream natural gas/natural gas liquids pipeline company Improved outlook for ethane recoveries and higher natural gas liquids (NGL) prices
EQT Midstream
Partners, LP
Midstream natural gas/natural gas liquids pipeline MLP Parent’s acquisition of Rice Energy Inc. will potentially generate enhanced growth
MPLX LP Midstream gathering and processing MLP Greater strategic clarity on dropdowns and incentive distribution rights restructuring
Williams Partners L.P. Midstream gathering and processing MLP Increased natural gas volume growth
 
Bottom five contributors Company type Performance driver
Plains All American
Pipeline, L.P.
Midstream crude oil pipeline MLP Reduced distribution on weaker supply & logistics outlook
Energy Transfer
Partners, L.P.
Midstream natural gas/natural gas liquids pipeline MLP Concerns about equity funding for project backlog
Buckeye Partners, L.P. Midstream refined product pipeline MLP Equity overhang around VTTI acquisition
Western Gas
Partners, LP
Midstream gathering and processing MLP Concerns about Colorado drilling and regulatory outlook
Genesis Energy L.P. Midstream crude oil pipeline MLP Lower distribution growth rate

(unaudited)

Tortoise Capital Advisors 7



 


Tortoise
MLP Fund, Inc. (NTG) (continued)


Distributable cash flow and distributions

Distributable cash flow (“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.

Distributions received from investments increased approximately 1.5% as compared to 2nd quarter 2017 due primarily to the impact of increased distribution rates on the fund’s investments. Operating expenses, consisting primarily of fund advisory fees, decreased approximately 8.3% during the quarter due to lower asset-based fees. Leverage costs increased approximately 0.5% as compared to 2nd quarter 2017 due primarily to an increase in interest rates during the quarter.

As a result of the changes in income and expenses, DCF increased approximately 3.5% as compared to 2nd quarter 2017. The fund paid a quarterly distribution of $0.4225 per share, which was equal to the distribution paid in the prior quarter and 3rd quarter 2016. The fund has paid cumulative distributions to stockholders of $11.6575 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 are not 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 3rd quarter 2017 (in thousands):

      YTD 2017       3rd Qtr 2017
Net Investment Loss,
       before Income Taxes $ (22,450 )       $ (5,422 )
Adjustments to reconcile to DCF:
       Distributions characterized
              as return of capital 79,526 24,463
       Net Premiums on options written 539 242
       Amortization of debt issuance costs 277 93
              DCF $ 57,892 $ 19,376

Leverage

The fund’s leverage utilization decreased by $3.4 million during 3rd quarter 2017 and represented 30.6% of total assets at August 31, 2017. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, approximately 77% of the leverage cost was fixed, the weighted-average maturity was 2.3 years and the weighted-average annual rate on leverage was 3.73%. 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 3rd quarter 2017, the fund’s deferred tax liability decreased by $23.2 million to $151.0 million, primarily as a result of the decrease in value of its investment portfolio. The fund had net realized gains of $13.3 million during the quarter. As of November 30, 2016, the fund had net operating losses of $63 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, please visit www.tortoiseadvisors.com.

(unaudited)

8 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

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.

2016   2017
      Q3(1)         Q4(1)         Q1(1)         Q2(1)         Q3(1)     
Total Income from Investments
       Distributions and dividends from investments   $ 27,901   $ 27,640    $ 27,925    $ 26,705    $ 27,094
       Premiums on options written 297 242
              Total from investments 27,901 27,640 27,925 27,002 27,336
Operating Expenses Before Leverage
       Costs and Current Taxes
       Advisory fees, net of fees waived 3,654 3,584 3,752 3,828 3,490
       Other operating expenses 336 336 324 332 324  
   3,990 3,920 4,076 4,160 3,814
       Distributable cash flow before leverage costs and current taxes 23,911 23,720 23,849 22,842 23,522
       Leverage costs(2) 3,960 4,013 4,051 4,124 4,146
       Current income tax expense(3)
             Distributable Cash Flow(4) $ 19,951 $ 19,707 $ 19,798 $ 18,718 $ 19,376
  
As a percent of average total assets(5)
       Total from investments 7.28 % 7.29 % 7.09 % 6.69 % 7.30 %
       Operating expenses before leverage costs and current taxes 1.04 % 1.03 % 1.04 % 1.03 % 1.02 %
       Distributable cash flow before leverage costs and current taxes 6.24 % 6.26 % 6.05 % 5.66 % 6.28 %
As a percent of average net assets(5)
       Total from investments 11.90 % 12.17 % 11.79 % 11.27 % 12.67 %
       Operating expenses before leverage costs and current taxes 1.70 % 1.73 % 1.72 % 1.74 % 1.77 %
       Leverage costs and current taxes 1.69 % 1.77 % 1.71 % 1.72 % 1.92 %
       Distributable cash flow 8.51 % 8.67 % 8.36 % 7.81 % 8.98 %
   
Selected Financial Information
Distributions paid on common stock $ 19,858 $ 19,891 $ 19,892 $ 19,891 $ 19,962
Distributions paid on common stock per share 0.4225 0.4225 0.4225   0.4225   0.4225
Distribution coverage percentage for period(6) 100.5 % 99.1 % 99.5 % 94.1 % 97.1 %
Net realized gain, net of income taxes, for the period 27,199 14,157 14,896 2,126 13,289
Total assets, end of period(7) 1,528,949 1,514,354   1,657,717   1,509,815 1,437,520
Average total assets during period(7)(8) 1,524,786   1,524,805   1,596,610   1,601,462   1,486,578
Leverage(9) 443,300     440,800 439,700 442,700     439,300
Leverage as a percent of total assets       29.0 % 29.1 % 26.5 % 29.3 % 30.6 %
Net unrealized appreciation, end of period 112,273 107,907   193,975   123,020 69,547
Net assets, end of period 919,721 904,866   981,071 886,964 823,888
Average net assets during period(10) 932,440 913,726 960,910 950,384 855,842
Net asset value per common share 19.53 19.22 20.84 18.81 17.44
Market value per common share 19.68 18.90 20.49 18.99 17.70
Shares outstanding (000’s) 47,081 47,081 47,081 47,161 47,247

(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 new premiums on options written, the premium on redemption of senior notes and amortization of debt issuance costs; and decreased by current taxes paid on net investment income.
(5) Annualized.
(6) Distributable Cash Flow divided by distributions paid.
(7) Includes deferred issuance and offering costs on senior notes and preferred stock.
(8) Computed by averaging month-end values within each period.
(9) Leverage consists of senior notes, preferred stock and outstanding borrowings under the credit facility.
(10) Computed by averaging daily net assets within each period.

Tortoise Capital Advisors 9



 


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

The fund’s market-based and NAV-based returns for the fiscal quarter ending August 31, 2017 were -5.7% and -3.0%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise North American Pipeline IndexSM returned 1.7% for the same period. Despite solid company business fundamentals, pipeline equity performance lagged due to fickle capital markets and isolated, company-specific issues resulting in doubts over distribution growth.

Third fiscal quarter highlights      
Distributions paid per share $ 0.4075
Distribution rate (as of 8/31/2017) 8.8%
Quarter-over-quarter distribution increase 0.0%
Year-over-year distribution increase 0.0%
Cumulative distributions paid per share to stockholders      
       since inception in October 2011 $ 9.6900
Market-based total return (5.7)%
NAV-based total return (3.0)%
Premium (discount) to NAV (as of 8/31/2017) (7.5)%

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. In an attempt to generate the same monthly income, the out-of-the-money percentage was generally flat year-over-year as volatility was similar. The notional amount of the fund’s covered calls averaged approximately 9.2% of total assets, and their out-of-the-money percentage at the time written averaged approximately 5.7% during the fiscal quarter.

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.

Key asset performance drivers
 
Top five contributors         Company type         Performance driver
TransCanada
Corporation
Midstream natural gas/natural gas liquids pipeline company Regulated pipeline business with visibility to dividend growth
ONEOK, Inc. Midstream natural gas/natural gas liquids pipeline company Improved outlook for ethane recoveries and higher natural gas liquids (NGL) prices
Enbridge Inc. Midstream crude oil pipeline company Diversified business model generated steady cash flows
Tallgrass Energy GP, LP Midstream natural gas/natural gas liquids pipeline MLP Continued strong distribution growth with visibility to continue dropdowns to its LP
The Williams
Companies, Inc.
Midstream gathering and processing company Visibility to stronger balance sheet post divestitures along with increased natural gas volume growth
  
Bottom five contributors Company type Performance driver
Plains GP Holdings, L.P. Midstream crude oil pipeline company Reduced distribution on weaker supply & logistics outlook
Energy Transfer
Partners, L.P.
Midstream natural gas/natural gas liquids pipeline MLP Concerns about equity funding for project backlog
SemGroup Corporation Midstream crude oil pipeline company Acquisition of Houston Fuel Oil Terminal resulted in equity overhang
Enbridge Energy
Management, L.L.C.
Midstream crude oil pipeline company Strategic review with lower distribution viewed unfavorably
Pioneer Natural
Resources Company
Upstream liquids producer Concern about oil production percentage relative to natural gas production percentage from the Permian basin

(unaudited)
  
10 Tortoise Capital Advisors



2017 3rd Quarter Report | August 31, 2017





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.

Distributions received from investments was relatively unchanged as compared to 2nd quarter 2017. Operating expenses, consisting primarily of fund advisory fees, decreased approximately 6.7% during the quarter due to lower asset-based fees. Leverage costs increased approximately 2.7% as compared to 2nd quarter 2017 due mainly to an increase in interest rates during the quarter. As a result of the changes in income and expenses, DCF increased by 1.3% as compared to 2nd quarter 2017. In addition, the fund had net realized gains on investments of $0.6 million during 3rd quarter 2017.

The fund paid a quarterly distribution of $0.4075 per share, which was unchanged over the prior quarter and 3rd quarter 2016. 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 if necessary to meet minimum annual distribution requirements and to avoid being subject to excise taxes. The fund’s distribution policy is described on the inside front cover of this report. The fund has paid cumulative distributions to stockholders of $9.69 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 are not 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 3rd quarter 2017 (in thousands):

      YTD 2017       3rd Qtr 2017
Net Investment Loss $ (491 ) $ (49 )
Adjustments to reconcile to DCF:  
       Net premiums on options written 3,536 1,126
       Distributions characterized      
              as return of capital     7,065       2,334
       Dividends paid in stock 865   242
       Amortization of debt issuance costs 43 15
              DCF $     11,018 $     3,668

Leverage

The fund’s leverage utilization increased slightly during 3rd quarter 2017 and represented 24.7% of total assets at August 31, 2017. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, approximately 65% of the leverage cost was fixed, the weighted-average maturity was 2.4 years and the weighted-average annual rate on leverage was 3.41%. 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)
  
Tortoise Capital Advisors 11



 


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.

2016 2017
      Q3(1)         Q4(1)         Q1(1)       Q2(1)       Q3(1)     
Total Income from Investments
       Dividends and distributions from investments,
              net of foreign taxes withheld $ 3,855 $ 3,606 $ 3,594 $ 3,778 $ 3,780
       Dividends paid in stock 433 444 385 238 242
       Net premiums on options written 1,219 1,284 1,275 1,135 1,126
              Total from investments 5,507 5,334 5,254 5,151 5,148
Operating Expenses Before Leverage Costs
       Advisory fees, net of fees waived 742 768 824 822 756
       Other operating expenses 144 142 150 145 146
  886 910 974 967 902
       Distributable cash flow before leverage costs 4,621 4,424 4,280 4,184 4,246
       Leverage costs(2) 536 544 551 563 578
              Distributable Cash Flow(3) $ 4,085 $ 3,880 $ 3,729 $ 3,621 $ 3,668
  
Net realized gain (loss) on investments and foreign currency
       translation, for the period $ 1,927 $ 25,178 $ 2,316 $ (357 ) $ 643
As a percent of average total assets(4)
       Total from investments 7.83 % 7.25 % 6.94 % 6.89 % 7.35 %
       Operating expenses before leverage costs 1.26 % 1.24 % 1.29 % 1.29 % 1.29 %
       Distributable cash flow before leverage costs 6.57 % 6.01 % 5.65 % 5.60 % 6.06 %
As a percent of average net assets(4)
       Total from investments 10.10 % 9.38 % 8.77 % 8.88 % 9.93 %
       Operating expenses before leverage costs 1.63 % 1.60 % 1.63 % 1.67 % 1.74 %
       Leverage costs 0.98 % 0.96 % 0.92 % 0.97 % 1.11 %
       Distributable cash flow 7.49 % 6.82 % 6.22 % 6.24 % 7.08 %
   
Selected Financial Information
Distributions paid on common stock $ 4,082 $ 4,082 $ 4,082 $ 4,081 $ 4,082
Distributions paid on common stock per share 0.4075 0.4075 0.4075 0.4075   0.4075
Total assets, end of period(5) 286,224   303,989 303,685 278,733 274,878
Average total assets during period(5)(6) 279,684 295,803 307,063 296,418 278,007
Leverage(7) 65,000 66,600 66,700     67,400 68,000
Leverage as a percent of total assets 22.7 %   21.9 %   22.0 % 24.2 % 24.7 %
Net unrealized appreciation (depreciation), end of period   11,363 6,052 8,983 (13,246 )   (21,276 )
Net assets, end of period 218,368 234,539     235,779   210,076 199,503
Average net assets during period(8)   216,881   228,681 242,897 230,203 205,675
Net asset value per common share 21.80 23.42 23.54 20.97 19.92
Market value per common share 19.69 21.55 21.45 19.97 18.43
Shares outstanding (000’s) 10,016 10,016 10,016 10,016 10,016

(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 value of paid-in-kind distributions, the premium on redemption of senior notes 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.

12 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

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 fund’s market-based and NAV-based returns for the fiscal quarter ending August 31, 2017 were -9.4% and -10.3%, respectively (including the reinvestment of distributions). Comparatively, the Tortoise North American Oil and Gas Producers IndexSM returned -7.2% for the same period. Although both negative, natural gas producers performed better than liquids producers. Liquids producers in the Permian retreated the most during the period. The fund’s negative performance was somewhat mitigated by its exposure to midstream companies that it holds to execute its covered call strategy.

Third fiscal quarter highlights      
Distributions paid per share $ 0.4375
Distribution rate (as of 8/31/2017) 13.9%
Quarter-over-quarter distribution increase   0.0%
Year-over-year distribution increase 0.0%
Cumulative distributions paid per share to stockholders
       since inception in July 2012 $ 8.7500
Market-based total return (9.4)%
NAV-based total return (10.3)%
Premium (discount) to NAV (as of 8/31/2017) 7.0%

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 65.3% of total assets and their out-of-the-money percentage at the time written averaged approximately 8.3% during the fiscal quarter.

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.

Key asset performance drivers

Top five contributors         Company type         Performance driver
Cabot Oil & Gas
Corporation
Upstream liquids producer Growing natural gas production and declining basis differentials in the Northeast
Rice Energy Inc.   Upstream natural gas producer Announced acquisition by EQT Corporation
EQT Corporation Upstream natural gas producer Growing natural gas production and declining basis differentials in the Northeast
MPLX LP Midstream gathering and processing MLP Greater strategic clarity on dropdowns and incentive distribution rights restructuring
Centennial Resource
Development, Inc.
Upstream oil and gas producer Reported better than expected 2Q earnings and increased 2017 production growth outlook
  
Bottom five contributors Company type Performance driver
Pioneer Natural
Resources Company
Upstream liquids producer Concern about oil production percentage relative to natural gas production percentage from the Permian basin
Carrizo Oil & Gas, Inc. Upstream oil and natural gas producer Equity overhang due to high leverage and perceived need for acquisition
Range Resources
Corporation
Upstream natural gas producer Lower than expected results in Terryville natural gas asset
Concho Resources Inc. Upstream liquids producer Concern about oil production percentage relative to natural gas production percentage from the Permian basin
Newfield Exploration
Company
Upstream natural gas producer Concerns related to financing operating cash flow outspend

(unaudited)
  
Tortoise Capital Advisors 13



 


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


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.

Distributions received from investments increased approximately 4.8% as compared to 2nd quarter 2017, primarily due to higher net premiums on options written. Operating expenses, consisting primarily of fund advisory fees, decreased approximately 11.8% during the quarter due to lower asset-based fees. Total leverage costs increased approximately 13.0% as compared to 2nd quarter 2017, primarily due to an increase in interest rates during the quarter. As a result of the changes in income and expenses, DCF increased by approximately 7.1% as compared to 2nd quarter 2017. In addition, the fund had net realized losses on investments of $2.3 million during 3rd quarter 2017.

The fund maintained its quarterly distribution of $0.4375 per share during 3rd quarter 2017, which was equal to the distribution paid in the prior quarter and 3rd quarter 2016. 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 if necessary to meet minimum annual distribution requirements and to avoid being subject to excise taxes. The fund has paid cumulative distributions to stockholders of $8.75 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 are not 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 3rd quarter 2017 (in thousands):

YTD 2017        3rd Qtr 2017
Net Investment Loss    $ (2,182 )        $ (723 )
Adjustments to reconcile to DCF:  
       Net premiums on options written 16,928 5,754
       Distributions characterized
              as return of capital 3,143 1,106
       Dividends paid in stock 561 132
              DCF $ 18,450 $ 6,269

Leverage

The fund’s leverage utilization increased slightly as compared to 2nd quarter 2017. The fund utilizes all floating rate leverage that had an interest rate of 2.03% and represented 27.1% 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)
   
14 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

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.

      2016       2017  
Q3(1)       Q4(1) Q1(1)       Q2(1)       Q3(1)  
Total Income from Investments
       Distributions and dividends from investments,
              net of foreign taxes withheld $ 1,457 $ 1,363 $ 1,494 $ 1,516 $ 1,526
       Dividends paid in stock 285 293 299 129 132
       Net premiums on options written 5,863 5,645 5,749 5,425 5,754
              Total from investments 7,605 7,301 7,542 7,070 7,412
Operating Expenses Before Leverage Costs
       Advisory fees, net of fees waived 737 749 820 791 686
       Other operating expenses 174 151 144 140 135
  911 900 964 931 821
       Distributable cash flow before leverage costs 6,694 6,401 6,578 6,139 6,591
       Leverage costs(2) 199 212 251 285 322
              Distributable Cash Flow(3) $ 6,495 $ 6,189 $ 6,327 $ 5,854 $ 6,269
 
Net realized gain (loss) on investments and foreign currency
       translation, for the period $ (690 ) $ 4,490 $ 5,898 $ (6,084 ) $ (2,332 )
As a percent of average total assets(4)  
       Total from investments 10.29 % 9.58 % 9.86 % 9.70 % 11.55 %
       Operating expenses before leverage costs 1.23 % 1.18 % 1.26 % 1.28 % 1.28 %
       Distributable cash flow before leverage costs 9.06 % 8.40 % 8.60 % 8.42 % 10.27 %
As a percent of average net assets(4)
       Total from investments 13.00 % 12.31 % 12.36 % 12.60 % 15.93 %
       Operating expenses before leverage costs 1.56 % 1.52 % 1.58 % 1.66 % 1.76 %
       Leverage costs 0.34 % 0.36 % 0.41 % 0.51 % 0.69 %
       Distributable cash flow 11.10 % 10.43 % 10.37 % 10.43 % 13.48 %
 
Selected Financial Information
Distributions paid on common stock $ 6,350 $ 6,351 $ 6,351 $ 6,360 $ 6,380
Distributions paid on common stock per share 0.4375 0.4375 0.4375 0.4375 0.4375
Total assets, end of period 301,460 319,343 297,341 264,083 238,932
Average total assets during period(5) 294,100 306,669 310,231 289,030 254,645
Leverage(6) 64,000 63,800 65,100 64,600 64,700
Leverage as a percent of total assets 21.2 % 20.0 % 21.9 % 24.5 % 27.1 %
Net unrealized appreciation (depreciation), end of period (7,816 ) 1,717 (16,339 ) (40,654 ) (63,116 )
Net assets, end of period 235,472 246,088 230,201 198,379 171,942
Average net assets during period(7) 232,775 238,453 247,529 222,615 184,587
Net asset value per common share 16.22 16.95 15.84 13.63 11.79
Market value per common share 15.61 15.85 16.33 14.43 12.61
Shares outstanding (000’s) 14,516 14,516 14,537 14,559 14,584

(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 and the value of paid-in-kind distributions.
(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.

Tortoise Capital Advisors 15



 


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

The fund’s market-based and NAV-based returns for the fiscal quarter ending August 31, 2017 were -5.2% and -1.8%, respectively (including the reinvestment of distributions). Comparatively, the TPZ Benchmark Composite* returned -0.4% for the same period. Despite solid company business fundamentals, pipeline equity performance lagged due to fickle capital markets and isolated, company-specific issues resulting in doubts over distribution growth. Performance was helped by the fund’s focus on power and utilities which had positive performance for the fiscal quarter due to low interest rates. Negative performance was further mitigated by the fund’s energy fixed income holdings as they outperformed energy equities throughout the fiscal quarter.

Third fiscal quarter highlights
Monthly distributions paid per share $0.1250
Distribution rate (as of 8/31/2017) 7.4%
Quarter-over-quarter distribution increase 0.0%
Year-over-year distribution increase 0.0%
Cumulative distribution to stockholders
       since inception in July 2009 $13.400
Market-based total return (5.2)%
NAV-based total return (1.8)%
Premium (discount) to NAV (as of 8/31/2017) (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. 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.

