Managements Discussion
(Unaudited)
|
The information contained in this
section should be read in conjunction with our Financial Statements and the
Notes thereto. In addition, this report contains certain forward-looking
statements. These statements include the plans and objectives of management for
future operations and financial objectives and can be identified by the use of
forward-looking terminology such as may, will, expect, intend,
anticipate, estimate, or continue or the negative thereof or other
variations thereon or comparable terminology. These forward-looking statements
are subject to the inherent uncertainties in predicting future results and
conditions. Certain factors that could cause actual results and conditions to
differ materially from those projected in these forward-looking statements are
set forth in the Risk Factors section of our public filings with the
SEC.
Overview
Tortoise Energy Capital Corps goal
is to provide a growing distribution stream to our investors. We seek to provide
our stockholders with an efficient vehicle to invest in the energy
infrastructure sector. While we are a registered investment company under the
Investment Company Act of 1940, as amended (the 1940 Act), we are not a
regulated investment company for federal tax purposes. Our distributions do
not typically generate unrelated business taxable income (UBTI) and our stock
may therefore be suitable for holding by pension funds, IRAs and mutual funds,
as well as taxable accounts. We invest primarily in MLPs through private and
public market purchases. MLPs are publicly traded partnerships whose equity
interests are traded in the form of units on public exchanges, such as the NYSE
or NASDAQ.
Company Update
Market values of our MLP investments
increased during 1st quarter 2009 from their levels at November 30, 2008, having
a positive impact on our capital structure and increasing the existing cushion
on our leverage coverage ratios. We have entered into a 90-day extension of our
bank credit facility and are confident that we will finalize a longer-term
facility during 2nd quarter 2009. Additional information on our leverage is
disclosed below and in our Notes to Financial Statements. The impact of
portfolio sales in fiscal year 2008 to fund completed leverage reductions is
reflected in decreased revenues, operating expenses and leverage
costs.
As outlined in our letter to
stockholders, we continue to position our portfolio investments to manage
through this difficult period. While we expect the current year to be
challenging for almost every industry, including the energy infrastructure
sector, we continue to believe the flow of energy commodities remains critical
to our economy and that the long-term prospect for MLPs is
attractive.
Critical Accounting
Policies
The financial statements are based on
the selection and application of critical accounting policies, which require
management to make significant estimates and assumptions. Critical accounting
policies are those that are both important to the presentation of our financial
condition and results of operations and require managements most difficult,
complex, or subjective judgments. Our critical accounting policies are those
applicable to the valuation of investments, tax matters and certain revenue
recognition matters as discussed in Note 2 in the Notes to Financial
Statements.
Determining Distributions to
Stockholders
Our portfolio generates cash flow
from which we pay distributions to stockholders. Our Board of Directors
considers our distributable cash flow (DCF) in determining distributions to
stockholders. Our Board of Directors reviews the distribution rate quarterly,
and may adjust the quarterly distribution throughout the year. Our goal is to
declare what we believe to be sustainable increases in our regular quarterly
distributions. We have targeted to pay at least 95 percent of DCF on an
annualized basis.
Determining DCF
DCF is simply distributions received
from investments less expenses. The total distributions received from our
investments include the amount received by us as cash distributions from MLPs,
paid-in-kind distributions, and dividend and interest payments. The total
expenses include current or anticipated operating expenses, leverage costs and
current income taxes. Each are summarized for you in the table on page 2 and are
discussed in more detail below.
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: GAAP recognizes that a significant portion
of the cash distributions received from MLPs are treated 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. 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 as disclosed in the Statement of Operations, the DCF
calculation reflects interest expense, recurring agent fees, distributions to
preferred stockholders and realized and unrealized gains (losses) on interest
rate swap settlements as leverage costs, as well as current taxes
paid.
Distributions Received from
Investments
Our ability to generate cash is
dependent on the ability of our portfolio of investments to generate cash flow
from their operations. In order to maintain and grow distributions to our
stockholders, we evaluate each holding based upon its contribution to our
investment income, our expectation for its growth rate, and its risk relative to
other potential investments.
We concentrate on MLPs we believe can
expect an increasing demand for services from economic and population growth. We
seek well-managed businesses with hard assets and stable recurring revenue
streams. Our focus remains primarily on investing in fee-based service providers
that operate long-haul, interstate pipelines. We further diversify among
issuers, geographies and energy commodities to seek a distribution payment which
approximates an investment directly in energy infrastructure MLPs. In addition,
most energy infrastructure companies are regulated and utilize an inflation
escalator index that factors in inflation as a cost pass-through. So, over the
long-term, we believe MLPs distributions will outpace inflation and interest
rate increases, and produce positive returns. However, during the last year the
economy has been retrenching. Many economists are forecasting a decline in
consumer and capital spending which may lead some MLPs to slow distribution
growth or possibly reduce distributions.
Total distributions received from our
investments for the 1st quarter 2009 was approximately $10.9 million,
representing a 31 percent decrease as compared to 1st quarter 2008 and a 15
percent decrease as compared to 4th quarter 2008. These changes reflect the
result of net portfolio sales over the last 12 months to fund leverage
redemptions and net distribution increases from our MLP investments.
Expenses
We incur two types of expenses: (1)
operating expenses, consisting primarily of the advisory fee; and (2) leverage
costs. On a percentage basis, operating expenses before leverage costs and
current taxes were an annualized 1.10 percent of average total assets for the
1st quarter 2009 as compared to 1.06 percent for the 1st quarter 2008 and 1.12
percent for the 4th quarter 2008. Advisory fees for the 1st quarter 2009
decreased 33 percent from 4th quarter 2008, as a result of reduced average
managed assets. If yields on our MLP investments revert more to their historical
norm, all else being equal, MLP asset values will increase as will our managed
assets and advisory fees. Other operating expenses, primarily professional fees
and administrator fees, decreased 25 percent during the same period reflecting
the non-recurring expenses associated with the reduction of leverage during the
4th quarter and reduced average managed assets.
Leverage costs consist of four major
components: (1) the direct interest expense on our Tortoise Notes and short-term
credit facility; (2) the agent fees, which are the marketing and rating agency
costs for the leverage; (3) the realized and unrealized gain or loss on interest
rate swap settlements (if any); and (4) distributions to preferred
stockholders.
Total leverage costs for DCF purposes
were approximately $1.8 million for the 1st quarter 2009 as compared to $6.1
million for the 1st quarter 2008 and $4.2 million for the 4th quarter 2008, as
detailed below.
|
|
1Q 08
|
|
4Q 08
|
|
1Q 09
|
Interest expense
|
|
$
|
3,762,810
|
|
$
|
2,692,964
|
|
$
|
1,383,996
|
Agent
fees
|
|
|
186,916
|
|
|
30,727
|
|
|
24,158
|
Net realized and unrealized loss
|
|
|
|
|
|
|
|
|
|
on interest rate swap
settlements
|
|
|
347,399
|
|
|
|
|
|
|
Distributions to preferred stockholders
|
|
|
1,770,699
|
|
|
1,442,896
|
|
|
361,368
|
Total
leverage costs
|
|
$
|
6,067,824
|
|
$
|
4,166,587
|
|
$
|
1,769,522
|
Average
outstanding leverage (in millions)
|
|
$
|
361.1
|
|
$
|
276.8
|
|
$
|
185.0
|
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
3
|
Managements Discussion
(Unaudited)
(Continued)
|
The average annualized total cost of
leverage (total leverage costs divided by average outstanding leverage) was 3.88
percent for the 1st quarter 2009 as compared to 6.05 percent for the 4th quarter
2008, and 6.76 percent for 1st quarter 2008. The decrease of 217 basis points
from 4th quarter 2008 to 1st quarter 2009 is the result of lower LIBOR-based
borrowing costs on our auction rate preferred.
