Item 1. Report to
Stockholders.
Company at a Glance
Tortoise Energy Capital Corp.
(NYSE: TYY) is a closed-end investment company investing primarily in equity
securities of publicly-traded Master Limited Partnerships (MLPs) and their
affiliates in the energy infrastructure sector.
Investment Goals: Yield, Growth
and Quality
TYY seeks a high level of total
return with an emphasis on current distributions paid to
stockholders.
In seeking to achieve
yield
, we target distributions to our stockholders that are
roughly equal to the underlying yield on a direct investment in MLPs. In order
to accomplish this, we maintain our strategy of investing primarily in energy
infrastructure companies with attractive current yields and growth
potential.
We seek to achieve distribution
growth
as revenues of our underlying companies grow with the
economy, with the population and through rate increases. This revenue growth
generally leads to increased operating profits, and when combined with internal
expansion projects and acquisitions, is expected to provide attractive growth in
distributions to us. We also seek distribution growth through timely debt and
equity offerings.
TYY seeks to achieve
quality
by investing in companies operating energy
infrastructure assets that are critical to the U.S. economy. Often these assets
would be difficult to replicate. We also back experienced management teams with
successful track records. By investing in us, our stockholders have access to a
portfolio that is diversified through geographic regions and across product
lines, including natural gas, natural gas liquids, crude oil and refined
products.
About Energy Infrastructure Master
Limited Partnerships
MLPs are limited partnerships whose
units trade on public exchanges such as the New York Stock Exchange (NYSE), NYSE
Alternext US and NASDAQ. Buying MLP units makes an investor a limited partner in
the MLP. There are currently more than 70 MLPs in the market, mostly in
industries related to energy and natural resources.
We primarily invest in MLPs and their
affiliates in the energy infrastructure sector. Energy infrastructure MLPs are
engaged in the transportation, storage and processing of crude oil, natural gas
and refined products from production points to the end users. Our investments
are primarily in mid-stream (mostly pipeline) operations, which typically
produce steady cash flows with less exposure to commodity prices than many
alternative investments in the broader energy industry. With the growth
potential of this sector along with our disciplined investment approach, we
endeavor to generate a predictable and increasing distribution stream for our
investors.
A TYY Investment Versus a Direct
Investment in MLPs
We provide our stockholders an
alternative to investing directly in MLPs and their affiliates. A direct MLP
investment potentially offers an attractive distribution with a significant
portion treated as return of capital, and a historically low correlation to
returns on stocks and bonds. However, the tax characteristics of a direct MLP
investment are generally undesirable for tax-exempt investors such as retirement
plans. We are structured as a C Corporation accruing federal and state income
taxes, based on taxable earnings and profits. Because of this innovative
structure, pioneered by Tortoise Capital Advisors, institutions and retirement
accounts are able to join individual stockholders as investors in
MLPs.
Additional features
include:
-
One Form 1099 per stockholder at the end of the year, thus avoiding multiple K-1s and multiple state filings for individual partnership investments;
-
A professional management team, with more
than 130 years combined investment experience, to select
and manage the portfolio on your behalf;
-
The ability to access investment grade credit
markets to enhance stockholder return; and
-
Access to direct placements and other
investments not available through the public markets.
December 31, 2012
Dear Fellow Stockholders,
Our fiscal year ended Nov. 30, 2012
was a positive one for midstream MLPs, which continued to demonstrate solid
growth and produced healthy cash flows. In fact, more than 80 percent of
midstream MLPs grew their distributions in 2012, supported by stable
fundamentals and visible growth profiles. The recent performance of these assets
in periods of volatility and uncertainty once again demonstrates how their
desirable operating characteristics can translate into an attractive,
diversifying, long-term investment.
Although the market struggled with
significant challenges during 2012, including sluggish global economic growth,
escalating geopolitical concerns and a contentious U.S. presidential election,
excitement continues to grow about the transformation underway in U.S. energy.
These fundamental strengths, technological advances and optimism about the
future of energy in America have not been overlooked by investors who have
continued to recognize quality over longer periods, an approach that ultimately
drove positive performance of midstream MLPs during the year.
Master Limited Partnership sector
review and outlook
The Tortoise MLP Index
®
posted a
solid 14.6 percent total return for our fiscal year ending Nov. 30, 2012. After
a relatively flat first half of the year, MLPs rebounded for much of the second
half, until general uncertainty clouded the market following the election in
November. The broad equity market, as represented by the S&P 500 Index
®
,
returned 16.1 percent for the same period, following a lethargic
2011.
Despite macro uncertainties,
increased energy production in the U.S. is an exciting and promising event,
providing a potential boost for the economy along with other benefits for
Americans, such as creating
jobs, generating
federal, state and local tax revenues and improving national security. Today,
North American crude oil production stands at approximately 6.5 million barrels
per day, up from 4.95 million barrels per day in 2008 and is a figure that is
expected to grow significantly in the next two decades. The positive
implications of this dramatic growth in U.S. crude oil production for the
midstream portion of the energy value chain and for pipeline MLPs are
significant. The pace of projects continues to be strong as pipeline
infrastructure build-out is critical to support expanding production. Evidence
of this exists by the disparate prices of crude oil by location across the
country. We continue to see a clear need for increased pipeline takeaway
capacity from this growing production. In just the next three years, we estimate
more than $40 billion in midstream MLP capital investment.
Merger and acquisition (M&A)
activity remains elevated compared to the long-term historical average. MLP
acquisitions in fiscal 2012 totaled $40.9 billion, a figure that excludes
several deals announced in December.
Fund performance review and
outlook
Our total assets increased from
$804.5 million on Nov. 30, 2011 to $889.9 million on Nov. 30, 2012. This
increase resulted primarily from net realized and unrealized gains on
investments as well as approximately $12.0 million in new equity and leverage
proceeds. For fiscal year 2012, our market-based total return was 15.9 percent
and our NAV-based total return was 13.4 percent (both including the reinvestment
of distributions). The difference between the market value total return as
compared to the NAV total return reflects the change in the markets premium or
discount over the time period.
(Unaudited)
2012 Annual
Report
1
The growing volumes of U.S. and
Canadian-produced oil, natural gas and natural gas liquids fueled increased
demand for pipeline infrastructure build-out. During the year, our asset
performance was boosted by exposure to refined products and crude oil pipeline
MLPs. Additionally, natural gas pipeline MLPs contributed positively, although
faced some headwinds due to a more modest near-term growth outlook. Although
natural gas MLPs underperformed liquids pipeline MLPs this year, we continue to
believe in their longer-term opportunity. Natural gas consumption continued to
displace coal as an energy source, a trend which bodes well for midstream MLPs
in the years ahead. Gathering and processing activity remained strong, with
companies engaged in those activities showing solid growth profiles from the
high demand for natural gas liquids, which also contributed to our performance.
We were also positively impacted by our midstream strategy with no holdings in
upstream and coal MLPs.
We paid a distribution of $0.4175 per
common share ($1.67 annualized) to our stockholders on Nov. 30, 2012, an
increase of 0.6 percent quarter-over-quarter and an increase of 2.5 percent
year-over-year. This represented an annualized yield of 5.8 percent based on our
fiscal year closing price of $28.57. Our distribution coverage (distributable
cash flow divided by distributions) for the fourth fiscal quarter was 110.4
percent, reflective of our emphasis on sustainability. For tax purposes,
distributions to stockholders for 2012 were 100 percent qualified dividend
income.
We ended our fiscal year with
leverage (including bank debt, senior notes and preferred stock), at 19.3
percent of total assets, below our long-term target of 25 percent. This provides
us flexibility in managing the portfolio during market cycles and allows us to
add leverage when
compelling opportunities
arise. As of Nov. 30, 2012, our leverage had a weighted average maturity of 2.9
years and a weighted average cost of leverage of 4.6 percent, with 86.8 percent
at fixed rates. During the year, we capitalized on the low interest-rate
environment and refinanced TYYs mandatory redeemable preferred shares, lowering
our borrowing costs.
Additional information about our
financial performance is available in the Key Financial Data and Managements
Discussion sections of this report.
Conclusion
We believe we are in the early stages
of a significant transformation of North American energy. As this exciting
scenario continues to unfold, we look forward to serving you as your
professional investment adviser in navigating the course ahead, with a strategy
anchored in quality midstream MLPs.
Sincerely,
The Managing Directors
Tortoise
Capital Advisors, L.L.C.
The adviser
to Tortoise Energy Capital Corp.
|
|
|
H. Kevin Birzer
|
Zachary A. Hamel
|
Kenneth P. Malvey
|
|
|
|
|
|
|
Terry Matlack
|
David J. Schulte
|
|
(Unaudited)
2
Tortoise Energy Capital Corp.