Key asset performance drivers
 
Top five contributors Company type Performance driver
ONEOK, Inc. Midstream natural gas/natural gas liquids pipeline company Improved outlook for ethane recoveries and higher natural gas liquids (NGL) prices
Enbridge Inc. Midstream crude oil pipeline company Diversified business model generated steady cash flows
Tallgrass Energy GP, LP Midstream natural gas/natural gas liquids pipeline MLP Continued strong distribution growth with visibility to continue dropdowns to its LP
NRG Energy Inc. (fixed income) Downstream power/utility (YieldCo) Strategic review likely to benefit debt holders
MPLX LP Midstream gathering and processing MLP Greater strategic clarity on dropdowns and incentive distribution rights restructuring
 
Bottom five contributors Company type Performance driver
Plains GP Holdings, L.P. Midstream crude oil pipeline company Reduced distribution on weaker supply & logistics outlook
Energy Transfer Partners, L.P. Midstream natural gas/natural gas liquids pipeline MLP Concerns about equity funding for project backlog
Enbridge Energy Management, L.L.C. Midstream crude oil pipeline company Strategic review with lower distribution viewed unfavorably
Plains All American Pipeline, L.P. Midstream crude oil pipeline MLP Reduced distribution on weaker supply & logistics outlook
Rice Midstream Partners LP Midstream gathering and processing MLP Acquisition of parent company by EQT Corporation will likely result in lower growth

(unaudited)

16 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017





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.

Distributions received from investments increased approximately 1.0% as compared to 2nd quarter 2017 mainly due to increased distribution rates on the fund’s investments. Operating expenses, consisting primarily of fund advisory fees, decreased approximately 3.7% during the quarter due to lower asset-based fees. Total leverage costs increased approximately 8.6% as compared to 2nd quarter 2017, primarily due to an increase in interest rates during the quarter. As a result of the changes in income and expenses, DCF increased approximately 1.5% as compared to 2nd quarter 2017. In addition, the fund had net realized losses on investments of $0.3 million during 3rd quarter 2017.

The fund paid monthly distributions of $0.125 per share during 3rd quarter 2017, which was unchanged over the prior quarter and 3rd quarter 2016. 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 if necessary to meet minimum annual distribution requirements and to avoid being subject to excise taxes. The fund’s Board of Directors has declared monthly distributions of $0.125 per share to be paid during 4th quarter 2017. The fund’s distribution policy is described on the inside front cover of this report. The fund has paid cumulative distributions to stockholders of $13.40 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 are not 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 3rd quarter 2017 (in thousands):

      YTD 2017       3rd Qtr 2017
Net Investment Income       $ 3,082          $ 1,095
Adjustments to reconcile to DCF:
       Dividends paid in stock 592 166
       Distributions characterized
              as return of capital 3,803 1,199
       Interest rate swap expenses (113 ) (27 )
       Change in amortization methodology 18 5
              DCF $ 7,382 $ 2,438

Leverage

The fund’s leverage utilization was relatively unchanged as compared to 2nd quarter 2017 and represented 24.0% of total assets at August 31, 2017. The fund has maintained compliance with its applicable coverage ratios. At quarter-end, including the impact of interest rate swaps, approximately 29% of the leverage cost was fixed, the weighted-average maturity was 0.9 years and the weighted-average annual rate on leverage was 2.16%. These rates will vary in the future as a result of changing floating rates and as swaps mature or are redeemed. During the quarter, interest rate swaps with a notional value of $6 million matured. During the period that the swaps were outstanding, the fund paid a fixed interest rate of 1.89% and received a floating interest rate equal to the 3-month U.S. Dollar LIBOR.

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)

Tortoise Capital Advisors 17



 


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.

      2016 2017  
Q3(1)       Q4(1)       Q1(1)       Q2(1)       Q3(1)
Total Income from Investments
       Interest earned on corporate bonds $ 1,605 $ 1,537 $ 1,519 $ 1,508 $ 1,480
       Distributions and dividends from investments,
              net of foreign taxes withheld 1,738 1,620 1,650 1,657 1,715
       Dividends paid in stock 251 258 264 162 166
              Total from investments 3,594 3,415 3,433 3,327 3,361
Operating Expenses Before Leverage Costs
       Advisory fees 499 503 518 525 501
       Other operating expenses 153 140 133 130 130
  652 643 651 655 631
       Distributable cash flow before leverage costs 2,942 2,772 2,782 2,672 2,730
       Leverage costs(2) 230 221 241 269 292
              Distributable Cash Flow(3) $ 2,712 $ 2,551 $ 2,541 $ 2,403 $ 2,438
 
Net realized gain (loss) on investments and foreign currency
       translation, for the period $ 3,840 $ 8,066 $ 3,005 $ 5,008 $ (347 )
As a percent of average total assets(4)
       Total from investments 6.82 % 6.39 % 6.30 % 5.99 % 6.31 %
       Operating expenses before leverage costs 1.24 % 1.20 % 1.20 % 1.18 % 1.18 %
       Distributable cash flow before leverage costs 5.58 % 5.19 % 5.10 % 4.81 % 5.13 %
As a percent of average net assets(4)
       Total from investments 9.02 % 8.37 % 8.13 % 7.84 % 8.45 %
       Operating expenses before leverage costs 1.64 % 1.58 % 1.54 % 1.54 % 1.59 %
       Leverage costs 0.58 % 0.54 % 0.57 % 0.63 % 0.73 %
       Distributable cash flow 6.80 % 6.25 % 6.02 % 5.67 % 6.13 %
 
Selected Financial Information
Distributions paid on common stock $ 2,607 $ 2,607 $ 2,607 $ 2,607 $ 2,606
Distributions paid on common stock per share 0.3750 0.3750 0.3750 0.3750 0.3750
Total assets, end of period 213,243 217,415 223,313 213,441 213,992
Average total assets during period(5) 209,610 215,113 220,830 220,356 211,408
Leverage(6) 50,700 50,600 51,100 51,300 51,400
Leverage as a percent of total assets 23.8 % 23.3 % 22.9 % 24.0 % 24.0 %
Net unrealized appreciation, end of period 32,831 30,817 34,896 21,461 17,555
Net assets, end of period 161,615 166,073 171,566 161,413 155,739
Average net assets during period(7) 158,507 164,170 171,188 168,319 157,849
Net asset value per common share 23.25 23.89 24.68 23.22 22.40
Market value per common share 21.57 21.43 22.56 21.84 20.33
Shares outstanding (000’s) 6,951 6,951 6,951 6,951 6,951

(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 value of paid-in-kind distributions and the change in methodology for calculating amortization of premiums or discounts; 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.

18 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

TYG Schedule of Investments (unaudited)
August 31, 2017

      Shares       Fair Value
Master Limited Partnerships — 177.2%(1)
Crude Oil Pipelines — 32.3%(1)
United States — 32.3%(1)
Andeavor Logistics LP 2,697,314 $ 134,191,371
Enbridge Energy Partners, L.P. 4,778,228 72,772,413
Genesis Energy L.P. 2,514,842 67,146,281
Plains All American Pipeline, L.P. 5,284,633 114,465,150
Shell Midstream Partners, L.P. 1,113,567 30,812,399
419,387,614
Natural Gas/Natural Gas Liquids Pipelines — 56.4%(1)
United States — 56.4%(1)
Dominion Energy Midstream
       Partners, LP 1,452,776 41,622,032
Energy Transfer Partners, L.P.(2) 11,786,063 224,053,058
Enterprise Products Partners L.P. 7,395,953 192,812,495
EQT Midstream Partners, LP 1,628,242 124,348,842
Spectra Energy Partners, LP 1,522,280 67,482,672
Tallgrass Energy Partners, LP 1,701,776 80,442,952
730,762,051
Natural Gas Gathering/Processing — 46.7%(1)
United States — 46.7%(1)
Antero Midstream Partners LP 1,660,647 56,080,049
DCP Midstream, LP 1,817,807 58,369,783
EnLink Midstream Partners, LP 4,587,525 74,455,531
MPLX LP 3,173,073 108,899,865
Noble Midstream Partners LP 418,670 20,167,334
Rice Midstream Partners LP 3,085,403 64,022,112
Western Gas Partners, LP 2,849,396 145,547,148
Williams Partners L.P. 1,966,643 77,485,734
605,027,556
Refined Product Pipelines — 41.8%(1)
United States — 41.8%(1)
Buckeye Partners, L.P. 2,647,499 151,410,468
Holly Energy Partners, L.P. 1,838,870 60,020,717
Magellan Midstream Partners, L.P. 2,839,689 191,366,642
NuStar Energy L.P. 1,365,641 55,294,804
Phillips 66 Partners LP 946,859 45,240,923
Valero Energy Partners LP 888,135 38,678,279
542,011,833
Total Master Limited Partnerships
       (Cost $1,948,170,463) 2,297,189,054
             
Common Stock — 6.7%(1)
Natural Gas/Natural Gas Liquids Pipelines — 6.7%(1)
United States — 6.7%(1)
ONEOK, Inc.
       (Cost $83,118,316) 1,593,526 86,305,368
 
Preferred Stock — 2.9%(1)
Natural Gas Gathering/Processing — 1.8%(1)
United States — 1.8%(1)
Targa Resources Corp., 9.500%(3)(4) 21,758 23,674,990
Oil and Gas Production — 1.1%(1)
United States — 1.1%(1)
Anadarko Petroleum Corporation,
       7.500%, 06/07/2018 392,800 14,533,600
Total Preferred Stock
       (Cost $35,755,731) 38,208,590
 
Private Investment — 1.0%(1)
Renewables — 1.0%(1)
United States — 1.0%(1)
Tortoise HoldCo II, LLC(3)(4)
       (Cost $12,928,743) N/A 12,928,743
 
Short-Term Investment — 0.0%(1)
United States Investment Company — 0.0%(1)
Government & Agency Portfolio — Institutional Class,
       0.93%(5) (Cost $290,384) 290,384 290,384
Total Investments — 187.8%(1)
     (Cost $2,080,263,637) 2,434,922,139
Interest Rate Swap Contracts — (0.0)%(1)
$15,000,000 notional — net unrealized depreciation(6) (357,703 )
Other Assets and Liabilities — (2.5)%(1) (32,369,219 )
Deferred Tax Liability — (31.3)%(1) (405,413,519 )
Credit Facility Borrowings — (9.5)%(1) (122,500,000 )
Senior Notes — (31.8)%(1) (412,500,000 )
Mandatory Redeemable Preferred Stock
       at Liquidation Value — (12.7)%(1) (165,000,000 )
Total Net Assets Applicable to
     Common Stockholders — 100.0%(1) $ 1,296,781,698

(1) Calculated as a percentage of net assets applicable to common stockholders.
(2) A portion of the security is segregated as collateral for the unrealized depreciation of interest rate swap contracts of $357,703.
(3) Restricted securities have a total fair value of $36,603,733, which represents 2.8% 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, as more fully described in Note 2 to the financial statements.
(5) Rate indicated is the current yield as of August 31, 2017.
(6) See Note 11 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 19



 


NTG Schedule of Investments (unaudited)
August 31, 2017

      Shares       Fair Value
Master Limited Partnerships — 162.7%(1)
Crude Oil Pipelines — 29.5%(1)
United States — 29.5%(1)
Andeavor Logistics LP 1,450,409 $ 72,157,848
Enbridge Energy Partners, L.P. 2,771,842 42,215,154
Genesis Energy L.P. 1,442,424 38,512,721
Plains All American Pipeline, L.P. 3,387,097 73,364,521
Shell Midstream Partners, L.P. 600,405 16,613,206
242,863,450
Natural Gas/Natural Gas Liquids Pipelines — 55.2%(1)
United States — 55.2%(1)
Dominion Energy Midstream
       Partners, LP 1,202,231 34,443,918
Energy Transfer Partners, L.P. 7,068,994 134,381,576
Enterprise Products Partners L.P. 4,800,215 125,141,605
EQT Midstream Partners, LP 911,273 69,593,919
Spectra Energy Partners, LP 834,847 37,008,768
Tallgrass Energy Partners, LP 1,135,235 53,662,559
454,232,345
Natural Gas Gathering/Processing — 49.5%(1)
United States — 49.5%(1)
Antero Midstream Partners LP 725,846 24,511,819
DCP Midstream, LP 1,641,517 52,709,111
EnLink Midstream Partners, LP 3,383,588 54,915,633
MPLX LP 1,978,380 67,898,002
Noble Midstream Partners LP 245,420 11,821,881
Rice Midstream Partners LP 1,869,108 38,783,991
Western Gas Partners, LP 1,671,813 85,396,208
Williams Partners L.P. 1,828,781 72,053,971
408,090,616
Refined Product Pipelines — 28.5%(1)
United States — 28.5%(1)
Buckeye Partners, L.P. 1,544,576 88,334,301
Holly Energy Partners, L.P. 1,010,104 32,969,795
Magellan Midstream Partners, L.P. 869,301 58,582,194
Nustar Energy L.P. 793,760 32,139,342
Phillips 66 Partners LP 310,784 14,849,260
Valero Energy Partners LP 187,891 8,182,653
235,057,545
Total Master Limited Partnerships
       (Cost $1,234,258,640) 1,340,243,956
             
Common Stock — 7.2%(1)
Natural Gas/Natural Gas Liquids Pipelines — 7.2%(1)
United States — 7.2%(1)
ONEOK, Inc.
       (Cost $56,872,760) 1,090,352 59,053,464
 
Preferred Stock — 2.5%(1)
Natural Gas Gathering/Processing — 1.6%(1)
United States — 1.6%(1)
Targa Resources Corp., 9.500%(2)(3) 12,252 13,331,464
Oil and Gas Production — 0.9%(1)
United States — 0.9%(1)
Anadarko Petroleum Corporation,
       7.500%, 06/07/2018 199,500 7,381,500
Total Preferred Stock
       (Cost $19,223,537) 20,712,964
 
Short-Term Investment — 0.0%(1)
United States Investment Company — 0.0%(1)
Government & Agency Portfolio — Institutional Class,
       0.93%(4) (Cost $138,513) 138,513 138,513
Total Investments — 172.4%(1)
       (Cost $1,310,493,450) 1,420,148,897
Other Assets and Liabilities — (0.7)%(1) (5,932,493 )
Deferred Tax Liability — (18.3)%(1) (151,028,686 )
Credit Facility Borrowings — (5.5)%(1) (45,300,000 )
Senior Notes — (34.5)%(1) (284,000,000 )
Mandatory Redeemable Preferred Stock
       at Liquidation Value — (13.4)%(1) (110,000,000 )
Total Net Assets Applicable to
       Common Stockholders — 100.0%(1) $ 823,887,718

(1) Calculated as a percentage of net assets applicable to common stockholders.
(2) Restricted securities have a total fair value of $13,331,464, which represents 1.6% 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, as more fully described in Note 2 to the financial statements.
(4) Rate indicated is the current yield as of August 31, 2017.

See accompanying Notes to Financial Statements.

20 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

TTP Schedule of Investments (unaudited)
August 31, 2017

      Shares       Fair Value
Common Stock — 92.0%(1)
Crude Oil Pipelines — 35.0%(1)
Canada — 21.2%(1)
Gibson Energy Inc 85,269 $ 1,192,230
Enbridge Inc. 613,931 24,551,101
Inter Pipeline Ltd. 502,133 9,196,222
Pembina Pipeline Corporation 226,342 7,295,508
United States — 13.8%(1)
Plains GP Holdings, L.P. 913,432 20,533,951
SemGroup Corporation 273,746 7,035,272
69,804,284
Natural Gas Gathering/Processing — 15.4%(1)
United States — 15.4%(1)
EnLink Midstream, LLC 530,288 9,041,410
Targa Resources Corp. 263,924 11,763,093
The Williams Companies, Inc. 333,567 9,916,947
30,721,450
Natural Gas/Natural Gas Liquids Pipelines — 25.1%(1)
Canada — 12.0%(1)
Keyera Corp. 58,564 1,699,587
TransCanada Corporation 439,087 22,305,620
United States — 13.1%(1)
ONEOK, Inc. 335,302 18,159,956
Tallgrass Energy GP, LP 297,750 8,003,520
50,168,683
Oil and Gas Production — 11.5%(1)
United States — 11.5%(1)
Anadarko Petroleum Corporation(2) 9,400 384,742
Antero Resources Corporation(2)(3) 35,700 702,933
Cabot Oil & Gas Corporation(2) 112,800 2,882,040
Carrizo Oil & Gas, Inc.(2)(3) 36,600 491,904
Cimarex Energy Co.(2) 16,100 1,605,009
Concho Resources Inc.(2)(3) 24,400 2,707,668
Continental Resources, Inc.(2)(3) 24,300 824,256
Diamondback Energy, Inc.(2)(3) 9,700 880,663
EOG Resources, Inc.(2) 52,300 4,444,977
EQT Corporation(2) 8,000 498,720
Gulfport Energy Corporation(2)(3) 30,200 378,406
Hess Corporation(2) 7,400 287,860
Laredo Petroleum, Inc.(2)(3) 50,800 630,936
Newfield Exploration Company(2)(3) 27,200 710,736
Noble Energy, Inc.(2) 36,300 862,851
Occidental Petroleum Corporation(2) 7,200 429,840
PDC Energy, Inc.(2)(3) 6,246 245,655
Pioneer Natural Resources Company(2) 21,100 2,735,615
Range Resources Corporation(2) 31,800 552,048
RSP Permian, Inc.(2)(3) 23,100 724,878
22,981,737
Refined Product Pipelines — 5.0%(1)
United States — 5.0%(1)
VTTI Energy Partners LP 509,553 9,885,328
Total Common Stock
       (Cost $201,861,611) 183,561,482
 
Master Limited Partnerships
       and Related Companies — 37.8%(1)
Crude Oil Pipelines — 8.1%(1)
United States — 8.1%(1)
Andeavor Logistics LP 36,548 1,818,263
Enbridge Energy Management, L.L.C.(4) 777,698 11,206,630
Genesis Energy L.P. 76,499 2,042,523
Plains All American Pipeline, L.P. 6,525 141,332
Shell Midstream Partners, L.P. 34,724 960,813
16,169,561
Natural Gas/Natural Gas Liquids Pipelines — 10.5%(1)
United States — 10.5%(1)
Energy Transfer Equity, L.P. 43,645 758,114
Energy Transfer Partners, L.P. 655,206 12,455,466
Enterprise Products Partners L.P. 174,456 4,548,068
EQT Midstream Partners, LP 20,323 1,552,068
Tallgrass Energy Partners, LP 35,125 1,660,359
20,974,075
Natural Gas Gathering/Processing — 10.1%(1)
United States — 10.1%(1)
DCP Midstream, LP 58,115 1,866,073
EnLink Midstream Partners, LP 69,184 1,122,856
MPLX LP 245,647 8,430,605
Noble Midstream Partners LP 24,185 1,164,992
Rice Midstream Partners LP 182,372 3,784,219
Western Gas Partners, LP 50,531 2,581,123
Williams Partners L.P. 29,581 1,165,491
20,115,359
Refined Product Pipelines — 9.1%(1)
United States — 9.1%(1)
Buckeye Partners, L.P. 71,433 4,085,253
Holly Energy Partners, L.P. 96,994 3,165,884
Magellan Midstream Partners, L.P. 35,211 2,372,869
NuStar Energy L.P. 133,420 5,402,176
Phillips 66 Partners LP 36,049 1,722,421
Valero Energy Partners LP 31,129 1,355,668
18,104,271
Total Master Limited Partnerships
       and Related Companies (Cost $78,155,047) 75,363,266

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 21



 


TTP Schedule of Investments (unaudited) (continued)
August 31, 2017

      Shares       Fair Value
Preferred Stock — 3.4%(1)
Natural Gas Gathering/Processing — 1.2%(1)
United States — 1.2%(1)
Targa Resources Corp., 9.500%(5)(6) 2,108 $ 2,293,725
Oil and Gas Production — 2.2%(1)
United States — 2.2%(1)
Anadarko Petroleum Corporation,
       7.500%, 06/07/2018 39,500 1,461,500
Hess Corporation,
       8.000%, 02/01/2019 60,000 2,997,000
4,458,500
Total Preferred Stock
       (Cost $7,040,512) 6,752,225
 
Short-Term Investment — 0.0%(1)
United States Investment Company — 0.0%(1)
Government & Agency Portfolio — Institutional Class,
       0.93%(7) (Cost $135,898) 135,898 135,898
Total Investments — 133.2%(1)
       (Cost $287,193,068) 265,812,871
Total Value of Options Written
       (Premiums received $338,186) — (0.1)%(1) (238,266 )
Other Assets and Liabilities — 1.0%(1) 1,928,760
Credit Facility Borrowings — (9.0)%(1) (18,000,000 )
Senior Notes — (17.1)%(1) (34,000,000 )
Mandatory Redeemable Preferred Stock
       at Liquidation Value — (8.0)%(1) (16,000,000 )
Total Net Assets Applicable to
       Common Stockholders — 100.0%(1) $ 199,503,365

(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) Security distributions are paid-in-kind. Rate determined by dividing the cash value of a distribution declared by Enbridge Energy Partners, L.P. by the average closing price of Enbridge Energy Management, L.L.C. shares for the ten consecutive trading days prior to the ex-dividend date.
(5) Restricted securities have a total fair value of $2,293,725, which represents 1.2% of net assets. See Note 6 to the financial statements for further disclosure.
(6) Securities have been valued by using significant unobservable inputs in accordance with fair value procedures, as more fully described in Note 2 to the financial statements.
(7) Rate indicated is the current yield as of August 31, 2017.

