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 CAPITAL RESOURCES 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[TORTOISE LOGO]
TORTOISE CAPITAL RESOURCES CORPORATION
10801 Mastin Boulevard, Suite 222
Overland Park, Kansas 66210
___________, 2008
Dear Fellow Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Tortoise Capital Resources Corporation (the "Company") on Monday, April 21, 2008
at 11:00 a.m., Central Time, at The Doubletree Hotel, 10100 College Boulevard,
Overland Park, KS 66210.
The matters scheduled for consideration at the meeting are the election of one
director 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, the
grant of authority to the Company to sell warrants or options to acquire common
shares, and the ratification of the selection of Ernst & Young LLP as the
independent registered public accounting firm of the Company for its fiscal year
ending November 30, 2008, as more fully discussed in the enclosed proxy
statement.
We have asked shareholders to consider granting authority to the Company to sell
its common shares for less than net asset value and to sell warrants or options
to acquire common shares because we expect that periodically we will be
presented with attractive investment opportunities to acquire securities 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 excess 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. Each of these two proposals give us another strategic
method to raise capital to take advantage of attractive investment opportunities
which we believe will be beneficial to all shareholders.
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 Company's Board
of Directors recommends that you vote to approve each of the proposals, the
actual proxy for you to sign and return and the Company's Annual Report to
stockholders for the fiscal year ended November 30, 2007, which includes the
information required by Rule 14a-3 of the Securities Exchange Act of 1934. If
you have any questions about the enclosed proxy or need any assistance in voting
your shares, please call 1-866-362-9331.
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
Chief Executive Officer
TORTOISE CAPITAL RESOURCES CORPORATION
ANSWERS TO SOME IMPORTANT QUESTIONS
Q. WHAT AM I BEING ASKED TO VOTE "FOR" ON THIS PROXY?
A. This proxy contains five proposals from the Company: (i) the
election of one director to serve until the 2011 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; (iii) the grant of
authority to the Company to sell warrants or options to acquire common shares,
and (iv) the ratification of Ernst & Young LLP as the Company's independent
registered public accounting firm. 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 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, 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 entire Proxy Statement carefully.
If you have questions, call 1-866-362-9331.
TORTOISE CAPITAL RESOURCES CORPORATION
10801 Mastin Boulevard, Suite 222
Overland Park, Kansas 66210
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Tortoise Capital Resources Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tortoise
Capital Resources Corporation, a Maryland corporation (the "Company"), will be
held on Monday, April 21, 2008 at 11:00 a.m. Central Time at The Doubletree
Hotel, 10100 College Boulevard, Overland Park, KS 66210 for the following
purposes:
1. To elect one director of the Company, to hold office for a term of
three years and until his successor is 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 grant the Company the authority to sell warrants or options to
acquire common shares; and
4. To ratify the selection of Ernst & Young LLP as the independent
registered public accounting firm of the Company for its fiscal year
ending November 30, 2008.
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 February 13, 2008 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,
Connie J. Savage
Secretary
____________, 2008
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 (with postage 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 CAPITAL RESOURCES CORPORATION
10801 Mastin Boulevard, Suite 222
Overland Park, Kansas 66210
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 2008
This proxy statement is being sent to you by the Board of Directors of
Tortoise Capital Resources Corporation (the "Company"). The Board of Directors
is asking you to complete and return the enclosed proxy, permitting your shares
of the Company to be voted at the annual meeting of stockholders called to be
held on April 21, 2008. The Board of Directors has fixed the close of business
on February 13, 2008 as the record date (the "record date") for the
determination of stockholders entitled to notice of and to vote at the meeting
and at any adjournment thereof as set forth in this proxy statement. This proxy
statement, the enclosed proxy and the Company's Annual Report to stockholders
for the fiscal year ended November 30, 2007, which includes the information
required by Rule 14a-3 of the Securities Exchange Act of 1934 (the "Report"),
are first being mailed to stockholders on or about __________, 2008.
