UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement.
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to ss.240.14a-12
TORTOISE ENERGY CAPITAL CORPORATION
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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 |
TORTOISE ENERGY CAPITAL CORPORATION
10801 Mastin Boulevard, Suite 222
Overland Park, Kansas 66210
1-800-727-0254
January 27, 2006
Dear Fellow Stockholder:
You are cordially invited to attend the first annual meeting of stockholders of
Tortoise Energy Capital Corporation (the "Company") on Wednesday, April 12, 2006
at [____ a].m., Central Time, at [The Doubletree Hotel, 10100 College Boulevard,
Overland Park, Kansas 66210].
The matters scheduled for consideration at the meeting are the election of two
directors of the Company, the grant of authority to the Company to sell its
common shares for less than net asset value, subject to certain conditions, and
the ratification of the selection of Ernst & Young LLP as independent,
registered certified public accountants of the Company for its fiscal year
ending November 30, 2006, as more fully discussed in the enclosed proxy
statement.
Enclosed with this letter are answers to questions you may have about the
proposals, the formal notice of the meeting, the Company's proxy statement,
which gives detailed information about the proposals and why the Board
recommends that you vote to approve each of them, the actual proxy for you to
sign and return, and the Company's Annual Report to stockholders for the fiscal
year ended November 30, 2005. If you have any questions about the enclosed proxy
or need any assistance in voting your shares, please call 1-800-727-0254.
Your vote is important. Please complete, sign, and date the enclosed proxy card
and return it in the enclosed envelope. This will ensure that your vote is
counted, even if you cannot attend the meeting in person.
Sincerely,
David J. Schulte
CEO and President
|
TORTOISE ENERGY CAPITAL CORPORATION
ANSWERS TO SOME IMPORTANT QUESTIONS
Q. WHAT AM I BEING ASKED TO VOTE "FOR" ON THIS PROXY?
A. This proxy contains three proposals: (i) the election of two directors
to serve until the 2009 Annual Stockholder Meeting; (ii) the grant of authority
to the Company to sell its common shares for less than net asset value, subject
to certain conditions; and (iii) the ratification of Ernst & Young LLP as the
Company's independent, registered certified public accountants. Stockholders of
the Company may also transact such other business as may properly come before
the meeting.
Q. HOW DOES THE BOARD OF DIRECTORS SUGGEST THAT I VOTE?
A. The Board of Directors of the Company unanimously recommends that you
vote "FOR" all proposals on the enclosed proxy card.
Q. HOW CAN I VOTE?
A. You can vote by completing, signing and dating your proxy card, and
mailing it in the enclosed envelope. You also may vote in person if you are able
to attend the meeting. However, even if you plan to attend the meeting, we urge
you to cast your vote by mail. That will ensure that your vote is counted should
your plans change.
This information summarizes information that is included in more
detail in the Proxy Statement. We urge you to
read the Proxy Statement carefully.
If you have questions, call 1-800-727-0254.
TORTOISE ENERGY CAPITAL CORPORATION
10801 Mastin Boulevard, Suite 222
Overland Park, Kansas 66210
1-800-727-0254
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Tortoise Energy Capital Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tortoise
Energy Capital Corporation, a Maryland Corporation (the "Company"), will be held
on Wednesday, April 12, 2006 at [______a].m. Central Time at [The Doubletree
Hotel, 10100 College Boulevard, Overland Park, Kansas 66210] for the following
purposes:
1. To elect two directors of the Company, to hold office for a term
of three years and until their respective successors are duly
elected and qualified;
2. To grant the Company the authority to sell its common shares for
less than net asset value, subject to certain conditions;
3. To ratify the selection of Ernst & Young LLP as independent,
registered certified public accountants of the Company for its
fiscal year ending November 30, 2006; and
4. To transact any other business that may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Stockholders may also transact any other business that properly comes before the
meeting.
Stockholders of record as of the close of business on January 17, 2006 are
entitled to notice of and to vote at the meeting (or any adjournment or
postponement of the meeting).
By Order of the Board of Directors of the Company,
Zachary A. Hamel
Secretary
January 27, 2006
Overland Park, Kansas
All stockholders are cordially invited to attend the meeting in person. Whether
or not you expect to attend the meeting, please complete, date, sign and return
the enclosed proxy as promptly as possible in order to ensure your
representation at the meeting. A return envelope (which postage is prepaid if
mailed in the United States) is enclosed for that purpose. Even if you have
given your proxy, you may still vote in person if you attend the meeting. Please
note, however, that if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the meeting, you must obtain from the record
holder a proxy issued in your name.
TORTOISE ENERGY CAPITAL CORPORATION
10801 Mastin Boulevard, Suite 222
Overland Park, Kansas 66210
1-800-727-0254
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2006
This proxy statement is being sent to you by the Board of Directors of
Tortoise Energy Capital Corporation (the "Company"). The Board of Directors is
asking you to complete and return the enclosed proxy card, permitting your
shares of the Company to be voted at the annual meeting of stockholders called
to be held on April 12, 2006. Stockholders of record at the close of business on
January 17, 2006 (the "record date") are entitled to vote at the meeting as set
forth in this proxy statement. This proxy statement and the enclosed proxy and
the Company's Annual Report to stockholders for the fiscal year ended November
30, 2005 are first being mailed to stockholders on or about January 27, 2006.
The Company's reports can be accessed on its link at its investment
advisor's website (www.tortoiseadvisors.com) or on the Securities and Exchange
Commission's ("SEC") website (www.sec.gov).
1
PROPOSAL ONE
ELECTION OF TWO DIRECTORS
The Board of Directors unanimously nominated Terry C. Matlack and Charles
E. Heath, following recommendation by the nominating and governance committee,
for election as directors at the annual meeting. If elected, Messrs. Matlack and
Heath will serve for a term of three years and until their successors are duly
elected and qualified. Each of these nominees is currently a director, has
consented to be named in this proxy statement and has agreed to serve if
elected. The Company has no reason to believe that either Mr. Matlack or Mr.
Heath will be unavailable to serve.
The persons named on the accompanying proxy card intend to vote at the
meeting (unless otherwise directed) FOR the election of Messrs. Matlack and
Heath as directors of the Company. Currently the Company has five directors. In
accordance with the Company's Articles of Incorporation, as amended, its Board
of Directors is divided into three classes of approximately equal size. The
terms of the directors of the different classes are staggered. The terms of John
R. Graham and H. Kevin Birzer expire on the date of the 2007 annual meeting of
stockholders and the term of Conrad S. Ciccotello expires at the annual meeting
of stockholders in 2008. If Mr. Matlack and Mr. Heath are elected at the 2006
annual meeting, their terms will expire on the date of the 2009 annual meeting
of stockholders.
In accordance with the Company's Bylaws ("Bylaws"), each share may be voted
for as many individuals as there are directors to be elected and for whose
election the share is entitled to vote. On this proposal, the holders of common
shares are entitled to vote each share on the election of each of the two
directors. The Company's directors are elected by a plurality of the votes cast
at the meeting. Where, as here, there are two vacancies for director, the two
nominees with the highest number of affirmative votes, regardless of the votes
withheld for those candidates, will be elected. Thus, abstentions, withheld
votes and broker non-votes, if any, will not be counted towards such nominee's
achievement of a plurality. Stockholders do not have cumulative voting rights.
If elected, Mr. Matlack and Mr. Heath will hold office until the 2009
annual meeting of stockholders and until their successors are duly elected and
qualified. If either Mr. Matlack or Mr. Heath is unable to serve because of an
event not now anticipated, the persons named as proxies may vote for one or more
other persons designated by the Board of Directors.