Key
Financial Data
(Supplemental Unaudited Information)
(dollar amounts in
thousands unless otherwise indicated)
|
The information presented below
regarding Distributable Cash Flow and Selected Financial Information is
supplemental non-GAAP financial information, which we believe is meaningful to
understanding our operating performance. The Distributable Cash Flow Ratios
include the functional equivalent of EBITDA for non-investment companies, and we
believe they are an important supplemental measure of performance and promote
comparisons from period-to-period. This information is supplemental, is not
inclusive of required financial disclosures (e.g. Total Expense Ratio), and
should be read in conjunction with our full financial statements.
|
|
Year Ended November
30,
|
|
2011
|
|
2012
|
|
|
|
2011
|
|
2012
|
|
Q4
(1)
|
|
Q1
(1)
|
|
Q2
(1)
|
|
Q3
(1)
|
|
Q4
(1)
|
|
Total Income from Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received from master limited
partnerships
|
|
$
|
46,036
|
|
$
|
48,562
|
|
$
|
11,769
|
|
$
|
11,966
|
|
$
|
11,854
|
|
$
|
12,285
|
|
$
|
12,457
|
|
Dividends paid in stock
|
|
|
4,004
|
|
|
3,595
|
|
|
842
|
|
|
856
|
|
|
862
|
|
|
893
|
|
|
984
|
|
Other income
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from
investments
|
|
|
50,306
|
|
|
52,157
|
|
|
12,611
|
|
|
12,822
|
|
|
12,716
|
|
|
13,178
|
|
|
13,441
|
|
Operating
Expenses Before Leverage Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Current
Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory fees, net of fees
waived
|
|
|
7,460
|
|
|
8,130
|
|
|
1,827
|
|
|
2,026
|
|
|
2,027
|
|
|
1,994
|
|
|
2,083
|
|
Other operating expenses
|
|
|
1,095
|
|
|
941
|
|
|
254
|
|
|
260
|
|
|
232
|
|
|
224
|
|
|
225
|
|
|
|
|
8,555
|
|
|
9,071
|
|
|
2,081
|
|
|
2,286
|
|
|
2,259
|
|
|
2,218
|
|
|
2,308
|
|
Distributable cash flow before leverage
costs and current taxes
|
|
|
41,751
|
|
|
43,086
|
|
|
10,530
|
|
|
10,536
|
|
|
10,457
|
|
|
10,960
|
|
|
11,133
|
|
Leverage costs
(2)
|
|
|
8,728
|
|
|
8,431
|
|
|
2,120
|
|
|
2,140
|
|
|
2,281
|
|
|
2,011
|
|
|
1,999
|
|
Current income tax
expense
(3)
|
|
|
225
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable Cash Flow
(4)
|
|
$
|
32,798
|
|
$
|
34,655
|
|
$
|
8,363
|
|
$
|
8,396
|
|
$
|
8,176
|
|
$
|
8,949
|
|
$
|
9,134
|
|
|
As a percent of average total assets
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investments
|
|
|
6.31
|
%
|
|
6.04
|
%
|
|
6.45
|
%
|
|
6.00
|
%
|
|
5.91
|
%
|
|
6.22
|
%
|
|
6.08
|
%
|
Operating expenses before leverage costs
and current taxes
|
|
|
1.07
|
%
|
|
1.05
|
%
|
|
1.06
|
%
|
|
1.07
|
%
|
|
1.05
|
%
|
|
1.05
|
%
|
|
1.04
|
%
|
Distributable cash flow before leverage
costs and current taxes
|
|
|
5.24
|
%
|
|
4.99
|
%
|
|
5.39
|
%
|
|
4.93
|
%
|
|
4.86
|
%
|
|
5.17
|
%
|
|
5.04
|
%
|
As a percent of average net assets
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total from investments
|
|
|
10.15
|
%
|
|
9.88
|
%
|
|
10.47
|
%
|
|
9.66
|
%
|
|
9.67
|
%
|
|
10.23
|
%
|
|
9.97
|
%
|
Operating expenses before leverage costs
and current taxes
|
|
|
1.73
|
%
|
|
1.72
|
%
|
|
1.73
|
%
|
|
1.72
|
%
|
|
1.72
|
%
|
|
1.72
|
%
|
|
1.71
|
%
|
Leverage costs and current taxes
|
|
|
1.81
|
%
|
|
1.60
|
%
|
|
1.80
|
%
|
|
1.61
|
%
|
|
1.73
|
%
|
|
1.56
|
%
|
|
1.48
|
%
|
Distributable cash flow
|
|
|
6.61
|
%
|
|
6.56
|
%
|
|
6.94
|
%
|
|
6.33
|
%
|
|
6.22
|
%
|
|
6.95
|
%
|
|
6.78
|
%
|
|
Selected Financial
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
paid on common stock
|
|
$
|
31,396
|
|
$
|
32,577
|
|
$
|
7,965
|
|
$
|
8,037
|
|
$
|
8,104
|
|
$
|
8,161
|
|
$
|
8,275
|
|
Distributions paid on common stock per share
|
|
|
1.6150
|
|
|
1.6550
|
|
0.4075
|
|
|
0.4100
|
|
0.4125
|
|
|
0.4150
|
|
|
0.4175
|
|
Distribution
coverage percentage for period
(6)
|
|
|
104.5
|
%
|
|
106.4
|
%
|
|
105.0
|
%
|
|
104.5
|
%
|
|
100.9
|
%
|
|
109.7
|
%
|
|
110.4
|
%
|
Net realized gain (loss), net of income taxes, for the
period
|
|
|
57,610
|
|
|
50,080
|
|
|
30,011
|
|
|
(2,709
|
)
|
2,750
|
|
|
11,088
|
|
|
38,951
|
|
Total assets,
end of period
|
|
804,539
|
|
889,880
|
|
804,539
|
|
900,119
|
|
792,048
|
|
872,718
|
|
889,880
|
|
Average total assets during period
(7)
|
|
797,274
|
|
863,164
|
|
783,965
|
|
859,314
|
|
855,782
|
|
842,318
|
|
889,090
|
|
Leverage
(8)
|
|
167,000
|
|
171,800
|
|
167,000
|
|
169,700
|
|
160,700
|
|
161,900
|
|
171,800
|
|
Leverage as a percent of total assets
|
|
|
20.8
|
%
|
|
19.3
|
%
|
|
20.8
|
%
|
|
18.9
|
%
|
|
20.3
|
%
|
|
18.6
|
%
|
|
19.3
|
%
|
Net unrealized
appreciation, end of period
|
|
214,425
|
|
241,412
|
|
214,425
|
|
277,802
|
|
219,669
|
|
265,407
|
|
|
241,412
|
|
Net assets, end of period
|
|
500,129
|
|
540,491
|
|
500,129
|
|
550,701
|
|
484,864
|
|
531,497
|
|
540,491
|
|
Average net
assets during period
(9)
|
|
495,831
|
|
527,912
|
|
483,227
|
|
533,793
|
|
523,333
|
|
512,418
|
|
542,324
|
|
Net asset value per common share
|
|
|
25.54
|
|
|
27.23
|
|
|
25.54
|
|
|
28.09
|
|
|
24.68
|
|
|
27.01
|
|
|
27.23
|
|
Market value per
share
|
|
|
26.21
|
|
|
28.57
|
|
|
26.21
|
|
|
29.06
|
|
|
24.91
|
|
|
27.43
|
|
|
28.57
|
|
Shares outstanding
|
|
19,581,174
|
|
19,846,818
|
|
19,581,174
|
|
19,602,374
|
|
19,645,662
|
|
19,674,462
|
|
19,846,818
|
|
(1)
|
Q1 is the period from
December through February. Q2 is the period from March through May. Q3 is
the period from June through August. Q4 is the period from September
through November.
|
(2)
|
Leverage costs include
interest expense, distributions to preferred stockholders and other
recurring leverage expenses.
|
(3)
|
Includes taxes paid on
net investment income and foreign taxes, if any. Taxes related to realized
gains are excluded from the calculation of Distributable Cash Flow
(DCF).
|
(4)
|
Net investment income
(loss), before income taxes on the Statement of Operations is adjusted as
follows to reconcile to DCF: increased by the return of capital on MLP
distributions, the value of paid-in-kind distributions, distributions
included in direct placement discounts, premium on redemption of MRP stock
and amortization of debt issuance costs; and decreased by current taxes
paid on net investment income.
|
(5)
|
Annualized for periods
less than one full year.
|
(6)
|
Distributable Cash Flow
divided by distributions paid.
|
(7)
|
Computed by averaging
month-end values within each period.
|
(8)
|
Leverage consists of
long-term debt obligations, preferred stock and short-term
borrowings.
|
(9)
|
Computed by averaging
daily net assets within each period.
|
2012 Annual
Report
3
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 Corp.s (the
Company) goal is to provide a stable and 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 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. Tortoise Capital Advisors, L.L.C. serves as our investment
adviser.
Company Update
Total assets increased approximately
$17 million during the 4th quarter primarily as a result of increased market
values of our MLP investments. Distribution increases from our MLP investments
were in-line with our expectations and asset-based expenses increased from the
previous quarter. Total leverage as a percent of total assets increased and we
increased our quarterly distribution to $0.4175 per share. Additional
information on these events and results of our operations are discussed in more
detail below.
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 has
adopted a policy of declaring what it believes to be sustainable distributions.
In determining distributions, our Board of Directors
considers a number of current and anticipated factors,
including, among others, distributable cash flow (DCF), realized and
unrealized gains, leverage amounts and rates, current and deferred taxes
payable, and potential volatility in returns from our investments and the
overall market. While the Board considers many factors in determining
distributions to stockholders, particular emphasis is given to DCF and
distribution coverage. Distribution coverage is DCF divided by distributions
paid to stockholders and is discussed in more detail below. Over the long term,
we expect to distribute substantially all of our DCF to holders of common stock.
Our Board of Directors reviews the distribution rate quarterly, and may adjust
the quarterly distribution throughout the year.
Determining DCF
DCF is 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. Current income taxes include taxes paid on net investment
income of the Company, in addition to foreign taxes, if any. Taxes incurred from
realized gains on the sale of investments, expected tax benefits and deferred
taxes are not included in DCF.
The Key Financial Data table
discloses the calculation of DCF and should be read in conjunction with this
discussion. The difference between distributions received from investments in
the DCF calculation and total investment income as reported in the Statement of
Operations, is reconciled as follows: the Statement of Operations, in conformity
with U.S. generally accepted accounting principles (GAAP), recognizes
distribution income from MLPs and common stock on their ex-dates, whereas the
DCF calculation may reflect distribution income on their pay dates; GAAP
recognizes that a significant portion of the cash distributions received from
MLPs are characterized as a return of capital and therefore excluded from
investment income, whereas the DCF calculation includes the return of capital;
and, distributions received from investments in the DCF calculation include the
value of dividends paid-in-kind (additional stock or MLP units), whereas such
amounts are not included as income for GAAP purposes, and includes distributions
related to direct investments when the purchase price is reduced in lieu of
receiving cash distributions. 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, other recurring leverage expenses,
distributions to preferred stockholders, as well as taxes paid on net investment
income. A reconciliation of Net Investment Loss, before Income Taxes to DCF is
included below.
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.
4
Tortoise Energy Capital Corp.