See accompanying Notes to Financial Statements.

22 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

NDP Schedule of Investments (unaudited)
August 31, 2017

      Shares       Fair Value
Common Stock — 97.6%(1)
Crude Oil Pipelines — 0.0%(1)
United States — 0.0%(1)
SemGroup Corporation 344 $ 8,841
Natural Gas Gathering/Processing — 0.7%(1)
United States — 0.7%(1)
Targa Resources Corp. 26,507 1,181,417
Oil and Gas Production — 95.0%(1)
The Netherlands — 3.6%(1)
Royal Dutch Shell plc (ADR) 114,500 6,318,110
United States — 91.4%(1)
Anadarko Petroleum Corporation(2) 117,100 4,792,903
Antero Resources Corporation(2)(3) 310,410 6,111,973
Cabot Oil & Gas Corporation(2) 496,700 12,690,685
Carrizo Oil & Gas, Inc.(2)(3) 259,800 3,491,712
Centennial Resource Development, Inc.(3) 117,239 2,027,062
Cimarex Energy Co.(2) 76,000 7,576,440
Concho Resources Inc.(2)(3) 98,243 10,902,026
Continental Resources, Inc.(2)(3) 208,500 7,072,320
Devon Energy Corporation(2) 258,534 8,117,967
Diamondback Energy, Inc.(2)(3) 107,400 9,750,846
EOG Resources, Inc.(2) 201,500 17,125,485
EQT Corporation(2) 108,100 6,738,954
Laredo Petroleum, Inc.(2)(3) 306,100 3,801,762
Newfield Exploration Company(2)(3) 233,400 6,098,742
Parsley Energy, Inc.(2)(3) 247,600 6,202,380
PDC Energy, Inc.(2)(3) 63,500 2,497,455
Pioneer Natural Resources Company(2) 138,500 17,956,525
Range Resources Corporation(2) 455,700 7,910,952
RSP Permian, Inc.(2)(3) 245,000 7,688,100
SM Energy Company(2) 189,700 2,534,392
Whiting Petroleum Corporation(3) 27 121
WPX Energy, Inc.(2)(3) 606,200 6,055,938
163,462,850
Oil Services — 1.9%(1)
United States — 1.9%(1)
U.S. Silica Holdings, Inc. (2) 118,700 3,229,827
Total Common Stock
       (Cost $232,791,891) 167,882,935
 
Master Limited Partnerships
       and Related Companies — 39.0%(1)
Crude Oil Pipelines — 8.3%(1)
United States — 8.3%(1)
Andeavor Logistics LP 57,607 2,865,948
Enbridge Energy Management, L.L.C.(4) 385,779 5,559,069
Plains All American Pipeline, L.P. 204,532 4,430,163
Shell Midstream Partners, L.P. 51,895 1,435,935
14,291,115
Natural Gas/Natural Gas Liquids Pipelines — 10.0%(1)
United States — 10.0%(1)
Energy Transfer Equity, L.P. 44,365 770,620
Energy Transfer Partners, L.P. 342,200 6,505,222
Enterprise Products Partners L.P. 205,200 5,349,564
EQT GP Holdings, LP 8,439 240,680
EQT Midstream Partners, LP 24,303 1,856,020
Spectra Energy Partners, LP 34,627 1,535,015
Tallgrass Energy Partners, LP 20,140 952,018
17,209,139
Natural Gas Gathering/Processing — 12.0%(1)
United States — 12.0%(1)
Antero Midstream Partners LP 75,672 2,555,444
DCP Midstream, LP 155,345 4,988,128
EnLink Midstream Partners, LP 86,700 1,407,141
MPLX LP 121,726 4,177,636
Noble Midstream Partners LP 25,215 1,214,607
Rice Midstream Partners LP 181,028 3,756,331
Western Gas Partners, LP 17,480 892,878
Williams Partners L.P. 42,688 1,681,907
20,674,072
Refined Product Pipelines — 8.7%(1)
United States — 8.7%(1)
Buckeye Partners, L.P. 49,673 2,840,799
Holly Energy Partners, L.P. 100,261 3,272,519
Magellan Midstream Partners, L.P. 40,587 2,735,158
NuStar Energy L.P. 59,614 2,413,771
Phillips 66 Partners LP 53,277 2,545,575
Valero Energy Partners LP 26,106 1,136,916
14,944,738
Total Master Limited Partnerships
       and Related Companies (Cost $65,958,283) 67,119,064

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 23



 


NDP Schedule of Investments (unaudited) (continued)
August 31, 2017

      Shares       Fair Value
Preferred Stock — 2.1%(1)
Natural Gas Gathering/Processing — 1.3%(1)
United States — 1.3%(1)
Targa Resources Corp.,
       9.500%(5)(6) 1,997 $ 2,172,946
Oil and Gas Production — 0.8%(1)
United States — 0.8%(1)
Anadarko Petroleum Corporation,
       7.500%, 06/07/2018 36,900 1,365,300
Total Preferred Stock
       (Cost $3,317,432) 3,538,246
 
Short-Term Investment — 0.1%(1)
United States Investment Company — 0.1%(1)
Government & Agency Portfolio — Institutional Class,
       0.93%(7) (Cost $127,992) 127,992 127,992
Total Investments — 138.8%(1)
       (Cost $302,195,598) 238,668,237
Total Value of Options Written
       (Premiums received $1,879,637) — (0.9)%(1) (1,468,588 )
Other Assets and Liabilities — (0.3)%(1) (558,107 )
Credit Facility Borrowings — (37.6)%(1) (64,700,000 )
Total Net Assets Applicable to
       Common Stockholders — 100.0%(1) $ 171,941,542

(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) Security distributions are paid-in-kind. Rate determined by dividing the cash value of a distribution declared by Enbridge Energy Partners, L.P. by the average closing price of Enbridge Energy Management, L.L.C. shares for the ten consecutive trading days prior to the ex-dividend date.
(5) Restricted securities have a total fair value of $2,172,946 which represents 1.3% of net assets. See Note 6 to the financial statements for further disclosure.
(6) Securities have been valued by using significant unobservable inputs in accordance with fair value procedures, as more fully described in Note 2 to the financial statements.
(7) Rate indicated is the current yield as of August 31, 2017.

See accompanying Notes to Financial Statements.

24 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

TPZ Schedule of Investments (unaudited)
August 31, 2017

Principal
      Amount       Fair Value
Corporate Bonds — 67.8%(1)
Crude Oil Pipelines — 8.1%(1)
Canada — 4.3%(1)
Enbridge Inc.,
       5.500%, 07/15/2077 $ 2,000,000 $ 2,007,500
Gibson Energy Inc.,
       6.750%, 07/15/2021(2) 4,500,000 4,657,500
United States — 3.8%(1)
SemGroup Corp.,
       6.375%, 03/15/2025(2) 6,000,000 5,910,000
12,575,000
Natural Gas/Natural Gas Liquids Pipelines — 25.9%(1)
Canada — 4.8%(1)
TransCanada Corporation,
       5.625%, 05/20/2075 7,000,000 7,420,000
United States — 21.1%(1)
Cheniere Corp.,
       7.000%, 06/30/2024 4,000,000 4,550,000
Cheniere Corp.,
       5.875%, 03/31/2025 2,000,000 2,150,000
Columbia Pipeline Group, Inc.,
       3.300%, 06/01/2020 2,000,000 2,057,356
Florida Gas Transmission Co., LLC,
       5.450%, 07/15/2020(2) 1,500,000 1,622,430
Kinder Morgan, Inc.,
       6.500%, 09/15/2020 4,000,000 4,459,184
Midcontinent Express Pipeline LLC,
       6.700%, 09/15/2019(2) 2,000,000 2,142,500
ONEOK, Inc.,
       4.250%, 02/01/2022 4,500,000 4,693,680
ONEOK, Inc.,
       7.500%, 09/01/2023 2,000,000 2,403,400
Rockies Express Pipeline, LLC,
       6.000%, 01/15/2019(2) 4,000,000 4,135,000
Ruby Pipeline, LLC,
       6.000%, 04/01/2022(2) 1,500,000 1,605,782
Southern Star Central Corp.,
       5.125%, 07/15/2022(2) 3,000,000 3,075,000
40,314,332
Natural Gas Gathering/Processing — 9.9%(1)
United States — 9.9%(1)
Blue Racer Midstream, LLC,
       6.125%, 11/15/2022(2) 4,000,000 4,110,000
DCP Midstream LLC,
       9.750%, 03/15/2019(2) 4,000,000 4,395,000
The Williams Companies, Inc.,
       7.875%, 09/01/2021 5,000,000 5,837,500
The Williams Companies, Inc.,
       4.550%, 06/24/2024 1,000,000 1,022,500
15,365,000
Oil and Gas Production — 3.9%(1)
United States — 3.9%(1)
Carrizo Oil & Gas, Inc.,
       7.500%, 09/15/2020 1,000,000 1,013,750
EQT Corporation,
       8.125%, 06/01/2019 2,000,000 2,196,036
Hess Corporation,
       4.300%, 04/01/2027 3,000,000 2,941,545
6,151,331
Power/Utility — 17.2%(1)
United States — 17.2%(1)
The AES Corporation,
       5.500%, 04/15/2025 4,000,000 4,170,000
CMS Energy Corp.,
       8.750%, 06/15/2019 5,185,000 5,775,141
Dominion Resources, Inc.,
       5.750%, 10/01/2054 4,000,000 4,310,000
Duquesne Light Holdings, Inc.,
       6.400%, 09/15/2020(2) 3,000,000 3,362,238
Duquesne Light Holdings, Inc.,
       5.900%, 12/01/2021(2) 2,000,000 2,268,144
NRG Energy, Inc.,
       6.250%, 07/15/2022 2,000,000 2,095,000
NRG Yield Operating LLC,
       5.375%, 08/15/2024 2,500,000 2,612,500
NV Energy, Inc.,
       6.250%, 11/15/2020 1,000,000 1,124,673
Pattern Energy Group Inc.,
       5.875%, 02/01/2024(2) 1,000,000 1,047,500
26,765,196
Refining — 2.8%(1)
United States — 2.8%(1)
HollyFrontier Corporation,
       5.875%, 04/01/2026 4,000,000 4,342,680
Total Corporate Bonds
       (Cost $100,119,975) 105,513,539

See accompanying Notes to Financial Statements.
 
Tortoise Capital Advisors 25



 


TPZ Schedule of Investments (unaudited) (continued)
August 31, 2017

      Shares       Fair Value
Master Limited Partnerships
     and Related Companies — 36.4%(1)
Crude Oil Pipelines — 7.9%(1)
United States — 7.9%(1)
Andeavor Logistics LP 39,100 $ 1,945,225
Enbridge Energy Management, L.L.C.(3) 538,608 7,761,337
Genesis Energy, L.P. 54,067 1,443,589
Plains All American Pipeline, L.P. 15,615 338,220
Shell Midstream Partners, L.P. 29,307 810,925
12,299,296
Natural Gas/Natural Gas Liquids Pipelines — 10.8%(1)
United States — 10.8%(1)
Energy Transfer Equity, L.P. 30,902 536,768
Energy Transfer Partners, L.P.(4) 515,318 9,796,195
Enterprise Products Partners L.P. 158,699 4,137,283
EQT Midstream Partners, LP 4,770 364,285
Tallgrass Energy Partners, LP 42,886 2,027,221
16,861,752
Natural Gas Gathering/Processing — 9.0%(1)
United States — 9.0%(1)
DCP Midstream, LP 52,040 1,671,005
EnLink Midstream Partners, LP 49,588 804,813
MPLX LP 127,522 4,376,555
Noble Midstream Partners LP 17,176 827,368
Rice Midstream Partners LP 127,248 2,640,396
Western Gas Partners, LP 63,378 3,237,348
Williams Partners L.P. 12,216 481,311
14,038,796
Refined Product Pipelines — 8.7%(1)
United States — 8.7%(1)
Buckeye Partners, L.P. 48,744 2,787,669
Holly Energy Partners, L.P. 72,596 2,369,534
Magellan Midstream Partners, L.P. 34,561 2,329,066
NuStar Energy L.P. 100,609 4,073,658
Phillips 66 Partners LP 24,755 1,182,794
Valero Energy Partners LP 19,193 835,855
13,578,576
Total Master Limited Partnerships and
       Related Companies (Cost $46,195,969) 56,778,420
Common Stock — 23.2%(1)
Crude Oil Pipelines — 8.9%(1)
Canada — 2.6%(1)
Enbridge Inc. 99,304 3,971,167
United States — 6.3%(1)
Plains GP Holdings, L.P. 346,920 7,798,762
SemGroup Corporation 79,830 2,051,631
13,821,560
Natural Gas/Natural Gas Liquids Pipelines — 7.4%(1)
United States — 7.4%(1)
ONEOK, Inc. 148,091 8,020,608
Tallgrass Energy GP, LP 133,814 3,596,920
11,617,528
Natural Gas Gathering/Processing — 6.3%(1)
United States — 6.3%(1)
EnLink Midstream LLC 125,234 2,135,240
Targa Resources Corp. 115,900 5,165,663
The Williams Companies, Inc. 83,852 2,492,920
9,793,823
Refined Product Pipelines — 0.6%(1)
United States — 0.6%(1)
VTTI Energy Partners LP 50,626 982,144
Total Common Stock
       (Cost $35,030,475) 36,215,055

See accompanying Notes to Financial Statements.
 
26 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

TPZ Schedule of Investments (unaudited) (continued)
August 31, 2017

      Shares       Fair Value
Preferred Stock — 3.2%(1)
Natural Gas Gathering/Processing — 1.2%(1)
United States — 1.2%(1)
Targa Resources Corp.,
       9.500%(2)(5) 1,685 $ 1,833,457
Oil and Gas Production — 0.6%(1)
United States — 0.6%(1)
Anadarko Petroleum Corporation,
       7.500%, 06/07/2018 24,400 902,800
Power/Utility — 1.4%(1)
United States — 1.4%(1)
DTE Energy,
       6.500%, 10/01/2019 39,600 2,235,816
Total Preferred Stock
       (Cost $4,518,781) 4,972,073
Short-Term Investment — 0.1%(1)
United States Investment Company — 0.1%(1)
Government & Agency Portfolio — Institutional
       Class, 0.93%(6) (Cost $129,904) 129,904 129,904
Total Investments — 130.7%(1)
     (Cost $185,995,104) 203,608,991
Interest Rate Swap Contracts — (0.0)%(1)
$15,000,000 notional — net unrealized depreciation(7) (59,635 )
Other Assets and Liabilities — 2.3%(1) 3,589,816
Credit Facility Borrowings — (33.0)%(1) (51,400,000 )
Total Net Assets Applicable to
     Common Stockholders — 100.0%(1) $ 155,739,172

(1) Calculated as a percentage of net assets applicable to common stockholders.
(2) Restricted securities have a total fair value of $40,164,551, which represents 25.8% of net assets. See Note 6 to the financial statements for further disclosure.
(3) Security distributions are paid-in-kind. Rate determined by dividing the cash value of a distribution declared by Enbridge Energy Partners, L.P. by the average closing price of Enbridge Energy Management, L.L.C. shares for the ten consecutive trading days prior to the ex-dividend date.
(4) A portion of the security is segregated as collateral for the unrealized depreciation of interest rate swap contracts of $59,635.
(5) Securities have been valued by using significant unobservable inputs in accordance with fair value procedures, as more fully described in Note 2 to the financial statements.
(6) Rate indicated is the current yield as of August 31, 2017.
(7) See Note 11 to the financial statements for further disclosure.

See accompanying Notes to Financial Statements.
 
Tortoise Capital Advisors 27



 


Schedule of Interest Rate Swap Contracts (unaudited)
August 31, 2017

TYG
Fixed Rate Floating Rate
Maturity Notional Paid by Received by Unrealized
Counterparty       Date       Amount       TYG       TYG       Depreciation
The Bank of Nova Scotia 09/02/2018 $ 5,000,000 1.815% 1-month U.S. Dollar LIBOR     $ (27,065 )    
The Bank of Nova Scotia 09/02/2021 10,000,000 2.381% 1-month U.S. Dollar LIBOR (330,638 )
$ 15,000,000 $ (357,703 )
 
TPZ
Fixed Rate Floating Rate Unrealized
Maturity Notional Paid by Received by Appreciation
Counterparty Date Amount TPZ TPZ (Depreciation)
Wells Fargo Bank, N.A. 08/06/2018 $ 6,000,000 1.95% 3-month U.S. Dollar LIBOR $ (33,188 )
Wells Fargo Bank, N.A. 11/29/2019 6,000,000 1.33% 3-month U.S. Dollar LIBOR 27,394
Wells Fargo Bank, N.A. 08/06/2020 3,000,000 2.18% 3-month U.S. Dollar LIBOR (53,841 )
$ 15,000,000 $ (59,635 )

See accompanying Notes to Financial Statements.
 
28 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Schedule of Options Written (unaudited)
August 31, 2017

TTP
Call Options Written       Expiration Date       Strike Price       Contracts       Notional Value       Fair Value
Anadarko Petroleum Corporation September 2017      $ 44.50           94        $ 418,300   $ (1,128 )
Antero Resources Corporation September 2017 19.50 357 696,150 (19,863 )
Cabot Oil & Gas Corporation September 2017 26.00 1,128 2,932,800 (39,480 )
Carrizo Oil & Gas, Inc. September 2017 14.25 366 521,550 (12,321 )
Cimarex Energy Co. September 2017 103.00 161 1,658,300 (15,646 )
Concho Resources Inc. September 2017 122.75 244 2,995,100 (1,012 )
Continental Resources, Inc. September 2017 34.00 243 826,200 (23,571 )
Diamondback Energy, Inc. September 2017 90.75 97 880,275 (22,902 )
EOG Resources, Inc. September 2017 94.00 523 4,916,200 (1,569 )
EQT Corporation September 2017 64.00 80 512,000 (6,799 )
Gulfport Energy Corporation September 2017 12.25 302 369,950 (19,504 )
Hess Corporation September 2017 41.60 74 307,840 (1,202 )
Laredo Petroleum, Inc. September 2017 12.55 508 637,540 (17,892 )
Newfield Exploration Company September 2017 26.50 272 720,800 (15,856 )
Noble Energy, Inc. September 2017 26.25 363 952,875 (1,419 )
Occidental Petroleum Corporation September 2017 61.75 72 444,600 (557 )
PDC Energy, Inc. September 2017 38.75 62 240,250 (9,794 )
Pioneer Natural Resources Company September 2017 140.00 211 2,954,000 (7,385 )
Range Resources Corporation September 2017 18.35 318 583,530 (7,889 )
RSP Permian, Inc. September 2017 32.35 231 747,285 (12,477 )
 
Total Value of Call Options Written
       (Premiums received $338,186) $ 24,315,545 $ (238,266 )
 
NDP
Call Options Written Expiration Date Strike Price Contracts Notional Value Fair Value
Anadarko Petroleum Corporation September 2017 $ 45.00 1,171 $ 5,269,500 $ (10,539 )
Antero Resources Corporation September 2017 20.00 3,104 6,208,000 (93,120 )
Cabot Oil & Gas Corporation September 2017 26.00 4,967 12,914,200 (173,845 )
Carrizo Oil & Gas, Inc. September 2017 14.00 2,598 3,637,200 (109,498 )
Cimarex Energy Co. September 2017 105.00 760 7,980,000 (43,320 )
Concho Resources Inc. September 2017 116.50 982 11,440,300 (52,571 )
Continental Resources, Inc. September 2017 35.00 1,490 5,215,000 (84,930 )
Continental Resources, Inc. September 2017 35.50 595 2,112,250 (22,313 )
Devon Energy Corporation September 2017 32.00 2,585 8,272,000 (124,080 )
Diamondback Energy, Inc. September 2017 95.00 1,074 10,203,000 (51,552 )
EOG Resources, Inc. September 2017 90.00 2,015 18,135,000 (34,255 )
EQT Corporation September 2017 65.00 1,081 7,026,500 (59,455 )
Laredo Petroleum, Inc. September 2017 13.00 3,061 3,979,300 (45,915 )
Newfield Exploration Company September 2017 27.00 2,334 6,301,800 (93,360 )
Parsley Energy, Inc. September 2017 27.00 2,476 6,685,200 (28,468 )
PDC Energy, Inc. September 2017 40.00 635 2,540,000 (60,325 )
Pioneer Natural Resources Company September 2017 143.50 1,385 19,874,750 (16,097 )
Range Resources Corporation September 2017 19.00 4,557 8,658,300 (68,355 )
RSP Permian, Inc. September 2017 33.50 2,450 8,207,500 (63,724 )
SM Energy Company September 2017 14.00 1,897 2,655,800 (77,286 )
US Silica Holdings Inc September 2017 28.00 1,187 3,323,600 (94,960 )
WPX Energy, Inc. September 2017 11.00 6,062 6,668,200 (60,620 )
 
Total Value of Call Options Written
       (Premiums received $1,879,637) $ 167,307,400 $ (1,468,588 )

See accompanying Notes to Financial Statements.
 
