N
OTES TO
F
INANCIAL
S
TATEMENTS
(Continued)
On February 1, 2008, April 25, 2008
and July 18, 2008, the Company partially redeemed its Series A Notes in the
amount of $20,000,000, $10,000,000 and $30,000,000, respectively. The
unamortized balance of allocated capitalized costs was expensed and resulted in
a loss on early redemption in the amount of $254,375, $126,158 and $376,902,
respectively, which is included in amortization of debt issuance costs in the
accompanying Statement of Operations. The weighted-average interest rate for the
period from December 1, 2007 through July 18, 2008 (date of redemption) was 5.58
percent. This rate does not include commissions paid to the auction agent which
are included in agent fees in the accompanying Statement of Operations.
The Company partially redeemed its
Series C Notes in the amount of $20,000,000 on February 5, 2008 and redeemed the
remaining Series C Notes in the amount of $50,000,000 on April 29, 2008. The
unamortized balance of allocated capitalized costs was expensed and resulted in
a loss on early redemption in the amount of $222,636 and $552,399, respectively,
which is included in amortization of debt issuance costs in the accompanying
Statement of Operations. The weighted-average interest rate for the period from
December 1, 2007 through April 29, 2008 (date of redemption) was 5.99 percent.
This rate does not include commissions paid to the auction agent which are
included in agent fees in the accompanying Statement of Operations.
The Company partially redeemed its
Series D Notes in the amount of $24,300,000 on November 7, 2008, and $36,300,000
on November 26, 2008. The Company paid a premium upon redemption of $486,000 and
$726,000, respectively. The unamortized balance of allocated capital costs was
expensed and resulted in a loss on early redemption of $64,363 and $95,332,
respectively, which is included in the amortization of debt issuance costs in
the accompanying Statement of Operations.
The Company partially redeemed its
Series E Notes in the amount of $3,600,000 on November 7, 2008, and $5,500,000
on November 26, 2008. The Company paid a premium upon redemption of $72,000 and
$110,000, respectively. The unamortized balance of allocated capital costs was
expensed and resulted in a loss on early redemption of $11,920 and $10,107,
respectively, which is included in the amortization of debt issuance costs in
the accompanying Statement of Operations.
The Company partially redeemed its
Series F Notes in the amount of $12,100,000 on November 7, 2008, and $18,200,000
on November 26, 2008. The Company paid a premium upon redemption of $242,000 and
$364,000, respectively. The unamortized balance of allocated capital costs was
expensed and resulted in a loss on early redemption of $41,837 and $33,716,
respectively, which is included in the amortization of debt issuance costs in
the accompanying Statement of Operations.
Estimated fair values of the Notes
were calculated using the spread between the AAA corporate finance debt rate and
the U.S. Treasury rate with an equivalent maturity date plus the average spread
between the fixed rates and the AAA corporate finance debt rate. At November 30,
2008, the total spread was applied to the equivalent U.S. Treasury rate for the
series and future cash flows were discounted to determine the estimated fair
value. The following table shows the issue date, maturity date,
notional/carrying amount, estimated fair value and fixed rate as of November 30,
2008 for each series of Notes outstanding at November 30, 2008.
|
|
|
|
|
|
Notional/
|
|
|
|
|
|
|
|
|
Issue
|
|
Maturity
|
|
Carrying
|
|
Estimated
|
|
Fixed
|
Series
|
|
Date
|
|
Date
|
|
Amount
|
|
Fair Value
|
|
Rate
|
Series D
|
|
December 21, 2007
|
|
December 21, 2014
|
|
$
|
39,400,000
|
|
$
|
36,144,121
|
|
6.07
|
%
|
Series
E
|
|
June 17,
2008
|
|
June 17,
2011
|
|
|
15,900,000
|
|
|
15,549,799
|
|
5.56
|
%
|
Series F
|
|
June 17, 2008
|
|
June 17, 2013
|
|
|
34,700,000
|
|
|
32,750,855
|
|
6.02
|
%
|
|
|
|
|
|
|
$
|
90,000,000
|
|
$
|
84,444,775
|
|
|
|
11. Preferred Stock
The Company has 4,400 authorized
shares of Money Market Preferred (MMP) Stock, of which 3,800 shares are
currently outstanding. The MMP Stock has rights determined by the Board of
Directors. The holders of MMP Stock have voting rights equal to the holders of
common stock (one vote per MMP 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 MMP Stock has a liquidation value
of $25,000 per share plus any accumulated, but unpaid distributions, whether or
not declared. Holders of the MMP Stock are entitled to receive cash distribution
payments at an annual rate that may vary for each rate period as determined by
the auction. In the event that there are not enough bidders in the auction at
rates below the maximum rate as prescribed by the terms of the preferred stock,
the auction fails. When an auction fails, the rate paid to continuing or new
bidders is set at the maximum rate. A failed auction does not cause a mandatory
redemption or affect the securitys liquidation preference. In the event of a
failed auction, distributions continue to be paid at the maximum rates and times
determined in the articles supplementary. The maximum rate on preferred stock
based on current ratings is 200 percent of the greater of: (i) the applicable AA
Composite Commercial Paper Rate or the applicable Treasury Index Rate or (ii)
the applicable LIBOR as of the date of the auction. The distribution rates for
the MMP I and MMP II Stock as of November 30, 2008 are 200 percent of the
applicable LIBOR as of the respective auction dates.
The preferred stock is redeemable in
certain circumstances at the option of the Company. Under the Investment Company
Act of 1940, the Company 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 MMP Stock would be less than 200 percent. The preferred stock is
also subject to a mandatory redemption if the Company fails to meet asset
coverage ratios required under the 1940 Act or the rating agency guidelines if
such failure is not waived or cured. At November 30, 2008, the Company was in
compliance with asset coverage covenants and basic maintenance covenants for its
preferred stock.
On October 2, 2008, the Company
redeemed MMP II Stock at liquidation value in the amount of $5,000,000. On
October 7, 2008, the Company redeemed MMP I Stock at liquidation value in the
amount of $10,000,000.