The following table sets forth each Board member's name, age and address;
position(s) with the Company and length of time served; principal occupation
during the past five years; the number of portfolios in the Fund Complex that
each Board member oversees; and other public company directorships held by each
Board member. The Fund Complex is comprised of the closed-end funds advised by
the Company's investment advisor, Tortoise Capital Advisors, L.L.C. (the
"Advisor"), and as of January 27, 2006 included the Company, Tortoise North
American Energy Corporation ("TYN") and Tortoise Energy Infrastructure
Corporation ("TYG").
2
NOMINEE FOR DIRECTOR WHO IS NOT AN INTERESTED PERSON:
Number of
Positions(s) Held Portfolios in Other
With Company and Fund Complex Directorships
Length of Time Principal Occupation Overseen by Held by
Name, Age and Address Served During Past Five Years Director Director
--------------------- ------------------- ---------------------- ---------------- -------------
Charles E. Heath*, 63 Director since 2005 Retired in 1999. Formerly, Three None
10801 Mastin Blvd. Chief Investment Officer,
Suite 222 General Electric's Employers
Overland Park, KS 66210 Reinsurance Corporation
(1989-1999). CFA since
1974.
*Mr. Heath is also a director of Tortoise Capital Resources Corporation ("TTO"),
an affiliate of the Company and for which the Advisor serves as investment
advisor.
NOMINEE FOR DIRECTOR WHO IS AN INTERESTED PERSON:
Number of
Positions(s) Held Portfolios in Other
With Company and Fund Complex Directorships
Length of Time Principal Occupation Overseen by Held by
Name, Age and Address Served During Past Five Years Director Director
--------------------- --------- ---------------------- ---------------- -------------
Terry C. Matlack*, 49 Director and Chief Managing Director of the Three None
10801 Mastin Blvd. Financial Officer Advisor; Managing Director,
Suite 222 since 2005, Kansas City Equity Partners
Overland Park, KS 66210 Assistant Treasurer LC ("KCEP"), a private equity
since November firm (2001-present). Formerly,
2005, Treasurer President, GreenStreet Capital
from April 2005 to (1995 - 2001).
November 2005
*Mr. Matlack, as a principal of the Advisor, is an "interested person" of the
Company, as that term is defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended (the "1940 Act"). Mr. Matlack is also a director of TTO.
3
REMAINING DIRECTORS WHO ARE NOT INTERESTED PERSONS:
Number of
Positions(s) Held Portfolios in Other
With Company and Fund Complex Directorships
Length of Time Principal Occupation Overseen by Held by
Name, Age and Address Served During Past Five Years Director Director
--------------------- --------- ---------------------- ---------------- ------------
Conrad S. Ciccotello*, 45 Director since 2005 Associate Professor of Risk Three None
10801 Mastin Blvd. Management and Insurance,
Suite 222 Robinson College of Business,
Overland Park, KS 66210 Georgia State University since
1999; Director of Graduate
Personal Financial Planning
Programs, and Editor,
Financial Services Review
since 2001 (an academic
journal dedicated to the
study of individual
financial management).
Formerly, faculty member,
Pennsylvania State
University (1997-1999).
John R. Graham*, 60 Director since 2005 Executive-in-Residence and Three Erie Indemnity
10801 Mastin Blvd. Professor of Finance, College Company; Erie
Suite 222 of Business Administration, Family Life
Overland Park, KS 66210 Kansas State University (has Insurance
served as a professor or Company;
adjunct professor since 1970); Kansas State
Chairman of the Board, Bank
President and CEO, Graham
Capital Management, Inc. and
Owner of Graham Ventures.
Formerly, CEO, Kansas Farm
Bureau Financial Services,
including seven affiliated
insurance or financial
service companies
(1979-2000).
*Messrs. Ciccotello and Graham are also directors of TTO.
4
REMAINING DIRECTOR WHO IS AN INTERESTED PERSON:
Number of
Position(s) Held Portfolios in Other
With Company and Fund Complex Directorships
Length of Time Principal Occupation Overseen by Held by
Name, Age and Address Served During Past Five Years Director Director
--------------------- --------- ---------------------- --------------- ----------
H. Kevin Birzer*, 46 Director and Managing Director of the Three None
10801 Mastin Blvd. Chairman of the Advisor; Partner/Senior
Suite 222 Board since 2005 Analyst, Fountain Capital
Overland Park, KS 66210 Management, L.L.C. ("Fountain
Capital"), a registered
investment advisor (1989-
present). Formerly,
Vice President, Corporate
Finance Department, Drexel
Burnham Lambert (1986-1989);
and Vice President, F. Martin
Koenig & Co. (1983-1986).
*Mr. Birzer, as principal of the Advisor, is an "interested person" of the
Company, as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Birzer
is also a director of TTO.
Officers. Mr. Birzer is the Chairman of the Board of the Company, and Mr.
Matlack is the Chief Financial Officer and Assistant Treasurer of the Company.
The preceding table gives more information about Mr. Birzer and Mr. Matlack. The
following table sets forth each other officer's name, age and address;
position(s) held with the Company and length of time served; principal
occupation during the past five years; the number of portfolios in the Fund
Complex overseen by each officer; and other directorships held by each officer.
Each officer serves until his successor is chosen and qualified or until his
resignation or removal. As principals of the Advisor, each of the following
officers of the Company are "interested persons" of the Company, as that term is
defined in Section 2(a)(19) of the 1940 Act.
5
Number of
Position(s) Held Portfolios in Other
With Company and Fund Complex Directorships
Length of Time Principal Occupation Overseen by Held by
Name, Age and Address Served During Past Five Years Officer Officer
--------------------- --------- ---------------------- --------------- -----------
David J. Schulte, 44 President and Managing Director of the Three None
10801 Mastin Blvd. Chief Executive Advisor; Managing Director,
Suite 222 Officer since 2005 KCEP (1993-present).
Overland Park, KS 66210
Zachary A. Hamel, 40 Senior Vice Managing Director of the Three None
10801 Mastin Blvd. President and Advisor; Partner/Senior
Suite 222 Secretary since Analyst with Fountain Capital
Overland Park, KS 66210 2005 (1997-present).
Kenneth P. Malvey, 40 Senior Vice Managing Director of the Three None
10801 Mastin Blvd. President since Advisor; Partner/Senior Analyst,
Suite 222 2005, Treasurer Fountain Capital (2002-present).
Overland Park, KS 66210 since November 2005; Investment Risk Manager and
Assistant Formerly, member of the Global Office of
Treasurer from Investments, 2005 GE Capital's
April 2005 to Employers Reinsurance Corporation
November 2005 GE Capital's Employers
(1996 - 2002).
Committees of the Board of Directors. The Company's Board of Directors
currently has three standing committees:
o Executive Committee. Messrs. Birzer and Matlack are members of the
executive committee. The executive committee has authority to exercise
the powers of the Board (i) where assembling the full Board in a
timely manner is impracticable, (ii) to address emergency matters, or
(iii) to address matters of an administrative or ministerial nature.
Messrs. Birzer and Matlack are "interested persons" of the Company as
defined by Section 2(a)(19) of the 1940 Act.
o Audit Committee. Messrs. Ciccotello, Heath and Graham serve on the
audit committee. The audit committee was established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and operates under a written charter
adopted and approved by the Board, which is attached to this proxy
statement as Appendix A. The audit committee approves and recommends
to the Board the election, retention or termination of independent
auditors; approves services to be rendered by the auditors; monitors
the auditors' performance; reviews the results of the Company's audit;
determines whether to recommend to the Board that the Company's
audited financial statements be included in the Company's Annual
Report; and responds to other matters as outlined in the Audit
Committee Charter.