Tortoise Capital Advisors 29



 


Statements of Assets & Liabilities (unaudited)
August 31, 2017

 
Tortoise Energy
Infrastructure Tortoise MLP
            Corp.       Fund, Inc.
Assets
       Investments at fair value(1) $ 2,434,922,139 $ 1,420,148,897
       Receivable for Adviser fee waiver 7,236
       Receivable for investments sold 28,325,160 14,865,045
       Dividends, distributions and interest receivable from investments 719,081 384,406
       Current tax asset 813,582
       Prepaid expenses and other assets 983,435 456,225
              Total assets 2,464,957,051 1,436,668,155
Liabilities
       Call options written, at fair value(2)
       Payable to Adviser 4,004,932 2,352,579
       Accrued directors’ fees and expenses 58,380 45,820
       Payable for investments purchased 30,107,723 17,208,666
       Accrued expenses and other liabilities 5,752,690 3,696,635
       Unrealized depreciation of interest rate swap contracts 357,703
       Current tax liability 24,626,888
       Deferred tax liability 405,413,519 151,028,686
       Credit facility borrowings 122,500,000 45,300,000
       Senior notes, net(3) 411,822,249 283,676,136
       Mandatory redeemable preferred stock, net(4) 163,531,269 109,471,915
              Total liabilities 1,168,175,353 612,780,437
              Net assets applicable to common stockholders $ 1,296,781,698 $ 823,887,718
Net Assets Applicable to Common Stockholders Consist of:
       Capital stock, $0.001 par value per share $ 49,311 $ 47,247
       Additional paid-in capital 883,934,318 583,584,956
       Undistributed (accumulated) net investment income (loss), net of income taxes (237,428,458 ) (133,846,961 )
       Undistributed (accumulated) net realized gain (loss), net of income taxes 980,775,523 304,555,798
       Net unrealized appreciation (depreciation), net of income taxes (330,548,996 ) 69,546,678
              Net assets applicable to common stockholders $ 1,296,781,698 $ 823,887,718
Capital shares:
       Authorized 100,000,000 100,000,000
       Outstanding 49,311,266 47,246,780
       Net Asset Value per common share outstanding (net assets applicable
              to common stock, divided by common shares outstanding) $ 26.30 $ 17.44
 
(1)    Investments at cost $ 2,080,263,637 $ 1,310,493,450
(2)    Call options written, premiums received $ $
(3)    Deferred debt issuance and offering costs $ 677,751 $ 323,864
(4)    Deferred offering costs $ 1,468,731 $ 528,085

See accompanying Notes to Financial Statements.
 
30 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




Tortoise Power
Tortoise Pipeline Tortoise Energy and Energy
& Energy Independence Infrastructure
Fund, Inc.            Fund, Inc.            Fund, Inc.
 
$ 265,812,871 $ 238,668,237 $ 203,608,991
8,480,224 8,320,832
416,938 235,186 2,041,435
44,353 28,286 20,912
     274,754,386      238,931,709      213,992,170
 
238,266 1,468,588
510,725 458,095 337,617
23,667 23,382 19,587
6,000,543 6,123,650
601,345 340,102 312,509
59,635
18,000,000 64,700,000 51,400,000
33,919,566
15,956,909
75,251,021 66,990,167 58,252,998
$ 199,503,365 $ 171,941,542 $ 155,739,172
 
$ 10,016 $ 14,584 $ 6,951
224,166,332 272,962,254 129,482,470
(2,364,530 ) 1,869,335
(3,397,307 ) (35,554,453 ) 6,825,329
(21,275,676 ) (63,116,313 ) 17,555,087
$ 199,503,365 $ 171,941,542 $ 155,739,172
 
100,000,000 100,000,000 100,000,000
10,016,413 14,583,662 6,951,333
 
$ 19.92 $ 11.79 $ 22.40
 
$ 287,193,068 $ 302,195,598 $ 185,995,104
$ 338,186 $ 1,879,637 $
$ 80,434 $ $
$ 43,091 $ $

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 31



 


Statements of Operations (unaudited)
Period from December 1, 2016 through August 31, 2017

 
Tortoise Energy  
Infrastructure Tortoise MLP
      Corp.       Fund, Inc.
Investment Income
       Distributions from master limited partnerships $ 131,638,835 $ 79,272,982
       Dividends and distributions from common stock 1,722,455 1,015,563
       Dividends and distributions from preferred stock 2,655,007 1,434,049
       Less return of capital on distributions (139,511,869 ) (79,526,119 )
       Less foreign taxes withheld
       Net dividends and distributions from investments (3,495,572 ) 2,196,475
       Interest from corporate bonds
       Dividends from money market mutual funds 2,883 1,598
              Total Investment Income (loss) (3,492,689 ) 2,198,073
Operating Expenses
       Advisory fees 18,887,685 11,069,616
       Administrator fees 381,258 339,191
       Professional fees 259,320 175,145
       Directors’ fees 169,402 133,994
       Stockholder communication expenses 153,263 97,127
       Custodian fees and expenses 83,409 50,213
       Fund accounting fees 70,409 59,754
       Registration fees 39,763 34,864
       Stock transfer agent fees 10,755 9,609
       Franchise fees 8,230 3,818
       Other operating expenses 145,182 76,547
              Total Operating Expenses 20,208,676 12,049,878
Leverage Expenses
       Interest expense 12,998,832 8,740,654
       Distributions to mandatory redeemable preferred stockholders 5,189,999 3,507,754
       Amortization of debt issuance costs 349,816 277,107
       Other leverage expenses 211,290 73,094
              Total Leverage Expenses 18,749,937 12,598,609
              Total Expenses 38,958,613 24,648,487
       Less fees waived by Adviser (24,841 )
              Net Expenses 38,933,772 24,648,487
Net Investment Income (Loss), before Income Taxes (42,426,461 ) (22,450,414 )
       Deferred tax benefit 12,213,753 6,225,555
Net Investment Income (Loss) (30,212,708 ) (16,224,859 )
Realized and Unrealized Gain (Loss) on Investments and Interest Rate Swaps
       Net realized gain (loss) on investments 170,127,485 44,992,073
       Net realized gain on options 575,965 352,770
       Net realized loss on interest rate swap settlements (151,376 )
       Net realized gain on foreign currency and translation of other assets
              and liabilities denominated in foreign currency
              Net realized gain, before income taxes 170,552,074 45,344,843
                     Current tax expense (34,804,548 ) (161,627 )
                     Deferred tax expense (21,440,669 ) (14,871,828 )
                            Income tax expense (56,245,217 ) (15,033,455 )
                                   Net realized gain 114,306,857 30,311,388
       Net unrealized depreciation of investments (168,465,509 ) (57,386,306 )
       Net unrealized appreciation of options
       Net unrealized appreciation of interest rate swap contracts 7,348
       Net unrealized appreciation of other assets and liabilities due to foreign currency translation
              Net unrealized depreciation, before income taxes (168,458,161 ) (57,386,306 )
                     Deferred tax benefit 55,554,679 19,025,635
                                   Net unrealized depreciation (112,903,482 ) (38,360,671 )
Net Realized and Unrealized Gain (Loss) 1,403,375 (8,049,283 )
Net Decrease in Net Assets Applicable to Common Stockholders
       Resulting from Operations $ (28,809,333 ) $ (24,274,142 )

See accompanying Notes to Financial Statements.

32 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




Tortoise Power
Tortoise Pipeline Tortoise Energy and Energy
& Energy Independence Infrastructure
Fund, Inc.       Fund, Inc.       Fund, Inc.
 
$ 3,958,150 $ 3,416,143 $ 2,944,002
7,056,382 918,715 1,644,929
441,289 246,068 448,121
(7,065,711 ) (3,143,466 ) (3,803,164 )
(305,192 ) (48,434 ) (16,850 )
4,084,918 1,389,026 1,217,038
4,488,567
1,490 2,913 1,370
4,086,408 1,391,939 5,706,975
 
2,414,789 2,323,594 1,543,575
87,810 84,494 64,995
116,821 115,299 118,280
67,437 67,437 54,600
52,086 37,103 72,125
15,987 14,752 8,300
39,521 38,757 22,714
18,361 18,361 18,303
10,078 9,628 12,614
33,266 33,581 20,892
2,856,156 2,743,006 1,936,398
 
1,162,716 857,807 688,432
514,801
42,799
13,514
1,733,830 857,807 688,432
4,589,986 3,600,813 2,624,830
(12,974 ) (26,663 )
4,577,012 3,574,150 2,624,830
(490,604 ) (2,182,211 ) 3,082,145
(490,604 ) (2,182,211 ) 3,082,145
 
2,582,793 (2,518,100 ) 7,787,879
2,426,090 13,540,413
(122,239 )
 
18,728 644
5,027,611 11,022,313 7,666,284
5,027,611 11,022,313 7,666,284
(28,427,090 ) (71,405,550 ) (13,356,386 )
1,095,281 6,571,888
93,673
4,150 776
(27,327,659 ) (64,833,662 ) (13,261,937 )
(27,327,659 ) (64,833,662 )     (13,261,937 )
(22,300,048 ) (53,811,349 ) (5,595,653 )
 
$     (22,790,652 ) $     (55,993,560 ) $ (2,513,508 )

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 33



 


Statements of Changes in Net Assets


 
Tortoise Energy Infrastructure Corp. Tortoise MLP Fund, Inc.
Period from Period from
December 1, 2016 Year Ended December 1, 2016 Year Ended
through November 30, through November 30,
August 31, 2017 2016 August 31, 2017 2016
      (unaudited)             (unaudited)      
Operations
      Net investment income (loss) $ (30,212,708 ) $ (38,025,109 ) $ (16,224,859 ) $ (21,714,757 )
      Net realized gain (loss) 114,306,857 117,748,586 30,311,388 49,307,107
      Net unrealized appreciation (depreciation) (112,903,482 ) 26,561,096 (38,360,671 ) 78,801,730
            Net increase (decrease) in net assets
                  applicable to common stockholders
                  resulting from operations (28,809,333 ) 106,284,573 (24,274,142 ) 106,394,080
Distributions to Common Stockholders
      Net investment income
      Net realized gain
      Return of capital (96,450,039 ) (127,370,405 ) (59,708,706 ) (79,464,402 )
            Total distributions to common stockholders (96,450,039 ) (127,370,405 ) (59,708,706 ) (79,464,402 )
Capital Stock Transactions
      Proceeds from issuance of common shares
            through shelf offerings 4,639,779 24,678,844
      Underwriting discounts and offering expenses
            associated with the issuance of
            common stock (80,986 ) (412,770 ) (46,340 )
      Issuance of common shares from reinvestment
            of distributions to stockholders 5,207,749 3,361,039 3,004,499 1,573,688
      Other proceeds 180
            Net increase in net assets applicable to common
                  stockholders from capital stock transactions 9,766,722 27,627,113 3,004,499 1,527,348
      Total increase (decrease) in net assets applicable
            to common stockholders (115,492,650 ) 6,541,281 (80,978,349 ) 28,457,026
Net Assets
      Beginning of period 1,412,274,348 1,405,733,067 904,866,067 876,409,041
      End of period $      1,296,781,698 $      1,412,274,348 $        823,887,718 $      904,866,067
      Undistributed (accumulated) net investment
            income (loss), net of income taxes,
            end of period $ (237,428,458 ) $ (207,215,750 ) $ (133,846,961 ) $ (117,622,102 )
Transactions in common shares
      Shares outstanding at beginning of period 48,980,215 48,016,591 47,080,789 47,000,211
      Shares issued through shelf offerings 155,743 849,006
      Shares issued through reinvestment
            of distributions 175,308 114,618 165,991 80,578
      Shares outstanding at end of period 49,311,266 48,980,215 47,246,780 47,080,789

See accompanying Notes to Financial Statements.

34 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




Tortoise Power and Energy
Tortoise Pipeline & Energy Fund, Inc. Tortoise Energy Independence Fund, Inc. Infrastructure Fund, Inc.
Period from Period from Period from
December 1, 2016 Year Ended   December 1, 2016 Year Ended December 1, 2016 Year Ended
through November 30, through November 30, through November 30,
August 31, 2017   2016 August 31, 2017 2016 August 31, 2017 2016
(unaudited)             (unaudited)             (unaudited)      
$ (490,604 )   $ 372,171 $ (2,182,211 )   $ (1,807,587 ) $ 3,082,145   $ 4,960,755
5,027,611   5,319,164     11,022,313     (20,323,202 )     7,666,284 6,898,290  
(27,327,659 ) 47,731,706 (64,833,662 ) 68,212,366 (13,261,937 ) 17,338,882
 
 
(22,790,652 ) 53,423,041 (55,993,560 ) 46,081,577 (2,513,508 ) 29,197,927
 
(1,436,249 ) (3,810,236 ) (7,820,250 ) (8,977,396 )
(12,516,517 ) (1,710,279 )
(10,808,816 ) (19,079,933 ) (25,403,124 )
(12,245,065 ) (16,326,753 ) (19,079,933 ) (25,403,124 ) (7,820,250 ) (10,687,675 )
 
 
 
 
 
927,023
 
927,023
 
(35,035,717 ) 37,096,288 (74,146,470 ) 20,678,453 (10,333,758 ) 18,510,252
 
234,539,082 197,442,794 246,088,012 225,409,559 166,072,930 147,562,678
$ 199,503,365 $ 234,539,082 $ 171,941,542 $ 246,088,012 $ 155,739,172 $ 166,072,930
 
 
$ $ 1,926,853 $ (2,364,530 ) $ (182,319 ) $ 1,869,335 $ 6,607,440
 
10,016,413 10,016,413 14,516,071 14,516,071 6,951,333 6,951,333
 
67,591
10,016,413 10,016,413 14,583,662 14,516,071 6,951,333 6,951,333

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 35



 


Statements of Cash Flows (unaudited)
Period from December 1, 2016 through August 31, 2017

 
Tortoise Energy
Infrastructure Tortoise MLP
       Corp.        Fund, Inc.
Cash Flows From Operating Activities
       Dividends, distributions and interest received from investments $ 136,018,699 $ 81,724,101
       Purchases of long-term investments      (357,632,496 )    (221,130,419 )
       Proceeds from sales of long-term investments   366,789,042 222,843,010
       Sales of short-term investments, net 76,069   218,975
       Call options written, net 575,965 352,770
       Payments on interest rate swap contracts, net (151,376 )
       Interest received on securities sold, net    
       Interest expense paid (13,876,202 ) (8,270,290 )
       Distributions to mandatory redeemable preferred stockholders (6,920,000 )     (3,507,750 )
       Other leverage expenses paid (295,692 ) (122,500 )
       Income taxes paid (707,588 ) (144,500 )
       Operating expenses paid (20,359,315 ) (12,150,202 )
              Net cash provided by operating activities 103,517,106 59,813,195
Cash Flows From Financing Activities
       Advances (repayments) on credit facilities, net 13,200,000 (1,500,000 )
       Maturity of senior notes (30,000,000 )
       Issuance of common stock 4,639,779
       Common stock issuance costs (114,819 )
       Distributions paid to common stockholders (91,242,246 ) (58,313,195 )
       Other proceeds 180
              Net cash used in financing activities (103,517,106 ) (59,813,195 )
       Net change in cash
       Cash — beginning of period
       Cash — end of period $ $

See accompanying Notes to Financial Statements.

36 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




Tortoise Power
Tortoise Pipeline       Tortoise Energy       and Energy
& Energy Independence Infrastructure
Fund, Inc. Fund, Inc. Fund, Inc.
 
$ 11,199,908 $ 4,569,379 $ 9,557,016
     (29,842,803 )      (96,028,491 )      (36,854,080 )
31,792,753 99,155,686 36,731,963
179,743 148,713 11,251
2,301,280 13,266,489
(122,239 )
252,009
(1,182,759 ) (779,916 ) (621,832 )
(514,800 )
(18,000 )
(450 ) (550 )
(2,845,656 ) (2,760,946 ) (1,933,838 )
11,069,216 17,570,364 7,020,250  
 
1,400,000 900,000 800,000
(12,469,216 ) (18,470,364 ) (7,820,250 )
(11,069,216 ) (17,570,364 ) (7,020,250 )
$ $ $

See accompanying Notes to Financial Statements.
   
Tortoise Capital Advisors 37



 


Statements of Cash Flows (unaudited) (continued)
Period from December 1, 2016 through August 31, 2017

 
      Tortoise Energy       
Infrastructure Tortoise MLP
Corp. Fund, Inc.
Reconciliation of net decrease in net assets applicable to common stockholders
       resulting from operations to net cash provided by operating activities
       Net decrease in net assets applicable to common stockholders resulting from operations $ (28,809,333 ) $ (24,274,142 )
       Adjustments to reconcile net decrease in net assets applicable to common stockholders
              resulting from operations to net cash provided by operating activities:
                     Purchases of long-term investments (387,740,219 ) (238,339,085 )
                     Proceeds from sales of long-term investments 395,114,202 237,708,055
                     Sales of short-term investments, net 76,069 218,975
                     Call options written, net 575,965 352,770
                     Return of capital on distributions received 139,511,869 79,526,119
                     Deferred tax benefit (46,327,763 ) (10,379,362 )
                     Net unrealized depreciation 168,458,161 57,386,306
                     Amortization of market premium, net
                     Net realized gain (170,703,450 ) (45,344,843 )
                     Amortization of debt issuance costs 349,816 277,107
                     Changes in operating assets and liabilities:  
                            (Increase) decrease in dividends, distributions and interest receivable from investments (481 ) (91 )
                            Decrease in current tax asset 9,470,072 17,127
                            Increase in receivable for investments sold (28,325,160 ) (14,865,045 )
                            Increase in prepaid expenses and other assets (157,692 ) (103,637 )
                            Increase in payable for investments purchased 30,107,723 17,208,666
                            Decrease in payable to Adviser, net of fees waived (65,864 ) (50,992 )
                            Increase in current tax liability 24,626,888
                            Increase (decrease) in accrued expenses and other liabilities (2,643,697 ) 475,267
                                   Total adjustments 132,326,439 84,087,337
       Net cash provided by operating activities $ 103,517,106 $ 59,813,195
Non-Cash Financing Activities
       Reinvestment of distributions by common stockholders in additional common shares $ 5,207,749 $ 3,004,499

See accompanying Notes to Financial Statements.
   
38 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




            Tortoise Power
Tortoise Pipeline Tortoise Energy and Energy  
& Energy Independence Infrastructure
Fund, Inc. Fund, Inc. Fund, Inc.
 
 
$ (22,790,652 ) $ (55,993,560 ) $ (2,513,508 )
 
 
      (35,843,346 )       (96,028,491 )       (42,977,730 )
40,272,977 99,155,686 45,052,795
179,743 148,713 11,251
2,301,280 13,266,489
7,065,711 3,143,466 3,803,164
27,327,659 64,833,662 13,261,937
406,284
(5,027,611 ) (11,022,313 ) (7,788,523 )
42,799
 
47,789 33,974 (107,398 )
(8,480,224 ) (8,320,832 )
(20,052 ) (15,514 ) (12,137 )
6,000,543 6,123,650
(5,541 ) (42,744 ) (2,054 )
(1,859 ) 90,996 83,351
33,859,868 73,563,924 9,533,758
$ 11,069,216 $ 17,570,364 $ 7,020,250
 
$ $ 927,023 $

See accompanying Notes to Financial Statements.
   
Tortoise Capital Advisors 39



 


TYG Financial Highlights

  Period from
December 1, 2016          
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Per Common Share Data(1)
       Net Asset Value, beginning of period $ 28.83 $ 29.28 $ 49.34 $ 43.36 $ 36.06 $ 33.37
       Income (Loss) from Investment Operations
              Net investment loss(2) (0.61 ) (0.78 ) (0.62 ) (0.66 ) (0.73 ) (0.64 )
              Net realized and unrealized gain (loss)
                     on investments and interest rate
                     swap contracts(2) 0.05 2.94 (16.85 ) 9.01 10.27 5.51
                            Total income (loss) from investment
                                   operations (0.56 ) 2.16 (17.47 ) 8.35 9.54 4.87
       Distributions to Common Stockholders
              Return of capital (1.97 ) (2.62 ) (2.59 ) (2.38 ) (2.29 ) (2.25 )
       Capital Stock Transactions
              Premiums less underwriting discounts
                     and offering costs on issuance of
                     common stock(3) (0.00 ) 0.01 (0.00 ) 0.01 0.05 0.07
       Net Asset Value, end of period $ 26.30 $ 28.83 $ 29.28 $ 49.34 $ 43.36 $ 36.06
       Per common share market value,
              end of period $ 28.47 $ 30.63 $ 26.57 $ 46.10 $ 49.76 $ 39.17
       Total investment return based on
              market value(4)(5) (0.80 )% 26.21 % (37.86 )% (2.54 )% 33.77 % 5.62 %
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s) $          1,296,782 $     1,412,274 $     1,405,733 $     2,369,068 $     1,245,761 $     1,020,421
       Average net assets (000’s) $ 1,455,613 $ 1,345,764 $ 1,974,038 $ 1,837,590 $ 1,167,339 $ 989,745
       Ratio of Expenses to Average Net Assets(6)  
              Advisory fees 1.73 % 1.74 % 1.76 % 1.65 % 1.61 % 1.60 %
              Other operating expenses 0.12 0.12 0.10 0.13 0.12 0.13
                     Total operating expenses,    
                            before fee waiver 1.85 1.86 1.86 1.78 1.73 1.73
              Fee waiver(7) (0.00 ) (0.01 ) (0.00 ) (0.00 ) (0.01 )
                     Total operating expenses 1.85 1.85 1.86 1.78 1.73 1.72
              Leverage expenses 1.71 2.29 1.75 1.38 1.59 1.67
              Income tax expense (benefit)(8) (1.05 ) 4.64 (24.50 ) 7.81 14.05 8.37
                     Total expenses 2.51 % 8.78 % (20.89 )% 10.97 % 17.37 % 11.76 %

See accompanying Notes to Financial Statements.
   