At November 30, 2008, fair value of
the MMP Stock approximates the carrying amount because the distribution rate
fluctuates with changes in interest rates available in the current market. The
table below shows the number of shares outstanding, aggregate liquidation
preference, current rate as of November 30, 2008, the weighted-average rate for
year ended November 30, 2008 and the typical rate period for each series of MMP
Stock outstanding at November 30, 2008. The Company may designate a rate period
that is different than the rate period indicated in the table below.
|
|
|
|
|
|
Aggregate
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Shares
|
|
Liquidation
|
|
Current
|
|
Average
|
|
|
|
|
Series
|
|
Outstanding
|
|
Preference
|
|
Rate
|
|
Rate
|
|
Rate Period
|
MMP I Stock
|
|
|
2,400
|
|
|
$
|
60,000,000
|
|
4.72
|
%
|
|
5.75
|
%
|
|
|
28 days
|
|
MMP II
Stock
|
|
|
1,400
|
|
|
|
35,000,000
|
|
2.35
|
%
|
|
5.40
|
%
|
|
|
7
days
|
|
|
|
|
3,800
|
|
|
$
|
95,000,000
|
|
|
|
|
|
|
|
|
|
|
The rates in the preceding table do
not include commissions paid to the auction agent which are included in agent
fees in the accompanying Statement of Operations.
18
|
Tortoise
Energy Capital Corp.
|
N
OTES TO
F
INANCIAL
S
TATEMENTS
(Continued)
12. Interest Rate Swap
Contracts
The Company entered into interest
rate swap contracts in an attempt to protect itself from increasing interest and
dividend expense on its leverage resulting from increasing short-term interest
rates. At November 30, 2008, the Company had no outstanding swap
contracts.
The table below shows the notional
amount at November 30, 2007, maturity date, fixed rate paid by the Company,
floating rate received by the Company, termination date(s) and the realized loss
on the termination of the interest rate swap contracts with U.S. Bank, N.A. for
the year ended November 30, 2008.
Notional
|
|
|
|
Fixed Rate
|
|
Floating Rate
|
|
|
|
Realized
|
Amount
at
|
|
Maturity
|
|
Paid by the
|
|
Received by
|
|
Termination
|
|
Loss on
|
11/30/2007
|
|
Date
|
|
Company
|
|
the Company
|
|
Date(s)
|
|
Termination
|
$60,000,000
|
|
11/25/2015
|
|
5.11
|
%
|
|
1 month U.S. Dollar LIBOR
|
|
1/10/2008,
|
|
$
|
(3,606,295
|
)
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
60,000,000
|
|
12/2/2015
|
|
5.11
|
%
|
|
1 month
U.S. Dollar LIBOR
|
|
1/11/2008,
|
|
|
(3,629,661
|
)
|
|
|
|
|
|
|
|
|
|
6/18/2008
|
|
|
|
|
20,000,000
|
|
4/15/2013
|
|
5.03
|
%
|
|
1 month U.S. Dollar LIBOR
|
|
6/18/2008,
|
|
|
(728,598
|
)
|
|
|
|
|
|
|
|
|
|
7/25/2008
|
|
|
|
|
45,000,000
|
|
4/21/2012
|
|
4.99
|
%
|
|
1 month
U.S. Dollar LIBOR
|
|
6/18/2008
|
|
|
(1,430,984
|
)
|
20,000,000
|
|
2/15/2013
|
|
4.95
|
%
|
|
1 month U.S. Dollar LIBOR
|
|
7/25/2008
|
|
|
(766,428
|
)
|
20,000,000
|
|
3/1/2018
|
|
4.99
|
%
|
|
1 month
U.S. Dollar LIBOR
|
|
7/25/2008
|
|
|
(646,434
|
)
|
15,000,000
|
|
2/28/2017
|
|
5.05
|
%
|
|
1 month U.S. Dollar LIBOR
|
|
7/25/2008
|
|
|
(624,395
|
)
|
15,000,000
|
|
2/28/2015
|
|
5.01
|
%
|
|
1 month
U.S. Dollar LIBOR
|
|
7/25/2008
|
|
|
(601,653
|
)
|
35,000,000
|
|
4/21/2014
|
|
5.06
|
%
|
|
1 month U.S. Dollar LIBOR
|
|
7/25/2008
|
|
|
(1,560,273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(13,594,721
|
)
|
13. Common Stock
The Company has 100,000,000 shares of
capital stock authorized and 17,470,673 shares outstanding at November 30, 2008.
Transactions in common stock for the years ended November 30, 2007 and 2008,
were as follows:
Shares at November 30, 2006
|
16,013,802
|
Shares sold
through shelf offering
|
1,350,000
|
Shares issued through reinvestment of distributions
|
42,284
|
Shares at
November 30, 2007
|
17,406,086
|
Shares issued through reinvestment of distributions
|
64,587
|
Shares at November 30,
2008
|
17,470,673
|
14. Credit Facility
On March 22, 2007, the Company
entered into an agreement establishing a $150,000,000 unsecured credit facility
maturing on March 21, 2008. On March 20, 2008, the Company entered into an
extension of its unsecured credit facility. The amended credit agreement
provides for a revolving credit facility of up to $92,500,000 that can be
increased to $160,000,000 if certain conditions are met. The amended credit
facility terminates on March 20, 2009. Under the terms of the credit facility,
U.S. Bank, N.A. serves as a lender and the lending syndicate agent on behalf of
other lenders participating in the credit facility. Outstanding balances
generally will accrue interest at a variable annual rate equal to one-month
LIBOR plus 0.75 percent.
Under the terms of the credit
facility, the Company must maintain asset coverage required under the 1940 Act.
If the Company 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.
The average principal balance and
interest rate for the period during which the credit facility was utilized
during the year ended November 30, 2008 was approximately $36,000,000 and 3.74
percent, respectively. At November 30, 2008, the Company had no outstanding
borrowings under the credit facility.
R
EPORT OF
I
NDEPENDENT
R
EGISTERED
P
UBLIC
A
CCOUNTING
F
IRM
The Board of Directors and
Stockholders
Tortoise Energy Capital Corporation
We have audited the accompanying
statement of assets and liabilities of Tortoise Energy Capital Corporation (the
Company), including the schedule of investments, as of November 30, 2008, and
the related statements of operations and cash flows for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles
used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of November 30, 2008, by correspondence with the
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial
statements and financial highlights referred to above present fairly, in all
material respects, the financial position of Tortoise Energy Capital Corporation
at November 30, 2008, the results of its operations and its cash flows for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
As discussed in Note 5 to the
financial statements, the Company adopted the provisions of Financial Accounting
Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes,
on December 1, 2007.
|
|
Kansas
City, Missouri
|
|
January 20,
2009
|
|
20
|
|
Tortoise Energy Capital
Corp.