6
Each audit committee member is "independent" as defined under the
applicable New York Stock Exchange listing standards.
o Nominating and Governance Committee. Messrs. Ciccotello, Heath and
Graham serve on the nominating and governance committee (formerly the
Nominating Committee), none of whom are "interested persons" of the
Company as defined in the 1940 Act. Each nominating and governance
committee member is "independent" as defined under the New York Stock
Exchange listing standards. The nominating and governance committee
operates under a written charter adopted and approved by the Board[, a
current copy of which is available at the Company's link on the
Advisor's website (www.tortoiseadvisors.com)]. The nominating and
governance committee: (i) identifies individuals qualified to become
Board members and recommends to the Board the director nominees for
the next annual meeting of stockholders and to fill any vacancies;
(ii) monitors the structure and membership of Board committees;
recommends to the Board director nominees for each committee; (iii)
reviews issues and developments related to corporate governance issues
and develops and recommends to the Board corporate governance
guidelines and procedures, to the extent necessary or desirable; (iv)
actively seeks individuals who meet the standards for directors set
forth in the Company's Bylaws, who meet the requirements of any
applicable laws or exchange requirements and who are otherwise
qualified to become board members for recommendation to the Board; (v)
has the sole authority to retain and terminate any search firm used to
identify director candidates and to approve the search firm's fees and
other retention terms, though it has yet to exercise such authority;
and (vi) may not delegate its authority. The nominating and governance
committee will consider stockholder recommendations for nominees for
membership to the Board so long as such recommendations are made in
accordance with the Company's Bylaws. Nominees recommended by
stockholders in compliance with the Bylaws of the Company will be
evaluated on the same basis as other nominees considered by the
nominating and governance committee. Stockholders should see
"Stockholder Proposals and Nominations for the 2007 Annual Meeting"
below for information relating to the submission by stockholders of
nominees and matters for consideration at a meeting of the Company's
stockholders. The Company's Bylaws require all directors and nominees
for directors (1) to be at least 21 years of age and have substantial
expertise, experience and relationships relevant to the business of
the Company and (2) to have a master's degree in economics, finance,
business administration or accounting, to have a graduate professional
degree in law from an accredited university or college in the United
States, or the equivalent degree from an equivalent institution of
higher learning in another country, to have a certification as a
public accountant in the United States, to be deemed an "audit
committee financial expert" as such term is defined in item 401 of
Regulation S-K as promulgated by the SEC, or to be a current director
of the Company. The nominating and governance committee has the sole
discretion to determine if an individual satisfies the foregoing
qualifications.
o Compliance Committee. This committee was formed in December 2005.
Messrs. Ciccotello, Heath and Graham serve on the compliance
committee. Each compliance committee member is "independent" as
defined under the New York
7
Stock Exchange listing standards, and none are "interested persons" of
the Company as defined in the 1940 Act. The compliance committee
operates under a written charter adopted and approved by the Board.
The compliance committee reviews and assesses management's compliance
with applicable securities laws, rules and regulations; monitors
compliance with the Company's Code of Ethics; and handles other
matters as the Board or committee chair deems appropriate.
The Board does not currently have a standing compensation committee.
The New York Stock Exchange does not require boards of directors of
closed-end funds to have a standing compensation committee.
The following table shows the number of Board and committee meetings held
during the fiscal year ended November 30, 2005:
Board of Directors 4
Executive Committee 0
Audit Committee 1
Nominating Committee (became the Nominating and 0
Governance Committee in December 2005)
All of the members of the Board and committee members then serving attended
at least 75% of the aggregate meetings of the Board of Directors and applicable
committees held during the fiscal year.
Director and Officer Compensation. The Company does not compensate any of
the directors who are interested persons and does not compensate any of its
officers. The following table sets forth certain information with respect to the
compensation paid by the Company and the Fund Complex during fiscal 2005 to each
of the current directors. The Company has no retirement or pension plans.
Total Compensation from
Name Compensation from Company Fund Complex
---- ------------------------- ------------
H. Kevin Birzer $0 $0
Terry C. Matlack $0 $0
Conrad S. Ciccotello $27,000 $69,000
John R. Graham $21,000 $59,333
Charles E. Heath $21,000 $65,333
Required Vote. Mr. Heath and Mr. Matlack will be elected by the vote of a
plurality of all shares of the Company present at the meeting, in person or by
proxy. Each common share is entitled to one vote in the election of each of
Messrs. Heath and Matlack. Abstensions, withheld votes and broker non-votes, if
any, will not be counted towards a nominee's achievement of a plurality.
8
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE
COMPANY VOTE "FOR" MR. HEATH AND MR. MATLACK AS DIRECTORS.
9
PROPOSAL TWO
APPROVAL TO SELL COMMON SHARES
BELOW NET ASSET VALUE
Our initial public offering was in May 2005. Under the 1940 Act, the
Company may sell common shares in subsequent public offerings and invest the
proceeds from such subsequent public offerings in accordance with its investment
objectives, so long as the net sale price to the Company (after deduction of
offering expenses) is at least equal to the net asset value per share (the
"NAV") of its common shares. Additionally, the 1940 Act permits the Company to
sell its common shares below NAV with the consent of a majority of its common
stockholders or under certain other circumstances.
The Company believes that having the ability to issue its common shares
below NAV in certain instances will benefit all of its stockholders. The Company
expects that it will be periodically presented with attractive opportunities to
acquire securities of master limited partnerships ("MLPs") that require the
Company to make its investment commitment quickly. Because the Company generally
attempts to remain fully invested and does not intend to maintain cash for the
purpose of making these investments, the Company may be unable to capitalize on
investment opportunities presented to it unless it quickly raises capital. The
market value of our common shares, however, may periodically fall below our NAV,
which is not uncommon for a closed-end fund such as the Company. If this
happens, absent the approval of this proposal by a majority of the common
stockholders, the Company will not be able to effectively access capital markets
to enable it to take advantage of attractive investment opportunities.
The proposed action would give the Company the opportunity to raise cash
and purchase attractively priced securities even if the net sale price to the
Company of our common shares is below NAV. The Company does not anticipate
selling common shares below NAV unless the Company has identified attractive
near term investment opportunities that the directors, including a majority of
disinterested directors, as defined in the 1940 Act, reasonably believe will
increase stockholder distributions. Further, to the extent the Company issues
common shares below NAV in a publicly registered transaction, the market
capitalization and number of publicly tradable shares of the Company will
increase, thus affording all stockholders greater liquidity.
Upon stockholder approval, the Company will only sell common shares below
NAV if all of the following conditions are met:
1. The per share offering price, before deduction of underwriting fees,
commissions and offering expenses, will not be less than the NAV per share of
the Company's common stock, as determined at any time within two business days
of pricing of the common stock to be sold in the offering.
2. Immediately following the offering, after deducting offering expenses
and underwriting fees and commissions, the NAV per share of the Company's common
stock, as determined at any time within two business days of pricing of the
common stock to be sold, would not have been diluted by greater than a total of
1% of such value per share of all outstanding common stock. The Company will not
be subject to a maximum number of shares that can be sold or a defined minimum
sales price per share in any offering so long as the
10
aggregate number of shares offered and the price at which such shares are sold
together would not result in dilution of the NAV per share of the Company's
common stock in excess of the 1% limitation.
3. A majority of the Company's independent directors makes a determination,
based on information and a recommendation from the Advisor, that they reasonably
expect that the investment(s) to be made with the net proceeds of such issuance
will lead to a long-term increase in distribution growth.