Managements Discussion
(Unaudited)
(Continued)
|
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,
many crude/refined products and natural gas liquids pipeline companies are
regulated and currently benefit from a tariff inflation escalation index of PPI
+ 2.65 percent. Over the long-term, we believe MLPs distributions will outpace
inflation and interest rate increases, and produce positive real
returns.
Total distributions received from our
investments for the 4th quarter 2012 was approximately $13.4 million, an
increase of 6.6 percent as compared to 4th quarter 2011 and an increase of 2.0
percent as compared to 3rd quarter 2012. These changes reflect increases in per
share distribution rates on our MLP investments, the distributions received from
additional investments funded from equity and leverage proceeds and the impact
of various portfolio trading activity.
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 1.04 percent of average total assets for the
4th quarter 2012, a decrease of 0.02 percent as compared to the 4th quarter 2011
and a decrease of 0.01 percent as compared to 3rd quarter 2012. Advisory fees
for the 4th quarter 2012 increased 4.5 percent from 3rd quarter 2012 as a result
of increased average managed assets for the quarter. Yields on our MLP
investments are currently below their 5-year historical average of approximately
7 percent. All else being equal, if MLP yields decrease and distributions remain
constant or grow, MLP asset values will increase as will our managed assets and
advisory fees. Other operating expenses increased slightly as compared to 3rd
quarter 2012.
Leverage costs consist of two major
components: (1) the direct interest expense on our senior notes and short-term
credit facility, and (2) distributions to preferred stockholders. Other leverage
expenses include rating agency fees and commitment fees. Total leverage costs
for DCF purposes were approximately $2.0 million for the 4th quarter 2012, a
slight decrease as compared to 3rd quarter 2012.
The weighted average annual rate of
our leverage at November 30, 2012 was 4.60 percent. This rate includes balances
on our bank credit facility which accrue interest at a variable rate equal to
one-month LIBOR plus 1.25 percent. Our weighted average rate may vary in future
periods as a result of changes in LIBOR, the utilization of our credit facility
and as our leverage matures or is redeemed. Additional information on our
leverage and amended credit facility is disclosed below in Liquidity and Capital
Resources and in our Notes to Financial Statements.
Distributable Cash Flow
For 4th quarter 2012, our DCF was
approximately $9.1 million, an increase of 9.2 percent as compared to 4th
quarter 2011 and an increase of 2.1 percent as compared to 3rd quarter 2012.
These changes are the net result of distributions and expenses as outlined
above. We declared a distribution of $8.3 million, or $0.4175 per share, during
the quarter. This represents an increase of $0.01 per share as compared to 4th
quarter 2011 and an increase of $0.0025 per share as compared to 3rd quarter
2012.
Our distribution coverage ratio was
110.4 percent for 4th quarter 2012. Our goal is to pay what we believe to be
sustainable distributions with any increases safely covered by earned DCF. A
distribution coverage ratio of greater than 100 percent provides flexibility for
on-going management of the portfolio, changes in leverage costs, the impact of
taxes from realized gains and other expenses. An on-going distribution coverage
ratio of less than 100 percent will, over time, erode the earning power of a
portfolio and may lead to lower distributions. In 2013, we expect to allocate a
portion of the projected growth in DCF to increase distributions to stockholders
while also continuing to build critical distribution coverage to help preserve
the sustainability of distributions to stockholders for the years
ahead.
Net investment loss before income
taxes on the Statement of Operations is adjusted as follows to reconcile to DCF
for 2012 YTD and 4th quarter 2012 (in thousands):
|
|
2012
YTD
|
|
4th Qtr
2012
|
Net Investment
Loss, before Income Taxes
|
|
$
|
(15,562
|
)
|
|
$
|
(3,567
|
)
|
Adjustments to reconcile to
DCF:
|
|
|
|
|
|
|
|
|
Dividends paid in stock
|
|
|
3,595
|
|
|
|
984
|
|
Distributions characterized as return of capital
|
|
|
44,864
|
|
|
|
11,656
|
|
Amortization of debt issuance
costs
|
|
|
1,258
|
|
|
|
61
|
|
Premium
on redemption of MRP stock
|
|
|
500
|
|
|
|
|
|
DCF
|
|
$
|
34,655
|
|
|
$
|
9,134
|
|
Liquidity and Capital
Resources
We had total assets of $890 million
at year-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 and any expenses that may have been prepaid. During 4th quarter
2012, total assets increased $17 million. This change was primarily the result
of a $12 million increase in the value of our investments as reflected by the
change in realized and unrealized gains on investments (excluding return of
capital on distributions), net purchases during the quarter of $6.4 million and
a net decrease in other assets of $1.2 million.
We issued 123,623 shares of our
common stock during the quarter under our at-the-market equity program for a net
total of approximately $3.5 million. We used the proceeds to partially fund net
purchases during the quarter. We are waiving our advisory fees on the net
proceeds from shares issued under our at-the-market equity program for six
months.
2012 Annual
Report
5
Managements Discussion
(Unaudited)
(Continued)
|
Total leverage outstanding at November 30, 2012 was $171.8
million, an increase of $9.9 million as compared to August 31, 2012. On an
adjusted basis to reflect the payment of the 3rd quarter 2012 distribution at
the beginning of the 4th quarter 2012, total leverage increased by approximately
$2.4 million. The increase in leverage is primarily due to the utilization of
our bank credit facility to partially fund net purchases during the quarter.
Outstanding leverage is comprised of $104.1 million in senior notes, $50 million
in MRP stock and $17.7 million outstanding under the credit facility, with 86.8
percent of leverage with fixed rates and a weighted average maturity of 2.9
years. Total leverage represented 19.3 percent of total assets at November 30,
2012, as compared to 18.6 percent as of August 31, 2012 and 20.8 percent as of
November 30, 2011. Our leverage as a percent of total assets remains below our
long-term target level of 25 percent of total assets, allowing the opportunity
to add leverage when compelling investment opportunities arise. Temporary
increases to up to 30 percent of our total assets may be permitted, provided
that such leverage is consistent with the limits set forth in the 1940 Act, and
that such leverage is expected to be reduced over time in an orderly fashion to
reach our long-term target. 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.
Our longer-term leverage (excluding
our bank credit facility) of $154.1 million on November 30, 2012 was comprised
of 68 percent private placement debt and 32 percent publicly traded preferred
equity with a weighted average rate of 4.93 percent and weighted average
laddered maturity of 3.2 years.
Our Mandatory Redeemable Preferred
Stock has an optional redemption feature allowing us to redeem all or a portion
of the stock after May 1, 2013 and on or prior to May 1, 2014 at $10.10 per
share. Any optional redemption after May 1, 2014 and on or prior to May 1, 2015
will be at $10.05 per share. Any redemption after May 1, 2015 will be at the
liquidation preference amount of $10.00 per share.
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. Additional information on our leverage and asset
coverage requirements is discussed in Note 9 and Note 10 in the Notes to
Financial Statements. Our coverage ratios are updated each week on our Web site
at www.tortoiseadvisors.com.
Taxation of our Distributions and
Income Taxes
We invest in partnerships that
generally have cash distributions in excess of their income for accounting and
tax purposes. 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 (E&P).
E&P is primarily comprised of the taxable income from MLPs with certain
specified adjustments as reported on annual K-1s, fund operating expenses and
net realized gains. If we have E&P, it is first allocated to the preferred
shares and then to the common shares.
In the event we have E&P
allocated to our common shares, all or a portion of our distribution will
currently be taxable at the 15 percent Qualified Dividend Income (QDI) rate,
assuming various holding requirements are met by the stockholder. The 15 percent
QDI rate is currently effective through 2012. As a result of legislative
changes, starting in 2013, the QDI rate is variable based on the taxpayers
taxable income. 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-1 allocations and
result in 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 characterization of our distributions is undeterminable
until the year is over.
E&P for 2012 exceeded total
distributions to stockholders. As a result, for tax purposes, distributions to
common stockholders for the year ended 2012 were 100 percent qualified dividend
income. This information is reported to stockholders on Form 1099-DIV and is
available on our Web site at www.tortoiseadvisors.com. For book purposes, the
source of distributions to common stockholders for the year ended 2012 was 100
percent return of capital.
As of November 30, 2012, we estimate
that we have utilized our capital loss carryforward of approximately $23
million. For the fiscal year, we realized net capital gains which were offset
first by capital loss carryforwards and then by net operating losses. As of
November 30, 2012, we had approximately $15 million in net operating losses. To
the extent we have taxable income in the future that is not offset by net
operating losses, we will owe federal and state income taxes. Tax payments can
be funded from investment earnings, fund assets or borrowings. Details of our
taxes are disclosed in Note 5 in our Notes to Financial Statements.
The unrealized gain or loss we have
in the portfolio is reflected in the Statement of Assets and Liabilities. At
November 30, 2012, our investments are valued at $888.3 million, with an
adjusted cost of $515.1 million. The $373.2 million difference reflects
unrealized gain that would be realized for financial statement purposes if those
investments were sold at those values. The Statement of Assets and Liabilities
also reflects either a net deferred tax liability or net deferred tax asset
depending primarily upon unrealized gains (losses) on investments, realized
gains (losses) on investments, capital loss carryforwards and net operating
losses. At November 30, 2012, the balance sheet reflects a net deferred tax
liability of approximately $174.6 million or $8.80 per share. Accordingly, our
net asset value per share represents the amount which would be available for
distribution to stockholders after payment of taxes.
6
Tortoise Energy Capital Corp.