|
C
OMPANY
O
FFICERS AND
D
IRECTORS
(Unaudited)
November 30,
2008
|
|
Position(s) Held with
|
|
|
|
Number
of
|
|
Other
|
|
|
Company, Term of
|
|
|
|
Portfolios in Fund
|
|
Positions
|
|
|
Office
and Length of
|
|
|
|
Overseen by
|
|
Held
by
|
Name and Age*
|
|
Time Served
|
|
Principal Occupation During
Past 5 Years
|
|
Director
(1)
|
|
Director
|
Independent
Directors
|
|
|
|
|
|
|
|
|
Conrad S. Ciccotello
(Born
1960)
|
|
Director since
2005
|
|
Tenured Associate Professor of
Risk Management and Insurance, Robinson College of Business, Georgia State
University (faculty member since 1999); Director of Graduate Personal
Financial Planning Programs; formerly, Editor, Financial Services
Review, (2001-2007) (an academic journal dedicated to the study of
individual financial management); formerly, faculty member, Pennsylvania
State University (1997-1999). Published several academic and professional
journal articles about energy infrastructure and oil and gas
MLPs.
|
|
6
|
|
None
|
John R. Graham
(Born
1945)
|
|
Director since
2005
|
|
Executive-in-Residence and
Professor of Finance (Part-time), College of Business Administration,
Kansas State University (has served as a professor or adjunct professor
since 1970); Chairman of the Board, President and CEO, Graham Capital
Management, Inc. (primarily a real estate development, investment and
venture capital company) and Owner of Graham Ventures (a business services
and venture capital firm); Part-time Vice President Investments, FB
Capital Management, Inc. (a registered investment adviser), since 2007.
Formerly, CEO, Kansas Farm Bureau Financial Services, including seven
affiliated insurance or financial service companies
(1979-2000).
|
|
6
|
|
Kansas
State
Bank
|
Charles E. Heath
(Born
1942)
|
|
Director since
2005
|
|
Retired in 1999. Formerly,
Chief Investment Officer, GE Capitals Employers Reinsurance Corporation
(1989-1999); Chartered Financial Analyst (CFA) designation since
1974.
|
|
6
|
|
None
|
(1)
|
This number
includes TYG, TYN, TTO, two private investment companies and the Company.
Our Adviser also serves as the investment adviser to TYG, TYN, TTO and two
private investment companies.
|
*
|
The address of
each director and officer is 11550 Ash Street, Suite 300, Leawood, Kansas
66211.
|
C
OMPANY
O
FFICERS AND
D
IRECTORS
(Unaudited)
November 30,
2008
|
|
Position(s) Held with
|
|
|
|
Number
of
|
|
Other
|
|
|
Company, Term of
|
|
|
|
Portfolios in Fund
|
|
Positions
|
|
|
Office
and Length of
|
|
|
|
Overseen by
|
|
Held
by
|
Name and Age*
|
|
Time Served
|
|
Principal Occupation During
Past 5 Years
|
|
Director
(1)
|
|
Director
|
Interested Directors and
Officers
(2)
|
H. Kevin Birzer
(Born 1959)
|
|
Director and
Chairman of
the
Board since 2005
|
|
Managing Director of our
Adviser since 2002; Partner, Fountain Capital Management (1990-present);
Vice President, Corporate Finance Department, Drexel Burnham Lambert
(1986-1989); formerly, Vice President, F. Martin Koenig & Co., an
investment management firm (1983-1986); CFA designation since
1988.
|
|
6
|
|
None
|
Terry Matlack
(Born
1956)
|
|
Director and Chief
Financial Officer
since 2005
|
|
Managing Director of our
Adviser since 2002; Full-time Managing Director, Kansas City Equity
Partners, L.C. (KCEP) (2001-2002); formerly, President, GreenStreet
Capital, a private investment firm (1998-2001); Chief Compliance Officer
of each of the Company and TYN from their inception through May 2006 and
of TYG from 2004 through May 2006; Treasurer of each of the Company, TYG
and TYN from their inception to November 2005; Assistant Treasurer of the
Company, TYG and TYN from November 2005 to April 2008, of TTO and one of
the two private investment companies from their inception to April 2008,
and of the other private investment company since its inception; CFA
designation since 1985.
|
|
6
|
|
None
|
David J. Schulte
(Born
1961)
|
|
President and Chief
Executive Officer
since 2005
|
|
Managing Director of our
Adviser since 2002; Full-time Managing Director, KCEP (1993-2002);
President and Chief Executive Officer of TYG since 2003; Chief Executive
Officer of TYN since 2005 and President of TYN from 2005 to September
2008; Chief Executive Officer of TTO since 2005 and President of TTO from
2005 to April 2007; President of the two private investment companies
since 2007; Chief Executive Officer of one of the two private investment
companies since 2007 and of the other private investment company from 2007
to December 2008; CFA designation since 1992.
|
|
N/A
|
|
None
|
Zachary A. Hamel
(Born
1965)
|
|
Senior Vice President
since
April 2005
|
|
Managing Director of our
Adviser since 2002; Partner, Fountain Capital Management (1997-present);
Senior Vice President of TTO since 2005 and of TYG, TYN and the two
private investment companies since 2007; Secretary of each of the Company,
TYG, TYN and TTO from their inception to April 2007; CFA designation since
1998.
|
|
N/A
|
|
None
|
Kenneth P. Malvey
(Born
1965)
|
|
Senior Vice President
since
inception;
Treasurer since
November 2005
|
|
Managing Director of our
Adviser since 2002; Partner, Fountain Capital Management (2002-present);
formerly Investment Risk Manager and member of Global Office of
Investments, GE Capitals Employers Reinsurance Corporation (1996-2002);
Treasurer of TYG and TYN since November 2005, of TTO since September 2005,
and of the two private investment companies since 2007; Senior Vice
President of TTO since 2005, and of TYG, TYN and the two private
investment companies since 2007; Assistant Treasurer of the Company, TYG
and TYN from their inception to November 2005; Chief Executive Officer of
one of the private investment companies since December 2008; CFA
designation since 1996.
|
|
N/A
|
|
None
|
(1)
|
This number
includes TYG, TYN, TTO, two private investment companies and the Company.