The Company's reports filed with the Securities and Exchange Commission
("SEC") can be accessed on the Company's website
(www.tortoiseadvisors.com/tto.cfm) or on the SEC's website (www.sec.gov).
PROPOSAL ONE
ELECTION OF ONE DIRECTOR
The Board of Directors of the Company unanimously nominated Conrad S.
Ciccotello following a recommendation by the Nominating, Corporate Governance
and Compensation Committee of the Company, for election as director at the
annual meeting of stockholders of the Company. Mr. Ciccotello is currently a
director of the Company, has consented to be named in this proxy statement and
has agreed to serve if elected. The Company has no reason to believe that Mr.
Ciccotello 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 Mr. Ciccotello as
director of the Company. Currently, the Company has five directors. In
accordance with the Company's Articles of Incorporation, 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 Terry C. Matlack
and Charles E. Heath expire on the date of the 2009 annual meeting of
stockholders and the terms of H. Kevin Birzer and John R. Graham expire on the
date of the 2010 annual meeting of stockholders.
In accordance with the Company's Bylaws ("Bylaws"), each share of the
Company's common stock may be voted for as many individuals as there are
directors to be elected. Thus, each common share is entitled one vote in the
election of Mr. Ciccotello. Stockholders do not have cumulative voting rights.
If elected, Mr. Ciccotello will hold office until the 2011 annual meeting
of stockholders and until his successor is duly elected and qualified. If Mr.
Ciccotello is unable to serve because of an event not now anticipated, the
persons named as proxies may vote for another person designated by the Company's
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 Investment Company Act of 1940, as amended (the "1940 Act"),
requires the term "Fund Complex" to be defined to include registered investment
companies advised by the Company's investment adviser, Tortoise Capital
Advisors, L.L.C. (the "Adviser"). As of __________, 2008, the Fund Complex
included the Company, Tortoise Energy Infrastructure Corporation ("TYG"),
Tortoise Energy Capital Corporation ("TYY"), Tortoise North American Energy
Corporation ("TYN"), Tortoise Total Return Fund, LLC ("TTRF") and Tortoise Gas
and Oil Corporation ("TGOC"), but does not include Tortoise Power and Energy
Income Company ("TPZ"). TPZ has registered as an investment company but not yet
commenced operations and its advisory agreement with the Adviser has not become
effective.
2
Nominee For Director Who Is Independent:
Number of Other Public
Positions(s) Held Portfolios in Company
With The Company Fund Complex Directorships
and Length of Principal Occupation Overseen by Held by
Name, Age and Address Time Served During Past Five Years Director Director
---------------------- ----------------- ---------------------- ---------------- ------------
Conrad S. Ciccotello*, 47 Director of the Tenured Associate Professor of Six None
10801 Mastin Blvd. Company since its Risk Management and Insurance,
Suite 222 inception in 2005. Robinson College of Business,
Overland Park, KS 66210 Georgia State University
(faculty member since
1999); Director of
Graduate Personal
Financial Planning
Programs. Formerly Editor,
Financial Services Review
(2001-2007) (an academic
journal dedicated to the
study of individual
financial management).
Formerly, faculty member,
Pennsylvania State
University (1997-1999).
*Mr. Ciccotello has also served as a Director of each of TYG, TYY, TYN, TTRF and
TGOC since its inception (TYG inception in 2003; TYY and TYN inception in 2005;
TTRF and TGOC inception in 2007).
3
Remaining Directors Who Are Independent:
Number of Other Public
Positions(s) Held Portfolios in Company
With The Company Fund Complex Directorships
and Length of Principal Occupation Overseen by Held by
Name, Age and Address Time Served During Past Five Years Director Director
---------------------- ----------------- ---------------------- ---------------- ------------
John R. Graham*, 62 Director of the Executive-in-Residence and Six Kansas State
10801 Mastin Blvd. Company since its Professor of Finance Bank
Suite 222 inception. (Part-time), College of
Overland Park, KS 66210 Business Administration,
Kansas State University (has
served as a professor or
adjunct professor since 1970);
Chairman of the Board,
President and CEO, Graham
Capital Management, Inc.