Our effective cost of leverage as of
February 28, 2009 was 3.40 percent including the $90 million aggregate Series D,
E and F Notes (weighted average maturity of approximately 4.6 years), $95
million notional amount of outstanding auction rate preferred shares, and agent
fees. This 48 basis point decrease as compared to the 1st quarter 2009 is the
result of lower LIBOR-based borrowing costs on our auction rate preferred. This
all-in rate will vary as Notes are redeemed or mature and as our auction rate
securities are reset every 7 or 28 days.
At February 28, 2009, borrowing costs
on our 7 and 28 day auction rate preferred reflected LIBOR of 0.369 percent and
0.474 percent, respectively. In recent months, both the 1-week and 1-month rates
have been less than 0.50 percent, substantially decreasing our current cost of
leverage. We expect these rates to return to higher levels as economic
conditions improve and LIBOR increases to more historical levels.
In 2008, our auctions, like most
others, began resetting at their maximum rate, which in our case has been 200
percent of the applicable LIBOR. Additional information on our leverage is
included in the Liquidity and Capital Resources section below.
At February 28, 2009, approximately
49 percent of our leverage was at a fixed rate. Additional information on our
leverage is disclosed below in Liquidity and Capital Resources and in our Notes
to Financial Statements.
Distributable Cash
Flow
For 1st quarter 2009, our DCF was
approximately $7.9 million, an increase of 11 percent as compared to 1st quarter
2008 and 18 percent as compared to 4th quarter 2008. These changes are the net
result of lower total distributions received from investments which were more
than offset by reduced expenses, as outlined above. We paid a distribution of
$7.0 million, or 87.9 percent of DCF, during the quarter. On a per share basis,
we declared a $0.40 distribution on February 12, 2009. This is a decrease of
$0.0175 or 4.2 percent as compared to 1st quarter 2008 and $0.03 or 7.0 percent
as compared to 4th quarter 2008.
Factoring in portfolio sales in
fiscal year 2008 to fund leverage reductions, moderate to no increases in
projected distribution income from MLPs, operating expense projections and a
more normalized cost of leverage, we currently expect to pay quarterly
distributions to our stockholders of not less than $0.38 during fiscal year
2009. This represents a current estimate and subject to change based upon actual
results and Board approval.
Liquidity and Capital
Resources
We had total assets of $446 million
at quarter-end. Our total assets reflect the value of our investments, which are
itemized in the Schedule of Investments. It also reflects cash, interest and
receivables, net deferred tax asset and any expenses that may have been prepaid.
During 1st quarter 2009, total assets increased from $414 million to $446
million, an increase of $32 million. This change was primarily the result of
unrealized appreciation of investments during the quarter.
Total leverage outstanding at
February 28, 2009 of $185 million is comprised of $90 million in senior notes
and $95 million in preferred shares. Total leverage represented 41.4 percent of
total assets, above our target ratio of 33 percent of total assets, but a
decrease of 3.3 percent as compared to November 30, 2008. Our leverage ratio is
impacted by increases or decreases in MLP values, issuance of equity and/or the
sale of securities where proceeds are used to reduce leverage.
Subsequent to quarter-end, we entered
into a 90-day extension of our bank credit facility. Terms of the extension
provide for an unsecured facility of up to $40 million. During the extension,
outstanding balances generally will accrue interest at a variable rate equal to
one-month LIBOR plus 2.00 percent with a fee of 0.25 percent on any unused
balance. The expiring facility provided up to $92.5 million in credit
availability, with outstanding balances generally accruing at a variable rate
equal to one-month LIBOR plus 0.75 percent and a fee of 0.15 percent on any
unused balance. We reduced the amount of the facility to $40 million to reflect
our anticipated borrowing needs over the near term and expect to finalize a
longer-term credit facility during 2nd quarter 2009.
We have used leverage to acquire MLPs
consistent with our investment philosophy. The terms of our leverage are
governed by regulatory and contractual asset coverage requirements that arise
from the use of leverage. Under the 1940 Act, we may not pay distributions to
our common stockholders if we do not meet a 300 percent asset coverage ratio for
debt and 200 percent asset coverage ratio for debt and preferred shares after
payment of the distribution, and we may not pay distributions on our preferred
shares if we fail to meet a 200 percent asset coverage ratio on our debt. Under
the agreement with our bank lenders, if portfolio values decline such that we no
longer meet the asset coverage ratios under the 1940 Act, we must repay a
portion of our bank line until we meet the coverage requirement. Further, under
the terms of our institutional senior notes and preferred shares, if we fail to
meet basic maintenance ratios as of any valuation date (generally Fridays) or
fail to satisfy the 1940 Act asset coverage as of the last business day of any
month, we could be subject to mandatory redemption of the senior notes or
preferred shares if such failure is not waived or cured. In some cases we may be
delayed in paying common stock or preferred share distributions until such
coverage ratios can be met.
As disclosed in Section 18 of the
1940 Act, the 300 percent asset coverage ratio for debt is equal to total assets
less all liabilities and indebtedness not represented by debt divided by debt.
The 200 percent asset coverage ratio for preferred shares is equal to the same
numerator as the 300 percent test divided by the sum of debt and preferred
shares. Deferred tax assets are a component of total assets in calculation of
these ratios. Our coverage ratios are currently updated each week and available
on our web site at www.tortoiseadvisors.com.
Taxation of our Distributions and
Deferred Taxes
We invest in partnerships which
generally have larger distributions of cash than the accounting income which
they generate. Accordingly, the distributions include a return of capital
component for accounting and tax purposes. Distributions declared and paid by us
in a year generally differ from taxable income for that year, as such
distributions may include the distribution of current year taxable income or
return of capital.
The taxability of the distribution
you receive depends on whether we have annual earnings and profits. If so, those
earnings and profits are first allocated to the preferred shares and then to the
common shares.
In the event we have earnings and
profits allocated to the common shares, all or a portion of our distribution
will be taxable at the 15 percent Qualified Dividend Income (QDI) rate,
assuming various holding requirements are met by the stockholder. The portion of
our distribution that is taxable may vary for either of two reasons: first, the
characterization of the distributions we receive from MLPs could change annually
based upon the K-1s we receive and become less return of capital and more in the
form of income. Second, we could sell an MLP investment and realize a gain or
loss at any time. It is for these reasons that we inform you of the tax
treatment after the close of each year as the ultimate result is undeterminable
until the year is over.
For book and tax purposes,
distributions to stockholders for the fiscal year ended 2008 were comprised of
100 percent return of capital. We currently expect that a portion of our 2009
distributions will consist of return of capital, although the ultimate
determination will not be made until January 2010, after determining our
earnings and profits.
The unrealized gain or loss we have
in the portfolio is reflected in the Statement of Assets and Liabilities. At
February 28, 2009, our investments at value are $417 million, with an adjusted
cost of $454 million. The $37 million difference reflects unrealized
depreciation that would be realized for financial statement purposes if those
investments were sold at those values. The Statement of Assets and Liabilities
reflects either a deferred tax liability or deferred tax asset depending
primarily upon unrealized gains (losses) on investments, realized gains (losses)
on investments and net operating losses. At February 28, 2009, the balance sheet
reflects a net deferred tax asset of approximately $29 million or $1.65 per
share.
The net deferred tax asset of
approximately $29 million reflects the net benefit we have determined will be
realized in future periods under generally accepted accounting principles.
Realization of a deferred tax asset is dependent on whether there will be
sufficient future taxable income within the carryforward periods to realize a
portion or all of the deferred tax benefit. The carryforward period for ordinary
losses to offset ordinary income is 20 years while capital losses can be carried
forward 5 years to offset capital gains. A valuation allowance against the
deferred tax asset is needed when, based on the weight of the available
evidence, it is more likely than not that some portion or all of the deferred
tax asset will not be realized. Our valuation allowance policy is in conformity
with generally accepted accounting principles and is based upon our estimation
of potential future taxable income. If we do not believe we can use a deferred
tax asset in a relatively short period, in our case three years or less, we
create a valuation allowance against the current gross deferred tax asset. At
February 28, 2009, we had a gross deferred tax asset of approximately $33
million, against which we provided a valuation allowance of approximately $4
million resulting in a net deferred tax asset of approximately $29 million. Our
Adviser does not charge an advisory fee based upon net deferred tax assets.