40 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




   Period from               
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Ratio of net investment loss to average
       net assets before fee waiver(6) (2.77 )% (2.83 )% (1.50 )% (1.33 )% (1.78 )% (1.82 )%
Ratio of net investment loss to average
       net assets after fee waiver(6) (2.77 )% (2.82 )% (1.50 )% (1.33 )% (1.78 )% (1.81 )%
Portfolio turnover rate(4) 14.61 % 24.23 % 12.94 % 15.33 % 13.40 % 12.86 %
Credit facility borrowings,
       end of period (000’s) $                 122,500 $      109,300 $ 66,000 $ 162,800 $ 27,600 $ 63,400
Senior notes, end of period (000’s) $ 412,500 $ 442,500 $      545,000 $      544,400 $      300,000 $      194,975
Preferred stock, end of period (000’s) $ 165,000 $ 165,000 $ 295,000 $ 224,000 $ 80,000 $ 73,000
Per common share amount of senior  
       notes outstanding, end of period $ 8.37 $ 9.03 $ 11.35 $ 11.34 $ 10.44 $ 6.89
Per common share amount of net assets,    
       excluding senior notes, end of period $ 34.67 $ 37.86 $ 40.63 $ 60.68 $ 53.80 $ 42.95
Asset coverage, per $1,000 of principal
       amount of senior notes and credit
       facility borrowings(9) $ 3,732 $ 3,858 $ 3,784 $ 4,667 $ 5,047 $ 5,232
Asset coverage ratio of senior notes and
       credit facility borrowings(9) 373 % 386 % 378 % 467 % 505 % 523 %
Asset coverage, per $10 liquidation value
       per share of mandatory redeemable
       preferred stock(10) $ 29 $ 30 $ 26 $ 35 $ 41 $ 41
Asset coverage ratio of preferred stock(10) 285 % 297 % 255 % 354 % 406 % 408 %

(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, 2016, 2015, 2014, 2013 and 2012 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 per share for the period from December 1, 2016 through August 31, 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. Represents the premium on the shelf offerings of $0.06 per share, less the underwriting and offering costs of $0.01 per share for the year ended November 30, 2013. Represents the premium on the shelf offerings of $0.08 per share, less the underwriting and offering costs of $0.01 per share for the year ended November 30, 2012.
(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, 2016 through August 31, 2017 and the years ended November 30, 2014 and 2013.
(8) For the period from December 1, 2016 through August 31, 2017, TYG accrued $34,804,548 for current income tax expense and $46,327,763 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. For the year ended November 30, 2013, TYG accrued $23,290,478 for net current income tax expense and $140,745,675 for net deferred income tax expense. For the year ended November 30, 2012, TYG accrued $16,189,126 for current income tax expense and $66,613,182 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.
   
Tortoise Capital Advisors 41



 


NTG Financial Highlights

  Period from              
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Per Common Share Data(1)
       Net Asset Value, beginning of period $ 19.22 $ 18.65 $ 29.83 $ 28.00 $ 24.50 $ 24.54
       Income (Loss) from Investment Operations
              Net investment loss(2) (0.34 ) (0.46 ) (0.32 ) (0.54 ) (0.42 ) (0.40 )
              Net realized and unrealized gain (loss)
                     on investments(2) (0.17 ) 2.72 (9.17 ) 4.06 5.59 2.02
                            Total income (loss) from investment
                                   operations (0.51 ) 2.26 (9.49 ) 3.52 5.17 1.62
       Distributions to Common Stockholders
              Return of capital (1.27 ) (1.69 ) (1.69 ) (1.69 ) (1.67 ) (1.66 )
       Capital stock transactions
              Premiums less underwriting discounts
                     and offering costs on issuance of
                     common stock(3) (0.00 ) (0.00 ) 0.00 0.00
       Net Asset Value, end of period $ 17.44 $ 19.22 $ 18.65 $ 29.83 $ 28.00 $ 24.50
       Per common share market value,  
              end of period $ 17.70 $ 18.90 $ 16.18 $ 27.97 $ 27.22 $ 24.91
       Total investment return based on
              market value(4)(5) 0.15 % 27.99 % (37.08 )% 9.08 % 16.27 % 7.14 %
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s) $              823,888 $       904,866 $ 876,409 $     1,401,926 $     1,315,866 $     1,140,635
       Average net assets (000’s) $ 922,097 $ 862,527 $    1,174,085 $ 1,404,751 $ 1,274,638 $ 1,157,421
       Ratio of Expenses to Average Net Assets(6)
              Advisory fees 1.60 % 1.56 % 1.56 % 1.48 % 1.38 % 1.34 %
              Other operating expenses 0.14 0.16 0.12 0.10 0.10 0.10
                     Total operating expenses,
                            before fee waiver 1.74 1.72 1.68 1.58 1.48 1.44
              Fee waiver (0.01 ) (0.09 ) (0.16 ) (0.23 ) (0.28 )
                     Total operating expenses 1.74 1.71 1.59 1.42 1.25 1.16
              Leverage expenses 1.82 1.95 1.42 1.09 1.08 1.20
              Income tax expense (benefit)(7) (1.48 ) 7.25 (21.92 ) 7.04 11.09 3.86
                     Total expenses 2.08 % 10.91 % (18.91 )% 9.55 % 13.42 % 6.22 %

See accompanying Notes to Financial Statements.
   
42 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




   Period from               
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Ratio of net investment loss to average
       net assets before fee waiver(6) (2.34 )% (2.53 )% (1.36 )% (1.97 )% (1.76 )% (1.88 )%
Ratio of net investment loss to average
       net assets after fee waiver(6) (2.34 )% (2.52 )% (1.27 )% (1.81 )% (1.53 )% (1.60 )%
Portfolio turnover rate(4) 15.31 % 35.47 % 17.54 % 18.09 % 13.42 % 15.14 %
Credit facility borrowings,
       end of period (000’s) $ 45,300 $ 46,800 $ 62,800 $ 68,900 $ 27,200 $ 23,900
Senior notes, end of period (000’s) $             284,000 $      284,000 $      348,000 $      348,000 $      255,000 $      255,000
Preferred stock, end of period (000’s) $ 110,000 $ 110,000 $ 90,000 $ 90,000 $ 90,000 $ 90,000
Per common share amount of senior
       notes outstanding, end of period $ 6.01 $ 6.03 $ 7.40 $ 7.40 $ 5.43 $ 5.48
Per common share amount of net assets,
       excluding senior notes, end of period $ 23.45 $ 25.25 $ 26.05 $ 37.23 $ 33.43 $ 29.98
Asset coverage, per $1,000 of principal
       amount of senior notes and credit
       facility borrowings(8) $ 3,836 $ 4,068 $ 3,353 $ 4,579 $ 5,982 $ 5,412
Asset coverage ratio of senior notes and
       credit facility borrowings(8) 384 % 407 % 335 % 458 % 598 % 541 %
Asset coverage, per $25 liquidation value
       per share of mandatory redeemable
       preferred stock(9) $ 72 $ 76 $ 69 $ 94 $ 113 $ 102
Asset coverage ratio of preferred stock(9) 288 % 305 % 275 % 377 % 454 % 409 %

(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, 2016, 2015, 2014, 2013 and 2012 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 per share for the years ended November 30, 2016 and 2015. Represents the premiums on the shelf offerings of less than $0.01 per share, less the underwriter discount and offering costs of less than $0.01 per share for the years ended November 30, 2013 and 2012.
(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). This calculation also assumes reinvestment of distributions at actual prices pursuant to NTG’s dividend reinvestment plan.
(6) Annualized for periods less than one full year.
(7) For the period from December 1, 2016 through August 31, 2017, NTG accrued $161,627 for current income tax expense and $10,379,362 for net deferred income tax benefit. For the year ended November 30, 2016, NTG accrued $1,891,670 for current income tax expense and $60,652,872 for net deferred income tax expense. For the year ended November 30, 2015, NTG accrued $200,550 for current income tax expense and $257,585,058 for net deferred income tax benefit. For the year ended November 30, 2014, NTG accrued $581,000 for current income tax expense and $98,329,597 for net deferred income tax expense. For the year ended November 30, 2013, NTG accrued $141,332,523 for net deferred income tax expense. For the year ended November 30, 2012, NTG accrued $44,677,351 for net deferred income tax expense.
(8) Represents value of total assets less all liabilities and indebtedness not represented by senior notes, credit facility borrowings and preferred stock at the end of the period divided by senior notes and credit facility borrowings outstanding at the end of the period.
(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, credit facility borrowings and preferred stock outstanding at the end of the period.

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 43



 


TTP Financial Highlights


   Period from               
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Per Common Share Data(1)
       Net Asset Value, beginning of period $ 23.42 $ 19.71 $ 35.04 $ 30.33 $ 25.24 $ 24.42
       Income (Loss) from Investment Operations
              Net investment income (loss)(2) (0.05 ) 0.04 0.22 0.08 0.10 0.12
              Net realized and unrealized gain (loss)(2) (2.23 ) 5.30 (13.60 ) 6.26 6.62 2.33
                     Total income (loss) from investment
                            operations (2.28 ) 5.34 (13.38 ) 6.34 6.72 2.45
       Distributions to Common Stockholders
              Net investment income (0.14 ) (0.38 ) (0.34 ) (0.02 ) (0.57 ) (0.24 )
              Net realized gain (1.25 ) (1.61 ) (1.61 ) (1.03 ) (1.07 )
              Return of capital (1.08 ) (0.03 ) (0.32 )
                     Total distributions to common
                            stockholders (1.22 ) (1.63 ) (1.95 ) (1.63 ) (1.63 ) (1.63 )
       Net Asset Value, end of period $ 19.92 $ 23.42 $ 19.71 $ 35.04 $ 30.33 $ 25.24
       Per common share market value,
              end of period $ 18.43 $ 21.55 $ 17.47 $ 32.50 $ 28.11 $ 24.15
       Total investment return based on
              market value(3)(4) (9.09 )% 34.89 % (41.19 )% 21.68 % 23.44 % 3.18 %
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s) $               199,503 $        234,539 $        197,443 $        350,975 $        303,797 $        252,508
       Average net assets (000’s) $ 226,137 $ 192,888 $ 292,473 $ 357,486 $ 289,876 $ 253,815
       Ratio of Expenses to Average Net Assets(5)
              Advisory fees 1.43 % 1.48 % 1.44 % 1.37 % 1.42 % 1.44 %
              Other operating expenses 0.26 0.29 0.22 0.18 0.19 0.21
                     Total operating expenses,
                            before fee waiver 1.69 1.77 1.66 1.55 1.61 1.65
              Fee waiver (0.01 ) (0.07 ) (0.14 ) (0.19 ) (0.26 ) (0.33 )
                     Total operating expenses 1.68 1.70 1.52 1.36 1.35 1.32
              Leverage expenses 1.02 1.23 0.93 0.75 0.90 1.03
                     Total expenses 2.70 % 2.93 % 2.45 % 2.11 % 2.25 % 2.35 %

See accompanying Notes to Financial Statements.

44 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




   Period from               
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Ratio of net investment income (loss) to
       average net assets before fee waiver(5) (0.30 )% 0.12 % 0.60 % 0.02 % 0.08 % 0.16 %
Ratio of net investment income (loss) to
       average net assets after fee waiver(5) (0.29 )% 0.19 % 0.74 % 0.21 % 0.34 % 0.49 %
Portfolio turnover rate(3) 12.25 % 90.22 % 18.84 % 18.45 % 31.43 % 34.65 %
Credit facility borrowings,
       end of period (000’s) $ 18,000 $ 16,600 $ 16,900 $ 26,000 $ 22,200 $ 16,600
Senior notes, end of period (000’s) $               34,000 $        34,000 $        54,000 $        49,000 $        49,000 $        49,000
Preferred stock, end of period (000’s) $ 16,000 $ 16,000 $ 16,000 $ 16,000 $ 16,000 $ 16,000
Per common share amount of senior
       notes outstanding, end of period $ 3.39 $ 3.39 $ 5.39 $ 4.89 $ 4.89 $ 4.90
Per common share amount of net assets,
       excluding senior notes, end of period $ 23.31 $ 26.81 $ 25.10 $ 39.93 $ 35.22 $ 30.14
Asset coverage, per $1,000 of principal
       amount of senior notes and credit
       facility borrowings(6) $ 5,144 $ 5,951 $ 4,010 $ 5,893 $ 5,492 $ 5,093
Asset coverage ratio of senior notes and
       credit facility borrowings(6) 514 % 595 % 401 % 589 % 549 % 509 %
Asset coverage, per $25 liquidation value
       per share of mandatory redeemable
       preferred stock(7) $ 98 $ 113 $ 82 $ 121 $ 112 $ 102
Asset coverage ratio of preferred stock(7) 393 % 452 % 327 % 486 % 448 % 409 %

(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, 2016, 2015, 2014, 2013 and 2012 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) Not annualized for periods less than one full year.
(4) Total investment return is calculated assuming a purchase of common stock at the beginning of the period and a sale at the closing price on the last day of the period reported (excluding brokerage commissions). The calculation also assumes reinvestment of distributions at actual prices pursuant to TTP’s dividend reinvestment plan.
(5) Annualized for periods less than one full year.
(6) Represents value of total assets less all liabilities and indebtedness not represented by senior notes, credit facility borrowings and preferred stock at the end of the period divided by senior notes and credit facility borrowings outstanding at the end of the period.
(7) Represents value of total assets less all liabilities and indebtedness not represented by senior notes, credit facility borrowings and preferred stock at the end of the period divided by senior notes, credit facility borrowings and preferred stock outstanding at the end of the period.

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 45



 


NDP Financial Highlights


   Period from                Period from
December 1, 2016 July 31, 2012(1)
through Year Ended Year Ended Year Ended Year Ended through
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Per Common Share Data(2)
       Net Asset Value, beginning of period $ 16.95 $ 15.53 $ 22.76 $ 26.49 $ 22.73 $
       Public offering price 25.00
       Income (Loss) from Investment Operations
              Net investment income (loss)(3) (0.15 ) (0.12 ) (0.10 ) (0.12 ) 0.01 0.04
              Net realized and unrealized gain (loss)(3) (3.70 ) 3.29 (5.38 ) (1.86 ) 5.50 (0.65 )
                     Total income (loss) from investment
                            operations (3.85 ) 3.17 (5.48 ) (1.98 ) 5.51 (0.61 )
       Distributions to Common Stockholders
              Net investment income(4) (0.00 ) (0.00 ) (0.27 ) (0.03 )
              Net realized gain (1.66 ) (1.42 ) (0.36 )
              Return of capital (1.31 ) (1.75 ) (1.75 ) (0.09 ) (0.06 ) (0.05 )
                     Total distributions to common
                            stockholders (1.31 ) (1.75 ) (1.75 ) (1.75 ) (1.75 ) (0.44 )
       Underwriting discounts and offering costs
              on issuance of common stock(5) (1.22 )
       Net Asset Value, end of period $ 11.79 $ 16.95 $ 15.53 $ 22.76 $ 26.49 $ 22.73
       Per common share market value,
              end of period $ 12.61 $ 15.85 $ 13.18 $ 21.29 $ 24.08 $ 22.33
       Total investment return based on
              market value(6)(7) (12.55 )% 36.27 % (31.05 )% (5.16 )% 15.83 % (8.89 )%
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s) $            171,942 $      246,088 $      225,410 $      330,458 $      384,471 $      329,676
       Average net assets (000’s) $ 218,030 $ 212,528 $ 288,672 $ 413,380 $ 366,900 $ 334,232
       Ratio of Expenses to Average Net Assets(8)
              Advisory fees 1.42 % 1.42 % 1.33 % 1.25 % 1.25 % 1.18 %
              Other operating expenses 0.26 0.29 0.21 0.16 0.16 0.20
                     Total operating expenses,
                            before fee waiver 1.68 1.71 1.54 1.41 1.41 1.38
              Fee waiver (0.02 ) (0.13 ) (0.13 ) (0.17 ) (0.17 ) (0.16 )
                     Total operating expenses 1.66 1.58 1.41 1.24 1.24 1.22
              Leverage expenses 0.52 0.37 0.21 0.14 0.16 0.10
                     Total expenses 2.18 % 1.95 % 1.62 % 1.38 % 1.40 % 1.32 %

See accompanying Notes to Financial Statements.

46 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




   Period from                Period from
December 1, 2016 July 31, 2012(1)
through Year Ended Year Ended Year Ended Year Ended through
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Ratio of net investment income (loss) to
       average net assets before fee waiver(8) (1.35 )% (0.98 )% (0.61 )% (0.61 )% (0.13 )% 0.38 %
Ratio of net investment income (loss) to
       average net assets after fee waiver(8) (1.33 )% (0.85 )% (0.48 )% (0.44 )% 0.04 % 0.54 %
Portfolio turnover rate(6) 33.89 % 47.03 % 15.63 % 43.21 % 45.56 % 15.68 %
Credit facility borrowings,
       end of period (000’s) $             64,700 $          63,800 $          61,800 $          56,200 $          56,300 $          49,000
Asset coverage, per $1,000 of principal
       amount of credit facility borrowings(9) $ 3,658 $ 4,857 $ 4,647 $ 6,880 $ 7,829 $ 7,728
Asset coverage ratio of credit facility
       borrowings(9) 366 % 486 % 465 % 688 % 783 % 773 %

(1) Commencement of operations.
(2) Information presented relates to a share of common stock outstanding for the entire period.
(3) The per common share data for the years ended November 30, 2016, 2015, 2014 and 2013 and the period from July 31, 2012 through November 30, 2012 do not reflect the change in estimate of investment income and return of capital, for the respective year. See Note 2C to the financial statements for further disclosure.
(4) Less than $0.01 for the years ended November 30, 2015 and 2014.
(5) Represents the dilution per common share from underwriting and other offering costs for the period from July 31, 2012 through November 30, 2012.
(6) Not annualized for periods less than one full year.
(7) Total investment return is calculated assuming a purchase of common stock at the beginning of the period (or initial public offering price) 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 NDP’s dividend reinvestment plan.
(8) Annualized for periods less than one full year.
(9) Represents value of total assets less all liabilities and indebtedness not represented by credit facility borrowings at the end of the period divided by credit facility borrowings outstanding at the end of the period.

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 47



 


TPZ Financial Highlights


   Period from               
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
2017 2016 2015 2014 2013 2012
(unaudited)
Per Common Share Data(1)
       Net Asset Value, beginning of period $ 23.89 $ 21.23 $ 31.08 $ 28.12 $ 26.76 $ 25.37
       Income (loss) from Investment Operations
              Net investment income(2) 0.45 0.71 0.88 0.81 0.76 0.72
              Net realized and unrealized gain (loss)(2) (0.81 ) 3.49 (7.87 ) 3.65 2.10 2.17
                     Total income (loss) from investment
                            operations (0.36 ) 4.20 (6.99 ) 4.46 2.86 2.89
       Distributions to Common Stockholders
              Net investment income (1.13 ) (1.29 ) (0.91 ) (0.90 ) (0.50 ) (0.88 )
              Net realized gain (0.25 ) (1.95 ) (0.60 ) (1.00 ) (0.62 )
                     Total distributions to common
                            stockholders (1.13 ) (1.54 ) (2.86 ) (1.50 ) (1.50 ) (1.50 )
       Net Asset Value, end of period $ 22.40 $ 23.89 $ 21.23 $ 31.08 $ 28.12 $ 26.76
       Per common share market value,
              end of period $ 20.33 $ 21.43 $ 18.53 $ 26.90 $ 24.74 $ 25.26
       Total investment return based on
              market value(3)(4) (0.15 )% 25.57 % (22.54 )% 14.94 % 3.80 % 10.83 %
       Total investment return based on
              net asset value(3)(5) (1.32 )% 22.18 % (23.19 )% 16.84 % 11.36 % 11.90 %
 
Supplemental Data and Ratios
       Net assets applicable to common
              stockholders, end of period (000’s) $      155,739 $      166,073 $      147,563 $      216,048 $      195,484 $      186,034
       Average net assets (000’s) $ 165,746 $ 146,274 $ 187,752 $ 208,698 $ 193,670 $ 182,224
       Ratio of Expenses to Average Net Assets(6)
              Advisory fees 1.24 % 1.27 % 1.20 % 1.12 % 1.13 % 1.13 %
              Other operating expenses 0.32 0.39 0.31 0.26 0.26 0.27
                     Total operating expenses,
                            before fee waiver 1.56 1.66 1.51 1.38 1.39 1.40
              Fee waiver (0.01 ) (0.07 ) (0.12 ) (0.12 )
                     Total operating expenses 1.56 1.66 1.50 1.31 1.27 1.28
              Leverage expenses 0.55 0.44 0.26 0.19 0.25 0.44
                     Total expenses 2.11 % 2.10 % 1.76 % 1.50 % 1.52 % 1.72 %

See accompanying Notes to Financial Statements.