(primarily a real estate
development, investment and
venture capital company) and
Owner of Graham Ventures (a
business services and venture
capital firm); Part-time Vice
President Investments, FB
Capital Management, Inc. (a
registered investment
adviser), since 2007.
Formerly, CEO, Kansas Farm
Bureau Financial Services,
including seven affiliated
insurance or financial service
companies (1979-2000).
Charles E. Heath*, 65 Director of the Retired in 1999. Formerly, Six None
10801 Mastin Blvd. Company since its Chief Investment Officer, GE
Suite 222 inception. Capital's Employers
Overland Park, KS 66210 Reinsurance Corporation
(1989-1999); Chartered
Financial Analyst ("CFA")
designation since 1974.
*Mr. Graham and Mr. Heath have also served as Directors of each of TYG, TYY,
TYN, TTRF and TGOC since its inception.
4
Remaining Directors Who Are Interested Persons:
Number of Other Public
Positions(s) Held Portfolios in Company
With The Company Fund Complex Directorships
and Length of Principal Occupation Overseen by Held by
Name, Age and Address Time Served During Past Five Years Director Director
---------------------- ----------------- ---------------------- ---------------- ------------
H. Kevin Birzer*,48 Director and Managing Director of the Six None
10801 Mastin Blvd. Chairman of the Adviser since 2002; Partner,
Suite 222 Board of the Fountain Capital Management,
Overland Park, KS 66210 Company since its L.L.C. ("Fountain Capital"), a
inception. registered investment adviser
(1990 - present). Formerly,
Vice President, Corporate
Finance Department, Drexel
Burnham Lambert (1986-1989);
and Vice President, F. Martin
Koenig & Co. (1983- 1986).
Terry C. Matlack*, 52 Director and Chief Managing Director of the Six None
10801 Mastin Blvd. Financial Officer Adviser since 2002; Full-time
Suite 222 of the Company Managing Director, Kansas City
Overland Park, KS 66210 since its Equity Partners LC ("KCEP"), a
inception; private equity firm (2001-
Assistant Treasurer 2002). Formerly, President,
of the Company GreenStreet Capital (1995 -
since its 2001); CFA designation since
inception; Chief 1985.
Compliance Officer
of the Company from
its inception
through May 2006.
*Mr. Birzer and Mr. Matlack, as principals of the Adviser, are each an
"interested person" of the Company, as that term is defined in Section 2(a)(19)
of the 1940 Act. Mr. Birzer has also served as a Director and Chairman of the
Board of each of TYG, TYY, TYN, TTRF and TGOC since its inception. Mr. Matlack
has also served as a Director and Chief Financial Officer of each of TYG, TYY,
TYN, TTRF and TGOC since its inception, as Assistant Treasurer of each of TTRF
and TGOC since its inception, and of each of TYG, TYY and TYN since November
2005, as Treasurer of each of TYG, TYY and TYN from its inception to November
2005, and as Chief Compliance Officer of each of TYG, TYY and TYN from its
inception through May 2006.
Information About Executive 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 tables give 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 public company directorships held by
each officer. Each officer serves until his successor is elected and qualified
or until his resignation or removal. As principals of the Adviser, each of the
following officers are "interested persons" of the Company, as that term is
defined in Section 2(a)(19) of the 1940 Act. Additionally, other than Mr.
Russell, each of the following officers also serves as an officer of TYG, TYY,
TYN, TTRF and TGOC.
5
Number of Other Public
Position(s) Held Portfolios in Company
With The Company Fund Complex Directorships
and Length of Principal Occupation Overseen by Held by
Name, Age and Address Time Served During Past Five Years Officer Officer
--------------------- ----------------- ---------------------- --------------- -----------
David J. Schulte, 46 Chief Executive Managing Director of the Six None
10801 Mastin Blvd., Officer since Adviser since 2002; Full-time
Suite 222 inception; Managing Director, KCEP
Overland Park, KS 66210 President from (1993-2002); CFA designation
inception to April since 1992.