Details of our deferred taxes are disclosed in Note 5 in our Notes to Financial
Statements.
4
|
|
Tortoise Energy Capital
Corp.
|
|
|
|
Schedule
of Investments
February
28, 2009
|
(Unaudited)
|
|
Shares
|
|
Fair Value
|
Master Limited Partnerships and
|
|
|
|
|
|
Related Companies
156.8%
(1)
|
|
|
|
|
|
|
|
Crude/Refined Products Pipelines
83.2%
(1)
|
|
|
|
|
United
States 83.2%
(1)
|
|
|
|
|
|
Buckeye Partners, L.P.
|
100,632
|
|
$
|
3,974,964
|
|
Enbridge
Energy Partners, L.P.
|
659,157
|
|
|
18,766,200
|
|
Enbridge Energy Partners, L.P.
(2)(3)
|
333,606
|
|
|
9,421,046
|
|
Holly
Energy Partners, L.P.
|
26,453
|
|
|
674,023
|
|
Kinder Morgan Management, LLC
(3)
|
928,217
|
|
|
38,725,213
|
|
Magellan
Midstream Partners, L.P.
|
636,738
|
|
|
20,248,268
|
|
NuStar Energy L.P.
|
615,763
|
|
|
28,411,305
|
|
Plains All
American Pipeline, L.P.
|
933,179
|
|
|
35,964,719
|
|
SemGroup Energy Partners, L.P.
|
436,674
|
|
|
1,200,854
|
|
Sunoco
Logistics Partners L.P.
|
764,713
|
|
|
42,051,568
|
|
TEPPCO Partners, L.P.
|
443,491
|
|
|
10,093,855
|
|
|
|
|
|
209,532,015
|
|
Natural Gas/Natural Gas Liquids Pipelines
49.4%
(1)
|
|
|
|
|
United
States 49.4%
(1)
|
|
|
|
|
|
Boardwalk Pipeline Partners, LP
|
433,173
|
|
|
9,139,950
|
|
El Paso
Pipeline Partners, L.P.
|
817,426
|
|
|
14,411,220
|
|
Energy Transfer Equity, L.P.
|
314,061
|
|
|
6,165,017
|
|
Energy
Transfer Partners, L.P.
|
671,538
|
|
|
24,316,391
|
|
Enterprise GP Holdings L.P.
|
282,774
|
|
|
5,533,887
|
|
Enterprise
Products Partners L.P.
|
1,069,167
|
|
|
23,072,624
|
|
ONEOK Partners, L.P.
|
130,822
|
|
|
5,542,928
|
|
Spectra
Energy Partners, LP
|
256,165
|
|
|
5,681,740
|
|
TC PipeLines, LP
|
887,700
|
|
|
22,964,799
|
|
Williams
Pipeline Partners L.P.
|
481,642
|
|
|
7,638,842
|
|
|
|
|
|
124,467,398
|
|
Natural Gas Gathering/Processing
17.3%
(1)
|
|
|
|
|
United States 17.3%
(1)
|
|
|
|
|
|
Copano Energy, L.L.C.
|
984,736
|
|
|
14,002,946
|
|
Crosstex Energy, L.P.
|
45,820
|
|
|
158,537
|
|
Crosstex Energy, L.P.
(2)(4)
|
581,301
|
|
|
2,092,684
|
|
DCP Midstream Partners, LP
|
255,000
|
|
|
2,748,900
|
|
Duncan Energy Partners L.P.
|
250,700
|
|
|
4,088,917
|
|
Exterran Partners, L.P.
|
209,900
|
|
|
2,571,275
|
|
MarkWest Energy Partners, L.P.
|
1,405,456
|
|
|
15,122,707
|
|
Targa Resources Partners LP
|
97,783
|
|
|
827,244
|
|
Western Gas Partners LP
|
141,430
|
|
|
2,074,778
|
|
|
|
|
|
43,687,988
|
|
Propane Distribution 4.0%
(1)
|
|
|
|
|
|
United States 4.0%
(1)
|
|
|
|
|
|
Inergy, L.P.
|
451,250
|
|
|
10,162,150
|
|
Shipping 2.9%
(1)
|
|
|
|
|
|
Republic of the Marshall Islands 0.7%
(1)
|
|
|
|
|
|
Teekay LNG Partners L.P.
|
98,200
|
|
|
1,807,862
|
|
United States 2.2%
(1)
|
|
|
|
|
|
K-Sea Transportation Partners L.P.
|
330,997
|
|
|
5,527,650
|
|
|
|
|
|
7,335,512
|
|
Total Master Limited Partnerships and
|
|
|
|
|
|
Related Companies (Cost
$432,353,443)
|
|
|
|
395,185,063
|
|
Short-Term Investments 8.8%
(1)
|
|
|
|
|
|
United States Investment Companies 8.8%
(1)
|
|
|
|
|
|
AIM Short-Term Treasury Fund
|
|
|
|
|
|
Institutional Class, 0.28%
(5)
|
157,668
|
|
|
157,668
|
|
First American Government Obligations Fund
|
|
|
|
|
|
Class Y, 0.27%
(5)
|
2,897,613
|
|
|
2,897,613
|
|
Merrill Lynch Premier Institutional Fund, 0.94%
(5)
|
19,025,926
|
|
|
19,025,926
|
|
Total Short-Term Investments
|
|
|
|
|
|
(Cost $22,081,207)
|
|
|
|
22,081,207
|
|
Total Investments 165.6%
(1)
|
|
|
|
|
|
(Cost $454,434,650)
|
|
|
|
417,266,270
|
|
Other Assets and Liabilities 7.8%
(1)
|
|
|
|
19,708,406
|
|
Long-Term Debt Obligations (35.7%)
(1)
|
|
|
|
(90,000,000
|
)
|
Preferred Shares at Redemption Value
(37.7%)
(1)
|
|
|
(95,000,000
|
)
|
Total Net Assets Applicable to
|
|
|
|
|
|
Common
Stockholders 100.0%
(1)
|
|
|
$
|
251,974,676
|
|
(1)
|
Calculated as a
percentage of net assets applicable to common
stockholders.
|
(2)
|
Restricted securities
have been fair valued in accordance with procedures approved by the Board
of Directors and have a total fair value of $11,513,730, which represents
4.6% of net assets. See Note 7 to the financial statements for further
disclosure.
|
(3)
|
Security distributions
are paid-in-kind.
|
(4)
|
Non-income
producing.
|
(5)
|
Rate indicated is the
current yield as of February 28, 2009.
|
See accompanying Notes to
Financial Statements.