Schedule of Investments
November 30,
2012
|
|
|
Shares
|
|
Fair Value
|
Master Limited Partnerships
and
|
|
|
|
|
|
|
Related
Companies 164.3%
(1)
|
|
|
|
|
|
|
|
|
Crude/Refined Products Pipelines
68.2%
(1)
|
|
|
|
|
United States 68.2%
(1)
|
|
|
|
|
|
|
Buckeye
Partners, L.P.
|
|
653,500
|
|
$
|
32,844,910
|
|
Enbridge Energy Partners,
L.P.
|
|
1,372,700
|
|
|
39,835,754
|
|
Holly Energy
Partners, L.P.
|
|
312,000
|
|
|
20,950,800
|
|
Kinder Morgan Management,
LLC
(2)
|
|
645,160
|
|
|
48,967,637
|
|
Magellan
Midstream Partners, L.P.
|
|
1,454,300
|
|
|
64,687,264
|
|
MPLX LP
|
|
268,481
|
|
|
7,748,362
|
|
NuStar Energy
L.P.
|
|
508,300
|
|
|
23,300,472
|
|
Oiltanking Partners,
L.P.
|
|
147,900
|
|
|
5,481,174
|
|
Plains All
American Pipeline, L.P.
|
|
1,318,400
|
|
|
61,411,072
|
|
Sunoco Logistics Partners
L.P.
|
|
1,127,700
|
|
|
57,309,714
|
|
Tesoro Logistics
LP
|
|
137,400
|
|
|
6,334,140
|
|
|
|
|
|
|
368,871,299
|
|
Natural Gas/Natural Gas Liquids
Pipelines 69.4%
(1)
|
|
|
United States 69.4%
(1)
|
|
|
|
|
|
|
Boardwalk
Pipeline Partners, LP
|
|
1,282,700
|
|
|
33,080,833
|
|
El Paso Pipeline Partners,
L.P.
|
|
1,253,700
|
|
|
46,800,621
|
|
Energy Transfer
Equity, L.P.
|
|
332,472
|
|
|
15,117,502
|
|
Energy Transfer Partners,
L.P.
|
|
883,400
|
|
|
38,772,426
|
|
Enterprise
Products Partners L.P.
|
|
1,176,500
|
|
|
60,977,995
|
|
EQT Midstream Partners,
LP
|
|
173,842
|
|
|
5,340,426
|
|
Inergy
Midstream, L.P.
|
|
213,600
|
|
|
5,023,872
|
|
ONEOK Partners, L.P.
|
|
724,000
|
|
|
42,173,000
|
|
Regency Energy
Partners LP
|
|
1,705,700
|
|
|
38,156,509
|
|
Spectra Energy Partners,
LP
|
|
508,409
|
|
|
15,145,504
|
|
TC PipeLines,
LP
|
|
563,085
|
|
|
23,475,013
|
|
Williams Partners L.P.
|
|
1,005,500
|
|
|
51,190,005
|
|
|
|
|
|
|
375,253,706
|
|
Natural Gas Gathering/Processing
26.7%
(1)
|
|
|
|
|
United States
26.7%
(1)
|
|
|
|
|
|
|
Access Midstream Partners,
L.P.
|
|
730,200
|
|
$
|
25,549,698
|
|
Copano Energy,
L.L.C.
|
|
551,300
|
|
|
17,382,489
|
|
Crestwood Midstream Partners
LP
(2)
|
|
369,131
|
|
|
8,615,517
|
|
DCP Midstream
Partners, LP
|
|
554,876
|
|
|
23,238,207
|
|
MarkWest Energy Partners,
L.P.
|
|
368,600
|
|
|
19,049,248
|
|
Southcross
Energy Partners, L.P.
|
|
101,635
|
|
|
2,386,390
|
|
Summit Midstream Partners,
LP
|
|
177,600
|
|
|
3,509,376
|
|
Targa Resources
Partners LP
|
|
465,000
|
|
|
17,516,550
|
|
Western Gas Partners
LP
|
|
548,500
|
|
|
26,854,560
|
|
|
|
|
|
|
144,102,035
|
|
Total Master Limited
Partnerships and
|
|
|
|
|
|
|
Related Companies (Cost $515,066,651)
|
|
|
|
|
888,227,040
|
|
|
|
Short-Term Investment
0.0%
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Investment Company
0.0%
(1)
|
|
|
|
|
|
|
Fidelity Institutional Money
Market Portfolio
|
|
|
|
|
|
|
Class I, 0.14%
(3)
(Cost $88,285)
|
|
88,285
|
|
|
88,285
|
|
Total Investments
164.3%
(1)
|
|
|
|
|
|
|
(Cost
$515,154,936)
|
|
|
|
|
888,315,325
|
|
Other Assets and Liabilities
(35.8%)
(1)
|
|
|
|
(193,724,550
|
)
|
Long-Term Debt Obligations
(19.3%)
(1)
|
|
|
|
(104,100,000
|
)
|
Mandatory Redeemable Preferred Stock
|
|
|
|
|
|
|
at Liquidation Value
(9.2%)
(1)
|
|
|
|
|
(50,000,000
|
)
|
Total Net Assets Applicable
to
|
|
|
|
|
|
|
Common
Stockholders 100.0%
(1)
|
|
|
|
$
|
540,490,775
|
|
(1)
|
Calculated as a
percentage of net assets applicable to common
stockholders.
|
(2)
|
Security distributions
are paid-in-kind.
|
(3)
|
Rate indicated is the
current yield as of November 30, 2012.
|
See accompanying Notes to
Financial Statements.
2012 Annual
Report
7
Statement of Assets & Liabilities
November 30,
2012
|
Assets
|
|
|
|
|
Investments at fair value (cost $515,154,936)
|
|
$
|
888,315,325
|
|
Receivable for Adviser fee
waiver
|
|
|
6,206
|
|
Current
tax asset
|
|
|
251,945
|
|
Prepaid expenses and other
assets
|
|
|
1,306,995
|
|
Total assets
|
|
|
889,880,471
|
|
Liabilities
|
|
|
|
|
Payable
to Adviser
|
|
|
1,407,208
|
|
Accrued expenses and other
liabilities
|
|
|
1,604,115
|
|
Deferred tax liability
|
|
|
174,578,373
|
|
Short-term
borrowings
|
|
|
17,700,000
|
|
Long-term debt obligations
|
|
|
104,100,000
|
|
Mandatory redeemable
preferred stock ($10.00 liquidation
|
|
|
|
|
value per share; 5,000,000 shares outstanding)
|
|
|
50,000,000
|
|
Total liabilities
|
|
|
349,389,696
|
|
Net asset applicable to common stockholders
|
|
$
|
540,490,775
|
|
|
Net Assets Applicable to Common
Stockholders Consist of:
|
|
|
Capital
stock, $0.001 par value; 19,846,818 shares issued
|
|
|
|
|
and outstanding (100,000,000 shares authorized)
|
|
$
|
19,847
|
|
Additional paid-in
capital
|
|
|
249,533,152
|
|
Accumulated net investment loss, net of income taxes
|
|
|
(74,803,128
|
)
|
Undistributed realized
gain, net of income taxes
|
|
|
124,328,672
|
|
Net
unrealized appreciation of investments, net of income taxes
|
|
|
241,412,232
|
|
Net asset applicable to common stockholders
|
|
$
|
540,490,775
|
|
|
Net Asset Value per common
share outstanding
|
|
|
|
|
(net assets applicable to common stock,
|
|
|
|
|
dividend by common shares outstanding)
|
|
$
|
27.23
|
|
|
|
|
|
|
Statement
of Operations
|
|
|
|
|
Year Ended November 30, 2012
|
|
|
|
|
|
Investment Income
|
|
|
|
|
Distributions from master limited partnerships
|
|
$
|
48,562,400
|
|
Less return of capital on
distributions
|
|
|
(44,863,901
|
)
|
Net
distributions from master limited partnerships
|
|
|
3,698,499
|
|
Dividends from money market
mutual funds
|
|
|
337
|
|
Total Investment Income
|
|
|
3,698,836
|
|
Operating Expenses
|
|
|
|
|
Advisory fees
|
|
|
8,146,838
|
|
Administrator
fees
|
|
|
343,025
|
|
Professional fees
|
|
|
177,775
|
|
Directors fees
|
|
|
111,514
|
|
Stockholder communication expenses
|
|
|
86,896
|
|
Fund accounting
fees
|
|
|
68,389
|
|
Registration fees
|
|
|
50,800
|
|
Custodian fees and
expenses
|
|
|
39,119
|
|
Stock
transfer agent fees
|
|
|
20,588
|
|
Franchise fees
|
|
|
(46,134
|
)
|
Other
operating expenses
|
|
|
89,348
|
|
Total Operating Expenses
|
|
|
9,088,158
|
|
Leverage Expenses
|
|
|
|
|
Interest expense
|
|
|
5,947,159
|
|
Distributions to mandatory redeemable preferred stockholders
|
|
|
2,381,692
|
|
Amortization of debt
issuance costs
|
|
|
1,257,783
|
|
Premium on redemption of
mandatory redeemable preferred stock
|
500,000
|
|
Other leverage
expenses
|
|
|
102,326
|
|
Total Leverage Expenses
|
|
|
10,188,960
|
|
Total Expenses
|
|
|
19,277,118
|
|
Less
fees waived by Adviser
|
|
|
(16,944
|
)
|
Net Expenses
|
|
|
19,260,174
|
|
Net
Investment Loss, before Income Taxes
|
|
|
(15,561,338
|
)
|
Deferred tax
benefit
|
|
|
4,199,085
|
|
Net
Investment Loss
|
|
|
(11,362,253
|
)
|
Realized and Unrealized Gain on
Investments
|
|
|
|
|
Net
realized gain on investments, before income taxes
|
|
|
78,972,125
|
|
Current tax expense
|
|
|
(156,831
|
)
|
Deferred tax expense
|
|
|
(28,735,475
|
)
|
Income tax expense
|
|
|
(28,892,306
|
)
|
Net realized gain on investments
|
|
|
50,079,819
|
|
Net unrealized appreciation
of investments, before income taxes
|
42,556,536
|
|
Deferred tax expense
|
|
|
(15,569,499
|
)
|
Net unrealized appreciation of investments
|
|
|
26,987,037
|
|
Net
Realized and Unrealized Gain on Investments
|
|
|
77,066,856
|
|
Net Increase in Net Assets Applicable
to Common Stockholders
|
|
|
Resulting from
Operations
|
|
$
|
65,704,603
|
|
See accompanying Notes to
Financial Statements.
8
Tortoise Energy Capital Corp.