2007.
Zachary A. Hamel, 42 Senior Vice Managing Director of the Six None
10801 Mastin Blvd., President since Adviser since 2002; Partner,
Suite 222 inception; Fountain Capital
Overland Park, KS 66210 Secretary from (1997-present).
inception to April
2007.
Kenneth P. Malvey, 41 Senior Vice Managing Director of the Six None
10801 Mastin Blvd., President and Adviser since 2002; Partner,
Suite 222 Treasurer since Fountain Capital
Overland Park, KS 66210 inception. (2002-present). Formerly,
Investment Risk Manager and
member of the Global Office
of Investments, GE
Capital's Employers
Reinsurance Corporation
(1996-2002).
Edward Russell, 44 President since Senior Investment Professional One None
10801 Mastin Blvd., April 2007. of the Adviser since 2006;
Suite 222 formerly Managing Director
Overland Park, KS 66210 (1999-2006) in investment
banking department of
Stifel, Nicolaus & Company,
Incorporated, responsible
for all of the energy and
power transactions,
including all of the debt
and equity transactions,
prior to joining the
Adviser, for three of the
closed-end public funds
managed by the Adviser,
starting with the first
public equity offering in
February 2004, and the
first private placement
transaction for the
Company.
Committees Of The Board Of Directors
The Company's Board of Directors currently has four standing committees:
(i) the Executive Committee; (ii) the Audit and Valuation Committee; (iii) the
Nominating, Corporate Governance and Compensation Committee; and (iv) the
Compliance Committee. Currently, Mr. Ciccotello, Mr. Graham and Mr. Heath (all
of the Company's independent directors) are the sole members of the Audit and
6
Valuation Committee, the Nominating, Corporate Governance and Compensation
Committee and the Compliance Committee. The Company's Executive Committee
currently consists of Mr. Birzer and Mr. Matlack.
o Executive Committee. The Company's Executive Committee has authority
to exercise the powers of the Board (i) to address emergency matters
where assembling the full Board in a timely manner is impracticable,
or (ii) 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 and Valuation Committee. The Company's Audit and Valuation
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, a current copy of which is available on the Company's website
(www.tortoiseadvisors.com/tto.cfm) and in print to any shareholder who
requests it from the Secretary of the Company at 10801 Mastin
Boulevard, Suite 222, Overland Park, Kansas 66210. The Audit and
Valuation Committee: (i) approves and recommends to the Board the
election, retention or termination of the independent registered
public accounting firm (the "independent auditors"); (ii) approves
services to be rendered by the independent auditors and monitors the
independent auditors' performance; (iii) reviews the results of the
Company's audit; (iv) determines whether to recommend to the Board
that the Company's audited financial statements be included in the
Company's Annual Report; (v) reviews the portfolio Company valuations
proposed by the Adviser's investment committee; and (vi) responds to
other matters as outlined in the Committee's Charter. Each Audit and
Valuation Committee member is "independent" as defined under the New
York Stock Exchange listing standards, and none are "interested
persons" of the Company as defined in the 1940 Act. The Board of
Directors has determined that Conrad S. Ciccotello is an "audit
committee financial expert." In addition to his experience overseeing
or assessing the performance of companies or public accountants with
respect to the preparation, auditing or evaluation of financial
statements, Mr. Ciccotello has a Ph.D. in Finance.
o Nominating, Corporate Governance and Compensation Committee. The
Company's Nominating, Corporate Governance and Compensation Committee
operates under a written charter adopted and approved by the Board, a
current copy of which is available on the Company's website
(www.tortoiseadvisors.com/tto.cfm) and in print to any shareholder who
requests it from the Secretary of the Company at 10801 Mastin
Boulevard, Suite 222, Overland Park, Kansas 66210. The Nominating,
Corporate Governance and Compensation 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 and 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; (iv) evaluates and makes recommendations to the Board
regarding director compensation; (v) oversees the evaluation of the
Board and management; (vi) 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 (vii) may not delegate its
authority. The Nominating, Corporate Governance and Compensation
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
8
evaluated on the same basis as other nominees considered by the
Nominating, Corporate Governance and Compensation Committee.