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
5
|
Statement of
Assets & Liabilities
February 28, 2009
|
(Unaudited)
|
Assets
|
|
|
|
Investments at fair value (cost
$454,434,650)
|
$
|
417,266,270
|
|
Receivable for investments
sold
|
|
27,629
|
|
Dividend receivable
|
|
795
|
|
Deferred tax asset
|
|
28,741,994
|
|
Prepaid expenses and other assets
|
|
453,815
|
|
Total assets
|
|
446,490,503
|
|
Liabilities
|
|
|
|
Payable to Adviser
|
|
627,746
|
|
Distributions payable to common
stockholders
|
|
6,988,269
|
|
Distributions payable to preferred
stockholders
|
|
9,615
|
|
Accrued expenses and other
liabilities
|
|
1,345,503
|
|
Current tax liability
|
|
544,694
|
|
Long-term debt obligations
|
|
90,000,000
|
|
Total liabilities
|
|
99,515,827
|
|
Preferred Stock
|
|
|
|
$25,000 liquidation value per share
applicable to
|
|
|
|
3,800 outstanding shares (4,400 shares
authorized)
|
|
95,000,000
|
|
Net
assets applicable to common stockholders
|
$
|
251,974,676
|
|
Net Assets Applicable to Common Stockholders Consist
of:
|
|
|
|
Capital stock, $0.001 par value; 17,470,673
shares issued
|
|
|
|
and outstanding (100,000,000 shares
authorized)
|
$
|
17,471
|
|
Additional paid-in capital
|
|
311,719,500
|
|
Accumulated net investment loss, net of
income taxes
|
|
(34,261,484
|
)
|
Accumulated realized loss, net of income
taxes
|
|
(6,624,596
|
)
|
Net unrealized depreciation of investments,
net of income taxes
|
|
(18,876,215
|
)
|
Net assets applicable to common
stockholders
|
$
|
251,974,676
|
|
Net Asset Value per common share
outstanding
|
|
|
|
(net assets applicable to common
stock,
|
|
|
|
divided by common shares
outstanding)
|
$
|
14.42
|
|
Statement of
Operations
Period from
December 1, 2008 through February 28, 2009
|
(Unaudited)
|
Investment Income
|
|
|
|
Distributions from master limited
partnerships
|
$
|
9,264,498
|
|
Less return of capital on
distributions
|
|
(7,985,316
|
)
|
Net distributions from master limited
partnerships
|
|
1,279,182
|
|
Dividends from money market mutual
funds
|
|
34,986
|
|
Total Investment
Income
|
|
1,314,168
|
|
Operating Expenses
|
|
|
|
Advisory fees
|
|
911,203
|
|
Professional fees
|
|
99,301
|
|
Administrator fees
|
|
38,558
|
|
Directors fees
|
|
28,997
|
|
Reports to stockholders
|
|
23,111
|
|
Registration fees
|
|
16,591
|
|
Fund accounting fees
|
|
13,545
|
|
Custodian fees and expenses
|
|
8,694
|
|
Stock transfer agent fees
|
|
2,245
|
|
Other expenses
|
|
20,046
|
|
Total Operating
Expenses
|
|
1,162,291
|
|
Interest expense
|
|
1,383,996
|
|
Agent fees
|
|
24,158
|
|
Amortization of debt issuance
costs
|
|
15,659
|
|
Total Interest, Agent and Debt Issuance
Costs
|
|
1,423,813
|
|
Total Expenses
|
|
2,586,104
|
|
Net Investment Loss, before Income Taxes
|
|
(1,271,936
|
)
|
Current tax expense
|
|
(127,531
|
)
|
Deferred tax benefit
|
|
93,249
|
|
Income tax benefit, net
|
|
(34,282
|
)
|
Net Investment Loss
|
|
(1,306,218
|
)
|
Realized and Unrealized Gain (Loss) on
Investments
|
|
|
|
Net realized loss on investments, before
income taxes
|
|
(14,926,473
|
)
|
Deferred tax benefit
|
|
543,395
|
|
Net realized loss on investments
|
|
(14,383,078
|
)
|
Net unrealized appreciation of investments,
before income taxes
|
|
52,439,510
|
|
Deferred tax expense
|
|
(1,909,050
|
)
|
Net unrealized appreciation of investments
|
|
50,530,460
|
|
Net Realized and Unrealized Gain on Investments
|
|
36,147,382
|
|
Distributions to Preferred Stockholders
|
|
(361,368
|
)
|
Net Increase in Net Assets Applicable to Common
|
|
|
|
Stockholders Resulting from
Operations
|
$
|
34,479,796
|
|
See accompanying Notes to
Financial Statements.
6
|
|
Tortoise Energy Capital
Corp.
|
|
|
|
Statement
of Changes in Net Assets
|
|
Period from
|
|
|
|
|
|
December 1, 2008
|
|
|
|
|
|
through
|
|
Year Ended
|
|
February 28, 2009
|
|
November 30,
2008
|
|
(Unaudited)
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
Net investment loss
|
$
|
(1,306,218
|
)
|
|
$
|
(14,757,582
|
)
|
Net realized loss on investments and interest
rate swaps
|
|
(14,383,078
|
)
|
|
|
(13,878,321
|
)
|
Net unrealized appreciation (depreciation) of
investments and interest rate swap contracts
|
|
50,530,460
|
|
|
|
(196,524,707
|
)
|
Distributions to preferred
stockholders
|
|
(361,368
|
)
|
|
|
(6,161,055
|
)
|
Net increase (decrease) in net assets applicable to
common stockholders resulting from operations
|
|
34,479,796
|
|
|
|
(231,321,665
|
)
|
Distributions to Common Stockholders
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
Return of capital
|
|
(6,988,269
|
)
|
|
|
(29,574,603
|
)
|
Total distributions to common
stockholders
|
|
(6,988,269
|
)
|
|
|
(29,574,603
|
)
|
Capital Stock Transactions
|
|
|
|
|
|
|
|
Underwriting discounts and offering expenses
associated with the issuance of preferred stock
|
|
|
|
|
|
(14,000
|
)
|
Issuance of 64,587 common shares from
reinvestment of distributions to stockholders
|
|
|
|
|
|
1,525,365
|
|
Net increase in net assets, applicable to common
stockholders, from capital stock transactions
|
|
|
|
|
|
1,511,365
|
|
Cumulative effect of adopting Financial
Accounting Standards Board Interpretation No. 48 (Note 5)
|
|
|
|
|
|
(776,852
|
)
|
Total increase (decrease) in net assets applicable
to common stockholders
|
|
27,491,527
|
|
|
|
(260,161,755
|
)
|
Net Assets
|
|
|
|
|
|
|
|
Beginning of period
|
|
224,483,149
|
|
|
|
484,644,904
|
|
End
of period
|
$
|
251,974,676
|
|
|
$
|
224,483,149
|
|
Accumulated net investment loss, net of income taxes, at the end of
period
|
$
|
(34,261,484
|
)
|
|
$
|
(32,955,266
|
)
|
See accompanying Notes to
Financial Statements.
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
7
|
Statement
of Cash Flows
Period from
December 1, 2008 through February 28, 2009
|
(Unaudited)
|
Cash Flows From Operating Activities
|
|
|
|
Distributions
received from master
|
|
|
|
limited partnerships
|
$
|
9,264,498
|
|
Dividend income received
|
|
39,736
|
|
Proceeds from sales of long-term investments
|
|
14,784,789
|
|
Purchases of short-term investments, net
|
|
(19,527,197
|
)
|
Interest expense paid
|
|
(1,515,714
|
)
|
Income
taxes paid
|
|
(141,974
|
)
|
Operating expenses paid
|
|
(1,309,975
|
)
|
Net cash provided by operating activities
|
|
1,594,163
|
|
Cash Flows From Financing Activities
|
|
|
|
Distributions paid to common stockholders
|
|
(1,154,203
|
)
|
Distributions paid to preferred stockholders
|
|
(570,766
|
)
|
Net cash used in financing activities
|
|
(1,724,969
|
)
|
Net
decrease in cash
|
|
(130,806
|
)
|
Cash
beginning of period
|
|
130,806
|
|
Cash end of
period
|
$
|
|
|
Reconciliation of net increase in net assets applicable
to
|
|
|
|
common
stockholders resulting from operations to net cash
|
|
|
provided by operating activities
|
|
|
|
Net
increase in net assets applicable to common
|
|
|
|
stockholders resulting from operations
|
$
|
34,479,796
|
|
Adjustments to reconcile net increase in net assets
|
|
|
|
applicable to common stockholders resulting from
|
|
|
|
operations to net
cash provided by operating activities:
|
|
|
|
Return
of capital on distributions received
|
|
7,985,316
|
|
Proceeds from sales of long-term
investments
|
|
3,901,820
|
|
Purchases of short-term investments,
net
|
|
(19,527,197
|
)
|
Deferred tax expense
|
|
1,272,406
|
|
Net unrealized appreciation of
investments
|
|
(52,439,510
|
)
|
Net realized loss on investments
|
|
14,926,473
|
|
Amortization of debt issuance costs
|
|
15,659
|
|
Distributions to preferred
stockholders
|
|
361,368
|
|
Changes in operating assets and
liabilities:
|
|
|
|
Decrease in interest, dividend and distribution
receivable
|
|
4,750
|
|
Decrease in receivable for investments
sold
|
|
10,882,969
|
|
Decrease in prepaid expenses and other
assets
|
|
24,864
|
|
Decrease in current tax
liability
|
|
(14,442
|
)
|
Decrease in payable to
Adviser
|
|
(186,595
|
)
|
Decrease in accrued expenses and other
liabilities
|
|
(93,514
|
)
|
Total adjustments
|
|
(32,885,633
|
)
|
Net
cash provided by operating activities
|
$
|
1,594,163
|
|
See accompanying Notes to
Financial Statements.