Our Adviser also serves as the investment adviser to TYG, TYN, TTO and two
private investment companies.
|
(2)
|
As a result of
their respective positions held with our Adviser or its affiliates, these
individuals are considered interested persons within the meaning of the
1940 Act.
|
*
|
The address of each director
and officer is 11550 Ash Street, Suite 300, Leawood, Kansas
66211.
|
22
|
|
Tortoise
Energy Capital Corp.
|
A
DDITIONAL
I
NFORMATION
(Unaudited)
Director and Officer
Compensation
The Company does not compensate any
of its directors who are interested persons nor any of its officers. For the
year ended November 30, 2008, the aggregate compensation paid by the Company to
the independent directors was $134,000. The Company 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 the Companys 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 the Company 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 the Company uses to determine how to vote proxies relating to
portfolio securities owned by the Company and information regarding how the
Company voted proxies relating to the portfolio of securities during the
12-month period ended June 30, 2008 are available to stockholders (i) without
charge, upon request by calling the Company at (913) 981-1020 or toll-free at
(866) 362-9331 and on the Companys Web site at www.tortoiseadvisors.com; and
(ii) on the SECs Web site at www.sec.gov.
Form N-Q
The Company files its complete
schedule of portfolio holdings for the first and third quarters of each fiscal
year with the SEC on Form N-Q. The Companys Form N-Q is available without
charge upon request by calling the Company at (866) 362-9331 or by visiting the
SECs Web site at www.sec.gov. In addition, you may review and copy the
Companys Form N-Q at the SECs Public Reference Room in Washington D.C. You may
obtain information on the operation of the Public Reference Room by calling
(800) SEC-0330.
The Companys Form N-Qs are also
available on the Companys Web site at www.tortoiseadvisors.com.
Statement of Additional
Information
The Statement of Additional
Information (SAI) includes additional information about the Companys
directors and is available upon request without charge by calling the Company at
(866) 362-9331 or by visiting the SECs Web site at www.sec.gov.
Certifications
The Companys Chief Executive Officer
submitted to the New York Stock Exchange in 2008 the annual CEO certification as
required by Section 303A.12(a) of the NYSE Listed Company Manual.
The Company filed with the SEC, as an
exhibit to its most recently filed Form N-CSR, the certification of its Chief
Executive Officer and Chief Financial Officer required by Section 302 of the
Sarbanes-Oxley Act.
Privacy Policy
In order to conduct its business, the
Company collects and maintains certain nonpublic personal information about its
stockholders of record with respect to their transactions in shares of the
Companys securities. This information includes the stockholders 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 Companys other stockholders or the
Companys 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
Companys 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.
Automatic Dividend Reinvestment
Plan
If a stockholders shares are
registered directly with the Company or with a brokerage firm that participates
in the Companys Automatic Dividend Reinvestment Plan (the Plan), all
distributions are automatically reinvested for stockholders by the Plan Agent in
additional shares of common stock of the Company (unless a stockholder is
ineligible or elects otherwise). Stockholders holding shares that participate in
the Plan in a brokerage account may not be able to transfer the shares to
another broker and continue to participate in the Plan. Stockholders who elect
not to participate in the Plan will receive all distributions payable in cash
paid by check mailed directly to the stockholder of record (or, if the shares
are held in street or other nominee name, then to such nominee) by
Computershare, as dividend paying agent. Distributions subject to tax (if any)
are taxable whether or not shares are reinvested.
If, on the distribution payment date,
the net asset value per share of the common stock is equal to or less than the
market price per share of common stock plus estimated brokerage commissions, the
Company will issue additional shares of common stock to participants. The number
of shares will be determined by the greater of the net asset value per share or
95 percent of the market price. Otherwise, shares generally will be purchased on
the open market by the Plan Agent as soon as possible following the payment date
or purchase date, but in no event later than 30 days after such date except as
necessary to comply with applicable law. There are no brokerage charges with
respect to shares issued directly by the Company as a result of distributions
payable either in shares or in cash. However, each participant will pay a pro
rata share of brokerage commissions incurred with respect to the Plan Agents
open-market purchases in connection with the reinvestment of distributions. If a
participant elects to have the Plan Agent sell part or all of his or her common
stock and remit the proceeds, such participant will be charged a transaction fee
of $15.00 plus his or her pro rata share of brokerage commissions on the shares
sold.
Participation is completely
voluntary. Stockholders may elect not to participate in the Plan, and
participation may be terminated or resumed at any time without penalty, by
giving notice in writing, by telephone or Internet to Computershare, the Plan
Agent, at the address set forth below. Such termination will be effective with
respect to a particular distribution if notice is received prior to such record
date.
Additional information about the Plan
may be obtained by writing to Computershare Trust Company, N.A., P.O. Box 43078,
Providence, R.I. 02940-3078. You may also contact Computershare by phone at
(312) 588-4990 or visit their Web site at www.computershare.com.
A
DDITIONAL
I
NFORMATION
(Unaudited)
(Continued)
Approval of Investment Advisory
Agreement
In approving the renewal of the
Investment Advisory Agreement in November 2008, the independent directors
(Directors) of the Company requested and received extensive data and
information from the Adviser concerning the Company and the services provided to
it by the Adviser under the Investment Advisory Agreement. In addition, the
Directors requested and received data and information from the Adviser, which
also included information from independent, third-party sources, regarding the
factors considered in their evaluation.
Factors Considered
The Directors considered and
evaluated all the information provided by the Adviser. The Directors did not
identify any single factor as being all-important or controlling, and each
Director may have attributed different levels of importance to different
factors. In deciding to renew the agreement, the Directors decision was based
on the following factors.
Nature, Extent and Quality of
Services Provided.
The Directors
considered information regarding the history, qualification and background of
the Adviser and the individuals responsible for the Advisers investment
program, the adequacy of the number of the Adviser personnel and other the
Adviser resources and plans for growth, use of affiliates of the Adviser, and
the particular expertise with respect to energy infrastructure companies, MLP
markets and financing (including private financing). The Directors concluded
that the unique nature of the Company and the specialized expertise of the
Adviser in the niche market of MLPs made it uniquely qualified to serve as the
advisor. Further, the Directors recognized that the Advisers commitment to a
long-term investment horizon correlated well to the investment strategy of the
Company.
Investment Performance of the
Company and the Adviser, Costs of the Services To Be Provided and Profits To Be
Realized by the Adviser and its Affiliates from the Relationship, and Fee
Comparisons.
The Directors reviewed
and evaluated information regarding the Companys and the performance of other
Adviser accounts (including other investment companies), and information
regarding the nature of the markets during the performance period, with a
particular focus on the MLP sector. The Directors also considered the Companys
performance as compared to comparable closed-end funds for the relevant periods.