As discussed below under the caption "More Information About the Meeting -
Investment Advisory Agreement," the Advisor is paid a fee based upon the
Company's average monthly Managed Assets (as defined below). The Advisor is
controlled directly or indirectly by officers and certain directors of the
Company, among others. Therefore, the Advisor's interest in determining whether
to recommend that the Company issue common shares below NAV may conflict with
the interests of the Company and its stockholders.
Before voting on this proposal or giving proxies with regard to this
matter, common stockholders should consider the potentially dilutive effect of
the issuance of shares of the Company's common stock at less than NAV per share
on the NAV per outstanding share of common stock. Any sale of common stock at a
price below NAV would result in an immediate dilution on the NAV per outstanding
share to existing common stockholders of as much as 1%. The 1940 Act establishes
a connection between common share sale price and NAV because when stock is sold
at a sale price below NAV per share, the resulting increase in the number of
outstanding shares is not accompanied by a proportionate increase in the net
assets of the Company. Common stockholders should also consider that holders of
the Company's common stock have no subscription, preferential or preemptive
rights to acquire additional shares of the common stock proposed to be
authorized for issuance, and thus any future issuance of common stock will
dilute such stockholders' holdings of common stock as a percentage of shares
outstanding to the extent stockholders do not purchase sufficient shares in the
offering to maintain their percentage interest. Further, if current stockholders
of the Company either do not purchase any shares in an offering conducted by the
Company or do not purchase sufficient shares in the offering to maintain their
percentage interest, regardless of whether such offering is above or below the
then current NAV, their voting power will be diluted.
The persons named in the accompanying proxy card intend to vote at the
meeting (unless otherwise directed) FOR approval of the sale of common shares
below NAV.
Required Vote. The proposal must be approved by (a) the affirmative vote of
a majority of all common stockholders of record as of the record date, and (b)
the affirmative vote of a majority of the votes cast by the holders of common
stock.
Solely for the purpose of determining whether a majority of the number of
common stockholders of record approved the matter, the number of common shares
held by any single stockholder will not be relevant. For the purpose of
determining whether a majority of the number of common stockholders of record
approved Proposal Two, abstentions and broker non-votes, if any, recorded by
record owners will have the effect of a vote against the proposal. For the
purposes of determining whether a majority of the votes cast approved this
proposal, each common share is entitled to one vote. Further, abstentions and
broker non-votes will not be counted as votes cast and will have no effect on
the result of the vote.
11
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
OF THE COMPANY VOTE "FOR" THE PROPOSAL TO ALLOW THE COMPANY TO SELL ITS COMMON
SHARES BELOW NET ASSET VALUE.
12
PROPOSAL THREE
RATIFICATION OF SELECTION OF
INDEPENDENT, REGISTERED CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders of the Company
ratify the selection of Ernst & Young LLP ("E&Y"), independent, registered
certified public accountants, to audit the accounts of the Company for the
fiscal year ending November 30, 2006. [E&Y's selection was approved by the audit
committee at a meeting held on January 17, 2006. Their selection also was
ratified and approved by the vote, cast in person, of a majority of the
directors of the Company, including a majority of the directors who are not
"interested persons" of the Company within the meaning of the 1940 Act, and who
are "independent" as defined in the New York Stock Exchange listing standards,
at a meeting held on January 17, 2006.]
The persons named in the accompanying proxy card intend to vote at the
meeting (unless otherwise directed) FOR the ratification of E&Y as the Company's
independent, registered certified public accountants. E&Y has audited the
accounts of the Company since prior to the Company's commencement of business in
May 2005 and does not have any direct financial interest or any material
indirect financial interest in the Company. A representative of E&Y is expected
to be available at the meeting and to have the opportunity to make a statement
and respond to appropriate questions from the stockholders. The audit committee
of the Board of Directors meets each year with representatives of E&Y to discuss
the scope of their engagement, review the financial statements of the Company
and the results of their examination.
Required Vote. E&Y will be ratified as the Company's independent,
registered certified public accountant by the affirmative vote of a majority of
all shares cast at the meeting, in person or by proxy. Each common share is
entitled to one vote on this proposal. For the purposes of the vote on this
proposal, abstentions and broker non-votes will not be counted as votes cast and
will have no effect on the result of the vote.
AUDIT COMMITTEE REPORT
The audit committee of the Board of Directors of the Company reviews the
Company's annual financial statements with both management and the independent
auditors, and the committee meets periodically with the independent auditors to
consider their evaluation of the Company's financial and internal controls.
[The audit committee, in discharging its duties, has met with and
held discussions with management and the Company's independent auditors. The
committee has reviewed and discussed the Company's audited financial statements
for the fiscal year ended November 30, 2005 with management. Management has
represented to the independent auditors that the Company's financial statements
were prepared in accordance with generally accepted accounting principles.
The audit committee has also discussed with the independent auditors the
matters required to be discussed by the Statement on Auditing Standards No. 61
(Communications with Audit Committees). The independent auditors provided to the
committee the written disclosures and the letter required by Independence
Standards Board Standard No. 1 (Independence
13
Discussions with Audit Committees), and the committee discussed with
representatives of the independent auditors their firm's independence.
Based on the audit committee's review and discussions with management and
the independent auditors, the representations of management and the reports of
the independent auditors to the committee, the committee recommended that the
Board include the audited financial statements in the Company's Annual Report
for filing with the SEC.]
The Audit Committee
Conrad S. Ciccotello (Chairman)
Charles E. Heath
John R. Graham
INDEPENDENT AUDITORS
[On January 17, 2006, the Company's audit committee selected E&Y,
independent, registered certified public accountants, to audit the books and
records of the Company for its fiscal year ending November 30, 2006.] E&Y is
registered with the Public Company Accounting Oversight Board.
AUDIT AND RELATED FEES
Audit Fees. For professional services rendered with respect to the audit of
the Company's financial statements and the review of the Company's statutory and
regulatory filings for its last fiscal year, the Company paid E&Y fees in the
approximate amount of $61,126. The Company was formed on March 4, 2005, and thus
did not pay E&Y any fees prior to that date.
Audit-Related Fees. For professional services rendered with respect to
assurance and related services reasonably related to the performance of the
audit of the Company's annual financial statements for its fiscal year ending
November 30, 2005, the Company paid E&Y fees in the approximate amount of
$4,000. These fees were for services related to annual rating agency compliance
procedures.
Tax Fees. For professional services for tax compliance, tax advice and tax
planning for its last fiscal year, the Company paid to E&Y fees in the
approximate amount of $14,000. These services included providing tax advice and
assistance and preparation of tax returns.
All Other Fees. The Company did not pay E&Y any fees for services other
than those described above during its last fiscal year.
Aggregate Non-Audit Fees. The Company did not pay E&Y any amounts for any
non-audit services during the Company's last fiscal year.
The Advisor has not paid nor been billed for fees to E&Y for non-audit
services rendered to the Advisor during the Company's last fiscal year.
On April 15, 2005, the audit committee of the Company adopted pre-approval
polices and procedures. Under these policies and procedures, the audit committee
pre-approves (i) the selection of the Company's independent auditors, (ii) the
engagement of the independent
14
auditors to provide any non-audit services to the Company, (iii) the engagement
of the independent auditors to provide any non-audit services to the Advisor or
any entity controlling, controlled by, or under common control with the Advisor
that provides ongoing services to the Company, if the engagement relates
directly to the operations and financial reporting of the Company, and (iv) the
fees and other compensation to be paid to the independent auditors. The Chairman
of the audit committee may grant the pre-approval of any engagement of the
independent auditors for non-audit services of less than $5,000, and such
delegated pre-approvals will be presented to the full audit committee at its
next meeting. Under certain limited circumstances, pre-approvals are not
required under securities law regulations for certain non-audit services below
certain de minimus thresholds. Since the adoption of these policies and
procedures, the audit committee has pre-approved all audit and non-audit
services provided by E&Y, and all non-audit services provided by E&Y for the
Advisor, or any entity controlling, controlled by, or under common control with
the Advisor that provides ongoing services to the Company, that are related to
the operation of the Company. None of these services provided by E&Y were
approved by the audit committee pursuant to the de minimus exception under Rule
2.01(c)(7)(i)(C) or Rule 2.01(c)(7)(ii) of Regulation S-X.