Stockholders should see "Stockholder Proposals and Nominations for the
2008 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 (i) to be at least 21 years of
age and have substantial expertise, experience or relationships
relevant to the business of the Company, and (ii) 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, Corporate
Governance and Compensation Committee has the sole discretion to
determine if an individual satisfies the foregoing qualifications.
Each Nominating, Corporate Governance and Compensation Committee
member is "independent" as defined under the New York Stock Exchange
listing standards and none are "interested persons" of the Company as
defined in the 1940 Act.
o Compliance Committee. The Company formed this committee in April 2007.
Each committee member is "independent" as defined under the New York
Stock Exchange listing standards, and none are "interested persons" of
the Company as defined in the 1940 Act. The Company's Compliance
Committee operates under a written charter adopted and approved by the
Board. The 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 following table shows the number of Board and committee meetings held
during the fiscal year ended November 30, 2007:
Board of Directors 8
Executive Committee 1
Audit and Valuation Committee 2
Nominating, Corporate Governance and Compensation Committee 3
Compliance Committee 1
During the 2007 fiscal year, all directors attended at least 75% of the
aggregate of (i) the total number of meetings of the Board, and (ii) the total
number of meetings held by all committees of the Board on which they served. The
Company does not have has a policy with respect to Board member attendance at
annual meetings. All of the directors of the Company attended the Company's 2007
annual meeting.
The Company has designated Conrad S. Ciccotello as the presiding director
to preside at all executive sessions of the Company's non-management directors.
Executive sessions of the Company's non-management directors are held at least
twice a year. Stockholders and any interested parties may communicate directly
with Mr. Ciccotello, or with the non-management directors as a group, by writing
to the Secretary of the Company at its principal office at 10801 Mastin
Boulevard, Suite 222, Overland Park, Kansas 66210.
8
Director Compensation Table
The Company does not compensate any of its directors who are interested
persons, nor does the Company 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 2007 to each of the current
independent directors for their services as a director. The Company does not
have any retirement or pension plans, and no director received any compensation
from us other than in cash.
Pension or
Retirement Total
Benefits Compensation
Accrued as Estimated from Company and
Aggregate Part of Annual Fund Complex
Name of Person, Compensation from Company Benefits Upon Paid to
Position Company (1) Expenses Retirement Directors (2)
-------- ----------- -------- ------------ -------------
Independent Persons
Conrad S. Ciccotello $31,000 $0 $0 $145,000
John R. Graham $26,000 $0 $0 $124,000
Charles E. Heath $28,000 $0 $0 $132,000
(1) No amounts have been deferred for any of the persons listed in the table.
(2) Fund Complex includes the Company, TYG, TYY, TYN, TTRF and TGOC.
For the current fiscal year, each independent director receives from us an
annual retainer of $12,000 and a fee of $2,000 for each meeting of the Board or
Audit and Valuation Committee he or she attends in person (or $1,000 for each
Board or Audit and Valuation Committee meeting attended telephonically, or for
each Audit and Valuation Committee meeting attended in person that is held on
the same day as a Board meeting). Independent directors also receive $1,000 for
each other committee meeting attended in person or telephonically (other than
Audit and Valuation Committee meetings). The Chairman of the Audit and Valuation
Committee receives an additional annual retainer of $4,000. Each other committee
chairman receives an additional annual retainer of $1,000. The independent
directors are reimbursed for expenses incurred as a result of attendance at
meetings of the Board and Board committees.