The Adviser provided detailed
information concerning its cost of providing services to the Company, its
profitability in managing the Company, its overall profitability, and its
financial condition. The Directors have reviewed with the Adviser the
methodology used to prepare this financial information. This financial
information regarding the Adviser is considered in order to evaluate the
Advisers financial condition, its ability to continue to provide services under
the Investment Advisory Agreement, and the reasonableness of the current
management fee, and was, to the extent possible, evaluated in comparison to
other funds with similar investment objectives and strategies.
The Directors considered and
evaluated information regarding fees charged to, and services provided to, other
investment companies advised by the Adviser (including the impact of any fee
waiver or reimbursement arrangements and any expense reimbursement
arrangements), fees charged to separate institutional accounts by the Adviser,
and comparisons of fees of closed-end funds with similar investment objectives
and strategies, including other MLP investment companies, to the Company. The
Directors noted that the fee charged to the Company (0.95 percent of the
Companys average monthly Managed Assets) is below the average of the fees in
comparable closed-end MLP funds. The Directors concluded that the fees and
expense ratios that the Company is paying under the Advisory Agreement are
reasonable given the quality of services provided under the Advisory Agreement
and that such fees and expenses are comparable to, and in some cases lower than,
the fees charged by advisors to comparable funds.
Economies of Scale.
The Directors considered information
from the Adviser concerning whether economies of scale would be realized as the
Company grows, and whether fee levels reflect any economies of scale for the
benefit of the Companys stockholders. The Directors concluded that economies of
scale are difficult to measure and predict overall. Accordingly, the Directors
reviewed other information, such as year-over-year profitability of the Adviser
generally, the profitability of its management of the Company specifically, and
the fees of competitive funds not managed by the Adviser over a range of asset
sizes. The Directors concluded the Adviser is appropriately sharing any
economies of scale through its competitive fee structure and through
reinvestment in its business to provide stockholders additional content and
services.
Collateral Benefits Derived by
the Adviser.
The Directors reviewed
information from the Adviser concerning collateral benefits it receives as a
result of its relationship with the Company. They concluded that the Adviser
generally does not use the Companys or stockholder information to generate
profits in other lines of business, and therefore does not derive any
significant collateral benefits from them.
The Directors did not, with respect
to their deliberations concerning their approval of the continuation of the
Investment Advisory Agreement, consider the benefits the Adviser may derive for
relationships the Adviser may have with brokers through soft dollar arrangements
because the Adviser does not employ any such arrangements in rendering its
advisory services to the Company. Although the Adviser may receive research from
brokers with whom it places trades on behalf of clients, the Adviser does not
have soft dollar arrangements or understandings with such brokers regarding
receipt of research in return for commissions.
Conclusions of the
Directors
As a result of this process, the
independent directors, assisted by the advice of legal counsel that is
independent of the Adviser, taking into account all of the factors discussed
above and the information provided by the Adviser, unanimously concluded that
the Investment Advisory Agreement between the Company and the Adviser is fair
and reasonable in light of the services provided and should be
renewed.
24
|
|
Tortoise
Energy Capital Corp.
|
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
Managing
Directors of
Tortoise Capital Advisors, L.L.C.
H. Kevin Birzer
Zachary A. Hamel
Kenneth P.
Malvey
Terry Matlack
David J. Schulte
Board of
Directors of
Tortoise Energy Capital Corp.
H. Kevin Birzer,
Chairman
Tortoise Capital
Advisors, L.L.C.
Terry
Matlack
Tortoise Capital
Advisors, L.L.C.
Conrad S.
Ciccotello
Independent
John R.
Graham
Independent
Charles E.
Heath
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.
P.O. Box
43078
Providence, R.I. 02940-3078
(312)
588-4990
www.computershare.com
LEGAL
COUNSEL
Husch Blackwell
Sanders LLP
4801 Main St.
Kansas
City, Mo. 64112
INVESTOR
RELATIONS
(866)
362-9331
info@tortoiseadvisors.com
STOCK
SYMBOL
Listed NYSE Symbol:
TYY
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.
|
Tortoise Capital Advisors
Public Investment Companies
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
Ticker/
|
|
Primary Target
|
|
Investor
|
|
as of
11/30/08
|
Name
|
|
Inception Date
|
|
Investments
|
|
Suitability
|
|
($ in
millions)
|
Tortoise Energy Capital
Corp.
|
|
TYY
|
|
U.S. Energy Infrastructure
|
|
Retirement Accounts
|
|
$414
|
|
|
|
May 2005
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
Tortoise Energy Infrastructure
Corp.
|
|
TYG
|
|
U.S.
Energy Infrastructure
|
|
Retirement Accounts
|
|
$692
|
|
|
|
Feb.
2004
|
|
|
|
Pension
Plans
|
|
|
|
|
|
|
|
|
|
Taxable
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tortoise North American
Energy Corp.
|
|
TYN
|
|
U.S. Energy Infrastructure
|
|
Retirement Accounts
|
|
$75
|
|
|
|
Oct. 2005
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
Tortoise Capital Resources
Corp.
|
|
TTO
|
|
U.S.
Energy Infrastructure
|
|
Retirement Accounts
|
|
$162
|
|
|
|
Dec.
2005
|
|
Private
and Micro Cap
|
|
Pension
Plans
|
|
(as of 8/31/08)
|
|
|
(Feb. 2007 IPO)
|
|
Public Companies
|
|
Taxable Accounts
|
|
|
|
Steady
Wins
®
Tortoise Capital Advisors, L.L.C.
Investment Adviser to
Tortoise
Energy Capital Corp.
11550 Ash Street, Suite 300
·
Leawood, Kan. 66211
·
(913) 981-1020
·
(913) 981-1021
(fax)
·
www.tortoiseadvisors.com
Item 2. Code of
Ethics.
The Registrant has adopted a code
of ethics that applies to the Registrants President and Chief Executive Officer
and its Chief Financial Officer. The Registrant has not made any amendments to
this code of ethics during the period covered by this report. The Registrant has
not granted any waivers from any provisions of this code of ethics during the
period covered by this report.
Item 3. Audit Committee
Financial Expert.
The Registrants Board of
Directors has determined that there is at least one audit committee financial
expert serving on its audit committee. Mr. Conrad Ciccotello is the audit
committee financial expert and is considered to be independent as each term
is defined in Item 3 of Form N-CSR. In addition to his experience overseeing or
assessing the performance of companies or public accountants with respect to the
preparation, auditing or evaluation of financial statements, Mr. Ciccotello has
a Ph.D. in Finance.
Item 4. Principal Accountant
Fees and Services.