The audit committee of the Company has considered whether E&Y's provision
of services (other than audit services) to the Company, the Advisor or any
entity controlling, controlled by, or under common control with the Advisor that
provides services to the Company is compatible with maintaining E&Y's
independence in performing audit services.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters that
are intended to be brought before the meeting. If other matters are presented
for action, the proxies named in the enclosed form of proxy will vote on those
matters in their sole discretion.
MORE INFORMATION ABOUT THE MEETING
Stockholders. At the record date, the Company had [15,960,661] common
shares issued and outstanding.
At December 31, 2005, each director beneficially owned (as determined
pursuant to Rule 16a-1(a)(2) under the Exchange Act) shares of the Company and
in all Funds overseen by each Director in the same Fund Complex having values
within the indicated dollar ranges. Other than the Fund Complex and TTO, none of
the Company's directors who are not interested persons of the Company, nor any
of their immediate family members, has ever been a director, officer or employee
of the Advisor or its affiliates.
15
Aggregate Dollar Range of Holdings
Aggregate Dollar Range of Holdings in in Funds Overseen by Director in
Director the Company(1) Fund Complex(2)
-------- --------------
H. Kevin Birzer(3) Over $100,000 Over $100,000
Terry C. Matlack(3) Over $100,000 Over $100,000
Conrad S. Ciccotello $10,001 - $50,000 $50,001 - $100,000
John R. Graham $50,001-$100,000 Over $100,000
Charles E. Heath $10,001 - $50,000 Over $100,000
- ----------------------------
(1) Based on the closing price of the Company's common shares on the New York
Stock Exchange on December 30, 2005.
(2) Includes the Company, TYN and TYG. Amounts based on the closing price of
common shares of the Company, TYN and TYG on the New York Stock Exchange on
December 30, 2005.
(3) These persons are "interested persons" of the Company as defined by Section
2(a)(19) of the 1940 Act.
The following table sets forth the securities of TTO owned beneficially by
the Company's directors who are not "interested persons" of the Company, as
defined in Section 2(a)(19) of the 1940 Act, as of January 11, 2006. The Advisor
also serves as the investment advisor to TTO.
Value of Securities
Name of Director Title of Class (1) Percent of Class (2)
---------------- -------------- --- --------------------
Conrad S. Ciccotello (3) Common Shares $15,000 0.04%
John R. Graham (4) Common Shares $60,000 0.16%
Charles E. Heath (5) Common Shares $45,000 0.12%
(1) The value of the securities is determined by reference to the most recent
price at which TTO sold its common shares, and includes the net value of
all warrants to purchase common shares of TTO ("Warrants") held by such
director, assuming the Warrants were exercised on January 11, 2006.
(2) The percentage of class is determined by including all shares the director
could purchase if the director exercised all Warrants the director holds,
but not including the number of shares which could be purchased by all
other holders of Warrants if they exercised such Warrants.
(3) Mr. Ciccotello holds these shares jointly with his wife, Elizabeth
Ciccotello.
(4) These shares are held of record by the John R. Graham Trust U/A 1/3/92,
John R. Graham, Trustee.
(5) These shares are held of record by the Charles E. Heath Trust No.1 U/A
2/1/92, Charles E. Heath and Kathleen M. Heath, Trustees.
At December 31, 2005, each director, each officer and the directors and
officers as a group, beneficially owned (as determined pursuant to Rule 13d-3
under the Exchange Act) shares of common stock of the Company (or percentage of
outstanding shares) as follows:
16
Number of
Directors and Officers Common Shares %
---------------------- ------------- -----
H. Kevin Birzer** [10,700.00] *
Terry C. Matlack** [4,737.34] *
Conrad S. Ciccotello [500.00] *
John R. Graham [4,000.00] *
Charles E. Heath [2,000.00] *
David J. Schulte** [1,210.29] *
Zachary A. Hamel** [630.00] *
Kenneth P. Malvey** [630.00] *
Directors and Officers
as a Group [24,407.63] *
*Indicates less than 1%.
**These persons are "interested persons" of the Company as defined by Section
2(a)(19) of the 1940 Act.
At December 31, 2005, to the knowledge of the Company, no person held sole
or shared power to vote or dispose of more than 5% of the outstanding shares of
the Company.
Investment Advisory Agreement. Tortoise Capital Advisors, L.L.C. (the
"Advisor") is the Company's investment advisor. The Advisor is controlled
equally by Fountain Capital and KCEP. As of December 31, 2005, the Advisor had
approximately $1.5 billion of client assets under management. The Advisor may be
contacted at the address listed on the first page of this proxy statement.
Pursuant to the terms of an Advisory Agreement between the Company and the
Advisor, dated May 1, 2005 (the "Advisory Agreement"), the Company pays to the
Advisor quarterly, as compensation for the services rendered by the Advisor, a
fee equal to 0.90% annually of the Company's average monthly Managed Assets
until May 31, 2006. Thereafter, the Company will
17
pay the Advisor a fee equal to 0.95% annually of the Company's average monthly
Managed Assets for such services. "Managed Assets" means the Company's total
assets (including any assets attributable to any leverage that may be
outstanding) minus the sum of accrued liabilities other than (1) deferred taxes,
(2) debt entered into for purposes of leverage, and (3) the aggregate
liquidation preference of any outstanding preferred shares. In its last fiscal
year the Company paid the amount of $1,135,779 to the Advisor under the Advisory
Agreement. The Advisor is controlled directly or indirectly by David J. Schulte,
CEO and President of the Company; Terry Matlack, a director and the Chief
Financial Officer and Assistant Treasurer of the Company; H. Kevin Birzer,
director and Chairman of the Board of the Company, Zachary A. Hamel, Secretary
of the Company, and Kenneth P. Malvey, Treasurer of the Company, among others.
How Proxies Will Be Voted. All proxies solicited by the Board of Directors
that are properly executed and received prior to the meeting, and that are not
revoked, will be voted at the meeting. Shares represented by those proxies will
be voted in accordance with the instructions marked on the proxy. If no
instructions are specified, shares will be counted as a vote FOR the proposals
described in this proxy statement.
How To Vote. Complete, sign and date the enclosed proxy card and return it
in the enclosed envelope.
Expenses and Solicitation of Proxies. The expenses of preparing, printing
and mailing the enclosed proxy card, the accompanying notice and this proxy
statement and all other costs, in connection with the solicitation of proxies
will be borne by the Company. The Company may also reimburse banks, brokers and
others for their reasonable expenses in forwarding proxy solicitation material
to the beneficial owners of shares of the Company. In order to obtain the
necessary quorum at the meeting, additional solicitation may be made by mail,
telephone, telegraph, facsimile or personal interview by representatives of the
Company, the Advisor, the Company's transfer agent, or by brokers or their
representatives or by a solicitation firm that may be engaged by the Company to
assist in proxy solicitations. If a proxy solicitor is retained by the Company,
the costs associated with all proxy solicitation are not anticipated to exceed
$35,000. The Company will not pay any representatives of the Company or the
Advisor any additional compensation for their efforts to supplement proxy
solicitation.