48 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017




Period from
December 1, 2016
through Year Ended Year Ended Year Ended Year Ended Year Ended
August 31, November 30, November 30, November 30, November 30, November 30,
     2017      2016      2015      2014      2013      2012
(unaudited)
Ratio of net investment income to average
       net assets before fee waiver(6) 2.48 % 3.39 % 3.25 % 2.62 % 2.62 % 2.64 %
Ratio of net investment income to average
       net assets after fee waiver(6) 2.48 % 3.39 % 3.26 % 2.69 % 2.74 % 2.76 %
Portfolio turnover rate(3)   19.97 %   40.61 % 30.99 % 18.39 % 12.21 % 13.67 %
Credit facility borrowings,
       end of period (000’s) $               51,400 $        50,600 $        49,900 $        42,400 $        37,400 $        16,400
Senior notes, end of period (000’s) $ 20,000
Per common share amount of senior      
       notes outstanding, end of period     $ 2.88
Per common share amount of net assets,        
       excluding senior notes, end of period $ 22.40 $ 23.89   $ 21.23   $ 31.08 $ 28.12 $ 29.64
Asset coverage, per $1,000 of principal        
       amount of senior notes and credit  
       facility borrowings(7) $ 4,030   $ 4,282 $ 3,957 $ 6,095 $ 6,227 $ 6,111
Asset coverage ratio of senior notes and
       credit facility borrowings(7) 403 % 428 % 396 % 610 % 623 % 611 %

(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, 2016, 2015, 2014, 2013 and 2012 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) Not annualized for periods less than one full year.
(4) Total investment return is calculated assuming a purchase of common stock at the beginning of the period and a sale at the closing price on the last day of the period reported (excluding brokerage commissions). The calculation also assumes reinvestment of distributions at actual prices pursuant to TPZ’s dividend reinvestment plan.
(5) Total investment return is calculated assuming a purchase of common stock at the beginning of period and a sale at net asset value on the last day of the period reported. The calculation also assumes reinvestment of distributions at actual prices pursuant to TPZ’s dividend reinvestment plan.
(6) Annualized for periods less than one full year.
(7) Represents value of total assets less all liabilities and indebtedness not represented by senior notes and credit facility borrowings at the end of the period divided by senior notes and credit facility borrowings outstanding at the end of the period.

See accompanying Notes to Financial Statements.

Tortoise Capital Advisors 49



 


Notes to Financial Statements (unaudited)
August 31, 2017

1. General Organization

This report covers the following companies, each of which is listed on the New York Stock Exchange (“NYSE”): Tortoise Energy Infrastructure Corp. (“TYG”), Tortoise MLP Fund, Inc. (“NTG”), Tortoise Pipeline & Energy Fund, Inc. (“TTP”), Tortoise Energy Independence Fund, Inc. (“NDP”), and Tortoise Power and Energy Infrastructure Fund, Inc. (“TPZ”). These companies are individually referred to as a “Fund” or by their respective NYSE symbols, or collectively as the “Funds”, and each is a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Each of TYG, NTG, TTP and NDP has a primary investment objective to seek a high level of total return with an emphasis on current distributions. TPZ has a primary investment objective to provide a high level of current income, with a secondary objective of capital appreciation.

2. Significant Accounting Policies

The Funds follow accounting and reporting guidance applicable to investment companies under U.S. generally accepted accounting principles (“GAAP”).

A. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the amount of income and expenses during the period reported. Actual results could differ from those estimates.

B. Security Valuation
In general, and where applicable, the Funds use readily available market quotations based upon the last updated sales price from the principal market to determine fair value. The Funds primarily own securities that are listed on a securities exchange or are traded in the over-the-counter market. The Funds value those securities at their last sale price on that exchange or over-the-counter market on the valuation date. If the security is listed on more than one exchange, the Funds use the price from the exchange that it considers to be the principal exchange on which the security is traded. Securities listed on the NASDAQ are valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there has been no sale on such exchange or over-the-counter market on such day, the security is valued at the mean between the last bid price and last ask price on such day. These securities are categorized as Level 1 in the fair value hierarchy as further described below.

Restricted securities are subject to statutory or contractual restrictions on their public resale, which may make it more difficult to obtain a valuation and may limit a Fund’s ability to dispose of them. Investments in private placement securities and other securities for which market quotations are not readily available are valued in good faith by using fair value procedures. Such fair value procedures consider factors such as discounts to publicly traded issues, time until conversion date, securities with similar yields, quality, type of issue, coupon, duration and rating. If events occur that affect the value of a Fund’s portfolio securities before the net asset value has been calculated (a “significant event”), the portfolio securities so affected are generally priced using fair value procedures.

An equity security of a publicly traded company acquired in a private placement transaction without registration under the Securities Act of 1933, as amended (the “1933 Act”), is subject to restrictions on resale that can affect the security’s liquidity and fair value. If such a security is convertible into publicly traded common shares, the security generally will be valued at the common share market price adjusted by a percentage discount due to the restrictions and categorized as Level 2 in the fair value hierarchy. To the extent that such securities are convertible or otherwise become freely tradable within a time frame that may be reasonably determined, an amortization schedule may be used to determine the discount. If the security has characteristics that are dissimilar to the class of security that trades on the open market, the security will generally be valued and categorized as Level 3 in the fair value hierarchy.

Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity. Unobservable inputs reflect the Funds’ own beliefs about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances, which might include the Fund’s own data. The Fund’s own data are adjusted if information is reasonably available without undue cost and effort that indicates that market participants would use different assumptions. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Exchange-traded options are valued at the last reported sale price on any exchange on which they trade. If no sales are reported on any exchange on the measurement date, exchange-traded options are valued at the mean between the last highest bid and last lowest asked prices obtained as of the closing of the exchanges on which the option is traded. The value of Flexible Exchange Options (FLEX Options) are determined (i) by an evaluated price as determined by a third-party valuation service; or (ii) by using a quotation provided by a broker-dealer.

The Funds generally value debt securities at evaluated bid prices obtained from an independent third-party valuation service that utilizes a pricing matrix based upon yield data for securities with similar characteristics, or based on a direct written broker-dealer quotation from a dealer who has made a market in the security. Debt securities with 60 days or less to maturity at time of purchase are valued on the basis of amortized cost, which approximates market value.

Interest rate swap contracts are valued by using industry-accepted models, which discount the estimated future cash flows based on a forward rate curve and the stated terms of the interest rate swap agreement by using interest rates currently available in the market, or based on dealer quotations, if available, and are categorized as Level 2 in the fair value hierarchy.

50 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

Various inputs are used in determining the fair value of the Funds’ investments and financial instruments. These inputs are summarized in the three broad levels listed below:

      Level 1 —  quoted prices in active markets for identical investments
 
Level 2 — other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)
 
  Level 3 — significant unobservable inputs (including a Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following tables provide the fair value measurements of applicable assets and liabilities by level within the fair value hierarchy as of August 31, 2017. These assets and liabilities are measured on a recurring basis.

TYG:
Description       Level 1       Level 2       Level 3       Total
Assets
Investments:
       Master Limited Partnerships(a) $ 2,297,189,054 $ $ $ 2,297,189,054
       Common Stock(a) 86,305,368 86,305,368
       Preferred Stock(a) 14,533,600 23,674,990 38,208,590
       Private Investment(a) 12,928,743 12,928,743
       Short-Term Investment(b) 290,384 290,384
Total Assets $ 2,398,318,406 $ $ 36,603,733 $ 2,434,922,139
Liabilities
Interest Rate Swap Contracts $ $ 357,703 $ $ 357,703
 
NTG:
Description Level 1 Level 2 Level 3 Total
Assets
Investments:
       Master Limited Partnerships(a) $ 1,340,243,956 $ $ $ 1,340,243,956
       Common Stock(a) 59,053,464 59,053,464
       Preferred Stock(a) 7,381,500 13,331,464 20,712,964
       Short-Term Investment(b) 138,513 138,513
Total Assets $ 1,406,817,433 $ $ 13,331,464 $ 1,420,148,897
 
TTP:
Description Level 1 Level 2 Level 3 Total
Assets
Investments:
       Common Stock(a) $ 183,561,482 $ $ $ 183,561,482
       Master Limited Partnerships and Related Companies(a) 75,363,266 75,363,266
       Preferred Stock(a) 4,458,500 2,293,725 6,752,225
       Short-Term Investment(b) 135,898 135,898
Total Assets $ 263,519,146 $ $ 2,293,725 $ 265,812,871
Liabilities
Written Call Options $ 73,133 $ 165,133 $ $ 238,266
 
NDP:
Description Level 1 Level 2 Level 3 Total
Assets
Investments:
       Common Stock(a) $ 167,882,935 $ $ $ 167,882,935
       Master Limited Partnerships and Related Companies(a)   67,119,064   67,119,064
       Preferred Stock(a) 1,365,300     2,172,946   3,538,246
       Short-Term Investment(b)   127,992     127,992
Total Assets $ 236,495,291 $ $        2,172,946 $ 238,668,237
Liabilities
Written Call Options $ 1,120,944 $          347,644 $ $ 1,468,588

Tortoise Capital Advisors 51



 


Notes to Financial Statements (unaudited) (continued)

TPZ:
Description       Level 1       Level 2       Level 3       Total
Assets
Investments:
       Corporate Bonds(a) $  — $ 105,513,539 $ $ 105,513,539
       Master Limited Partnerships and Related Companies(a) 56,778,420     56,778,420
       Common Stock(a) 36,215,055     36,215,055
       Preferred Stock(a)     3,138,616   1,833,457   4,972,073
       Short-Term Investment(b) 129,904 129,904
Total Assets $      96,261,995 $      105,513,539 $      1,833,457 $      203,608,991
  
Liabilities
Interest Rate Swap Contracts $  — $ 59,635 $ $ 59,635

(a) All other industry classifications are identified in the Schedule of Investments.
(b) Short-term investment is a sweep investment for cash balances.

The Funds utilize the beginning of reporting period method for determining transfers between levels. During the period ended August 31, 2017, Rice Midstream Partners LP common units held by TYG, NTG, TTP, NDP, and TPZ in the amount of $37,261,802, $21,904,472, $2,844,385, $2,865,468, and $2,019,828, respectively, were transferred from Level 2 to Level 1 when they converted into registered and unrestricted common units of Rice Midstream Partners LP. There were no other transfers between levels for the Funds during the period ended August 31, 2017.

The following tables present each Fund’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended August 31, 2017:

Preferred Stock TYG NTG TTP NDP TPZ
Balance — beginning of period       $ 22,478,411       $ 12,657,666       $ 2,177,797       $ 2,063,121       $ 1,740,791
Purchases
Return of capital
Sales
Total realized gains
Change in unrealized gains 1,196,579 673,798 115,928 109,825 92,666
Balance — end of period $ 23,674,990 $ 13,331,464 $ 2,293,725 $ 2,172,946 $ 1,833,457
  
Warrants TYG   NTG TTP NDP TPZ
Balance — beginning of period $ 14,662,641 $ 8,256,558 $ 1,420,555 $ 1,345,782 $ 1,135,487
Purchases
Return of capital
Sales (15,779,244 ) (8,885,319 ) (1,528,735 ) (1,448,266 ) (1,221,957 )
Total realized gains 12,633,897 7,114,164 1,224,001 1,159,579 978,372
Change in unrealized gains (11,517,294 ) (6,485,403 ) (1,115,821 ) (1,057,095 ) (891,902 )
Balance — end of period $ $ $ $ $
  
Private Investment TYG NTG TTP NDP TPZ
Balance — beginning of period $ $ $ $ $
Purchases 12,928,743
Return of capital
Sales
Total realized gains
Change in unrealized gains
Balance — end of period $ 12,928,743 $ $ $ $
  
TYG NTG TTP NDP TPZ
Change in unrealized gains on
      investments still held at August 31, 2017 $ 1,196,579 $ 673,798 $ 115,928 $ 109,825 $ 92,666

The Funds own units of preferred stock of Targa Resources Corp. that were issued in a private placement transaction that closed on March 16, 2016. The preferred stock provides the purchaser an option to convert into common stock after 12 years. In addition, the preferred stock can be repurchased by the issuer at a price of $1,100 per share after five years and $1,050 per share after six years. As part of the transaction, each Fund received two classes of warrants. On December 29, 2016 each fund exercised warrant shares in full in exchange for common shares of Targa Resources Corp.

52 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

A lattice model is being utilized to determine fair value of the preferred stock. The Funds estimate future volatility of the underlying common stock price and the discount rate to apply to expected future cash flows. Unobservable inputs used to determine the discount rate include an illiquidity spread due to the shares being issued in the private market and a seniority spread due to the purchased private preferred units being lower in the capital structure than the issuer’s public preferred stock. An increase (decrease) in the illiquidity spread or seniority spread would lead to a corresponding decrease (increase) in fair value of the preferred stock. An increase (decrease) in estimated future volatility would lead to a corresponding increase (decrease) in fair value of the preferred stock.

During the period ended August 31, 2017, TYG invested in Tortoise HoldCo II, LLC, a wholly-owned investment of TYG, which acquired an approximately 33 megawatt commercial and industrial solar portfolio from Kenyon Energy and its affiliate Sun Financial. As of August 31, 2017, TYG has committed a total of $34,700,000 of equity funding to Tortoise Holdco II, LLC, and approximately $21,800,000 remains to be funded. As of August 31, 2017, the purchase price of the recent transaction is being used to determine the fair value of the private investment. For future periods it is anticipated that the fair value of the investment will be determined based on a pricing model prepared by a third party service provider.

The following tables summarize the fair value and significant unobservable inputs that each Fund used to value its portfolio investments categorized as Level 3 as of August 31, 2017:

Assets at Fair Value       TYG       NTG       TTP       NDP       TPZ
Preferred Stock $ 23,674,990 $ 13,331,464 $ 2,293,725 $ 2,172,946 $ 1,833,457
Private Investment $ 12,928,743 $  — $  — $  — $  —

Assets at Fair Value       Valuation Technique       Unobservable Inputs       Input
Preferred Stock Lattice model Illiquidity spread 1.25 %
Preferred Stock   Lattice model   Seniority spread   0.25 %
Private Investment Recent transaction Purchase price   $ 12,928,743

C. Securities Transactions and Investment Income
Securities transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Interest income is recognized on the accrual basis, including amortization of premiums and accretion of discounts. Dividend income and distributions are recorded on the ex-dividend date. Distributions received from investments generally are comprised of ordinary income and return of capital. The Funds estimate the allocation of distributions between investment income and return of capital at the time such distributions are received based on historical information or regulatory filings. These estimates may subsequently be revised based on actual allocations received from the portfolio companies after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year-end of the Funds.

Subsequent to November 30, 2016, the Funds reallocated the amount of investment income and return of capital they recognized for the period from December 1, 2015 through November 30, 2016 based on the 2016 tax reporting information received. These reclassifications amounted to:

Increase (Decrease) in Increase (Decrease) in Increase (Decrease) in
Net Investment Income Unrealized Appreciation Realized Gains
      Amount       Per Share       Amount       Per Share       Amount       Per Share
TYG  
       Pre-tax $ (18,247,941 ) $    (0.370 ) $   15,743,255 $    0.319 $    2,504,686 $ 0.051
       After-tax $ (11,496,203 ) $ (0.233 ) $ 9,918,250 $ 0.201 $ 1,577,953 $ 0.032
NTG      
       Pre-tax $ (3,490,318 ) $ (0.074 ) $ 3,339,710   $ 0.071 $ 150,608   $ 0.003
       After-tax $ (2,207,277 ) $ (0.047 )   $ 2,112,033 $ 0.045 $ 95,244   $ 0.002  
TTP   $ (83,274 ) $ (0.008 ) $ 79,038 $ 0.008   $ 4,236 $ 0.000
NDP $ 95,499 $ 0.007 $ (88,032 )   $ (0.006 ) $ (7,467 ) $ (0.001 )
TPZ $ (225,224 ) $ (0.032 ) $ 216,014 $ 0.031 $ 9,210 $ 0.001

Subsequent to the period ended February 28, 2017, the Funds reallocated the amount of investment income and return of capital they recognized in the current fiscal year based on their revised 2017 estimates, after considering the final allocations for 2016. These reclassifications amounted to:

Increase (Decrease) in Increase (Decrease) in Increase (Decrease) in
Net Investment Income Unrealized Appreciation Realized Gains
      Amount       Per Share       Amount       Per Share       Amount       Per Share
TYG
       Pre-tax $    (1,944,355 ) $    (0.039 ) $   1,702,133 $     0.034 $     242,222 $ 0.005
       After-tax $ (1,224,944 ) $ (0.025 ) $ 1,072,344 $ 0.022 $ 152,600 $ 0.003
NTG
       Pre-tax $ 236,618 $ 0.005 $ (230,444 ) $ (0.005 ) $ (6,174 ) $ (0.000 )
       After-tax $ 149,638 $ 0.003 $ (145,733 ) $ (0.003 ) $ (3,905 ) $ (0.000 )
TTP $ 20,893 $ 0.002 $ (20,893 ) $ (0.002 ) $ $
NDP $ 112,322 $ 0.008 $ (112,322 ) $ (0.008 ) $ $
TPZ $ 16,468 $ 0.002 $ (7,762 ) $ (0.001 ) $ (8,706 ) $ (0.001 )

Tortoise Capital Advisors 53



 


Notes to Financial Statements (unaudited) (continued)

In addition, the Funds may be subject to withholding taxes on foreign-sourced income. The Funds accrue such taxes when the related income is earned.

D. Foreign Currency Translation
For foreign currency, investments in foreign securities, and other assets and liabilities denominated in a foreign currency, the Funds translate these amounts into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date, and (ii) purchases and sales of investment securities, income and expenses at the relevant rates of exchange on the respective dates of such transactions. The Funds do not isolate the portion of gains and losses on investments that is due to changes in the foreign exchange rates from that which is due to changes in market prices of securities.

E. Federal and State Income Taxation
Each of TYG and NTG, as corporations, are obligated to pay federal and state income tax on its taxable income. Currently, the highest regular marginal federal income tax rate for a corporation is 35%. Each of TYG and NTG may be subject to a 20% federal alternative minimum tax (“AMT”) on its federal alternative minimum taxable income to the extent that its AMT exceeds its regular federal income tax.

TTP, NDP and TPZ each qualify as a regulated investment company (“RIC”) under the Internal Revenue Code (“IRC”). As a result, TTP, NDP and TPZ generally will not be subject to U.S. federal income tax on income and gains that they distribute each taxable year to stockholders if they meet certain minimum distribution requirements. RICs are required to distribute substantially all of their income, in addition to meeting certain asset diversification requirements, and are subject to a 4% non-deductible U.S. federal excise tax on certain undistributed income unless the fund makes sufficient distributions to satisfy the excise tax avoidance requirement.

The Funds invest in master limited partnerships (“MLPs”), which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, each Fund reports its allocable share of the MLP’s taxable income in computing its own taxable income. The Funds’ tax expense or benefit, if applicable, is included in the Statements of Operations based on the component of income or gains (losses) to which such expense or benefit relates. For TYG and NTG, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

The Funds recognize the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Funds’ policy is to record interest and penalties on uncertain tax positions as part of tax expense. As of August 31, 2017, the Funds had no uncertain tax positions and no penalties or interest was accrued. The Funds do not expect any change in their unrecognized tax positions in the next twelve months. The tax years ended on the following dates remain open to examination by federal and state tax authorities:

TYG — November 30, 2013 through 2016

NTG — November 30, 2010 through 2016

TTP, NDP and TPZ — November 30, 2013 through 2016

F. Distributions to Stockholders
Distributions to common stockholders are recorded on the ex-dividend date. The Funds may not declare or pay distributions to its common stockholders if it does not meet asset coverage ratios required under the 1940 Act or the rating agency guidelines for its debt and preferred stock following such distribution. The amount of any distributions will be determined by the Board of Directors. The character of distributions to common stockholders made during the year may differ from their ultimate characterization for federal income tax purposes.

As RICs, TTP, NDP and TPZ each intend to make cash distributions of its investment company taxable income and capital gains to common stockholders. In addition, on an annual basis, TTP, NDP and TPZ each may distribute additional capital gains in the last calendar quarter if necessary to meet minimum distribution requirements and thus avoid being subject to excise taxes. Distributions paid to stockholders in excess of investment company taxable income and net realized gains will be treated as return of capital to stockholders.

Distributions to mandatory redeemable preferred (“MRP”) stockholders are accrued daily based on applicable distribution rates for each series and paid periodically according to the terms of the agreements. The Funds may not declare or pay distributions to its preferred stockholders if it does not meet a 200% asset coverage ratio for its debt or the rating agency basic maintenance amount for the debt following such distribution. The character of distributions to preferred stockholders made during the year may differ from their ultimate characterization for federal income tax purposes.

For tax purposes, distributions to stockholders for the year ended November 30, 2016 were characterized as follows:

TYG NTG TTP* NDP TPZ*
      Common       Preferred       Common       Preferred       Common       Preferred       Common       Common
Qualified dividend income 86 % 100 % 39 % 39 % 11 %
Ordinary dividend income 58 % 58 % 80 %
Return of capital 14 % 100 % 100 % 100 %
Long-term capital gain 3 % 3 % 9 %

* For Federal income tax purposes, distributions of short-term capital gains are included in qualified dividend income.

54 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

The tax character of distributions paid to common and preferred stockholders for the current year will be determined subsequent to November 30, 2017.

G. Offering and Debt Issuance Costs
Offering costs related to the issuance of common stock are charged to additional paid-in capital when the stock is issued. Debt issuance costs related to senior notes and MRP Stock are capitalized and amortized over the period the debt or MRP Stock is outstanding.

TYG:
Offering costs (excluding underwriter discounts and commissions) of $80,986 related to the issuance of common stock were recorded to additional paid-in capital during the period ended August 31, 2017.

There were no offering or debt issuance costs recorded during the period ended August 31, 2017, for NTG, TTP, NDP or TPZ.