The Registrant has engaged its
principal accountant to perform audit services, audit-related services and tax
services during the past two fiscal years. Audit services refer to performing
an audit of the Registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for those fiscal years. Audit-related services refer to
the assurance and related services by the principal accountant that are
reasonably related to the performance of the audit. Tax services refer to
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning. The following table details the approximate
amounts of aggregate fees billed to the Registrant for the last two fiscal years
for audit fees, audit-related fees, tax fees and other fees by the principal
accountant.
|
|
FYE
11/30/2008
|
|
FYE
11/30/2007
|
Audit Fees
|
|
$
|
191,000
|
|
$
|
150,000
|
Audit-Related Fees
|
|
$
|
3,000
|
|
$
|
28,000
|
Tax Fees
|
|
$
|
49,000
|
|
$
|
73,000
|
All Other
Fees
|
|
|
|
|
|
|
Aggregate Non-Audit
Fees
|
|
$
|
52,000
|
|
$
|
101,000
|
The audit committee has adopted
pre-approval polices and procedures that require the audit committee to
pre-approve (i) the selection of the Registrants independent registered public
accounting firm, (ii) the engagement of the independent registered public
accounting firm to provide any non-audit services to the Registrant, (iii) the
engagement of the independent registered public accounting firm to provide any
non-audit services to the Adviser or any entity controlling, controlled by, or
under common control with the Adviser that provides ongoing services to the
Registrant, if the engagement relates directly to the operations and financial
reporting of the Registrant, and (iv) the fees and other compensation to be paid
to the independent registered public accounting firm. The Chairman of the audit
committee may grant the pre-approval of any engagement of the independent
registered public accounting firm for non-audit services of less than $10,000,
and such delegated pre-approvals will be presented to the full audit committee
at its next meeting. Under certain limited circumstances, pre-approvals are not
required under securities law regulations for certain non-audit services below
certain de minimus thresholds. Since the adoption of these policies and
procedures, the audit committee has pre-approved all audit and non-audit
services provided to the Registrant by the principal accountant. None of these
services provided by the principal accountant were approved by the audit
committee pursuant to the de minimus exception under Rule 2.01(c)(7)(i)(C) or
Rule 2.01(c)(7)(ii) of Regulation S-X. All of the principal accountants hours
spent on auditing the Registrants financial statements were attributed to work
performed by full-time permanent employees of the principal
accountant.
In the Registrants fiscal years
ended November 30, 2008 and 2007, the Adviser incurred approximately $13,610 and
$10,000 in fees, respectively, payable to the principal accountant in connection
with determining the Advisers compliance with GIPS
®
standards in
2006. Additionally, the Adviser paid $2,315 in 2008 and $12,000 in 2007 for
general tax consulting services delivered in 2008 and 2006, respectively. These
non-audit services were not required to be preapproved by the Registrants audit
committee. No entity controlling, controlled by, or under common control with
the Adviser that provides ongoing services to the Registrant, has paid to, or
been billed for fees by, the principal accountant for non-audit services
rendered to the Adviser or such entity during the Registrants last two fiscal
years. The audit committee has considered whether the principal accountants
provision of services (other than audit services) to the Registrant, the Adviser
or any entity controlling, controlled by, or under common control with the
Adviser that provides services to the Registrant is compatible with maintaining
the principal accountants independence in performing audit services.
Item 5. Audit Committee of
Listed Registrants.
The Registrant has a
separately-designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, and is comprised of
Mr. Conrad S. Ciccotello, Mr. John R. Graham and Mr. Charles E.
Heath.
Item 6. Schedule of
Investments.
Schedule of Investments is
included as part of the report to shareholders filed under Item 1.
Item 7. Disclosure of Proxy
Voting Policies and Procedures for Closed-End Management
Investment
Companies.
Copies of the proxy voting
policies and procedures of the Registrant and the Adviser are attached hereto as
Exhibit 99.VOTEREG and Exhibit 99.VOTEADV, respectively.
Item 8. Portfolio Managers
of Closed-End Management Investment Companies.
Unless otherwise indicated,
information is presented as of November 30, 2008.
Portfolio Managers
As of the date of this filing,
management of the Registrants portfolio is the responsibility of a team of
portfolio managers consisting of H. Kevin Birzer, Terry Matlack, David J.
Schulte, Zachary A. Hamel and Kenneth P. Malvey, all of whom are Managers of the
Adviser, comprise the investment committee of the Adviser and share
responsibility for such investment management. All decisions to invest in a
portfolio company must be approved by the unanimous decision of the Advisers
investment committee and any one member of the Advisers investment committee
can require the Adviser to sell a security or can veto the investment
committees decision to invest in a security. Biographical information about
each member of the Advisers investment committee as of the date of this filing
is set forth below.
|
|
Position(s) Held
|
|
|
|
|
with
Company
|
|
|
|
|
and
Length of
|
|
Principal Occupation
|
Name and Age*
|
|
Time Served
|
|
During Past Five
Years
|
H. Kevin
Birzer
(Born 1959)
|
|
Director
and
Chairman of the
Board since 2005
|
|
Managing Director
of our Adviser since 2002; Member, Fountain Capital Management
(1990-present); Vice President, Corporate Finance Department, Drexel
Burnham Lambert (1986-1989); formerly, Vice President, F. Martin Koenig
& Co., an investment management firm (1983-1986); CFA designation
since 1988.
|
Terry Matlack
(Born
1956)
|
|
Director and Chief
Financial
Officer
since 2005
|
|
Managing Director of our Adviser
since 2002; Full-time Managing Director, Kansas City Equity Partners, L.C.
(KCEP) (2001-2002); formerly, President, GreenStreet Capital, a private
investment firm (1998-2001); Chief Compliance Officer of each of the
Company and Tortoise North American Energy Corporation (TYN) from their
inception through May 2006 and of Tortoise Energy Infrastructure
Corporation (TYG) from 2004 through May 2006; Treasurer of each of the
Company, TYG and TYN from their inception to November 2005; Assistant
Treasurer of the Company, TYG and TYN from November 2005 to April 2008, of
Tortoise Capital Resources Corporation (TTO) and one of the two private
investment companies advised by our Adviser from their inception to April
2008, and of the other private investment company since its inception; CFA
designation since 1985.
|
David J.