8
|
|
Tortoise Energy Capital
Corp.
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
December 1, 2008
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
May 31, 2005
(1)
|
|
|
through
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
through
|
|
|
February 29, 2009
|
|
2008
|
|
2007
|
|
2006
|
|
November 30,
2005
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share Data
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value, beginning of period
|
|
$
|
12.85
|
|
|
$
|
27.84
|
|
|
$
|
26.79
|
|
|
$
|
23.23
|
|
|
$
|
|
|
Public offering price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.00
|
|
Underwriting discounts and offering costs on
issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
common and preferred stock
(3)
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
(0.06
|
)
|
|
|
(1.18
|
)
|
Premiums less underwriting discounts and offering
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on offering of common stock
(4)
|
|
|
|
|
|
|
|
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
Income (loss) from Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss)
(5)(6)
|
|
|
(0.07
|
)
|
|
|
(0.89
|
)
|
|
|
(0.64
|
)
|
|
|
(0.36
|
)
|
|
|
0.04
|
|
Net realized and unrealized gains (losses) on
investments and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest
rate swap contracts
(5)(6)
|
|
|
2.06
|
|
|
|
(12.05
|
)
|
|
|
3.80
|
|
|
|
5.68
|
|
|
|
(0.05
|
)
|
Total increase (decrease) from investment
operations
|
|
|
1.99
|
|
|
|
(12.94
|
)
|
|
|
3.16
|
|
|
|
5.32
|
|
|
|
(0.01
|
)
|
Less Distributions to Preferred
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
(0.02
|
)
|
|
|
(0.35
|
)
|
|
|
(0.33
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
Total distributions to preferred
stockholders
|
|
|
(0.02
|
)
|
|
|
(0.35
|
)
|
|
|
(0.33
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
Less Distributions to Common
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
Return of capital
|
|
|
(0.40
|
)
|
|
|
(1.70
|
)
|
|
|
(1.63
|
)
|
|
|
(1.51
|
)
|
|
|
(0.55
|
)
|
Total distributions to common
stockholders
|
|
|
(0.40
|
)
|
|
|
(1.70
|
)
|
|
|
(1.63
|
)
|
|
|
(1.51
|
)
|
|
|
(0.58
|
)
|
Net
Asset Value, end of period
|
|
$
|
14.42
|
|
|
$
|
12.85
|
|
|
$
|
27.84
|
|
|
$
|
26.79
|
|
|
$
|
23.23
|
|
Per common share market value, end of period
|
|
$
|
15.85
|
|
|
$
|
11.11
|
|
|
$
|
25.47
|
|
|
$
|
26.50
|
|
|
$
|
22.09
|
|
Total Investment Return Based on Market
Value
(7)
|
|
|
46.67
|
%
|
|
|
(52.44
|
)%
|
|
|
1.73
|
%
|
|
|
27.67
|
%
|
|
|
(8.33
|
)%
|
See accompanying Notes to
Financial Statements.
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
9
|
F
INANCIAL
H
IGHLIGHTS
(Continued)
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
December 1, 2008
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
May 31, 2005
(1)
|
|
|
through
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
through
|
|
|
February 29, 2009
|
|
2008
|
|
2007
|
|
2006
|
|
November 30,
2005
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data and Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common stockholders, end
of period (000s)
|
|
$
|
251,975
|
|
|
$
|
224,483
|
|
|
$
|
484,645
|
|
|
$
|
429,010
|
|
|
$
|
370,455
|
|
Ratio of expenses (including net current and deferred income tax
(benefit) expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net
assets
(8)(9)(10)
|
|
|
6.85
|
%
|
|
|
(21.81
|
)%
|
|
|
10.51
|
%
|
|
|
17.38
|
%
|
|
|
1.29
|
%
|
Ratio of expenses (excluding net current and
deferred income tax (benefit) expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net
assets
(8)(10)(11)
|
|
|
4.44
|
%
|
|
|
6.51
|
%
|
|
|
4.46
|
%
|
|
|
3.47
|
%
|
|
|
1.39
|
%
|
Ratio of net investment income (loss) to average net assets
(including net current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and deferred income tax (benefit)
expense)
(8)(9)(10)
|
|
|
(4.59
|
)%
|
|
|
23.33
|
%
|
|
|
(9.84
|
)%
|
|
|
(16.31
|
)%
|
|
|
0.60
|
%
|
Ratio of net investment income (loss) to average
net assets (excluding net current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and deferred income tax (benefit)
expense)
(8)(10)(11)
|
|
|
(2.18
|
)%
|
|
|
(4.99
|
)%
|
|
|
(3.79
|
)%
|
|
|
(2.40
|
)%
|
|
|
0.50
|
%
|
Portfolio turnover rate
(8)
|
|
|
0.00
|
%
|
|
|
6.44
|
%
|
|
|
9.90
|
%
|
|
|
5.56
|
%
|
|
|
0.08
|
%
|
Short-term borrowings, end of period
(000s)
|
|
|
|
|
|
|
|
|
|
$
|
24,700
|
|
|
$
|
28,000
|
|
|
|
|
|
Long-term debt obligations, end of period (000s)
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
|
$
|
190,000
|
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
Preferred stock, end of period (000s)
|
|
$
|
95,000
|
|
|
$
|
95,000
|
|
|
$
|
110,000
|
|
|
$
|
70,000
|
|
|
|
|
|
Per common share amount of long-term debt obligations
outstanding,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at end of period
|
|
$
|
5.15
|
|
|
$
|
5.15
|
|
|
$
|
10.92
|
|
|
$
|
7.49
|
|
|
$
|
7.52
|
|
Per common share amount of net assets, excluding
long-term debt obligations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at end of period
|
|
$
|
19.57
|
|
|
$
|
18.00
|
|
|
$
|
38.76
|
|
|
$
|
34.28
|
|
|
$
|
30.75
|
|
Asset coverage, per $1,000 of principal amount of long-term debt
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and short-term borrowings
(12)
|
|
$
|
4,855
|
|
|
$
|
4,550
|
|
|
$
|
3,770
|
|
|
$
|
4,372
|
|
|
$
|
4,087
|
|
Asset coverage ratio of long-term debt obligations
and short-term borrowings
(12)
|
|
|
486
|
%
|
|
|
455
|
%
|
|
|
377
|
%
|
|
|
437
|
%
|
|
|
409
|
%
|
Asset coverage, per $25,000 liquidation value per share of
preferred stock
(13)
|
|
$
|
91,309
|
|
|
$
|
84,075
|
|
|
$
|
135,147
|
|
|
$
|
178,218
|
|
|
|
|
|
Asset coverage, per $25,000 liquidation value per
share of preferred stock
(14)
|
|
$
|
59,051
|
|
|
$
|
55,336
|
|
|
$
|
62,315
|
|
|
$
|
74,198
|
|
|
|
|
|
Asset coverage ratio of preferred stock
(14)
|
|
|
236
|
%
|
|
|
221
|
%
|
|
|
249
|
%
|
|
|
297
|
%
|
|
|
|
|
(1)
|
|
Commencement
of Operations.
|
(2)
|
|
Information
presented relates to a share of common stock outstanding for the entire
period.
|
(3)
|
|
Represents the
issuance of preferred stock for the years ended November 30, 2007 and
2006. Represents the issuance of common stock for the period from May 31,
2005 through November 30, 2005.