H. Derivative Financial Instruments
The Funds have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Funds do not hold or issue derivative financial instruments for speculative purposes. All derivative financial instruments are recorded at fair value with changes in fair value during the reporting period, and amounts accrued under the agreements, included as unrealized gains or losses in the accompanying Statements of Operations. Derivative instruments that are subject to an enforceable master netting arrangement allow a Fund and the counterparty to the instrument to offset any exposure to the other party with amounts owed to the other party. The fair value of derivative financial instruments in a loss position are offset against the fair value of derivative financial instruments in a gain position, with the net fair value appropriately reflected as an asset or liability within the accompanying Statements of Assets & Liabilities.

TYG and TPZ use interest rate swap contracts in an attempt to manage interest rate risk. Cash settlements under the terms of the interest rate swap contracts and the termination of such contracts are recorded as realized gains or losses in the accompanying Statements of Operations.

TYG, NTG, TTP and NDP seek to provide current income from gains earned through an option strategy that normally consists of writing (selling) call options on selected equity securities held in the portfolio (“covered calls”). The premium received on a written call option is initially recorded as a liability and subsequently adjusted to the then current fair value of the option written. Premiums received from writing call options that expire unexercised are recorded as a realized gain on the expiration date. Premiums received from writing call options that are exercised are added to the proceeds from the sale of the underlying security to calculate the realized gain (loss). If a written call option is repurchased prior to its exercise, the realized gain (loss) is the difference between the premium received and the amount paid to repurchase the option.

I. Indemnifications
Under each of the Funds’ organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds may enter into contracts that provide general indemnification to other parties. A Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred, and may not occur. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.

J. Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments with an original maturity of three months or less and money market fund accounts.

K. Recent Accounting and Regulatory Updates
In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03 “Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 requires that debt issuance costs related to a note be reported in the balance sheet as a direct deduction from the face amount of that note. ASU 2015-03 is effective for fiscal years beginning on or after December 15, 2015 and interim periods within these fiscal years, and must be applied retrospectively. The funds adopted ASU 2015-03 during the period ended February 28, 2017. For TYG, NTG and TTP, accrued deferred debt issuance and offering costs related to senior notes were reclassified from “Prepaid expenses and other assets” to “Senior notes, net” and accrued deferred offering costs related to mandatory redeemable preferred stock were reclassified from “Prepaid expenses and other assets” to “Mandatory redeemable preferred stock, net” on the Statements of Assets & Liabilities. There was no impact to the financial statements related to the adoption of ASU 2015-03 for NDP and TPZ.

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X was August 1, 2017. The funds adopted the amendments to Regulation S-X during the period ended August 31, 2017. For TTP and NDP, the notional value of options written is disclosed in the Schedule of Options Written. There was no impact to the financial statements related to the adoption of the amendments to Regulation S-X for TYG, NTG, or TPZ.

3. Concentration Risk

Each of the Funds concentrates its investments in the energy sector. Funds that primarily invest in a particular sector may experience greater volatility than companies investing in a broad range of industry sectors. A Fund may, for defensive purposes, temporarily invest all or a significant portion of its assets in investment grade securities, short-term debt securities and cash or cash equivalents. To the extent a Fund uses this strategy, it may not achieve its investment objective.

Tortoise Capital Advisors 55



 

 

Notes to Financial Statements (unaudited) (continued)

4. Agreements

The Funds have each entered into an Investment Advisory Agreement with Tortoise Capital Advisors, L.L.C. (the “Adviser”). The Funds each pay the Adviser a fee based on the Fund’s average monthly total assets (including any assets attributable to leverage and excluding any net deferred tax asset) minus accrued liabilities (other than net deferred tax liability, debt entered into for purposes of leverage and the aggregate liquidation preference of outstanding preferred stock) (“Managed Assets”), in exchange for the investment advisory services provided. Average monthly Managed Assets is the sum of the daily Managed Assets for the month divided by the number of days in the month. Accrued liabilities are expenses incurred in the normal course of each Fund’s operations. Waived fees are not subject to recapture by the Adviser. The annual fee rates paid to the Adviser as of August 31, 2017 are as follows:

TYG — 0.95% up to $2,500,000,000, 0.90% between $2,500,000,000 and $3,500,000,000, and 0.85% above $3,500,000,000.

NTG — 0.95%.

TTP — 1.10%, less a fee waiver of 0.05% during calendar year 2016.

NDP — 1.10%, less a fee waiver of 0.10% during calendar year 2016.

TPZ — 0.95%.

In addition, the Adviser has contractually agreed to waive all fees due under the Investment Advisory Agreements for TYG and NTG related to the net proceeds received from the issuance of additional common stock under at-the-market equity programs for a six month period following the date of issuance.

U.S. Bancorp Fund Services, LLC serves as each Fund’s administrator. Each Fund pays the administrator a monthly fee computed at an annual rate of 0.04% of the first $1,000,000,000 of the Fund’s Managed Assets, 0.01% on the next $500,000,000 of Managed Assets and 0.005% on the balance of the Fund’s Managed Assets.

U.S. Bank, N.A. serves as the Funds’ custodian. Each Fund pays the custodian a monthly fee computed at an annual rate of 0.004% of the Fund’s U.S. Dollar-denominated assets and 0.015% of the Fund’s Canadian Dollar-denominated assets, plus portfolio transaction fees.

5. Income Taxes

TYG and NTG:
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of TYG’s and NTG’s deferred tax assets and liabilities as of August 31, 2017 are as follows:

       TYG        NTG
Deferred tax assets:
       Net operating loss carryforwards $ 878,196 $ 23,862,024
       Capital loss carryforwards
       AMT credit 2,523,836
878,196 26,385,860
Deferred tax liabilities:
       Basis reduction of investment in MLPs 275,195,976 137,105,203
       Net unrealized gains on investment securities 131,095,739 40,309,343
406,291,715 177,414,546
Total net deferred tax liability $   405,413,519 $   151,028,686

At August 31, 2017, a valuation allowance on deferred tax assets was not deemed necessary because each of TYG and NTG believe it is more likely than not that there is an ability to realize its deferred tax assets through future taxable income. Any adjustments to TYG’s or NTG’s estimates of future taxable income will be made in the period such determination is made.

Total income tax expense for each of TYG and NTG differs from the amount computed by applying the federal statutory income tax rate of 35% to net investment loss and net realized and unrealized gains (losses) on investments for the period ended August 31, 2017, as follows:

TYG        NTG
Application of statutory income tax rate $   (14,116,392 ) $   (12,072,157 )
State income taxes, net of federal tax effect (806,650 ) (607,058 )
Permanent differences   1,625,919 1,190,718
Rate change adjustments 1,773,908 1,270,762
Total income tax (benefit) $ (11,523,215 ) $ (10,217,735 )

56 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

Total income taxes are computed by applying the federal statutory rate plus a blended state income tax rate. During the period, each of TYG and NTG re-evaluated its blended state income tax rate, increasing the overall rate from 36.85% to 37.00% and from 36.59% to 36.76%, respectively, due to anticipated state apportionment of income and gains.

For the period ended August 31, 2017, the components of income tax expense for TYG and NTG include the following:

         TYG        NTG
Current state tax expense $ 34,804,548 $ 161,627
Deferred tax benefit  
       Federal   (43,823,560 ) (9,882,418 )
       State (net of federal tax effect) (2,504,203 ) (496,944 )
Total deferred tax (benefit) (46,267,763 ) (10,379,362 )
Total income tax (benefit) $ (11,523,215 ) $ (10,217,735 )

TYG acquired all of the net assets of Tortoise Energy Capital Corporation (“TYY”) and Tortoise North American Energy Corporation (“TYN”) on June 23, 2014 in a tax-free reorganization under Section 368(a)(1)(C) of the IRC. As of November 30, 2016, TYG and NTG had net operating losses for federal income tax purposes of approximately $3,866,000 (from TYN) and $62,852,000, respectively. The net operating losses may be carried forward for 20 years. If not utilized, these net operating losses will expire in the year ending November 30, 2027 for TYG and in the years ending November 30, 2033 through 2035 for NTG. Utilization of TYG’s net operating losses from TYN is further subject to Section 382 limitations of the IRC, which limit tax attributes subsequent to ownership changes.

As of November 30, 2016, NTG had capital loss carryforward of $47,721,000 which may be carried forward for 5 years. If not utilized, these capital losses will expire in the year ending November 30, 2021. For corporations, capital losses can only be used to offset capital gains and cannot be used to offset ordinary income. The amount of deferred tax asset for net operating losses includes amounts for the period from December 1, 2016 through August 31, 2017. As of November 30, 2016, NTG had $2,523,836 of AMT credits available, which may be credited in the future against regular income tax and carried forward indefinitely.

TTP, NDP and TPZ:
It is the intention of TTP, NDP and TPZ to each continue to qualify as a RIC under Subchapter M of the IRC and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to return of capital distributions from underlying investments, wash sales, straddles, swaps, differences in the timing of recognition of gains or losses on investments and distributions in excess of current earnings. These reclassifications have no impact on net assets or results of operations. Permanent book and tax basis differences, if any, may result in reclassifications of undistributed (accumulated) net investment income (loss), undistributed (accumulated) net realized gain (loss) and additional paid-in capital.

As of November 30, 2016, the components of accumulated earnings (deficit) on a tax basis were as follows:

       TTP          NDP          TPZ
Unrealized appreciation $ 1,163,740 $ 1,015,411 $ 36,601,033
Undistributed ordinary income 485,611
Undistributed long-term capital gain 917
Capital loss carryforwards (40,731,361 )
Qualified late year ordinary losses (1,417,779 ) (1)
Other temporary differences (2,095,433 ) (2) (3,908,007 ) (2) (18,441 )
Accumulated earnings (deficit) $ (446,082 ) $   (45,041,736 ) $   36,583,509

(1) Qualified late year ordinary losses are net ordinary losses incurred between January 1 and the end of NDP’s fiscal year on November 30, 2016, per IRC Sec. 852(b)(8). Such losses may be deferred until the first day of NDP’s next fiscal year.
(2) Primarily related to losses deferred under straddle regulations per IRC Sec. 1092.

As of November 30, 2016, NDP had a short-term capital loss carryforward of approximately $10,200,000 and a long-term capital loss carryforward of approximately $30,800,000, which may be carried forward for an unlimited period under the Regulated Investment Company Modernization Act of 2010. To the extent NDP realizes future net capital gains, those gains will be offset by any unused capital loss carryforwards. Capital loss carryforwards will retain their character as either short-term or long-term capital losses. Thus, such losses must be used first to offset gains of the same character; for example, long-term loss carryforwards will first offset long-term gains, before they can be used to offset short-term gains.

Tortoise Capital Advisors 57



 

 

Notes to Financial Statements (unaudited) (continued)

As of August 31, 2017, the aggregate cost of investments, aggregate gross unrealized appreciation and aggregate gross unrealized depreciation on a federal income tax basis were as follows:

      TYG       NTG       TTP       NDP       TPZ
Cost of investments $ 1,336,490,729 $ 937,519,551 $ 285,192,858 $ 291,906,417 $ 178,667,467
Gross unrealized appreciation of investments $ 1,106,778,855 $ 486,602,025 $ 17,211,345 $ 21,378,368 $ 30,384,576
Gross unrealized depreciation of investments (8,705,148 ) (3,972,679 ) (36,829,598 ) (76,085,136 ) (5,502,687 )
Net unrealized appreciation (depreciation) of investments $ 1,098,073,707 $ 482,629,346 $ (19,618,253 ) $ (54,706,768 ) $ 24,881,889

6. Restricted Securities

Certain of the Funds’ investments are restricted and are valued as determined in accordance with fair value procedures, as more fully described in Note 2. The following table shows the principal amount or shares, acquisition date(s), acquisition cost, fair value and the percent of net assets which the securities comprise at August 31, 2017.

TYG:
  Fair Value
Investment as Percent
Investment Security     Type     Shares     Acquisition Date(s)     Acquisition Cost     Fair Value     of Net Assets
Targa Resources Corp.,
       9.500% Preferred Stock 21,758 03/16/16 $ 19,265,393 $ 23,674,990 1.8 %
Tortoise HoldCo II, LLC Private Investment N/A 08/18/17-08/23/17 12,928,743 12,928,743 1.0
  $ 32,194,136 $ 36,603,733 2.8 %
 
NTG:                  
Fair Value
  Investment as Percent
Investment Security Type Shares Acquisition Date Acquisition Cost Fair Value of Net Assets
Targa Resources Corp.,
       9.500% Preferred Stock 12,252 03/16/16 $ 10,848,405 $ 13,331,464 1.6 %
 
TTP:
Fair Value
Investment as Percent
Investment Security Type Shares Acquisition Date Acquisition Cost Fair Value of Net Assets
Targa Resources Corp.,
       9.500% Preferred Stock 2,108 03/16/16 $ 1,866,506 $ 2,293,725 1.2 %
 
NDP:
Fair Value
Investment as Percent
Investment Security Type Shares Acquisition Date Acquisition Cost Fair Value of Net Assets
Targa Resources Corp.,
       9.500% Preferred Stock 1,997 03/16/16 $ 1,768,223 $ 2,172,946 1.3 %
 
TPZ:
Fair Value
Investment Principal as Percent
Investment Security Type Amount/Shares Acquisition Date(s) Acquisition Cost Fair Value of Net Assets
Blue Racer Midstream, LLC,                
       6.125%, 11/15/2022* Corporate Bond $ 4,000,000 06/23/16-07/29/16 $ 3,810,000 $ 4,110,000 2.6 %
DCP Midstream LLC,
       9.750%, 03/15/2019* Corporate Bond $ 4,000,000 08/07/09-08/16/12 3,674,870 4,395,000 2.8
Duquesne Light Holdings, Inc.,
       6.400%, 09/15/2020* Corporate Bond $ 3,000,000 11/30/11 3,180,330 3,362,238 2.2
Duquesne Light Holdings, Inc.,
       5.900%, 12/01/2021* Corporate Bond $ 2,000,000 11/18/11-12/05/11 2,074,420 2,268,144 1.4
Florida Gas Transmission Co., LLC,
       5.450%, 07/15/2020* Corporate Bond $ 1,500,000 07/08/10-01/04/11 1,551,220 1,622,430 1.0
Gibson Energy Inc.,
       6.750%, 07/15/2021* Corporate Bond $ 4,500,000 06/26/13-07/01/13 4,459,760 4,657,500 3.0
Midcontinent Express Pipeline, LLC,
       6.700%, 09/15/2019* Corporate Bond $ 2,000,000 09/09/09-03/02/10 2,061,010 2,142,500 1.4

58 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

Fair Value
Investment Principal as Percent
Investment Security       Type       Amount/Shares       Acquisition Date(s)       Acquisition Cost       Fair Value       of Net Assets
Pattern Energy Group Inc.,                            
       5.875%, 02/01/2024* Corporate Bond $ 1,000,000   01/20/17-01/24/17 $ 1,011,875 $ 1,047,500 0.7 %
Rockies Express Pipeline, LLC,
       6.000%, 01/15/2019* Corporate Bond $ 4,000,000 08/03/15 4,130,000 4,135,000 2.7
Ruby Pipeline, LLC,
       6.000%, 04/01/2022* Corporate Bond $ 1,500,000 09/17/12 1,616,250 1,605,782 1.0
SemGroup Corp.,
       6.375%, 03/15/2025* Corporate Bond $ 6,000,000 03/08/17 5,939,010 5,910,000 3.8
Southern Star Central Corp.,
       5.125%, 07/15/2022* Corporate Bond $ 3,000,000 06/17/14 3,041,250 3,075,000 2.0
Targa Resources Corp.,
       9.500% Preferred Stock 1,685 03/16/16 1,491,965 1,833,457 1.2
$ 38,041,960 $ 40,164,551 25.8 %

* Security is eligible for resale under Rule 144A under the 1933 Act.

7. Investment Transactions

For the period ended August 31, 2017, the amount of security transactions (other than U.S. government securities and short-term investments), is as follows:

      TYG       NTG       TTP       NDP TPZ
Purchases $ 387,740,219 $ 238,339,085 $ 35,843,346 $ 96,028,491       $ 42,977,730
Sales $ 395,114,202 $ 237,708,055 $ 40,272,977 $ 99,155,686 $ 45,052,795

8. Senior Notes

TYG, NTG and TTP each have issued private senior notes (collectively, the “Notes”), which are unsecured obligations and, upon liquidation, dissolution or winding up of a Fund, will rank: (1) senior to all of the Fund’s outstanding preferred shares, if any; (2) senior to all of the Fund’s outstanding common shares; (3) on parity with any unsecured creditors of the Fund and any unsecured senior securities representing indebtedness of the Fund and (4) junior to any secured creditors of the Fund. Holders of the Notes are entitled to receive periodic cash interest payments until maturity. The Notes are not listed on any exchange or automated quotation system.

The Notes are redeemable in certain circumstances at the option of a Fund, subject to payment of any applicable make-whole amounts or early redemption premiums. The Notes for a Fund are also subject to a mandatory redemption if the Fund fails to meet asset coverage ratios required under the 1940 Act or the rating agency guidelines if such failure is not waived or cured. At August 31, 2017, each of TYG, NTG and TTP were in compliance with asset coverage covenants and basic maintenance covenants for its senior notes.

Details of each Fund’s outstanding Notes, including estimated fair value, as of August 31, 2017 are included below. The estimated fair value of each series of fixed-rate Notes was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, plus either 1) the spread between the interest rate on recently issued debt and the U.S. Treasury rate with a similar maturity date or 2) if there has not been a recent debt issuance, the spread between the AAA corporate finance debt rate and the U.S. Treasury rate with an equivalent maturity date plus the spread between the fixed rates of the Notes and the AAA corporate finance debt rate. The estimated fair value of floating rate Notes approximates the carrying amount because the interest rate fluctuates with changes in interest rates available in the current market. The estimated fair values in the following tables are Level 2 valuations within the fair value hierarchy.

TYG:
Notional Estimated
Series       Maturity Date       Interest Rate       Payment Frequency       Amount       Fair Value
Series M September 27, 2017      2.75 %            Semi-Annual       $ 13,000,000 $ 13,158,098
Series BB September 27, 2017 2.75 % Semi-Annual 12,000,000 12,145,937
Series I May 12, 2018 4.35 % Quarterly 10,000,000 10,163,756
Series X   June 15, 2018 4.55 % Quarterly 12,500,000 12,838,410
Series N September 27, 2018 3.15 % Semi-Annual 10,000,000 10,218,889
Series CC September 27, 2019 3.48 % Semi-Annual 15,000,000 15,508,073
Series J December 19, 2019   3.30 % Semi-Annual 15,000,000 15,344,986
Series Y June 14, 2020 2.77 % Semi-Annual 12,500,000 12,626,785
Series LL June 14, 2020 2.44 % (1) Quarterly 20,000,000 20,000,000
Series O September 27, 2020 3.78 % Semi-Annual 15,000,000 15,743,897
Series Z June 14, 2021 2.98 % Semi-Annual 12,500,000 12,688,737

Tortoise Capital Advisors 59



 

 

Notes to Financial Statements (unaudited) (continued)

TYG:
Series       Maturity Date       Interest Rate       Payment Frequency       Notional
Amount
      Estimated
Fair Value
Series R January 22, 2022      3.77 %            Semi-Annual       $ 25,000,000 $ 26,085,075
Series DD September 27, 2022 4.21 % Semi-Annual 13,000,000 14,038,336
Series II December 18, 2022 3.22 %   Semi-Annual 10,000,000 10,211,102
Series K December 19, 2022 3.87 % Semi-Annual 10,000,000 10,541,219
Series S January 22, 2023 3.99 % Semi-Annual 10,000,000 10,568,165
Series P September 27, 2023 4.39 % Semi-Annual 12,000,000 13,145,072
Series FF November 20, 2023 4.16 % Semi-Annual 10,000,000 10,759,079
Series JJ December 18, 2023 3.34 % Semi-Annual 20,000,000 20,484,404
Series T January 22, 2024 4.16 % Semi-Annual 25,000,000 26,728,665
Series L December 19, 2024 3.99 % Semi-Annual 20,000,000 21,284,142
Series AA June 14, 2025 3.48 % Semi-Annual 10,000,000 10,297,909
Series MM June 14, 2025 2.49 % (2) Quarterly 30,000,000 30,000,000
Series NN   June 14, 2025     3.20 % Semi-Annual 30,000,000 30,298,115
Series KK December 18, 2025 3.53 % Semi-Annual 10,000,000 10,323,776
Series OO April 9, 2026 3.27 % Semi-Annual 30,000,000 30,544,193
$ 412,500,000 $ 425,746,820

(1)  Floating rate resets each quarter based on 3-month LIBOR plus 1.20%. The current rate is effective for the period from June 14, 2017 through September 13, 2017. The weighted-average interest rate for the period from December 1, 2016 through August 31, 2017 was 2.29%.
(2) Floating rate resets each quarter based on 3-month LIBOR plus 1.25%. The current rate is effective for the period from June 14, 2017 through September 13, 2017. The weighted-average interest rate for the period from December 1, 2016 through August 31, 2017 was 2.34%.

TYG’s Series G Notes with a notional amount of $30,000,000 and a fixed interest rate of 5.85% were paid in full upon maturity on December 21, 2016.