Required Vote
Mr. Ciccotello will be elected by the vote of a plurality of all shares of
common stock of the Company present at the meeting, in person or by proxy. When
there is one vacancy for director, as is the case here, a vote by plurality
means the nominee with the highest number of affirmative votes, regardless of
the votes withheld for that candidate, will be elected. Therefore, withheld
votes and broker non-votes, if any, will not be counted towards a nominee's
achievement of a plurality. Each common share is entitled to one vote in the
election of Mr. Ciccotello.
BOARD RECOMMENDATION
The Board of Directors of the Company unanimously recommends stockholders
of the Company vote "for" Mr. Ciccotello as a director.
9
PROPOSAL TWO
APPROVAL TO SELL COMMON SHARES
BELOW NET ASSET VALUE
Under the 1940 Act, the Company may sell common shares in subsequent
offerings and invest the proceeds from such offerings in accordance with its
investment objectives, so long as the net sale price to the Company (after
deduction of underwriting fees, commissions and 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. The Company is
seeking approval of this proposal so that it may, in one or more public or
private offerings of its common stock, sell shares of its common stock at a
price below its then current NAV per share, subject to certain conditions
discussed below. If approved, the authorization would be effective for a period
expiring on the date of the Company's 2009 Annual Meeting of Stockholders,
expected to be held in April 2009. The stockholders of the Company have
previously granted the Company the authority to sell its shares below NAV. This
authority extended through December 20, 2007.
The Board of Directors of the Company believes that the ability of the
Company to issue its common shares below NAV in certain instances will benefit
all of the Company's stockholders. The Company expects to be presented
periodically with attractive opportunities to acquire securities 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 the Company's common shares, however, may
periodically fall below its NAV, which is not uncommon for closed-end funds such
as the Company. If this happens, absent the approval of this proposal, the
Company will not be able to effectively access capital markets to enable it to
take advantage of attractive investment opportunities. The Board of Directors of
the Company has approved submitting this proposal to the Company's stockholders
for their approval.
The following table sets forth a comparison, as of the last day of each
of the Company's fiscal quarters ended in 2007, of the Company's NAV per share
and the comparable closing price of the Company's common stock, as reported on
the New York Stock Exchange.
Closing
Fiscal Quarter Ending NAV Price(1)
- --------------------- --- --------
November 30, 2007 $13.76 $11.66
August 31, 2007 $13.77 $14.45
May 31, 2007 $14.05 $17.85
February 28, 2007 $13.84 $14.50
(1) The Company began trading on the NYSE on February 2, 2007.
Approval of this proposal would give the Company the opportunity to raise
cash and purchase attractively priced securities even if the net sale price to
the Company of its 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
lead to a long-term increase in stockholder distributions, which distributions
may include a return of capital. The Board of Directors of the Company will
evaluate whether the sale of common shares below NAV achieved the intended
results.
Upon stockholder approval, the Company will only sell common shares
below NAV if all of the following conditions are met:
10
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
prior to the pricing of the common stock to be sold in the offering.
2. Immediately following each 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 prior to the pricing
of the common stock to be sold, would not have been diluted by greater than a
total of 4% of the NAV per share of all outstanding common stock as a result of
such offering. The Company will not be subject to a maximum number of shares
that can be sold, a defined minimum sales price per share in any offering, or a
maximum number of offerings it can make so long as for each offering the 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 4% limitation described above.
3. A majority of the Company's independent directors makes a determination,
based on information and a recommendation from the Adviser, 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 Adviser is paid a fee based upon the
Company's average monthly Managed Assets (as defined below). Therefore, the
Adviser'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, as such an issuance will result in an increase in the Company's
Managed Assets and ultimately in the fee paid to the Adviser. The Adviser is
controlled directly or indirectly by officers and the two interested directors
of the Company, among others. For that reason, any issuance of shares at a price
below NAV must be approved by a majority of the disinterested directors.
