Tortoise funds issue notice revealing conflict in distributions

On November 29, 2024, Tortoise Pipeline & Energy Fund, Inc. and Tortoise Power and Energy Infrastructure Fund, Inc. released a required notice under Section 19(a) of the Investment Company Act of 1940. This notice is significant as it informs stockholders about the sources of distributions paid, alongside the cumulative distributions that have occurred within the fiscal year to date. The funds highlighted that a large portion of these distributions, specifically 84% for Tortoise Pipeline and 81% for Tortoise Power, may be categorized as a return of capital. This return of capital indicates that the funds have likely distributed more than their income and net realized capital gains during the fiscal year. The breakdown of the current distribution for Tortoise Pipeline indicates that only 16% of the distributions were derived from net investment income. Notably, net realized short-term and long-term capital gains accounted for no distribution. This emphasizes the funds' reliance on return of capital rather than generated income through investments, which could signal potential concerns for investors regarding the sustainability of these distributions. The funds provided cumulative figures, noting that Tortoise Pipeline has seen a cumulative distribution per common share of $2.36 for the fiscal year, leading to an annualized current distribution rate of 5.15%. In a similar context, Tortoise Power recorded an annualized current distribution rate of 6.58%. Tortoise Capital Advisors, the adviser for both funds, has a long-standing history with 20 years of investment experience, focusing on the energy and power infrastructure sectors. As of October 31, 2024, the firm managed approximately $8.8 billion in assets. It is imperative for investors to understand the implications of these distributions, as the nature of returns may impact perspectives on fund performance. The distributions discussed do not necessarily reflect the funds' investment performance and could confuse some investors regarding yield or income. A form 1099-DIV will be sent out for tax reporting purposes, clarifying how to report these distributions for federal income taxes. The warning regarding forward-looking statements indicates that investors should be cautious not to place undue reliance on the projections presented by the funds without considering the risks and uncertainties involved in the investments. The notice serves a dual purpose not only as compliance but as an essential disclosure mechanism for current and prospective investors. Given the complexities surrounding investment income and capital returns, the future of these funds may hinge upon market conditions and the effectiveness of their investment strategies within the shifting energy landscape.