Revoking a Proxy. At any time before it has been voted, you may revoke your
proxy by: (1) sending a letter stating that you are revoking your proxy to the
Secretary of the Company at the Company's offices located at 10801 Mastin
Boulevard, Suite 222, Overland Park, Kansas 66210; (2) properly executing and
sending a later-dated proxy; or (3) attending the meeting, requesting return of
any previously delivered proxy, and voting in person.
Quorum. The presence, in person or by proxy, of holders of shares entitled
to cast a majority of the votes entitled to be cast (without regard to class)
constitutes a quorum. For purposes of determining the presence or absence of a
quorum, abstentions and broker non-votes will be treated as shares that are
present at the meeting but have not been voted.
If a quorum is not present in person or by proxy at the meeting, the
chairman of the meeting or the stockholders entitled to vote at such meeting,
present in person or by proxy, have the power to adjourn the meeting to a date
not more than 120 days after the original record date without notice other than
announcement at the meeting.
18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the Exchange Act require
the Company's directors and officers, the Advisor, affiliated persons of the
Advisor and persons who own more than 10% of a registered class of the Company's
equity securities to file forms reporting their affiliation with the Company and
reports of ownership and changes in ownership of the Company's shares with the
SEC and the New York Stock Exchange. Those persons and entities are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based on a review of those forms furnished to the Company, the
Company believes that its directors and officers, the Advisor and affiliated
persons of the Advisor have complied with all applicable Section 16(a) filing
requirements during the last fiscal year. To the knowledge of management of the
Company, no person owns beneficially more than 10% of a class of the Company's
equity securities.
ADMINISTRATOR
The Company has entered into an administration agreement with US Bancorp,
whose principal business address is 615 E. Michigan Street, Milwaukee, Wisconsin
53202.
STOCKHOLDER COMMUNICATIONS
Stockholders are able to send communications to the Board of Directors.
Communications should be addressed to the Secretary of the Company at its
principal offices at 10801 Mastin Boulevard, Suite 222, Overland Park, Kansas
66210. The Secretary will forward any communications received directly to the
Board of Directors. The Company does not have a policy with regard to Board
attendance at annual meetings. This is the Company's first annual meeting.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2007 ANNUAL MEETING
Method for Including Proposals in the Company's Proxy Statement. Under the
rules of the SEC, if you want to have a proposal included in our proxy statement
for our next annual meeting of stockholders, that proposal must be received by
the Secretary of the Company at 10801 Mastin Boulevard, Suite 222, Overland
Park, Kansas 66210, not later than 5:00 p.m., Central Time on September 29,
2006. Such proposal must comply with all applicable requirements of Rule 14a-8
of the Exchange Act.
Other Proposals and Nominations. If you want to nominate a director or have
other business considered at our next annual meeting of stockholders but do not
want those items included in our proxy statement, you must comply with the
advance notice provision of our Bylaws. Under our Bylaws, nominations for
director or other business proposals to be addressed at our next annual meeting
may be made by a stockholder who has delivered a notice to the Secretary of the
Company at 10801 Mastin Boulevard, Suite 222, Overland Park, Kansas 66210, no
earlier than August 30, 2006 nor later than 5:00 p.m. Central Time on September
29, 2006. The stockholder must satisfy certain requirements set forth in the
Company's Bylaws and the notice must contain specific information required by
the Company's Bylaws. With respect to nominees for director, the notice must
include, among other things, the name, age, business address and residence
address of any nominee for director, certain information regarding such person's
ownership of Company shares, and all other information relating to the nominee
as is
19
required to be disclosed in solicitations of proxies in an election contest or
as otherwise required by Regulation 14A under the Exchange Act. With respect to
other business to be brought before the meeting, a notice must include, among
other things, a description of the business and any material interest in such
business by the stockholder and certain associated persons proposing the
business. Any stockholder wishing to make a proposal should carefully read and
review the Company's Bylaws. A copy of the Company's Bylaws may be obtained by
contacting the Secretary of the Company at 1-800-727-0254 or by writing the
Secretary of the Company at 10801 Mastin Boulevard, Suite 222, Overland Park,
Kansas 66210. Timely submission of a proposal does not mean the proposal will be
included in the proxy material sent to stockholders.
These advance notice provisions are in addition to, and separate from, the
requirements that a stockholder must meet in order to have a proposal included
in the Company's proxy statement under the rules of the SEC.
A proxy granted by a stockholder will give discretionary authority to the
proxies to vote on any matters introduced pursuant to the above advance notice
Bylaw provisions, subject to applicable rules of the SEC.
By Order of the Board of Directors
Zachary A. Hamel
Secretary
January 27, 2006
20
APPENDIX A
AUDIT COMMITTEE CHARTER
TORTOISE ENERGY CAPITAL CORPORATION
(THE "COMPANY")
AUDIT COMMITTEE CHARTER
I. PURPOSE
The Audit Committee is a committee of the Board of Directors of the
Company. Its primary function is to assist the Board in fulfilling certain of
its responsibilities. This Charter sets forth the duties and responsibilities of
the Audit Committee.
The Audit Committee serves as an independent and objective party to oversee
the Company's accounting policies, financial reporting and internal control
system, as well as the work of the Company's independent auditors. The Audit
Committee assists Board oversight of (1) the integrity of the Company's
financial statements; (2) the Company's compliance with legal and regulatory
requirements; (3) the independent auditors' qualifications and independence; and
(4) the performance of the Company's independent auditors. The Audit Committee
also serves to provide an open avenue of communication among the independent
auditors, Company management and the Board.(1)
o Company management has the primary responsibility to establish and
maintain systems for accounting, reporting and internal controls,
which functions may be delegated to an accounting service agent or
custodian, provided Company management provides adequate oversight.
o The independent auditors have the primary responsibility to plan and
implement a proper audit of the Company's financial statements,
including consideration of the Company's accounting, reporting and
internal control practices.
The Audit Committee may have additional functions and responsibilities as
deemed appropriate by the Board and the Audit Committee.(2)
Although the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and have been prepared in accordance with generally accepted accounting
principles.
- ---------------------
(1) The New York Stock Exchange Corporate Governance Standards require the Audit
Committee's charter to address, as one of the Committee's purposes, that it
assist Board oversight of "the performance of the company's internal audit
function." Since the Company has no internal audit function, this has not been
included as one of the purposes of the Committee.
(2) The Audit Committee also has as a purpose the preparation of an audit
committee report to be included in the annual proxy statement. This report is
described in footnote 8.
II. COMPOSITION
The Audit Committee shall be comprised of all independent board members
who, in the opinion of the Board, are free from any relationship that would
interfere with the exercise of his or her independent judgment as a member of
the Audit Committee. For these purposes, a board member is considered an
independent board member if:
o he or she is not an "interested person" of the Company as that term is
defined in the Investment Company Act of 1940 (the "1940 Act");
o he or she does not accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the Company (except in the
capacity as a Board or committee member); and
o he or she meets the independence requirements set forth in the New
York Stock Exchange Listed Company Manual, Section 303A.07.
Each member of the Audit Committee shall be financially literate, as such
qualification is interpreted by the Board in its business judgment. The Audit
Committee will review the qualifications of its members and determine whether
any of its members qualify as an "audit committee financial expert"(3) as
defined in Form N-CSR. The Audit Committee will submit such determination to the
Board for its final determination. At least one member of the Audit Committee
must have accounting or related financial management expertise, as the Board
interprets such qualification in its business judgment.
Audit Committee members may enhance their familiarity with finance and
accounting by participating in educational programs from time to time, at the
expense of the Company.