Before voting on this proposal or giving proxies with regard to this
matter, common stockholders should consider the 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 of the NAV per outstanding share to
existing common stockholders of as much as 4%. There is 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 of the Company should also consider that they 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. Common stockholders should also consider the impact that
issuances of shares of common stock below NAV will have on the Company's expense
ratio. In general, assuming that a fund's expenses consist of both fixed and
variable costs, any time the fund issues shares the expense ratio should
decrease because the fixed costs are spread over a larger amount of assets. If
the Company issues shares of common stock below NAV, assuming its expenses
consist of both fixed and variable costs, the Company's expense ratio will
decrease; however, it will not decrease as much as it would have had the shares
been issued at NAV.
11
Required Vote
The proposal must be approved by both (a) the affirmative vote of common
stockholders holding a majority of all common stock, and (b) the affirmative
vote of common stockholders who are not affiliated persons of the Company and
who hold a majority of all common stock held by common stockholders who are not
affiliates of the Company. If both approvals are not obtained, the proposal will
not pass.
For the purpose of determining whether stockholders holding a majority of
all common stock and stockholders who are not affiliated persons of the Company
approved this proposal, each common share is entitled to one vote, and
abstentions and broker non-votes, if any, will have the effect of a vote against
the proposal.
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.
PROPOSAL THREE
APPROVAL TO SELL WARRANTS OR OPTIONS TO ACQUIRE COMMON SHARES
Under the 1940 Act, the Company may issue warrants or options to subscribe
for or convert to common shares of the Company, and subsequently issue shares of
common stock upon the exercise of such warrants or options, if several
conditions are satisfied. Specifically, any warrants or options must expire by
their terms within ten (10) years and if such warrants or options are
accompanied by any other security of the Company at the time they are issued,
then such warrants or options cannot be transferred separately from that other
security unless any class of the warrants or options or the accompanying
securities have been publicly distributed. In addition, the exercise or
conversion price of the warrants or options cannot be less than the current
market value of the common shares of the Company at the date of issuance, or if
no such market value exists, the current NAV of the common shares of the
Company. Finally, the amount of common stock issuable upon the exercise of all
outstanding warrants or options cannot exceed 25% of the common shares of the
Company outstanding when the warrants or options are issued. The subsequent
issuance of common shares of the Company upon exercise of properly authorized
warrants or options is permitted without regard to the NAV or market value of
the common shares of the Company at the time of exercise. The Company is seeking
approval of this proposal so that it may, in one or more transactions, sell
warrants or options, either as part of an offering of other securities issued by
the Company, or independent of an offering of any securities of the Company. If
approved, the authorization would be effective for a period expiring on the date
of the Company's 2009 Annual Meeting of Stockholders, expected to be held in
April 2009.
The Company expects that it will be periodically presented with attractive
investment opportunities to acquire securities 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 excess 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
Board of Directors of the Company believes that the Company having the ability
to issue warrants or options in certain instances will benefit all stockholders
of the Company. Approval of this proposal would give the Company the ability to
sell, either alone or in conjunction with the sale of another security of the
Company, warrants or options as part of the Company's financing and capital
raising activities. This ability may provide the Company its most cost-effective
way to raise capital to promptly capitalize on investment opportunities.
12
The issuance of warrants or options may also lower the Company's expense
ratio by spreading fixed costs over a larger asset base. The issuance of
additional common shares resulting from the exercise of any warrants or options
might also enhance the liquidity of the Company's common shares on the New York
Stock Exchange.
The Board of Directors, including a majority of the independent directors,
has approved submitting this proposal to the Company's stockholders for their
approval.
Before voting on this proposal or giving proxies with regard to this
matter, common stockholders should consider the dilutive effect of the issuance
of shares of the Company's common stock pursuant to the exercise of any warrants
or options. The issuance of common shares of the Company pursuant to the
exercise of any such warrants or options will dilute the voting power of the
stockholders of the Company.
Required Vote
This proposal must be approved by the affirmative vote of a majority of the
votes cast, in person or by proxy, at the meeting by the holders of common
stock.
Solely for the purpose of determining whether a majority of the votes cast
by the common stockholders approved this proposal, each common share is entitled
to one vote, and abstentions and broker non-votes will not be counted as votes
cast and will have no effect on the result of the vote.