NTG:
Series       Maturity Date       Interest Rate       Payment Frequency       Notional
Amount
      Estimated
Fair Value
Series C December 15, 2017      3.73 %            Quarterly       $ 57,000,000 $ 57,695,055
Series I April 17, 2018 2.77 % Semi-Annual 10,000,000 10,132,617
Series G May 12, 2018 4.35 % Quarterly 10,000,000 10,163,756
Series K September 9, 2019 2.52 % (1) Quarterly 35,000,000 35,000,000
Series D December 15, 2020 4.29 % Quarterly 112,000,000 118,722,201
Series J April 17, 2021 3.72 % Semi-Annual 30,000,000 31,459,111
Series L April 17, 2021 2.75 % (2) Quarterly 20,000,000 20,000,000
Series M April 17, 2021 3.06 % Semi-Annual 10,000,000 10,234,329
$ 284,000,000 $ 293,407,069

(1)  Floating rate resets each quarter based on 3-month LIBOR plus 1.30%. The current rate is effective for the period from June 9, 2017 through September 10, 2017. The weighted-average rate for the period from December 1, 2016 through August 31, 2017 was 2.38%.
(2) Floating rate resets each quarter based on 3-month LIBOR plus 1.45%. The current rate is effective for the period from July 17, 2017 through October 16, 2017. The weighted-average rate for the period from December 1, 2016 through August 31, 2017 was 2.54%.

TTP:                    
Series       Maturity Date       Interest Rate       Payment Frequency       Notional
Amount
      Estimated
Fair Value
Series C December 15, 2018      3.49 %            Quarterly       $ 6,000,000 $ 6,127,681
Series F December 12, 2020 3.01 % Semi-Annual 6,000,000 6,103,879
Series D December 15, 2021 4.08 % Quarterly 16,000,000 16,967,105
Series G December 12, 2022 2.28 % (1) Quarterly 6,000,000 6,000,000
$   34,000,000 $   35,198,665

(1)  Floating rate resets each quarter based on 3-month LIBOR plus 1.05%. The current rate is effective for the period from June 12, 2017 September 11, 2017. The weighted-average interest rate for the period from December 1, 2016 through August 31, 2017 was 2.14%.

60 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

9. Mandatory Redeemable Preferred Stock

TYG, NTG and TTP each have issued and outstanding MRP Stock at August 31, 2017. The MRP Stock has rights determined by the Board of Directors. Except as otherwise indicated in the Funds’ Charter or Bylaws, or as otherwise required by law, the holders of MRP Stock have voting rights equal to the holders of common stock (one vote per MRP share) and will vote together with the holders of shares of common stock as a single class except on matters affecting only the holders of preferred stock or the holders of common stock. The 1940 Act requires that the holders of any preferred stock (including MRP Stock), voting separately as a single class, have the right to elect at least two directors at all times.

Under the Investment Company Act of 1940, a fund may not declare dividends or make other distributions on shares of common stock or purchases of such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding MRP Stock would be less than 200%. The MRP Stock is also subject to a mandatory redemption if a Fund fails to meet an asset coverage ratio of at least 225% as determined in accordance with the 1940 Act or a rating agency basic maintenance amount if such failure is not waived or cured. At August 31, 2017, each of TYG, NTG and TTP were in compliance with asset coverage covenants and basic maintenance covenants for its MRP Stock.

Details of each Fund’s outstanding MRP Stock, including estimated fair value, as of August 31, 2017 is included below. The estimated fair value of each series of TYG, NTG and TTP MRP Stock was calculated for disclosure purposes by discounting future cash flows at a rate equal to the current U.S. Treasury rate with an equivalent maturity date, plus either 1) the spread between the interest rate on recently issued preferred stock and the U.S. Treasury rate with a similar maturity date or 2) if there has not been a recent preferred stock issuance, the spread between the AA corporate finance debt rate and the U.S. Treasury rate with an equivalent maturity date plus the spread between the fixed rates of the MRP Stock and the AA corporate finance debt rate. The estimated fair values of each series of the TYG, NTG and TTP MRP Stock are Level 2 valuations within the fair value hierarchy.

TYG:
TYG has 65,000,000 shares of preferred stock authorized and 16,500,000 shares of MRP Stock outstanding at August 31, 2017. TYG’s MRP Stock has a liquidation value of $10.00 per share plus any accumulated but unpaid distributions, whether or not declared. Holders of the MRP D Stock and MRP E Stock are entitled to receive cash interest payments semi-annually at a fixed rate until maturity. The TYG MRP Stock is not listed on any exchange or automated quotation system.

      Aggregate Liquidation       Estimated
Series       Mandatory Redemption Date       Fixed Rate       Shares Outstanding Preference Fair Value
Series D December 17, 2021 4.01%       8,500,000              $ 85,000,000        $ 87,556,662      
Series E December 17, 2024 4.34%   8,000,000 80,000,000 83,918,390
16,500,000 $ 165,000,000 $ 171,475,052

TYG’s MRP Stock is redeemable in certain circumstances at the option of TYG, subject to payment of any applicable make-whole amounts.

NTG:
NTG has 10,000,000 shares of preferred stock authorized and 4,400,000 shares of MRP Stock outstanding at August 31, 2017. NTG’s MRP Stock has a liquidation value of $25.00 per share plus any accumulated but unpaid distributions, whether or not declared. Holders of NTG MRP Stock are entitled to receive cash interest payments each quarter at a fixed rate until maturity. The NTG MRP Stock is not listed on any exchange or automated quotation system.

      Aggregate Liquidation       Estimated
Series Mandatory Redemption Date       Fixed Rate       Shares Outstanding Preference Fair Value      
Series B        December 15, 2017        4.33%        2,600,000               $ 65,000,000        $ 65,863,835
Series C December 8, 2020 3.73% 200,000 5,000,000 5,095,721
Series D December 8, 2022 4.19% 1,600,000 40,000,000 41,490,550
4,400,000 $ 110,000,000 $ 112,450,106

NTG’s MRP Stock is redeemable in certain circumstances at the option of NTG, subject to payment of any applicable make-whole amounts.

TTP:
TTP has 10,000,000 shares of preferred stock authorized and 640,000 shares of MRP Stock outstanding at August 31, 2017. TTP’s MRP Stock has a liquidation value of $25.00 per share plus any accumulated but unpaid distributions, whether or not declared. Holders of TTP MRP Stock are entitled to receive cash interest payments each quarter at a fixed rate until maturity. The TTP MRP Stock is not listed on any exchange or automated quotation system.

       Aggregate Liquidation        Estimated
Series        Mandatory Redemption Date        Fixed Rate        Shares Outstanding Preference Fair Value      
Series A December 15, 2018 4.29% 640,000 $16,000,000 $16,396,372

TTP’s MRP Stock is redeemable in certain circumstances at the option of TTP, subject to payment of any applicable make-whole amounts.

Tortoise Capital Advisors 61




 


Notes to Financial Statements (unaudited) (continued)

10. Credit Facilities

The following table shows key terms, average borrowing activity and interest rates for the period during which the facility was utilized during the period from December 1, 2016 through August 31, 2017, as well as the principal balance and interest rate in effect at August 31, 2017 for each of the Funds’ credit facilities:

      TYG       TYG       NTG       TTP       NDP       TPZ
Bank of America,
Lending syndicate agent U.S. Bank, N.A. Scotia Bank, N.A. N.A. Scotia Bank, N.A. Scotia Bank, N.A. Scotia Bank, N.A.
Unsecured, Unsecured, Unsecured, Unsecured, Unsecured, Unsecured,
revolving credit revolving credit revolving credit revolving credit revolving credit revolving credit
Type of facility facility facility facility facility facility facility
Borrowing capacity $130,000,000 $90,000,000 $97,000,000 $35,000,000 $80,000,000 $60,000,000
364-day rolling 179-day rolling 179-day rolling
Maturity date June 12, 2019 June 22, 2018 June 12, 2019 evergreen evergreen evergreen
1-month LIBOR 1-month LIBOR 1-month LIBOR 1-month LIBOR 1-month LIBOR 1-month LIBOR
Interest rate plus 1.20% plus 1.20% plus 1.20% plus 1.125% plus 0.80% plus 0.80%
Non-usage fee 0.15%-0.25%(1) 0.15%(2) 0.15%-0.25%(3) 0.15% 0.20%(4) 0.20%(5)
For the period ended August 31, 2017:
Average principal balance $67,800,000 $63,000,000 $51,200,000 $16,300,000(6) $63,400,000 $50,700,000
Average interest rate 2.18% 2.18% 2.18% 2.11%(6) 1.78% 1.78%
As of August 31, 2017:
Principal balance outstanding $59,500,000 $63,000,000 $45,300,000 $18,000,000 $64,700,000 $51,400,000
Interest rate 2.43% 2.43% 2.43% 2.36% 2.03% 2.03%


(1)

Non-use fees are equal to a rate of 0.25% when the outstanding balance is below $65,000,000 and 0.15% when the outstanding balance is at least $65,000,000, but below $91,000,000. The outstanding balance will not be subject to the non-use fee when the amount outstanding is at least $91,000,000.

(2)

Non-usage fee is waived if the outstanding balance on the facility is at least $63,000,000.

(3)

Non-use fees are equal to a rate of 0.25% when the outstanding balance is below $48,500,000 and 0.15% when the outstanding balance is at least $48,500,000, but below $67,900,000. The outstanding balance will not be subject to the non-use fee when the amount outstanding is at least $67,900,000.

(4)

Non-usage fee is waived if the outstanding balance on the facility is at least $56,000,000.

(5)

Non-usage fee is waived if the outstanding balance on the facility is at least $42,000,000.

(6)

For the period from June 30, 2015 through June 30, 2017 TTP’s credit facility allowed for interest rates to be fixed at 2.03% on $7,000,000 of outstanding principal balance.

Under the terms of the credit facilities, the Funds must maintain asset coverage required under the 1940 Act. If a Fund fails to maintain the required coverage, it may be required to repay a portion of an outstanding balance until the coverage requirement has been met. At August 31, 2017, each Fund was in compliance with credit facility terms.

11. Derivative Financial Instruments

The Funds have adopted the disclosure provisions of FASB Accounting Standard Codification 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires enhanced disclosures about the Funds’ use of and accounting for derivative instruments and the effect of derivative instruments on the Funds’ results of operations and financial position. Tabular disclosure regarding derivative fair value and gain/loss by contract type (e.g., interest rate contracts, foreign exchange contracts, credit contracts, etc.) is required and derivatives accounted for as hedging instruments under ASC 815 must be disclosed separately from those that do not qualify for hedge accounting. Even though the Funds may use derivatives in an attempt to achieve an economic hedge, the Funds’ derivatives are not accounted for as hedging instruments under ASC 815 because investment companies account for their derivatives at fair value and record any changes in fair value in current period earnings.

Interest Rate Swap Contracts
TYG and TPZ have each entered into interest rate swap contracts in an attempt to protect it from increasing interest expense on its leverage resulting from increasing interest rates. A decline in interest rates may result in a decline in the value of the swap contracts, which may result in a decline in the net assets of TYG and TPZ. At the time the interest rate swap contracts reach their scheduled termination, there is a risk that TYG and TPZ will not be able to obtain a replacement transaction, or that the terms of the replacement would not be as favorable as on the expiring transaction. In addition, if TYG or TPZ is required to terminate any swap contract early due to a decline in net assets below a threshold amount ($450,000,000 for TYG and $60,000,000 for TPZ) or failing to maintain a required 300% asset coverage of the liquidation value of the outstanding debt, then TYG or TPZ could be required to make a payment to the extent of any net unrealized depreciation of the terminated swaps, in addition to redeeming all or some of its outstanding debt. TYG and TPZ each segregate a portion of its assets as collateral for the amount of any net liability of its interest rate swap contracts.

62 Tortoise Capital Advisors




 

2017 3rd Quarter Report | August 31, 2017

Notes to Financial Statements (unaudited) (continued)

TYG and TPZ are exposed to credit risk on the interest rate swap contracts if the counterparty should fail to perform under the terms of the interest rate swap contracts. The amount of credit risk is limited to the net appreciation of the interest rate swap contracts, if any, as no collateral is pledged by the counterparty. In addition, if the counterparty to the interest rate swap contracts defaults, the Fund would incur a loss in the amount of the receivable and would not receive amounts due from the counterparty to offset the interest payments on the Fund’s leverage.

The average notional amount of all open swap agreements for TYG and TPZ for the period from December 1, 2016 through August 31, 2017 was approximately $15,000,000 and $20,800,000, respectively.

The following table presents TYG’s and TPZ’s interest rate swap contracts, each of which is subject to a netting agreement, on a gross and a net basis at August 31, 2017:

         Gross Amounts Not Offset in the
Statement of Assets & Liabilities
Gross Amounts Net Amounts of         
Offset in the Liabilities Presented in
Gross Amounts Statements of the Statements
of Recognized Assets & of Assets & Financial Cash Collateral
Description Assets Liabilities Liabilities Instruments Received Net Amount
TPZ: Interest Rate Swap Contracts     $ 27,394         $ (27,394)               $                $       —           $       —         $   
 
Gross Amounts Not Offset in the
Statement of Assets & Liabilities
Gross Amounts Net Amounts of
Offset in the Liabilities Presented in
Gross Amounts Statements of the Statements
of Recognized Assets & of Assets & Financial Cash Collateral
Description Liabilities Liabilities Liabilities Instruments Received Net Amount
TYG: Interest Rate Swap Contracts $    357,703 $ —   $    357,703 $ $ 357,703
TPZ: Interest Rate Swap Contracts $ 87,029 $ (27,394) $ 59,635 $ $ $ 59,635

Written Call Options

Transactions in written option contracts for TYG, NTG, TTP and NDP for the period from December 1, 2016 through August 31, 2017, are as follows:

      TYG       NTG
Number of       Number of      
Contracts Premium Contracts Premium
Options outstanding at November 30, 2016 $ $
Options written 19,366 892,865      12,353 539,616
Options closed*
Options exercised (5,548 ) (316,900 ) (3,350 ) (186,846 )
Options expired    (13,818 ) (575,965 ) (9,003 ) (352,770 )
Options outstanding at August 31, 2017 $ $
 
TTP NDP
Number of Number of
Contracts Premium Contracts Premium
Options outstanding at November 30, 2016 5,857 $ 462,996 36,989 $ 2,153,562
Options written 51,324 3,503,004 400,822 17,400,552
Options closed* (50,769 ) (3,558,604 ) (357,389 ) (16,218,565 )
Options exercised (706 ) (69,210 ) (13,056 ) (484,917 )
Options expired (18,900 ) (970,995 )
Options outstanding at August 31, 2017 5,706 $ 338,186 48,466 $ 1,879,637

* The aggregate cost of closing written option contracts was $0 for TYG, $0 for NTG, $1,132,514 for TTP and $3,649,147 for NDP, resulting in net realized gains of $0, $0, $2,426,090 and $12,569,418 for TYG, NTG, TTP and NDP, respectively.

Tortoise Capital Advisors 63



 


Notes to Financial Statements (unaudited) (continued)

The following table presents the types and fair value of derivatives by location as presented on the Statements of Assets & Liabilities at August 31, 2017:

      Liabilities
Derivatives not accounted for as     
hedging instruments under ASC 815 Location Fair Value
TYG: Interest rate swap contracts Interest rate swap contracts $ 357,703
TTP: Written equity call options Options written, at fair value $ 238,266
NDP: Written equity call options Options written, at fair value $ 1,468,588
TPZ: Interest rate swap contracts Interest rate swap contracts $ 59,635

The following table presents the effect of derivatives on the Statements of Operations for the period ended August 31, 2017:

      Net Unrealized
Derivatives not accounted for as       Location of Gains       Net Realized Gain Appreciation
hedging instruments under ASC 815 (Losses) on Derivatives (Loss) on Derivatives of Derivatives      
TYG: Interest rate swap contracts Interest rate swaps        $ (151,376 )           $ 7,348
TYG: Written equity call options Options $ 575,965 $
NTG: Written equity call options Options $ 352,770 $
TTP: Written equity call options Options $ 2,426,090 $ 1,095,281
NDP: Written equity call options Options $ 13,540,413 $ 6,571,888
TPZ: Interest rate swap contracts Interest rate swaps $ (122,239 ) $ 93,673

12. Subsequent Events

TYG:
On September 25, 2017, TYG issued $25,000,000 of Series PP Notes which carry a fixed interest rate of 3.33% and mature on September 25, 2027.

TYG has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.

NTG:
NTG has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no items require recognition or disclosure.

TTP:
TTP has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no items require recognition or disclosure.

NDP:
NDP has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no items require recognition or disclosure.

TPZ:
On September 29, 2017, TPZ paid a distribution in the amount of $0.125 per common share, for a total of $868,917. Of this total, the dividend reinvestment amounted to $12,556.

TPZ has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.

64 Tortoise Capital Advisors



 

2017 3rd Quarter Report | August 31, 2017

Additional Information (unaudited)

Director and Officer Compensation
The Funds do not compensate any of its directors who are “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, nor any of its officers. For the period from December 1, 2016 through August 31, 2017, the aggregate compensation paid by the Funds to the independent directors was as follows:

TYG NTG TTP NDP TPZ
$157,750 $124,000 $61,000 $61,000 $48,250

The Funds did not pay any special compensation to any of its directors or officers.

Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect each Fund’s actual results are the performance of the portfolio of investments held by it, the conditions in the U.S. and international financial, petroleum and other markets, the price at which shares of each Fund will trade in the public markets and other factors discussed in filings with the SEC.

Proxy Voting Policies
A description of the policies and procedures that each Fund uses to determine how to vote proxies relating to portfolio securities owned by the Fund and information regarding how each Fund voted proxies relating to the portfolio of securities during the 12-month period ended June 30, 2017 are available to stockholders (i) without charge, upon request by calling the Adviser at (913) 981-1020 or toll-free at (866) 362-9331 and on or through the Adviser’s Web site at www.tortoiseadvisors.com; and (ii) on the SEC’s Web site at www.sec.gov.

Form N-Q
Each Fund files its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the SEC on Form N-Q. Each Fund’s Form N-Q is available without charge upon request by calling the Adviser at (866) 362-9331 or by visiting the SEC’s Web site at www.sec.gov. In addition, you may review and copy each Fund’s Form N-Q at the SEC’s Public Reference Room in Washington D.C. You may obtain information on the operation of the Public Reference Room by calling (800) SEC-0330.

Each Fund’s Form N-Qs are also available through the Adviser’s Web site at www.tortoiseadvisors.com.

Statement of Additional Information
The Statement of Additional Information (“SAI”) includes additional information about each Fund’s directors and is available upon request without charge by calling the Adviser at (866) 362-9331 or by visiting the SEC’s Web site at www.sec.gov.

Certifications
Each Fund’s Chief Executive Officer has submitted to the New York Stock Exchange the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.

Each Fund has filed with the SEC, as an exhibit to its most recently filed Form N-CSR, the certification of its Chief Executive Officer and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act.

Privacy Policy
In order to conduct its business, each Fund collects and maintains certain nonpublic personal information about its stockholders of record with respect to their transactions in shares of each Fund’s securities. This information includes the stockholder’s address, tax identification or Social Security number, share balances, and distribution elections. We do not collect or maintain personal information about stockholders whose share balances of our securities are held in “street name” by a financial institution such as a bank or broker.

We do not disclose any nonpublic personal information about you, the Funds’ other stockholders or the Funds’ former stockholders to third parties unless necessary to process a transaction, service an account, or as otherwise permitted by law.

To protect your personal information internally, we restrict access to nonpublic personal information about the Funds’ stockholders to those employees who need to know that information to provide services to our stockholders. We also maintain certain other safeguards to protect your nonpublic personal information.

Repurchase Disclosure
Notice is hereby given in accordance with Section 23(c) of the 1940 Act, that each Fund may from time to time purchase shares of its common stock in the open market.

Tortoise Capital Advisors 65



Office of the Company
and of the Investment Adviser
Tortoise Capital Advisors, L.L.C.
11550 Ash Street, Suite 300
Leawood, Kan. 66211
(913) 981-1020
(913) 981-1021 (fax)
www.tortoiseadvisors.com

Board of Directors of
Tortoise Energy Infrastructure Corp.
Tortoise MLP Fund, Inc.
Tortoise Pipeline & Energy Fund, Inc.
Tortoise Energy Independence Fund, Inc.
Tortoise Power and Energy Infrastructure Fund, Inc.
H. Kevin Birzer, Chairman
Tortoise Capital Advisors, L.L.C.

Terry Matlack
Tortoise Capital Advisors, L.L.C.

Rand C. Berney
Independent

Conrad S. Ciccotello
Independent

Charles E. Heath
Independent

Alexandra Herger
Independent

Administrator
U.S. Bancorp Fund Services, LLC
615 East Michigan St.
Milwaukee, Wis. 53202

Custodian
U.S. Bank, N.A.
1555 North Rivercenter Drive, Suite 302
Milwaukee, Wis. 53212

Transfer, Dividend Disbursing
and Reinvestment Agent
Computershare Trust Company, N.A. /
Computershare Inc.
P.O. Box 30170
College Station, Tex. 77842-3170
(800) 426-5523
www.computershare.com

Legal Counsel
Husch Blackwell LLP
4801 Main St.
Kansas City, Mo. 64112

Investor Relations
(866) 362-9331
info@tortoiseadvisors.com

Stock Symbols
Listed NYSE Symbols: TYG, NTG, TTP, NDP, TPZ

This report is for stockholder information. This is not a prospectus intended for use in the purchase or sale of fund shares. Past performance is no guarantee of future results and your investment may be worth more or less at the time you sell.






11550 Ash Street, Suite 300
Leawood, KS 66211

www.tortoiseadvisors.com