Statement of Changes in Net Assets
Year Ended November
30
|
|
|
2012
|
|
2011
|
Operations
|
|
|
|
|
|
|
|
|
Net
investment loss
|
|
$
|
(11,362,253
|
)
|
|
$
|
(14,497,071
|
)
|
Net realized gain on
investments
|
|
|
50,079,819
|
|
|
|
57,609,999
|
|
Net
unrealized appreciation (depreciation) of investments
|
|
|
26,987,037
|
|
|
|
(6,499,262
|
)
|
Net
increase in net assets applicable to
common stockholders resulting
from operations
|
|
|
65,704,603
|
|
|
|
36,613,666
|
|
Distributions to Common Stockholders
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
(32,577,041
|
)
|
|
|
(31,395,854
|
)
|
Total
distributions to common stockholders
|
|
|
(32,577,041
|
)
|
|
|
(31,395,854
|
)
|
Capital Stock
Transactions
|
|
|
|
|
|
|
|
|
Proceeds from shelf offerings of 189,723 and 93,715
common shares, respectively
|
|
|
5,313,493
|
|
|
|
2,515,946
|
|
Underwriting discounts and offering
expenses
associated with the issuance of
common stock
|
|
|
(164,695
|
)
|
|
|
(101,308
|
)
|
Issuance of 75,921 and 142,443 common shares
from reinvestment of distributions to
stockholders, respectively
|
|
|
2,085,579
|
|
|
|
3,661,823
|
|
Net
increase in net assets applicable to common
stockholders from capital stock transactions
|
|
|
7,234,377
|
|
|
|
6,076,461
|
|
Total increase in net assets
applicable to common stockholders
|
|
|
40,361,939
|
|
|
|
11,294,273
|
|
Net Assets
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
500,128,836
|
|
|
|
488,834,563
|
|
End of year
|
|
$
|
540,490,775
|
|
|
$
|
500,128,836
|
|
Accumulated net investment loss, net of income taxes, end of
year
|
|
$
|
(74,803,128
|
)
|
|
$
|
(63,440,875
|
)
|
See accompanying Notes to
Financial Statements.
2012 Annual
Report
9
Statement of Cash Flows
Year Ended November 30,
2012
|
Cash Flows From Operating
Activities
|
|
|
|
|
Distributions received from master limited partnerships
|
|
$
|
48,562,400
|
|
Dividend income received
|
|
|
345
|
|
Purchases of long-term investments
|
|
|
(162,898,704
|
)
|
Proceeds from sales of long-term
investments
|
|
|
154,288,735
|
|
Proceeds from sales of short-term investments, net
|
|
|
42,805
|
|
Interest expense paid
|
|
|
(5,937,796
|
)
|
Distributions to mandatory redeemable preferred stockholders
|
|
|
(2,425,440
|
)
|
Other leverage expenses
paid
|
|
|
(100,948
|
)
|
Income
taxes paid
|
|
|
(406,852
|
)
|
Premium on redemption of mandatory
redeemable preferred stock
|
(500,000
|
)
|
Operating expenses paid
|
|
|
(8,979,170
|
)
|
Net
cash provided by operating activities
|
|
|
21,645,375
|
|
Cash Flows From Financing Activities
|
|
|
|
|
Advances from revolving line of
credit
|
|
|
88,500,000
|
|
Repayments on revolving line of credit
|
|
|
(83,700,000
|
)
|
Issuance of mandatory redeemable
preferred stock
|
|
|
50,000,000
|
|
Redemption of mandatory redeemable preferred stock
|
|
|
(50,000,000
|
)
|
Issuance of common stock
|
|
|
5,313,493
|
|
Common
stock issuance costs
|
|
|
(173,908
|
)
|
Debt issuance costs
|
|
|
(1,093,504
|
)
|
Distributions paid to common stockholders
|
|
|
(30,491,456
|
)
|
Net
cash used in financing activities
|
|
|
(21,645,375
|
)
|
Net
change in cash
|
|
|
|
|
Cash beginning of year
|
|
|
|
|
Cash
end of year
|
|
$
|
|
|
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
|
|
$
|
65,704,603
|
|
Adjustments to reconcile net
increase in net assets
|
|
|
|
|
applicable to common stockholders resulting from
|
|
|
|
|
operations to net cash provided by operating activities:
|
|
|
|
|
Purchases of long-term investments
|
|
|
(162,898,704
|
)
|
Proceeds from sales of long-term investments
|
|
|
153,897,835
|
|
Proceeds from sales of short-term investments, net
|
|
|
42,805
|
|
Return of capital on distributions received
|
|
|
44,863,901
|
|
Deferred tax expense
|
|
|
40,105,889
|
|
Net unrealized appreciation of investments
|
|
|
(42,556,536
|
)
|
Net realized gain on investments
|
|
|
(78,972,125
|
)
|
Amortization of debt issuance costs
|
|
|
1,257,783
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Increase in current tax asset
|
|
|
(251,945
|
)
|
Decrease in receivable for investments sold
|
|
|
390,900
|
|
Increase in prepaid expenses and other assets
|
|
|
(18,153
|
)
|
Increase in payable to Adviser, net of fees waived
|
|
|
159,003
|
|
Decrease in accrued expenses and other liabilities
|
|
|
(79,881
|
)
|
Total adjustments
|
|
|
(44,059,228
|
)
|
Net cash provided by operating
activities
|
|
$
|
21,645,375
|
|
Non-Cash Financing Activities
|
|
|
|
|
Reinvestment of distributions by
common stockholders
|
|
|
|
|
in
additional common shares
|
|
$
|
2,085,579
|
|
See accompanying Notes to
Financial Statements.
10
Tortoise Energy Capital Corp.
Financial Highlights
Year Ended November
30
|
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
Per Common Share
Data
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value, beginning
of year
|
|
$
|
25.54
|
|
|
$
|
25.27
|
|
|
$
|
19.90
|
|
|
$
|
12.85
|
|
|
$
|
27.84
|
|
Income
(Loss) from Investment Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(2)(3)
|
|
|
(0.58
|
)
|
|
|
(0.75
|
)
|
|
|
(0.60
|
)
|
|
|
(0.20
|
)
|
|
|
(0.89
|
)
|
Net realized and unrealized gains
(losses)
on investments and interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
swap contracts
(2)(3)
|
|
|
3.93
|
|
|
|
2.64
|
|
|
|
7.50
|
|
|
|
8.88
|
|
|
|
(12.05
|
)
|
Total income (loss) from
investment operations
|
|
|
3.35
|
|
|
|
1.89
|
|
|
|
6.90
|
|
|
|
8.68
|
|
|
|
(12.94
|
)
|
Distributions to Auction Preferred Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.04
|
)
|
|
|
(0.35
|
)
|
Total distributions to auction
preferred stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.04
|
)
|
|
|
(0.35
|
)
|
Distributions to Common
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
(1.66
|
)
|
|
|
(1.62
|
)
|
|
|
(1.60
|
)
|
|
|
(1.60
|
)
|
|
|
(1.70
|
)
|
Total distributions to common
stockholders
|
|
|
(1.66
|
)
|
|
|
(1.62
|
)
|
|
|
(1.60
|
)
|
|
|
(1.60
|
)
|
|
|
(1.70
|
)
|
Capital
Stock Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums less underwriting discounts
and
offering costs on issuance of common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
(4)(5)
|
|
|
(0.00
|
)
|
|
|
0.00
|
|
|
|
0.07
|
|
|
|
0.01
|
|
|
|
|
|
Total capital stock transactions
|
|
|
(0.00
|
)
|
|
|
0.00
|
|
|
|
0.07
|
|
|
|
0.01
|
|
|
|
|
|
Net Asset Value, end of
year
|
|
$
|
27.23
|
|
|
$
|
25.54
|
|
|
$
|
25.27
|
|
|
$
|
19.90
|
|
|
$
|
12.85
|
|
Per
common share market value, end of year
|
|
$
|
28.57
|
|
|
$
|
26.21
|
|
|
$
|
27.06
|
|
|
$
|
22.38
|
|
|
$
|
11.11
|
|
Total Investment Return
Based on Market
Value
(6)
|
|
|
15.92
|
%
|
|
|
3.10
|
%
|
|
|
29.31
|
%
|
|
|
120.32
|
%
|
|
|
(52.44
|
)%
|
|
Supplemental Data
and Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to
common
stockholders,
end of year (000s)
|
|
$
|
540,491
|
|
|
$
|
500,129
|
|
|
$
|
488,835
|
|
|
$
|
356,015
|
|
|
$
|
224,483
|
|
Average
net assets (000s)
|
|
$
|
527,912
|
|
|
$
|
495,831
|
|
|
$
|
435,781
|
|
|
$
|
289,712
|
|
|
$
|
402,149
|
|
Ratio of Expenses to
Average Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory fees
|
|
|
1.54
|
%
|
|
|
1.51
|
%
|
|
|
1.46
|
%
|
|
|
1.51
|
%
|
|
|
1.84
|
%
|
Other operating expenses
|
|
|
0.18
|
|
|
|
0.22
|
|
|
|
0.26
|
|
|
|
0.38
|
|
|
|
0.30
|
|
Fee waiver
(5)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
1.72
|
|
|
|
1.73
|
|
|
|
1.72
|
|
|
|
1.89
|
|
|
|
2.14
|
|
Leverage expenses
(7)
|
|
|
1.93
|
|
|
|
2.20
|
|
|
|
2.23
|
|
|
|
2.02
|
|
|
|
4.37
|
|
Income tax expense (benefit)
(8)
|
|
|
7.63
|
|
|
|
4.74
|
|
|
|
17.59
|
|
|
|
22.42
|
|
|
|
(28.32
|
)
|
Total expenses
|
|
|
11.28
|
%
|
|
|
8.67
|
%
|
|
|
21.54
|
%
|
|
|
26.33
|
%
|
|
|
(21.81
|
)%
|
See accompanying Notes to
Financial Statements.