|
(4)
|
|
Represents the
premium on the shelf offering of less than $0.01 per share, less the
underwriting and offering costs of $0.13 per share.
|
(5)
|
|
The per common
share data for the periods ended November 30, 2008, 2007, 2006 and 2005 do
not reflect the change in estimate of investment income and return of
capital, for the respective period. See Note 2C to the financial
statements for further disclosure.
|
(6)
|
|
The per common
share data for the year ended November 30, 2008 reflects the cumulative
effect of adopting FIN 48, which was a $776,852 increase to the beginning
balance of accumulated net investment loss, or $(0.04) per share. See Note
5 to the financial statements for further disclosure.
|
(7)
|
|
Not
annualized. Total investment return is calculated assuming a purchase of
common stock at the beginning of 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 the Companys
dividend reinvestment plan.
|
(8)
|
|
Annualized for
periods less than one full year.
|
(9)
|
|
For the period
from December 1, 2008 through February 28, 2009, the Company accrued
$127,531 for current tax expense and $1,272,406 for net deferred income
tax expense. For the year ended November 30, 2008, the Company accrued
$427,891 for current tax expense and $114,309,765 for net deferred income
tax benefit. The Company accrued $30,376,674 and $54,292,114 for the years
ended November 30, 2007 and 2006, respectively, for current and deferred
income tax expense. For the period from May 31, 2005 through November 30,
2005, the Company accrued $192,462 in net deferred income tax
benefit.
|
(10)
|
|
The expense
ratios and net investment income (loss) ratios do not reflect the effect
of distributions to preferred stockholders.
|
(11)
|
|
This ratio
excludes the impact of current and deferred income taxes.
|
(12)
|
|
Represents
value of total assets less all liabilities and indebtedness not
represented by long-term debt obligations, short-term borrowings and
preferred stock at the end of the period divided by long-term debt
obligations and short-term borrowings outstanding at the end of the
period.
|
(13)
|
|
Represents
value of total assets less all liabilities and indebtedness not
represented by preferred stock at the end of the period divided by
preferred stock outstanding at the end of the period, assuming the
retirement of all long-term debt obligations and short-term
borrowings.
|
(14)
|
|
Represents
value of total assets less all liabilities and indebtedness not
represented by long-term debt obligations, short-term borrowings and
preferred stock at the end of the period divided by the sum of long-term
debt obligations, short-term borrowings and preferred stock outstanding at
the end of the period.
|
See accompanying Notes to
Financial Statements.
10
|
|
Tortoise Energy Capital
Corp.
|
|
|
|
N
OTES TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
February 28, 2009
|
1. Organization
Tortoise Energy Capital Corporation
(the Company) was organized as a Maryland corporation on March 4, 2005, and is
a non-diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended (the 1940 Act). The Companys investment
objective is to seek a high level of total return with an emphasis on current
distributions to stockholders. The Company seeks to provide its stockholders
with an efficient vehicle to invest in the energy infrastructure sector. The
Company received the proceeds of its initial public offering and commenced
operations on May 31, 2005. The Companys stock is listed on the New York Stock
Exchange under the symbol TYY.
2. Significant Accounting
Policies
A. Use of Estimates
The preparation of financial
statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities, recognition of distribution income, and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
B. Investment
Valuation
The Company primarily owns securities
that are listed on a securities exchange or over-the-counter market. The Company
values 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 Company uses the price of that exchange that it considers
to be the principal exchange on which the stock is traded. Securities listed on
the NASDAQ will be 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 will be valued at
the mean between the bid and ask price on such day.
The Company may invest up to 50
percent of its total assets in restricted securities. 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 the Companys
ability to dispose of them. Investments in restricted securities and other
securities for which market quotations are not readily available will be valued
in good faith by using fair value procedures approved by the Board of Directors.
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 the Companys portfolio securities before the net asset value has been
calculated (a significant event), the portfolio securities so affected will
generally be priced using a fair value procedure.
An equity security of a publicly
traded company acquired in a direct placement transaction may be subject to
restrictions on resale that can affect the securitys liquidity and fair value.
Such securities that are convertible into or otherwise will become freely
tradable will be valued based on the market value of the freely tradable
security less an applicable discount. Generally, the discount will initially be
equal to the discount at which the Company purchased the securities. 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.
Effective December 1, 2007, the
Company adopted Statement of Financial Accounting Standards No. 157,
Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value in accordance with U.S. generally accepted
accounting principles and expands disclosures about fair value measurements.
SFAS 157 is applicable in conjunction with other accounting pronouncements that
require or permit fair value measurements, but does not expand the use of fair
value to any new circumstances. More specifically, SFAS 157 emphasizes that fair
value is a
market based measurement, not an
entity-specific measurement, and sets out a fair value hierarchy with the
highest priority given to quoted prices in active markets and the lowest
priority to unobservable inputs. The Companys adoption of SFAS 157 did not have
a material impact on its financial condition or results of operations. See Note
6 Fair Value of Financial Instruments for further disclosure.
The Company generally values
short-term debt securities at prices based on market quotations for such
securities, except those securities purchased with 60 days or less to maturity
are valued on the basis of amortized cost, which approximates market
value.
The Company generally values its
interest rate swap contracts based on dealer quotations, if available, or using
industry-accepted models which discount the estimated future cash flows derived
from the stated terms of the interest rate swap agreement and use a discount
rate based on interest rates currently available in the market.
C. Security Transactions and
Investment Income
Security 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 and distribution income is recorded on the
ex-dividend date. Distributions received from the Companys investments in
master limited partnerships (MLPs) generally are comprised of ordinary income,
capital gains and return of capital from the MLP. The Company allocates
distributions between investment income and return of capital based on estimates
made at the time such distributions are received. Such estimates are based on
historical information available from each MLP and other industry sources. These
estimates may subsequently be revised based on actual allocations received from
MLPs 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
Company.
For the period from December 1, 2008
through February 28, 2009, the Company estimated the allocation of investment
income and return of capital for the distributions received from MLPs within the
Statement of Operations. For this period, the Company has estimated the
allocation of distributions to be approximately 14 percent investment income and
approximately 86 percent return of capital.
D. Distributions to
Stockholders
Distributions to common stockholders
are recorded on the ex-dividend date. The Company 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 character of distributions
to common stockholders made during the year may differ from their ultimate
characterization for federal income tax purposes. For the year ended November
30, 2008 and the period ended February 28, 2009, the Companys distributions for
book purposes were comprised of 100 percent return of capital. For the year
ended November 30, 2008, the Companys distributions for tax purposes were
comprised of 100 percent return of capital. The tax character of distributions
paid for the current year will be determined subsequent to November 30,
2009.
Distributions to preferred
stockholders are based on variable rates set at auctions, normally held every 7
or 28 days unless a special rate period is designated. The Company may not
declare or pay distributions to its preferred stockholders if it does not meet a
200 percent asset coverage ratio for its debt or the rating agency basic
maintenance amount for the debt following such distribution. Distributions to
preferred stockholders are accrued on a daily basis for the subsequent rate
period at a rate determined on the auction date. Distributions to preferred
stockholders are payable on the first day following the end of the rate period
or the first day of month if the rate period is longer than one month. For the
year ended November 30, 2008 and the period ended February 28, 2009, the
Companys distributions for book purposes were comprised of 100 percent return
of capital. The tax character of distributions paid for the current year will be
determined subsequent to November 30, 2009.
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
11
|
N
OTES TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
E. Federal Income
Taxation
The Company, as a corporation, is
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
percent; however, the Company anticipates a marginal effective rate of 34.5
percent due to expectations of the level of taxable income relative to the
federal graduated tax rates, including the tax rate anticipated when temporary
differences reverse. The Company may be subject to a 20 percent federal
alternative minimum tax on its federal alternative minimum taxable income to the
extent that its alternative minimum tax exceeds its regular federal income
tax.
The Company invests its assets
primarily in MLPs, which generally are treated as partnerships for federal
income tax purposes. As a limited partner in the MLPs, the Company reports its
allocable share of the MLPs taxable income in computing its own taxable income.