Schulte
(Born 1961)
|
|
President and
Chief
Executive Officer
since 2005
|
|
Managing Director
of our Adviser since 2002; Full-time Managing Director, KCEP (1993-2002);
President and Chief Executive Officer of TYG since 2003; Chief Executive
Officer of TYN since 2005 and President of TYN from 2005 to September
2008; Chief Executive Officer of TTO since 2005 and President of TTO from
2005 to April 2007; President of the two private investment companies
since 2007; Chief Executive Officer of one of the two private investment
companies since 2007 and of the other private investment company from 2007
to December 2008; CFA designation since 1992.
|
Zachary A. Hamel
(Born
1965)
|
|
Senior Vice
President
since
2005
|
|
Managing Director of our Adviser
since 2002; Partner, Fountain Capital Management (1997-present); Senior
Vice President of TTO since 2005 and of TYG, TYN and the two private
investment companies since 2007; Secretary of each of the Company, TYG,
TYN and TTO from their inception to April 2007; CFA designation since
1998.
|
Kenneth P.
Malvey
(Born 1965)
|
|
Senior Vice
President since
inception;
Treasurer since
November
2005
|
|
Managing Director
of our Adviser since 2002; Partner, Fountain Capital Management
(2002-present); formerly Investment Risk Manager and member of Global
Office of Investments, GE Capitals Employers Reinsurance Corporation
(1996-2002); Treasurer of TYG and TYN since November 2005, of TTO since
September 2005, and of the two private investment companies since 2007;
Senior Vice President of TTO since 2005, and of TYG, TYN and the two
private investment companies since 2007; Assistant Treasurer of the
Company, TYG and TYN from their inception to November 2005; Chief
Executive Officer of one of the private investment companies since
December 2008; CFA designation since 1996.
|
*The address of each director and officer is
11550 Ash Street, Suite 300, Leawood, Kansas 66211.
Messrs. Birzer and Matlack also
serve as directors of TYN, TYG, and the two private investment companies advised
by our Adviser, registered closed-end management investment companies, as well
as TTO, a closed-end management investment company that has elected to be
regulated as a business development company. The Adviser also serves as the
investment adviser to TYN, TYG, TTO, and the two private investment companies.
The following table provides
information about the other accounts managed on a day-to-day basis by each of
the portfolio managers as of November 30, 2008:
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
|
Accounts
|
|
Total Assets of
|
|
|
|
|
|
|
Paying
a
|
|
Accounts Paying
|
|
|
Number of
|
|
Total Assets of
|
|
Performance
|
|
a Performance
|
Name of
Manager
|
|
Accounts
|
|
Accounts
|
|
Fee
|
|
Fee
|
H. Kevin Birzer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered investment companies
|
|
|
4
|
|
|
$
|
798,668,045
|
|
|
0
|
|
|
|
|
Other pooled investment
vehicles
|
|
|
4
|
|
|
$
|
158,054,961
|
|
|
1
|
|
$
|
106,802,516
|
|
Other accounts
|
|
|
210
|
|
|
$
|
1,388,290,551
|
|
|
0
|
|
|
|
|
Zachary A.
Hamel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered investment companies
|
|
|
4
|
|
|
$
|
798,668,045
|
|
|
0
|
|
|
|
|
Other pooled investment vehicles
|
|
|
4
|
|
|
$
|
158,054,961
|
|
|
1
|
|
$
|
106,802,516
|
|
Other accounts
|
|
|
210
|
|
|
$
|
1,388,290,551
|
|
|
0
|
|
|
|
|
Kenneth P. Malvey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered investment companies
|
|
|
4
|
|
|
$
|
798,668,045
|
|
|
0
|
|
|
|
|
Other pooled investment vehicles
|
|
|
4
|
|
|
$
|
158,054,961
|
|
|
1
|
|
$
|
106,802,516
|
|
Other accounts
|
|
|
210
|
|
|
$
|
1,388,290,551
|
|
|
0
|
|
|
|
|
Terry
Matlack
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered investment companies
|
|
|
4
|
|
|
$
|
798,668,045
|
|
|
0
|
|
|
|
|
Other pooled investment vehicles
|
|
|
1
|
|
|
$
|
106,802,516
|
|
|
1
|
|
$
|
106,802,516
|
|
Other accounts
|
|
|
197
|
|
|
$
|
228,230,735
|
|
|
0
|
|
|
|
|
David J. Schulte
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered investment companies
|
|
|
4
|
|
|
$
|
798,668,045
|
|
|
0
|
|
|
|
|
Other pooled investment vehicles
|
|
|
1
|
|
|
$
|
106,802,516
|
|
|
1
|
|
$
|
106,802,516
|
|
Other accounts
|
|
|
197
|
|
|
$
|
228,230,735
|
|
|
0
|
|
|
|
|
Material Conflicts of Interest
Conflicts of interest may arise
from the fact that the Adviser and its affiliates carry on substantial
investment activities for other clients, in which the Registrant has no
interest, some of which may have investment strategies similar to the
Registrant. The Adviser or its affiliates may have financial incentives to favor
certain of these accounts over the Registrant. For example, the Adviser may have
an incentive to allocate potentially more favorable investment opportunities to
other funds and clients that pay the Adviser an incentive or performance fee.
Performance and incentive fees also create the incentive to allocate potentially
riskier, but potentially better performing, investments to such funds and other
clients in an effort to increase the incentive fee. The Adviser also may have an
incentive to make investments in one fund, having the effect of increasing the
value of a security in the same issuer held by another fund, which, in turn, may
result in an incentive fee being paid to the Adviser by that other fund. Any of
their proprietary accounts or other customer accounts may compete with the
Registrant for specific trades. The Adviser or its affiliates may give advice
and recommend securities to, or buy or sell securities for, other accounts and
customers, which advice or securities recommended may differ from advice given
to, or securities recommended or bought or sold for, the Registrant, even though
their investment objectives may be the same as, or similar to, the Registrants
objectives. When two or more clients advised by the Adviser or its affiliates
seek to purchase or sell the same publicly traded securities, the securities
actually purchased or sold will be allocated among the clients on a good faith
equitable basis by the Adviser in its discretion and in accordance with the
clients various investment objectives and the Advisers procedures. In some
cases, this system may adversely affect the price or size of the position the
Registrant may obtain or sell. In other cases, the Registrants ability to
participate in volume transactions may produce better execution for
it.
The Adviser also serves as
investment adviser for three other publicly traded and two privately held
closed-end management investment companies, all of which invest in the energy
sector.
Situations may occur when the
Registrant could be disadvantaged because of the investment activities conducted
by the Adviser and its affiliates for their other accounts. Such situations may
be based on, among other things, the following: (1) legal or internal
restrictions on the combined size of positions that may be taken for the
Registrant or the other accounts, thereby limiting the size of the Registrants
position; (2) the difficulty of liquidating an investment for the Registrant or
the other accounts where the market cannot absorb the sale of the combined
position; or (3) limits on co-investing in private placement securities under
the Investment Company Act of 1940. The Registrants investment opportunities
may be limited by affiliations of the Adviser or its affiliates with energy
infrastructure companies.