2012 Annual
Report
11
Financial Highlights
(Continued)
Year Ended
November 30
|
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
Ratio of net
investment loss to average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before fee
waiver
(7)
|
|
|
(2.15
|
)%
|
|
|
(2.93
|
)%
|
|
|
(2.65
|
)%
|
|
|
(1.53
|
)%
|
|
|
(3.67
|
)%
|
Ratio of net investment loss to
average net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
after
fee waiver
(7)
|
|
|
(2.15
|
)%
|
|
|
(2.92
|
)%
|
|
|
(2.65
|
)%
|
|
|
(1.53
|
)%
|
|
|
(3.67
|
)%
|
Portfolio
turnover rate
|
|
|
17.90
|
%
|
|
|
19.37
|
%
|
|
|
12.92
|
%
|
|
|
14.86
|
%
|
|
|
6.44
|
%
|
Short-term borrowings, end of
year (000s)
|
|
$
|
17,700
|
|
|
$
|
12,900
|
|
|
$
|
7,400
|
|
|
$
|
14,600
|
|
|
|
|
|
Long-term debt
obligations, end of year (000s)
|
|
$
|
104,100
|
|
|
$
|
104,100
|
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
Preferred stock, end of year
(000s)
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
65,000
|
|
|
$
|
60,000
|
|
|
$
|
95,000
|
|
Per common share
amount of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligations outstanding,
end of year
|
|
$
|
5.25
|
|
|
$
|
5.32
|
|
|
$
|
4.65
|
|
|
$
|
5.03
|
|
|
$
|
5.15
|
|
Per common share amount of net
assets,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
excluding long-term debt obligations, end of year
|
|
$
|
32.48
|
|
|
$
|
30.86
|
|
|
$
|
29.92
|
|
|
$
|
24.93
|
|
|
$
|
18.00
|
|
Asset coverage,
per $1,000 of principal amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of long-term debt
obligations and short-term
borrowings
(9)
|
|
$
|
5,848
|
|
|
$
|
5,702
|
|
|
$
|
6,686
|
|
|
$
|
4,977
|
|
|
$
|
4,550
|
|
Asset coverage ratio of
long-term debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
short-term borrowings
(9)
|
|
|
585
|
%
|
|
|
570
|
%
|
|
|
669
|
%
|
|
|
498
|
%
|
|
|
455
|
%
|
Asset coverage,
per $25,000 liquidation value per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share of auction preferred
stock
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
55,336
|
|
Asset coverage, per $10
liquidation value per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share
of mandatory redeemable
preferred stock
(10)
|
|
$
|
41
|
|
|
$
|
40
|
|
|
$
|
40
|
|
|
$
|
32
|
|
|
|
|
|
Asset coverage
ratio of preferred stock
(10)
|
|
|
415
|
%
|
|
|
399
|
%
|
|
|
401
|
%
|
|
|
316
|
%
|
|
|
221
|
%
|
(1)
|
Information presented
relates to a share of common stock outstanding for the entire
year.
|
(2)
|
The per common share data
for the years ended November 30, 2011, 2010, 2009, and 2008 do not reflect
the change in estimate of investment income and return of capital, for the
respective year. See Note 2C to the financial statements for further
disclosure.
|
(3)
|
The per common share data
for the year ended November 30, 2008 reflects the cumulative effect of
adopting ASC 740-10, which was a $776,852 increase to the beginning
balance of accumulated net investment loss, or $(0.04) per
share.
|
(4)
|
Represents the premiums on
the shelf offerings of less than $0.01 per share, less the underwriter
discount and offering costs of less than $0.01 per share for the year
ended November 30, 2012. Represents the premiums on the shelf offerings of
less than $0.01 per share, less the underwriter discount and offering
costs of less than $0.01 per share for the year ended November 30, 2011.
Represents the premiums on the shelf offerings of $0.10 per share, less
the underwriting discount and offering costs of $0.03 per share for the
year ended November 30, 2010. Represents the premiums on the shelf
offerings of $0.02 per share, less the underwriting discount and offering
costs of $0.01 per share for the year ended November 30,
2009.
|
(5)
|
Less than $0.01 or 0.01%
for the years ended November 30, 2012 and 2011.
|
(6)
|
Total investment return is
calculated assuming a purchase of common stock at the beginning of the
year and a sale at the closing price on the last day of the year reported
(excluding brokerage commissions). The calculation also assumes
reinvestment of distributions at actual prices pursuant to the Companys
dividend reinvestment plan.
|
(7)
|
The expense ratios and net
investment loss ratios do not reflect the effect of distributions to
auction preferred stockholders.
|
(8)
|
For the year ended
November 30, 2012, the Company accrued $156,831 for net current income tax
expense and $40,105,889 for net deferred income tax expense. For the year
ended November 30, 2011, the Company accrued $490,272 for current income
tax expense and $23,004,007 for net deferred income tax expense. For the
year ended November 30, 2010, the Company accrued $409,606 for net current
income tax expense and $76,240,282 for net deferred income tax expense.
For the year ended November 30, 2009, the Company accrued $302,906 for net
current income tax benefit and $65,242,595 for net deferred income tax
expense. For the year ended November 30, 2008, the Company accrued
$427,891 for net current income tax expense and $114,309,765 for net
deferred income tax benefit.
|
(9)
|
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 year divided by long-term debt obligations and short-term borrowings
outstanding at the end of the year.
|
(10)
|
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 year divided by the sum of long-term debt obligations, short-term
borrowings and preferred stock outstanding at the end of the
year.
|
See accompanying Notes to
Financial Statements.
12
Tortoise Energy Capital Corp.
Notes
to Financial Statements
November 30, 2012
|
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 from the exchange that it
considers to be the principal exchange on which the security 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 last bid price and last 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 fair value procedures. The Company did not hold any
restricted securities at November 30, 2012.
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 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.
The Company generally values 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.
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
and return of capital from the MLPs. 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 information provided by
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.
During the year ended November 30,
2012, the Company reallocated the amount of 2011 investment income and return of
capital it recognized based on the 2011 tax reporting information received from
the individual MLPs. This reclassification amounted to an increase in pre-tax
net investment income of approximately $705,000 or $0.036 per share ($446,000 or
$0.023 per share, net of deferred tax expense), a decrease in unrealized
appreciation of investments of approximately $812,000 or $0.041 per share
($514,000 or $0.026 per share, net of deferred tax benefit), and an increase in
realized gains of approximately $107,000 or $0.005 per share ($68,000 or $0.003
per share, net of deferred tax expense) for the year ended November 30,
2012.
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 tax purposes, the
Companys distributions to common stockholders for the year ended November 30,
2012 were 100 percent qualified dividend income. For book purposes, the source
of the Companys distributions to common stockholders for the year ended
November 30, 2012 was 100 percent return of capital.
Distributions to mandatory redeemable
preferred (MRP) stockholders are accrued daily based on a fixed annual rate
and are paid on the first business day of each month. 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. The character of
distributions to MRP stockholders made during the year may differ from their
ultimate characterization for federal income tax purposes. For tax purposes, the
Companys distributions to MRP stockholders for the year ended November 30, 2012
were 100 percent qualified dividend income. For book purposes, the source of the
Companys distributions to MRP stockholders for the year ended November 30, 2012
was 100 percent return of capital.
2012 Annual
Report
13
Notes
to Financial Statements
(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. The Company may be subject to a 20 percent federal alternative minimum
tax (AMT) on its federal alternative minimum taxable income to the extent that
its AMT 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. Offering and Debt Issuance
Costs
Offering costs related to the
issuance of common and preferred stock are charged to additional paid-in capital
when the stock is issued. Offering costs (excluding underwriter discounts and
commissions) of $108,677 related to the issuance of common stock were recorded
to additional paid-in capital during the year ended November 30, 2012. Debt
issuance costs related to long-term debt obligations and MRP Stock are
capitalized and amortized over the period the debt and MRP Stock is outstanding.
The amount of such capitalized costs (excluding underwriter commissions) for the
MRP C Stock issued in April 2012 was $141,478.
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 agreements, 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. The Company did not hold any derivative
financial instruments during the year ended November 30, 2012.
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.
I. Recent Accounting
Pronouncements
In May 2011, the FASB issued ASU No.
2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in GAAP and the International Financial Reporting Standards
(IFRSs). ASU No. 2011-04 amends FASB ASC Topic 820, Fair Value Measurements
and Disclosures, to establish common requirements for measuring fair value and
for disclosing information about fair value measurements in accordance with GAAP
and IFRSs. ASU No. 2011-04 is effective for fiscal years beginning after
December 15, 2011 and for interim periods within those fiscal years. The Company
has adopted these amendments and they did not have a material impact on the
financial statements.
In December 2011, the FASB issued ASU
2011-11 Balance Sheet (Topic 210) Disclosures about Offsetting Assets and
Liabilities. ASU 2011-11 requires new disclosures for recognized financial
instruments and derivative instruments that are either offset on the balance
sheet in accordance with the offsetting guidance in ASC 210-20-45 or ASC
815-10-45 or are subject to an enforceable master netting arrangement or similar
arrangement. ASU 2011-11 is effective for periods beginning on or after January
1, 2013 and must be applied retrospectively. Management is currently evaluating
the impact of these amendments on the financial statements.
3. Concentration of Risk
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 Adviser has
contractually agreed to waive all fees due under the Investment Advisory
Agreement related to the net proceeds received from the issuance of additional
common stock under the at-the-market equity program for a six month period
following the date of issuance.
14
Tortoise Energy Capital Corp.
Notes
to Financial Statements
(Continued)
|
U.S. Bancorp Fund Services, LLC
serves 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, 0.01 percent on the next
$500,000,000 of Managed Assets and 0.005 percent on the balance of the Companys
Managed Assets.
Computershare Trust Company, N.A.
serves as the Companys transfer agent and registrar and Computershare Inc.
serves as the Companys 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 0.004 percent of the Companys portfolio assets, plus portfolio
transaction fees.