The Companys tax expense or benefit is included in the Statement of Operations
based on the component of income or gains (losses) to which such expense or
benefit relates. 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.
F. Organization Expenses, Offering
and Debt Issuance Costs
The Company is responsible for paying
all organizational expenses, which were expensed as incurred. Offering costs
related to the issuance of common and preferred stock is charged to additional
paid-in capital when the stock is issued. Debt issuance costs related to
long-term debt obligations are capitalized and amortized over the period the
debt is outstanding.
G. Derivative Financial
Instruments
The Company may use derivative
financial instruments (principally interest rate swap contracts) in an attempt
to manage interest rate risk. The Company has established policies and
procedures for risk assessment and the approval, reporting and monitoring of
derivative financial instrument activities. The Company does 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 derivative instruments
included as unrealized gains or losses in the accompanying Statement of
Operations. Monthly cash settlements under the terms of the derivative
instruments and termination of such contracts are recorded as realized gains or
losses in the accompanying Statement of Operations.
On December 1, 2008, the Company
adopted the Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standards No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities an amendment to FASB Statement No. 133.
SFAS 161 requires enhanced disclosures about an entitys derivative and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments; (b) how derivative instruments
and related hedged items are accounted for under Statement 133 and its related
interpretations and (c) how derivative instruments and related hedged items
affect an entitys financial position, financial performance and cash flows. The
Company does not have any outstanding derivative instruments at February 28,
2009 and the adoption of SFAS 161 did not have an impact on the Companys
financial statements and related disclosures.
H. Indemnifications
Under the Companys organizational
documents, its officers and directors are indemnified against certain
liabilities arising out of the performance of their duties to the Company. In
addition, in the normal course of business, the Company may enter into contracts
that provide general indemnifications to other parties. The Companys maximum
exposure under these arrangements is unknown, as this would involve future
claims that may be made against the Company that have not yet occurred, and may
not occur. However, the Company has not had prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
3. Concentration of
Risk
The Companys investment objective is
to seek a high level of total return with an emphasis on current distributions
paid to its stockholders. Under normal circumstances, the Company will have at
least 80 percent of its net assets, plus any borrowings for investment purposes,
invested in equity securities of entities in the energy sector and at least 80
percent of its total assets in equity securities of MLPs and their affiliates in
the energy infrastructure sector. The Company will not invest more than 15
percent of its total assets in any single issuer as of the time of purchase. The
Company may invest up to 50 percent of its total assets in restricted
securities, all of which may be illiquid securities. The Company may invest up
to 20 percent of its total assets in debt securities, including securities rated
below investment grade. In determining application of these policies, the term
total assets includes assets obtained through leverage. Companies that
primarily invest in a particular sector may experience greater volatility than
companies investing in a broad range of industry sectors. The Company 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 the Company uses this strategy, it may not
achieve its investment objective.
4. Agreements
The Company has entered into an
Investment Advisory Agreement with Tortoise Capital Advisors, L.L.C. (the
Adviser). Under the terms of the agreement, the Company pays the Adviser a fee
equal to an annual rate of 0.95 percent of the Companys 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.
The Company has engaged U.S. Bancorp
Fund Services, LLC to serve as the Companys administrator. The Company pays the
administrator a monthly fee computed at an annual rate of 0.04 percent of the
first $1,000,000,000 of the Companys Managed Assets, 0.03 percent on the next
$1,000,000,000 of Managed Assets and 0.02 percent on the balance of the
Companys Managed Assets.
Computershare Trust Company, N.A.
serves as the Companys transfer agent, dividend paying agent, and agent for the
automatic dividend reinvestment plan.
U.S. Bank, N.A. serves as the
Companys custodian. The Company pays the custodian a monthly fee computed at an
annual rate of 0.015 percent on the first $100,000,000 of the Companys
portfolio assets and 0.01 percent on the balance of the Companys portfolio
assets.
12
|
|
Tortoise Energy Capital
Corp.
|
|
|
|
N
OTES TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
5. Income Taxes
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 the
Companys deferred tax assets and liabilities as of February 28, 2009, are as
follows:
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
32,429,386
|
|
Net unrealized losses on investment securities
|
|
13,681,680
|
|
Capital loss
|
|
2,982,265
|
|
Deferred expense associated with interest rate swap
terminations
|
|
1,400,297
|
|
Organization costs
|
|
16,965
|
|
Subtotal
|
|
50,510,593
|
|
Valuation allowance
|
|
(3,863,970
|
)
|
|
|
46,646,623
|
|
Deferred
tax liabilities:
|
|
|
|
Basis reduction of investment in MLPs
|
|
17,904,629
|
|
Total net
deferred tax asset
|
$
|
28,741,994
|
|
At February 28, 2009, the Company has
recorded a valuation allowance in the amount of $3,863,970 for a portion of its
deferred tax asset which it does not believe will, more likely than not, be
realized. The Company estimates, based on existence of sufficient evidence,
primarily regarding the amount and timing of distributions to be received from
portfolio companies, the ability to realize the remainder of its deferred tax
assets. Any adjustments to those estimates will be made in the period such
determination is made.
Management determined that no reserve
for unrecognized tax benefits is necessary when temporary differences represent
net future deductible amounts rather than net future taxable amounts. The
Companys policy is to record interest and penalties on uncertain tax positions
as part of tax expense. No interest or penalties were accrued at February 28,
2009. All tax years since inception remain open to examination by federal and
state tax authorities.
Total income tax expense differs from
the amount computed by applying the federal statutory income tax rate of 34.5
percent to net investment loss, realized loss and unrealized gains on
investments before taxes for the period ended February 28, 2009, as
follows:
Application of statutory income tax rate
|
$
|
12,503,180
|
|
State
income taxes, net of federal tax benefit
|
|
837,169
|
|
Foreign taxes, net of federal tax benefit
|
|
80,587
|
|
Change in
valuation allowance
|
|
(12,020,999
|
)
|
Total income tax
expense
|
$
|
1,399,937
|
|
Total income taxes are computed by
applying the federal statutory rate plus a blended state income tax
rate.
For the period from December 1, 2008
to February 28, 2009, the components of income tax expense include current
foreign tax expense of $127,531, and deferred federal and state income tax
expense (net of federal tax benefit) of $1,192,557 and $79,849, respectively.
The deferred income tax expense of $1,272,406 for the period ended February 28,
2009 is net of the reduction in valuation allowance of $12,020,999.
As of November 30, 2008, the Company
had a net operating loss for federal income tax purposes of approximately
$79,225,000. The net operating loss may be carried forward for 20 years. If not
utilized, this net operating loss will expire as follows: $555,000, $18,479,000,
$18,374,000 and $41,817,000 in the years ending November 30, 2025, 2026, 2027
and 2028, respectively. The amount of the deferred tax asset for the net
operating loss at February 28, 2009 also includes an amount for the period
from
December 1, 2008 through February 28,
2009. For the period ended February 28, 2009, the Company had a capital loss of
approximately $8,000,000 for federal income tax purposes. For corporations,
capital losses can only be used to offset capital gains and cannot be used to
offset ordinary income. This capital loss may be carried forward 5 years and,
accordingly, would expire as of November 30, 2014.
As of February 28, 2009, the
aggregate cost of securities for federal income tax purposes was $405,793,986.
At February 28, 2009, the aggregate gross unrealized appreciation for all
securities in which there was an excess of fair value over tax cost was
$25,360,897, the aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over fair value was $13,888,613 and the
net unrealized appreciation was $11,472,284.