- ---------------------
(3) An "audit committee financial expert" of a company is defined as a person
who has all of the following attributes: (1) an understanding of generally
accepted accounting principles ("GAAP") and financial statements; (2) the
ability to assess the general application of GAAP in connection with the
accounting for estimates, accruals and reserves; (3) experience preparing,
auditing, analyzing or evaluating financial statements that present a breadth
and level of complexity of accounting issues that are generally comparable to
the breadth and complexity of issues that can reasonably be expected to be
raised by the company's financial statements, or experience actively supervising
one or more persons engaged in such activities; (4) an understanding of internal
controls and procedures for financial reporting; and (5) an understanding of
audit committee functions. An audit committee financial expert must have
acquired such attributes through any one or more of the following: (1) education
and experience as a principal financial officer, principal accounting officer,
controller, public accountant or auditor or experience in one or more positions
that involve the performance of similar functions (or active supervision of such
persons); or (2) experience overseeing or assessing the performance of companies
or public accountants with respect to the preparation, auditing or evaluation of
financial statements; or (3) other relevant experience.
The members of the Audit Committee shall be elected by the Board annually
and serve until their successors shall be duly elected and qualified. Unless a
Chairman is elected by the Board, the Chairman shall be elected annually be a
majority vote of the members of the Audit Committee.
The Audit Committee shall have unrestricted access to the independent
auditors and the executive and financial management of the Company. The Audit
Committee shall have the resources and authority appropriate to discharge its
responsibilities, including the authority in its discretion to retain special
legal, accounting or other experts or consultants to advise the Audit Committee
at the expense of the Company if, in the Audit Committee's judgment, that is
appropriate.
III. MEETINGS
The Audit Committee shall meet two times annually, or more frequently as
circumstances dictate. Special meetings (including telephone meetings) may be
called by the Chair or a majority of the members of the Audit Committee upon
reasonable notice to the other members of the Audit Committee. With a view to
fostering open communication, the Audit Committee shall meet at least annually
with senior Company management responsible for accounting and financial
reporting and the independent auditors in separate executive sessions to discuss
any matters that the Audit Committee, or any of such other persons, believes
should be discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. Charter. Review this Charter annually and recommend changes, if any, to
the Board.
B. Internal Controls.
1. Review annually with Company management and the independent
auditors:
a. the organizational structure, reporting relationship,
adequacy of resources and qualifications of the senior
Company management personnel responsible for accounting and
financial reporting;
b. their separate evaluations of the adequacy and effectiveness
of the Company's system of internal controls, including
those of the Company's service providers; and
c. any significant findings related to the Company's systems
for accounting, reporting and internal controls, in the form
of written observations and recommendations (including any
management letter), and Company management's written
response.
2. Establish procedures for the receipt, retention and treatment of
complaints received by the Company and/or the Audit Committee
regarding accounting, internal accounting controls or auditing
matters and the confidential, anonymous submission by officers of
the Company or employees of the Company's investment adviser (the
"Adviser") or any other service provider to the Company of
concerns regarding questionable accounting or auditing matters.
3. Review annually with Company management and the independent
auditors, policies for valuation of Company portfolio securities,
and the frequency and magnitude of pricing errors.
C. Independent Auditors.
1. Approve and recommend to the Board, the selection, retention or
termination of the independent auditors, and approve the fees and
other compensation to be paid to the independent auditors. Such
selection shall be pursuant to a written engagement letter
approved by the Audit Committee, which shall provide that:
o The Audit Committee shall be directly responsible for the
appointment, compensation, retention and oversight (such
oversight shall include resolving any disagreements between
Company management and the independent auditors regarding
financial reporting) of the independent auditors; and
o The independent auditors shall report directly to the Audit
Committee.
2. Pre-approve any engagement of the independent auditors to provide
any non-prohibited services to the Company, including the fees
and other compensation to be paid to the independent auditors.(4)
o The Chairman of the Audit Committee may grant the
pre-approval referenced above for non-prohibited services
for engagements of less than $5,000.
- ---------------------
(4) Pre-approval of non-audit services for the Company pursuant to Section IV.C.
2 above is not required if: (a) the aggregate amount of all non-audit services
provided to the Company is no more than 5% of the total fees paid by the Company
to the independent auditors during the fiscal year in which the non-audit
services are provided; (b) the services were not recognized by Company
management at the time of the engagement as non-audit services; and (c) such
services are promptly brought to the attention of the Audit Committee by Company
management and the Audit Committee approves them (which may be by delegation)
prior to the completion of the audit.
o All such delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit Committee
meeting.
3. Pre-approve any engagement of the independent auditors, including
the fees and other compensation to be paid to the independent
auditors, to provide any non-audit services to the Adviser (or
any "control affiliate"(5) of the Adviser providing ongoing
services to the Company), if the engagement relates directly to
the operations and financial reporting of the Company.
o The Chairman of the Audit Committee may grant the
pre-approval referenced above for non-prohibited services
for engagements of less than $5,000.
o All such delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit Committee
meeting.
4. On an annual basis, request, receive in writing and review a
report by the independent auditors describing:
o the independent auditors' internal quality-control
procedures;
o any material issues raised by the most recent internal
quality-control review, or peer review, of the independent
auditors, or by any inquiry or investigations by
governmental or professional authorities, within the
preceding five years, respecting one or more independent
audits carried out by the independent auditors, and any
steps taken to deal with any such issues; and
o all relationships between the independent auditors and the
Company, so as to assess the auditors' independence,
including identification of all relationships the
independent auditors have with the Company and all
significant relationships the independent auditors have with
the Adviser (and any "control affiliate" of the Adviser) and
any material service provider to the Company (including, but
not limited to, disclosures regarding the independent
auditors' independence required by Independence Standards
Board Standard No. 1 and compliance with the applicable
independence provisions of Rule 2-01 of Regulation S-X).
- ---------------------
(5) "Control affiliate" means any entity controlling, controlled by, or under
common control with the Adviser.
In assessing the auditors' independence, the Audit Committee
shall take into account the opinions of Company management. The
Committee will present its conclusions with respect to the
independent auditors to the Board, and recommend that the Board
take appropriate action, if any, in response to the independent
auditors' report to satisfy itself of the independent auditors'
independence.
5. On an annual basis, meet with the independent auditors and
Company management to review the arrangements for and scope of
the annual audit for the current year and the audit procedures to
be utilized.
6. Review the management letter, if any, prepared by the independent
auditors and Company management's response.
7. Review and evaluate the lead audit partner (such review to
include consideration of whether, in addition to the regular
rotation of the lead audit partner as required by law, in order
to assure continuing auditor independence, there should be
regular consideration of rotation of the firm serving as
independent auditors).
D. Financial Reporting Processes.
1. Review with Company management and the independent auditors, the
Company's audited financial statements, including management's
discussion of Company performance, and recommend to the Board, if
appropriate, that the audited financial statements be included in
the Company's annual report to shareholders required by Section
30(e) of the 1940 Act and Rule 30d-1 thereunder;
2. Review the Company's policy and procedures with respect to
declaring dividends and issuing dividend announcements and
related press releases, as well as financial information and
dividend guidance provided to analysts and rating agencies; and
3. Review with Company management and the independent auditors the
matters that auditing professional standards require to be
communicated to the Audit Committee, including, but not limited
to, the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees) and 90
(Audit Committee Communications), including:
o the independent auditors' judgments about the quality, and
not just the acceptability, of the Company's accounting
principles as applied in its financial reporting;
o the process used by Company management in formulating
estimates and the independent auditors' conclusions
regarding the reasonableness of those estimates;
o all significant adjustments arising from the audit, whether
or not recorded by the Company;
o when the independent auditors are aware that Company
management has consulted with other accountants about
significant accounting and auditing matters, the independent
auditors' views about the subject of the consultation;
o any disagreements with Company management regarding
accounting or reporting matters;
o any difficulties encountered in the course of the audit,
including any restrictions on the scope of the independent
auditors' activities or on access to requested information;
and
o significant deficiencies in the design or operation of
internal controls.