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 November 30, 2012, are as
follows:
Deferred tax
assets:
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
6,244,014
|
AMT credit
|
|
|
687,987
|
Organization costs
|
|
|
11,259
|
|
|
|
6,943,260
|
Deferred tax
liabilities:
|
|
|
|
Basis reduction of
investment in MLPs
|
|
|
44,273,242
|
Net
unrealized gains on investment securities
|
|
|
137,248,391
|
|
|
|
181,521,633
|
Total net deferred tax
liability
|
|
$
|
174,578,373
|
At November 30, 2012, a valuation
allowance on deferred tax assets was not deemed necessary because the Company
believes it is more likely than not that there is an ability to realize its
deferred tax assets through future taxable income. Any adjustments to the
Companys estimates of future taxable income will be made in the period such
determination is made. The Company recognizes the tax benefits of uncertain tax
positions only when the position is more likely than not to be sustained upon
examination by the tax authorities based on the technical merits of the tax
position. The Companys policy is to record interest and penalties on uncertain
tax positions as part of tax expense. As of November 30, 2012, the Company had
no uncertain tax positions and no penalties and interest were accrued. The
Company does not expect any change to its unrecognized tax positions in the
twelve months subsequent to November 30, 2012. 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 35
percent to net investment loss and net realized and unrealized gains on
investments for the year ended November 30, 2012, as follows:
Application of
statutory income tax rate
|
|
$
|
37,088,563
|
|
State income taxes, net of
federal tax benefit
|
|
|
1,886,219
|
|
Change in
deferred tax liability due to change in overall tax rate
|
|
|
99,598
|
|
Nondeductible payments on
preferred stock
|
|
|
1,502,045
|
|
Dividends
received deduction
|
|
|
(313,705
|
)
|
Total income tax
expense
|
|
$
|
40,262,720
|
|
Total income taxes are computed by
applying the federal statutory rate plus a blended state income tax rate. During
the year, the Company re-evaluated its blended state income tax rate, increasing
the overall rate from 36.75 percent to 36.78 percent due to anticipated state
apportionment of income and gains.
For the year ended November 30, 2012,
the components of income tax expense include the following:
Current tax
expense (benefit)
|
|
|
|
|
State
|
|
$
|
(28,764
|
)
|
AMT
|
|
|
185,595
|
|
Total current tax
expense
|
|
|
156,831
|
|
Deferred tax
expense
|
|
|
|
|
Federal
|
|
|
38,164,930
|
|
State (net of
federal tax benefit)
|
|
|
1,940,959
|
|
Total deferred tax
expense
|
|
|
40,105,889
|
|
Total income tax
expense
|
|
$
|
40,262,720
|
|
As of November 30, 2012, the Company
had a net operating loss for federal income tax purposes of approximately
$15,453,000. The net operating loss may be carried forward for 20 years. If not
utilized, this net operating loss will expire as follows: $4,355,000, $31,000,
$10,079,000, $958,000 and $30,000 in the years ending November 30, 2027, 2028,
2029, 2030 and 2031, respectively. As of November 30, 2012, the Company
estimated that it utilized its capital loss carryforward of approximately
$23,000,000. The capital gains for the year ended November 30, 2012 have been
estimated based on information currently available. Such estimate is subject to
revision upon receipt of the 2012 tax reporting information from the individual
MLPs. For corporations, capital losses can only be used to offset capital gains
and cannot be used to offset ordinary income. As of November 30, 2012, an AMT
credit of $687,987 was available, which may be credited in the future against
regular income tax. This credit may be carried forward indefinitely.
As of November 30, 2012, the
aggregate cost of securities for federal income tax purposes was $394,781,792.
The aggregate gross unrealized appreciation for all securities in which there
was an excess of fair value over tax cost was $493,608,891, the aggregate gross
unrealized depreciation for all securities in which there was an excess of tax
cost over fair value was $75,358 and the net unrealized appreciation was
$493,533,533.
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.
2012 Annual
Report
15
Notes
to Financial Statements
(Continued)
|
The following table provides the fair
value measurements of applicable Company assets by level within the fair value
hierarchy as of November 30, 2012. These assets are measured on a recurring
basis.
|
|
Fair Value
at
|
|
|
|
|
|
|
|
|
|
Description
|
|
November 30,
2012
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Master Limited
Partnerships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Related
Companies
(a)
|
|
|
$
|
888,227,040
|
|
|
$
|
888,227,040
|
|
$
|
|
|
$
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term
Investment
(b)
|
|
|
|
88,285
|
|
|
|
88,285
|
|
|
|
|
|
|
Total Assets
|
|
|
$
|
888,315,325
|
|
|
$
|
888,315,325
|
|
$
|
|
|
$
|
|
(a)
|
All other industry
classifications are identified in the Schedule of
Investments.
|
(b)
|
Short-term investment is
a sweep investment for cash balances in the Company at November 30,
2012.
|
The Company did not hold any Level 3
securities during the year ended November 30, 2012
Valuation
Techniques
In general, and where applicable, the
Company uses readily available market quotations based upon the last updated
sales price from the principal market to determine fair value. This pricing
methodology applies to the Companys Level 1 investments.
An equity security of a publicly
traded company acquired in a private placement transaction without registration
under the Securities Act of 1933, as amended (the 1933 Act), is subject to
restrictions on resale that can affect the securitys fair value. If such a
security is convertible into publicly-traded common shares, the security
generally will be valued at the common share market price adjusted by a
percentage discount due to the restrictions and categorized as Level 2 in the
fair value hierarchy. If the security has characteristics that are dissimilar to
the class of security that trades on the open market, the security will
generally be valued and categorized as Level 3 in the fair value hierarchy.
The Company utilizes the beginning of
reporting period method for determining transfers between levels. There were no
transfers between levels for the year ended November 30, 2012.
7. Investment
Transactions
For the year ended November 30, 2012,
the Company purchased (at cost) and sold securities (proceeds received) in the
amount of $162,898,704 and $153,897,835 (excluding short-term debt securities),
respectively.
8. Long-Term Debt
Obligations
The Company has $104,100,000
aggregate principal amount of private senior notes, Series D, Series F, Series
G, Series H, and Series I (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 shares; (2) senior to all of the Companys outstanding
common stock; (3) on 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. Holders of the Notes are
entitled to receive cash interest payments each quarter until maturity. The
Series D, Series F, Series H and Series I Notes accrue interest at fixed rates
and the Series G Notes accrue interest at an annual rate that resets each
quarter based on 3-month LIBOR plus 1.35 percent. The Notes are not listed on
any exchange or automated quotation system.
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 November 30, 2012, the Company was in compliance with asset
coverage covenants and basic maintenance covenants for its senior
notes.
The estimated fair value of each
series of fixed-rate Notes was calculated, for disclosure purposes, by
discounting future cash flows by a rate equal to the current U.S. Treasury rate
with an equivalent maturity date, plus either 1) the spread between the interest
rate on recently issued debt and the U.S. Treasury rate with a similar maturity
date or 2) if there has not been a recent debt issuance, the spread between the
AAA corporate finance debt rate and the U.S. Treasury rate with an equivalent
maturity date plus the spread between the fixed rates of the Notes and the AAA
corporate finance debt rate. The estimated fair value of the Series G Notes
approximates the carrying amount because the interest rate fluctuates with
changes in interest rates available in the current market. The estimated fair
values in the table below are Level 2 valuations within the fair value
hierarchy. The following table shows the maturity date, interest rate,
notional/carrying amount and estimated fair value for each series of Notes
outstanding at November 30, 2012.
|
|
|
|
|
|
|
Notional/
|
|
|
|
|
|
Maturity
|
|
Interest
|
|
Carrying
|
|
Estimated
|
Series
|
|
Date
|
|
Rate
|
|
Amount
|
|
Fair Value
|
Series
D
|
|
December 21,
2014
|
|
6.07
|
%
|
|
$
|
39,400,000
|
|
$
|
42,835,068
|
Series F
|
|
June 17, 2013
|
|
6.02
|
%
|
|
|
34,700,000
|
|
|
36,171,132
|
Series
G
|
|
June 15,
2014
|
|
1.74
|
%
(1)
|
|
|
5,000,000
|
|
|
5,000,000
|
Series H
|
|
June 15, 2016
|
|
3.88
|
%
|
|
|
12,500,000
|
|
|
13,201,264
|
Series
I
|
|
June 15,
2018
|
|
4.55
|
%
|
|
|
12,500,000
|
|
|
13,745,730
|
|
|
|
|
|
|
|
$
|
104,100,000
|
|
$
|
110,953,194
|
(1)
|
Floating rate; rate
effective for period from September 15, 2012 through December 15, 2012.
The weighted-average interest rate for the year ended November 30, 2012
was 1.82 percent.
|
16
Tortoise Energy Capital Corp.
Notes
to Financial Statements
(Continued)
|
9. Preferred Stock
The Company has 10,000,000 shares of
preferred stock authorized. Of that amount, the Company has 5,000,000 authorized
shares of Mandatory Redeemable Preferred (MRP) C Stock and all 5,000,000
shares are outstanding at November 30, 2012. The MRP C Stock has a liquidation
value of $10.00 per share plus any accumulated but unpaid distributions, whether
or not declared. The Company issued 5,000,000 shares of MRP C Stock on April 17,
2012, and they are mandatorily redeemable on May 1, 2018. The MRP C Stock pays
cash distributions on the first business day of each month at an annual rate of
3.95 percent. The shares of MRP C Stock trade on the NYSE under the symbol TYY
Pr C.
The MRP Stock has rights determined by the Board of Directors. Except as
otherwise indicated in the Companys Charter or Bylaws, or as otherwise required
by law, the holders of MRP Stock have voting rights equal to the holders of
common stock (one vote per MRP share) and will vote together with the holders of
shares of common stock as a single class except on matters affecting only the
holders of preferred stock or the holders of common stock. The 1940 Act requires
that the holders of any preferred stock (including MRP Stock), voting separately
as a single class, have the right to elect at least two directors at all
times.