Under the Investment Company Act
of 1940, the Registrant and its affiliated companies may be precluded from
co-investing in negotiated private placements of securities. Except as permitted
by law, the Registrant will not co-invest with its affiliates in negotiated
private transactions. To the extent the Registrant is precluded from
co-investing, the Adviser will observe a policy for allocating negotiated
private investment opportunities among its clients that takes into account the
amount of each clients available cash and its investment objectives. These
allocation policies may result in the allocation of investment opportunities to
an affiliated company rather than to the Registrant.
To the extent that the Adviser
sources and structures private investments in master limited partnerships
(MLPs), certain employees of the Adviser may become aware of actions planned
by MLPs, such as acquisitions, which may not be announced to the public. It is
possible that the Registrant could be precluded from investing in or selling
securities of an MLP about which the Adviser has material, non-public
information; however, it is the Advisers intention to ensure that any material,
non-public information available to certain employees of the Adviser is not
shared with the employees responsible for the purchase and sale of publicly
traded MLP securities. The Registrants investment opportunities also may be
limited by affiliations of the Adviser or its affiliates with energy
infrastructure companies.
The Adviser and its principals,
officers, employees, and affiliates may buy and sell securities or other
investments for their own accounts and may have actual or potential conflicts of
interest with respect to investments made on the Registrants behalf. As a
result of differing trading and investment strategies or constraints, positions
may be taken by principals, officers, employees, and affiliates of the Adviser
that are the same as, different from, or made at a different time than positions
taken for the Registrant. Further, the Adviser may at some time in the future,
manage other investment funds with the same investment objective as the
Registrants.
Compensation
None of Messrs. Birzer, Hamel,
Malvey, Matlack or Schulte receives any direct compensation from the Registrant
or any other of the managed accounts reflected in the table above. All such
accounts are managed by the Adviser or Fountain Capital. Messrs. Birzer, Hamel,
Malvey, Matlack and Schulte are full-time employees of the Adviser and receive a
fixed salary for the services they provide. Additional benefits received by
Messrs. Birzer, Hamel, Malvey, Matlack and Schulte are normal and customary
benefits provided by investment advisers. Each of Messrs. Birzer, Hamel, Malvey,
Matlack and Schulte own an equity interest in either KCEP or FCM Tortoise,
L.L.C., the two entities that control the Adviser, and each thus benefits from
increases in the net income of the Adviser.
Securities Owned in the
Registrant by Portfolio Managers
The following table provides
information about the dollar range of equity securities in the Registrant
beneficially owned by each of the portfolio managers as of November 30,
2008:
|
|
|
Aggregate Dollar Range of
|
|
Portfolio Manager
|
|
Holdings
in the Registrant
|
|
H. Kevin Birzer
|
|
$100,001-$500,000
|
|
Zachary A.
Hamel
|
|
$
10,001-$50,000
|
|
Kenneth P. Malvey
|
|
$
10,001-$50,000
|
|
Terry
Matlack
|
|
$
100,001-$500,000
|
|
David J. Schulte
|
|
$
10,001-$50,000
|
Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and
Affiliated
Purchasers.
|
|
|
|
(d)
|
|
|
|
(c)
|
Maximum Number (or
|
|
|
|
Total Number
of
|
Approximate Dollar
|
|
(a)
|
|
Shares (or
Units)
|
Value) of Shares (or
|
|
Total Number
of
|
(b)
|
Purchased as Part
of
|
Units)
that May Yet
|
|
Shares (or
Units)
|
Average Price
Paid
|
Publicly
Announced
|
Be
Purchased Under
|
Period
|
Purchased
|
per Share (or Unit)
|
Plans
or Programs
|
the
Plans or Programs
|
Month #1
|
0
|
0
|
0
|
0
|
6/1/08-6/30/08
|
|
|
|
|
Month #2
|
0
|
0
|
0
|
0
|
7/1/08-7/31/08
|
|
|
|
|
Month #3
|
0
|
0
|
0
|
0
|
8/1/08-8/31/08
|
|
|
|
|
Month #4
|
0
|
0
|
0
|
0
|
9/1/08-9/30/08
|
|
|
|
|
Month #5
|
0
|
0
|
0
|
0
|
10/1/08-10/31/08
|
|
|
|
|
Month #6
|
0
|
0
|
0
|
0
|
11/1/08-11/30/08
|
|
|
|
|
Total
|
0
|
0
|
0
|
0
|
Item 10. Submission of
Matters to a Vote of Security Holders.
None.
Item 11. Controls and
Procedures.
(a) The Registrants President and
Chief Executive Officer and its Chief Financial Officer have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the 1940 Act)) are effective as of a
date within 90 days of the filing date of this report, based on the evaluation
of these controls and procedures required by Rule 30a-3(b) under the 1940 Act
and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended.
(b) There were no changes in the
Registrants internal control over financial reporting (as defined in Rule
30a-3(d) under the 1940 Act) that occurred during the Registrants second fiscal
quarter of the period covered by this report that have materially affected, or
are reasonably likely to materially affect, the Registrants internal control
over financial reporting.
Item 12.
Exhibits.
(a)(1)
Any code of ethics or amendment thereto, that is the
subject of the disclosure required by Item 2, to the extent that the Registrant
intends to satisfy Item 2 requirements through filing of an exhibit.
Filed herewith.
(2)
Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Filed
herewith.
(3)
Any written solicitation to purchase securities under
Rule 23c-1 under the Act sent or given during the period covered by the report
by or on behalf of the Registrant to 10 or more persons.
None.
(b)
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant)
|
|
Tortoise Energy Capital
Corporation
|
|
By
(Signature and Title)
|
|
/s/ David J. Schulte
|
|
|
David J.
Schulte, President and Chief Executive Officer
|
|
|
|
Date
February 3,
2009
|
|
|
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By
(Signature and Title)
|
|
/s/ David J. Schulte
|
|
|
David J.
Schulte, President and Chief Executive Officer
|
|
|
|
Date February
3, 2009
|
|
|
|
|
|
By
(Signature and Title)
|
|
/s/ Terry Matlack
|
|
|
Terry
Matlack, Chief Financial Officer
|
|
|
|
Date February
3, 2009
|
|
|
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