4. Receive annually a report from the independent auditors to the
Audit Committee of any changes to the previously reported
information regarding:
a. all critical accounting policies and practices to be used;
b. all alternative treatments of financial information within
GAAP for policies and practices related to material items
that have been discussed with Company management, the
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent
auditors;
c. other material written communications between the
independent auditors and Company management including, but
not limited to, any management letter or schedule of
unadjusted differences; and
d. all non-audit services provided to an entity in the
"investment company complex"(6) as defined in paragraph
(f)(14) of Rule 2-01
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(6) "Investment company complex" includes: (1) an investment company and its
investment adviser or sponsor; (2) any entity controlled by or controlling an
investment adviser or sponsor in (1) above, or any entity under common control
with any investment adviser or sponsor in (1) above if the entity: (A) is an
investment adviser or sponsor or (B) is engaged in the business of providing
administrative, custodian, underwriter, or transfer agent services to any
investment
of Regulation S-X that were not pre-approved by the Audit
Committee.
If the communication is not within 90 days prior to the
filing of the Company's annual financial statements with the
SEC, the independent auditors shall provide an update in the
90 day period prior to the filing.
5. Review, initially, with Company management and the independent
auditors, the process for developing the Company's "disclosure
controls and procedures"(7) as defined in Rule 30a-3(c) under the
1940 Act and thereafter any significant changes thereto.
6. Receive a report, semi-annually, from Company management that all
necessary certifications have been made under Sarbanes-Oxley Act
of 2002.
7. Review with Company management and the independent auditors a
report by Company management covering any Form N-CSR filed, and
any required certification of such filing, along with the results
of Company management's most recent evaluation of the Company's
"disclosure controls and procedures."
8. Ask Company management, the Company's accounting services agent
and the independent auditors to review significant changes to
elected tax accounting policies and their effect on amounts
distributed and reported to shareholders for Federal tax purposes
and review any material accounting,
- --------------------------------------------------------------------------------
company, investment adviser, or sponsor; and (3) an investment company or entity
that would be an investment company but for the exclusions provided by Section
3(c) of the 1940 Act that has an investment adviser or sponsor included in (1)
and (2) above. Investment adviser does not include a subadviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser. Sponsor is an entity that establishes a unit investment
trust.
(7) "Disclosure controls and procedures" means controls and other procedures of
a registered management investment company that are designed to ensure that
information required to be disclosed by the investment company on Form N-CSR is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an investment company in the reports that it files
or submits on Form N-CSR is accumulated and communicated to the investment
company's management, including its principal executive officer or officers and
principal financial officer or officers, or person performing similar functions,
as appropriate to allow timely decisions regarding required disclosure.
tax, valuation or recordkeeping issues that may affect the
Company, its financial statements or the amount of its dividends
or distributions.
E. Process Improvements
To the extent appropriate, review with the independent auditors
and Company management significant changes or improvements in
accounting and auditing processes that have been implemented.
F. Legal and Compliance
1. Review any legal or regulatory matters that arise that could have
a material impact on the Company's financial statements.
2. Review policies and procedures with respect to financial
statement risk assessment and risk management, including the
steps Company management has taken to monitor and control such
risk exposures.
3. Establish clear hiring policies for the Company with respect to
employees or former employees of the independent auditors.
G. Other Responsibilities
1. Review, annually, the performance of the Audit Committee.
2. Prepare a report of the Audit Committee as required to be
included in the annual proxy statement.(8)
3. Investigate any other matter brought to its attention within the
scope of its duties, and have the authority in its discretion to
retain legal, accounting or other experts or consultants to
advise the Audit Committee, at the expense of the Company, if, in
the Committee's judgment, that is appropriate.
- ---------------------
(8) Item 306 of Regulation S-K requires each proxy statement relating to a
shareholder meeting at which directors are to be elected to include a report,
followed by the name of each Audit Committee member, stating whether: (1) the
Committee has reviewed and discussed the audited financial statements with
management, (2) the Committee has discussed with the independent auditors the
matters required to be discussed by SAS 61, (3) the Committee has received the
written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, and has discussed with the
independent auditors their independence, and (4) based on the review and
discussions referred to in paragraphs (1) through (3), the Audit Committee
recommended to the Board that the audited financial statements be included in
the Company's annual report to shareholders required by Section 30(e) of the
1940 Act and Rule 30d-1 thereunder.
4. Perform any other activities consistent with this Charter, the
Company's Articles of Incorporation, Bylaws and governing law, as
the Audit Committee or the Board deems necessary or appropriate.
5. Maintain minutes of committee meetings, report its significant
activities to the Board, and make such recommendations to the
Board as the Audit Committee may deem necessary or appropriate.
V. FUNDING
The Audit Committee shall receive appropriate funding, as determined by the
Audit Committee, for payment of (i) compensation to the independent auditors for
approved audit or non-audit services for the Company; (ii) compensation to any
legal, accounting or other experts or consultants retained by the Audit
Committee pursuant to Section IV.G.3 above and (iii) ordinary administrative
expenses of the Audit Committee that are necessary or appropriate in carrying
out its duties.
* * * * *
Adopted April 15, 2005
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PROXY - TORTOISE ENERGY CAPITAL CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS - APRIL 12, 2006
The undersigned holder of common shares appoints David J. Schulte and Terry C.
Matlack, or either of them, each with power of substitution, to vote all shares
that the undersigned is entitled to vote at the annual meeting of stockholders
of Tortoise Energy Capital Corporation to be held on April 12, 2006 and at any
adjournments thereof, as set forth on the reverse side of this card, and in
their discretion upon any other business that may properly come before the
meeting.
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTMARKED ENVELOPE.
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
[ ] Mark this box with an X if you have made
changes to your name or address details above.
ANNUAL MEETING PROXY CARD
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
AND, ABSENT DIRECTION, WILL BE VOTED "FOR" THE PROPOSALS.
A. ELECTION OF DIRECTORS
1. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES BELOW.
FOR WITHHOLD
Terry Matlack [ ] [ ]
Charles E. Heath [ ] [ ]
B. ISSUES
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL AND
RATIFICATION BELOW.
2. Approval of the Company's sale of common shares below Net Asset Value
("NAV") subject to all of the following conditions being met: (i) the per
share offering price, before deduction of underwriting fees, commissions
and offering expenses, will not be less than the NAV per share of the
Company's common stock, as determined at any time within two business days
of pricing of the common stock to be sold in the offering; (ii) immediately
following the offering, after deducting offering expenses and underwriting
fees and commissions, the NAV per share of the Company's common stock, as
determined at any time within two business days of pricing of the common
stock to be sold, would not have been diluted by greater than a total of 1%
of such value per share of all outstanding common stock; and (iii) a
majority of the Company's independent directors makes a determination,
based on information and a recommendation from the Company's investment
advisor, that they reasonably expect that the investment(s) to be made with
the net proceeds of such issuance will lead to a long-term increase in
distribution growth.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of Ernst & Young LLP as the Company's independent, registered,
certified public accountants, to audit the accounts of the Company for the
fiscal year ending November 30, 2006:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
C. NON-VOTING ISSUE
CHECK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
D. AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED
Please sign exactly as your name appears. If acting as attorney, executor,
trustee, or in representative capacity, sign name and indicate title.
Signature 1 - Signature 2 - Date
Please keep signature Please keep signature (mm/dd/yyyy)
within the box within the box
- ---------------------- ---------------------- ----------------