At November 30, 2012, the estimated
fair value of the MRP C Stock is based on the closing market price of $10.18 per
share and is a Level 1 valuation within the fair value hierarchy. The following
table shows the mandatory redemption date, fixed rate, number of shares
outstanding, aggregate liquidation preference and estimated fair value as of
November 30, 2012.
|
|
Mandatory
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
Redemption
|
|
Fixed
|
|
Shares
|
|
Liquidation
|
|
Estimated
|
Series
|
|
Date
|
|
Rate
|
|
Outstanding
|
|
Preference
|
|
Fair
Value
|
MRP C
Stock
|
|
May 1, 2018
|
|
3.95
|
%
|
|
5,000,000
|
|
$
|
50,000,000
|
|
$
|
50,900,000
|
The MRP 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 MRP Stock would be less than 200 percent. The MRP Stock is also
subject to a mandatory redemption if the Company fails to meet an asset coverage
ratio of at least 225 percent as determined in accordance with the 1940 Act or a
rating agency basic maintenance amount if such failure is not waived or cured.
At November 30, 2012, the Company was in compliance with asset coverage
covenants and basic maintenance covenants for its MRP Stock.
The Company defeased its MRP B Stock
at liquidation value in the amount of $50,000,000 on April 17, 2012. The Company
paid a premium of $500,000 upon redemption. The unamortized balance of allocated
capital costs was expensed and resulted in a total loss on early redemption of
$1,018,581 which is included in amortization of debt issuance costs in the
accompanying Statement of Operations.
10. Credit Facility
On June 20, 2011, the Company entered
into an amendment to its credit facility that extended the credit facility
through June 18, 2012. U.S. Bank, N.A. serves as a lender and the lending
syndicate agent on behalf of other lenders participating in the credit facility.
The terms of the amendment provided for an unsecured revolving credit facility
of $40,000,000. During the extension, outstanding balances accrued interest at a
variable rate equal to one-month LIBOR plus 1.25 percent and unused portions of
the credit facility accrued a non-usage fee equal to an annual rate of 0.20
percent.
On June 18, 2012, the Company entered into an amendment to its credit
facility that extends the credit facility through June 17, 2013. The terms of
the amendment provide for an unsecured revolving credit facility of $40,000,000.
During the extension, outstanding balances generally will accrue interest at a
variable annual rate equal to one-month LIBOR plus 1.25 percent and unused
portions of the credit facility will accrue a non-usage fee equal to an annual
rate of 0.20 percent.
The average principal balance and
interest rate for the period during which the credit facility was utilized
during the year ended November 30, 2012 was approximately $18,200,000 and 1.49
percent, respectively. At November 30, 2012, the principal balance outstanding
was $17,700,000 at an interest rate of 1.46 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. At November 30, 2012, the Company was in compliance with the terms of
the credit facility.
11. Common Stock
The Company has 100,000,000 shares of
capital stock authorized and 19,846,818 shares outstanding at November 30, 2012.
Transactions in common stock for the year ended November 30, 2012, were as
follows:
Shares at November 30,
2011
|
|
19,581,174
|
Shares sold through shelf
offerings
|
|
189,723
|
Shares issued through
reinvestment of distributions
|
|
75,921
|
Shares at November 30, 2012
|
|
19,846,818
|
12. Subsequent
Events
During the period from December 1,
2012 through the date the financial statements were issued, the Company issued
42,798 shares of common stock under its at-the-market equity offering program
for gross proceeds of approximately $1.3 million.
The Company has performed an
evaluation of subsequent events through the date the financial statements were
issued and has determined that no additional items require recognition or
disclosure.
2012 Annual
Report
17
Report of Independent Registered Public Accounting
Firm
|
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, 2012, 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 each of the five years in the period
then ended. 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, 2012, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. 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, 2012, 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 five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
Kansas City, Missouri
January 22,
2013
18
Tortoise Energy Capital Corp.
Company Officers and Directors
(Unaudited)
November 30,
2012
|
|
|
Position(s) Held with
|
|
|
|
Number of
|
|
Other Public
|
|
|
Company, Term of
|
|
|
|
Portfolios in Fund
|
|
Company
|
|
|
Office and Length of
|
|
|
|
Complex Overseen
|
|
Directorships
|
Name and Age*
|
|
Time Served
|
|
Principal Occupation During Past
Five Years
|
|
by Director
(1)
|
|
Held
|
Independent
Directors
|
|
|
|
|
Conrad S. Ciccotello
(Born
1960)
|
|
Director since 2005
|
|
Associate Professor of Risk
Management and Insurance, Robinson College of Business, Georgia State
University (faculty member since 1999); Director of Personal Financial
Planning Program; Investment Consultant to the University System of
Georgia for its defined contribution retirement plan; Formerly Faculty
Member, Pennsylvania State University (1997-1999); Published a number of
academic and professional journal articles on investment company
performance and structure, with a focus on MLPs.
|
|
7
|
|
CorEnergy Infrastructure Trust,
Inc. (formerly Tortoise Capital Resources
Corporation)
|
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; 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).
|
|
7
|
|
CorEnergy Infrastructure Trust,
Inc. (formerly Tortoise Capital Resources
Corporation)
|
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.
|
|
7
|
|
CorEnergy Infrastructure Trust,
Inc. (formerly Tortoise Capital Resources
Corporation)
|
(1)
|
This number includes Tortoise Energy Infrastructure
Corporation (TYG), Tortoise North American Energy Corporation (TYN),
Tortoise Power and Energy Infrastructure Fund, Inc. (TPZ), Tortoise MLP
Fund, Inc. (NTG), Tortoise Pipeline & Energy Fund, Inc. (TTP),
Tortoise Energy Independence Fund, Inc. (NDP) and the Company. Our
Adviser also serves as the investment adviser to TYG, TYN, TPZ, NTG, TTP
and NDP.
|
*
|
The address of each director and officer is 11550 Ash Street,
Suite 300, Leawood, Kansas 66211.
|
2012 Annual
Report
19
Company Officers and Directors
(Unaudited)
(Continued)
November 30, 2012
|
|
|
Position(s) Held with
|
|
|
|
Number of
|
|
Other Public
|
|
|
Company, Term of
|
|
|
|
Portfolios in Fund
|
|
Company
|
|
|
Office and Length of
|
|
|
|
Complex Overseen
|
|
Directorships
|
Name and Age*
|
|
Time Served
|
|
Principal Occupation During Past
Five Years
|
|
by Director
(1)
|
|
Held
|
Interested Director and
Officers
(2)
|
|
|
|
|
H. Kevin Birzer
(Born
1959)
|
|
Director and Chairman of the Board
since 2005
|
|
Managing Director of the Adviser
since 2002; Member, Fountain Capital Management, LLC (Fountain Capital),
a registered investment adviser, (1990-May 2009); Director and Chairman of
the Board of each of TYG, TYN, TPZ, NTG, TTP and NDP since its inception;
Director and Chairman of the Board of Tortoise Capital Resources
Corporation (TTO) from its inception through November 30, 2011. CFA
designation since 1988.
|
|
7
|
|
None
|
Terry Matlack (Born
1956)
|
|
Chief Executive Officer since May
2011; Director since November 12, 2012
|
|
Managing Director of the Adviser
since 2002; Director of each of the Company, TYG, TYN, TPZ and TTO from
its inception to September 15, 2009; Director of each of TYG, TYN, TPZ,
NTG, TTP and NDP since November 12, 2012; Chief Executive Officer of NTG
since 2010, of each of TYG, TYN and TPZ since May 2011, and of each of TTP
and NDP since its inception; Chief Financial Officer of each of the
Company, TYG, TYN, and TPZ from its inception to May 2011, and of TTO from
its inception to June 2012. CFA designation since
1985.
|
|
7
|
|
None
|
P. Bradley Adams
(Born
1960)
|
|
Chief Financial Officer since May
2011
|
|
Director of Financial Operations of
the Adviser since 2005; Chief Financial Officer of NTG since 2010, of each
of TYG, TYN and TPZ since May 2011, and of each of TTP and NDP since its
inception; Assistant Treasurer of each of the Company, TYG and TYN from
November 2005 to May 2011, of TPZ from its inception to May 2011, and of
TTO from its inception to June 2012.
|
|
N/A
|
|
None
|
Zachary A. Hamel
(Born
1965)
|
|
President since May 2011
|
|
Managing Director of the Adviser since
2002; Joined Fountain Capital in 1997 and was Partner there from 2001
through September 2012. President of NTG since 2010, of each of TYG and
TPZ since May 2011, and of each of TTP and NDP since its inception, Senior
Vice President of the Company from 2005 to May 2011, of TYG from 2007 to
May 2011, of TYN since 2007, of TPZ from its inception to May 2011, and of
TTO from 2005 through November 2011. CFA designation since
1998.
|
|
N/A
|
|
None
|
Kenneth P. Malvey (Born
1965)
|
|
Senior Vice President since
inception; Treasurer since November 2005
|
|
Managing Director of the Adviser
since 2002; Joined Fountain Capital in 2002 and was a Partner there from
2004 through September 2012. Treasurer of each of TYG and TYN since 2005,
of each of TPZ, NTG, TTP and NDP since its inception, and of TTO from 2005
through November 2011; Senior Vice President of each of TYG and TYN since
2007, of each of TPZ, NTG, TTP and NDP since its inception, and of TTO
from 2005 through November 2011. CFA designation since 1996.
|
|
N/A
|
|
None
|
David J. Schulte
(Born 1961)
|
|
Senior Vice President since May
2011
|
|
Managing Director of the Adviser
since 2002; Managing Director of Corridor InfraTrust Management, LLC, an
affiliate of the Adviser; President and Chief Executive Officer of each of
the Company, TYG and TPZ from its inception to May 2011; Chief Executive
Officer of TYN from 2005 to May 2011 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 and since June 2012; Senior Vice President of
NTG since 2010, of each of TYG, TYN and TPZ since May 2011, and of each of
TTP and NDP since its inception. CFA designation since
1992.
|
|
N/A
|
|
CorEnergy Infrastructure Trust, Inc.
(formerly Tortoise Capital Resources
Corporation)
|
(1)
|
This
number includes TYG, TYN, TPZ, NTG, TTP, NDP and the Company. Our Adviser
also serves as the investment adviser to TYG, TYN, TPZ, NTG, TTP and
NDP.
|
(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.
|
20
Tortoise Energy Capital Corp.
Additional Information
(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 year ended November 30, 2012, the
aggregate compensation paid by the Company to the independent directors was
$109,000. 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, 2012 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.