6. Fair Value of Financial
Instruments
Various inputs are used in
determining the value of the Companys investments. 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 the Companys 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 table provides the fair
value measurements of applicable Company assets by level within the fair value
hierarchy as of February 28, 2009. These assets are measured on a recurring
basis.
|
|
|
|
Fair Value Measurements at
Reporting Date Using
|
|
|
|
|
Quoted
Prices in
|
|
|
|
Significant
|
|
|
|
|
Active
Markets for
|
|
Significant Other
|
|
Unobservable
|
|
|
Fair
Value at
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
Description
|
|
February 28, 2009
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Investments
|
|
$417,266,270
|
|
$405,752,540
|
|
$9,421,046
|
|
$2,092,684
|
|
Fair Value Measurements Using Significant Unobservable
Inputs
|
|
(Level 3) for
Investments
|
|
For the period from
|
|
December 1, 2008 through
|
|
February 28,
2009
|
Fair value beginning balance
|
$
|
3,313,416
|
|
Total
unrealized losses included in net increase in net assets
|
|
|
|
applicable to common
stockholders
|
|
(1,220,732
|
)
|
|
|
Net purchases, issuances and settlements
|
|
|
|
Return of
capital adjustments impacting cost basis of security
|
|
|
|
Transfers into Level 3
|
|
|
|
Fair value ending balance
|
$
|
2,092,684
|
|
The Company utilizes the beginning of
reporting period method for determining transfers into or out of Level 3.
Accordingly, this method is the basis for presenting the rollforward in the
preceding table. Under this method, the fair value of the asset at the beginning
of the period will be disclosed as a transfer into or out of Level 3, gains or
losses for an asset that transfers into Level 3 during the period will be
included in the reconciliation, and gains or losses for an asset that transfers
out of Level 3 will be excluded from the reconciliation.
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
13
|
N
OTES TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
7. Restricted
Securities
Certain of the Companys investments
are restricted and are valued as determined in accordance with procedures
established by the Board of Directors, as more fully described in Note 2. The
table below shows the number of units held, acquisition date, acquisition cost,
fair value per share and percent of net assets which the securities comprise at
February 28, 2009.
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
Value as
|
|
|
|
|
Number
|
|
Acquisition
|
|
Acquisition
|
|
Per
|
|
Percent of
|
Investment
Security
|
|
of Shares
|
|
Date
|
|
Cost
|
|
Share
|
|
Net Assets
|
Crosstex Energy, L.P.
|
|
Series D Subordinated Units
|
|
581,301
|
|
3/23/07
|
|
$
|
15,000,007
|
|
$
|
3.60
|
|
|
0.8
|
%
|
|
Enbridge
Energy Partners, L.P.
|
|
Class C
Common Units
|
|
333,606
|
|
4/02/07
|
|
|
15,000,000
|
|
|
28.24
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
$
|
30,000,007
|
|
|
|
|
|
4.6
|
%
|
|
8. Investment
Transactions
For the period ended February 28,
2009, the Company purchased (at cost) and sold securities (proceeds received) in
the amount of $0 and $3,901,820 (excluding short-term debt securities),
respectively.
9. Long-Term Debt
Obligations
The Company has $90,000,000 aggregate
principal amount of private senior notes, Series D, Series E and Series F
(collectively, the Notes) outstanding.
The Notes are unsecured obligations
of the Company and, upon liquidation, dissolution or winding up of the Company,
will rank: (1) senior to all of the Companys outstanding preferred stock; (2)
senior to all of the Companys outstanding common stock; (3) on a parity with
any unsecured creditors of the Company and any unsecured senior securities
representing indebtedness of the Company and (4) junior to any secured creditors
of the Company.
The Notes are redeemable in certain
circumstances at the option of the Company. The Notes are 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 February 28, 2009, the Company was in compliance with asset
coverage covenants and basic maintenance covenants for its senior
notes.
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 February 28,
2009, 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 February 28,
2009 for each series of Notes outstanding at February 28, 2009.
|
|
|
|
|
|
Notional/
|
|
|
|
|
|
|
|
Issue
|
|
Maturity
|
|
Carrying
|
|
Estimated
|
|
Fixed
|
Series
|
|
Date
|
|
Date
|
|
Amount
|
|
Fair Value
|
|
Rate
|
Series D
|
|
December 21, 2007
|
|
December 21, 2014
|
|
$
|
39,400,000
|
|
$
|
36,907,531
|
|
6.07%
|
Series
E
|
|
June 17,
2008
|
|
June 17,
2011
|
|
|
15,900,000
|
|
|
15,807,659
|
|
5.56%
|
Series F
|
|
June 17, 2008
|
|
June 17, 2013
|
|
|
34,700,000
|
|
|
33,462,880
|
|
6.02%
|
|
|
|
|
|
|
$
|
90,000,000
|
|
$
|
86,178,070
|
|
|
10. 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 February 28, 2009 are 200 percent of the
applicable LIBOR as of the respective auction dates.
The MMP 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 February 28, 2009, the Company was in
compliance with asset coverage covenants and basic maintenance covenants for its
preferred stock.
At February 28, 2009, 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 February 28, 2009, the weighted-average rate for
period ended February 28, 2009 and the typical rate period for each series of
MMP Stock outstanding at February 28, 2009. 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
|
|
0.95%
|
|
1.91%
|
|
28 days
|
MMP II
Stock
|
|
|
1,400
|
|
|
|
35,000,000
|
|
0.74%
|
|
0.87%
|
|
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.
14
|
|
Tortoise Energy Capital
Corp.
|
|
|
|
N
OTES TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
11. Common Stock
The Company has 100,000,000 shares of
capital stock authorized and 17,470,673 shares outstanding at February 28, 2009.
Transactions in common stock for the year ended November 30, 2008 and the period
ended February 28, 2009, were as follows:
Shares at November 30, 2007
|
17,406,086
|
Shares
issued through reinvestment of distributions
|
64,587
|
Shares at November 30, 2008 and February 28, 2009
|
17,470,673
|
12. Credit Facility
On March 20, 2008, the Company
entered into an agreement establishing an unsecured credit facility maturing on
March 20, 2009. The 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. 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 and unused
portions of the credit facility will accrue a non-usage fee equal to an annual
rate of 0.15 percent. The Company did not utilize the credit facility during the
period ended February 28, 2009.
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.
13. Subsequent
Events
On March 2, 2009, the Company paid a
distribution in the amount of $0.40 per common share, for a total of $6,988,269.
Of this total, the dividend reinvestment amounted to $1,089,894.
On March 20, 2009, the Company
entered into an extension of its credit facility through June 20, 2009. The
terms of the extension provide for an unsecured revolving credit facility of up
to $40,000,000. During the extension, outstanding balances will accrue interest
at a variable rate equal to one-month LIBOR plus 2.00 percent and unused
portions of the credit facility will accrue a non-usage fee equal to an annual
rate of 0.25 percent.
|
|
|
|
|
|
|
|
|
2009 1st Quarter
Report
|
|
15
|
A
DDITIONAL
I
NFORMATION
(Unaudited)
|
Director and Officer
Compensation
The Company does 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 ended February 28, 2009,
the aggregate compensation paid by the Company to the independent directors was
$33,750. 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
has 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 has 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.
16
|
|
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 3/31/09
|
Name
|
Inception Date
|
Investments
|
Suitability
|
($ in millions)
|
|
Tortoise Energy Capital
Corp.
|
TYY
|
U.S. Energy Infrastructure
|
Retirement Accounts
|
$441
|
|
May 2005
|
|
Pension Plans
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
|
|
Tortoise Energy Infrastructure
Corp.
|
TYG
|
U.S.
Energy Infrastructure
|
Retirement Accounts
|
$706
|
|
Feb.
2004
|
|
Pension
Plans
|
|
|
|
|
Taxable
Accounts
|
|
|
|
|
|
|
|
Tortoise North American
Energy Corp.
|
TYN
|
U.S. Energy Infrastructure
|
Retirement Accounts
|
$76
|
|
Oct. 2005
|
|
Pension Plans
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
|
|
Tortoise Capital Resources
Corp.
|
TTO
|
U.S. Energy Infrastructure
|
Retirement Accounts
|
$104
|
|
Dec. 2005
|
Private and Micro Cap
|
Pension Plans
|
(as of 2/28/09)
|
|
(Feb. 2007 IPO)
|
Public Companies
|
Taxable Accounts
|
|
|
|
|
|
|
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