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
warrants or options to acquire common shares of the Company.
PROPOSAL FOUR
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of the Company recommends that the stockholders of
the Company ratify the selection of Ernst & Young LLP ("E&Y") as the Company's
independent auditors, to audit the accounts of the Company for the fiscal year
ending November 30, 2008. E&Y's selection was approved by the Company's Audit
and Valuation Committee at a meeting held on February 27, 2008. 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 February 27, 2008.
E&Y has audited the financial statements of the Company since prior to
the Company's commencement of operations on December 8, 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 Company's Audit and Valuation Committee
intends to meet twice 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.
13
Required Vote
E&Y will be ratified as the Company's independent registered public
accounting firm by the affirmative vote of a majority of the votes cast, in
person or by proxy, at the meeting by the holders of common stock. 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 AND VALUATION COMMITTEE REPORT
The Audit and Valuation Committee of the Company reviews the Company's
annual financial statements with both management and the Company's independent
auditors and reviews the portfolio company valuations proposed by the Adviser's
investment committee.
The Audit and Valuation Committee of the Company, in discharging its
duties, has met with and has held discussions with management and the Company's
independent auditors. The Audit and Valuation Committee has reviewed and
discussed the Company's audited financial statements for the fiscal year ended
November 30, 2007 with management of the Company. Management of the Company has
represented to the independent auditors of the Company that the Company's
financial statements were prepared in accordance with U.S. generally accepted
accounting principles.
The Audit and Valuation Committee has also discussed with the
independent auditors of the Company the matters required to be discussed by the
Statement on Auditing Standards No. 114 (The Auditor's Communication With Those
Charged With Governance). The independent auditors of the Company provided to
the Audit and Valuation Committee the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit and Valuation Committee
discussed with representatives of the independent auditors of the Company their
firm's independence with respect to the Company.
Based on the Audit and Valuation Committee's review and discussions
with management and the independent auditors, and the representations of
management and the reports of the independent auditors to the committee, the
Audit and Valuation Committee recommended that the Board include the audited
financial statements of the Company in the Report.
The Audit and Valuation Committee of the Company
Conrad S. Ciccotello (Chairman)
Charles E. Heath
John R. Graham
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On February 27, 2008, the Company's Audit and Valuation Committee selected
E&Y as the independent registered public accounting firm to audit the books and
records of the Company for its fiscal year ending November 30, 2008. E&Y is
registered with the Public Company Accounting Oversight Board.
14
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FEES AND SERVICES
The following table sets forth the approximate amounts of the aggregate
fees billed to the Company by E&Y for the fiscal year ended November 30, 2007
and 2006, respectively:
2007 2006(1)
Audit Fees(2) $ $133,600
Audit-Related Fees(3) $ $ 5,000
Tax Fees(4) $ $ 18,900
All Other Fees $ - -
Aggregate Non-Audit Fees $ $ 23,900
1 Period from December 8, 2005 to November 30, 2006. The Company was
formed on September 8, 2005, but did not commence operations until
December 8, 2005. Thus, the Company did not pay any fees to E&Y prior
to December 8, 2005.
2 For professional services rendered auditing the Company's annual
financial statements, reviewing interim financial statements, and
reviewing the Company's statutory and regulatory filings with the SEC,
including the Company's filings related to its initial public
offering. The audit fees for November 30, 2007 are based on amounts
billed and expected to be billed by E&Y.
3 For professional services rendered researching the application of
accounting standards.
4 For professional services rendered to the Company for tax compliance,
tax advice and tax planning.
The Audit and Valuation Committee of the Company adopted pre-approval
polices and procedures on September 12, 2005. Under these policies and
procedures, the Audit and Valuation Committee of the Company pre-approves: (i)
the selection of the Company's independent registered public accounting firm;
(ii) the engagement of the independent registered public accounting firm to
provide any non-audit services to the Company; (iii) the engagement of the
independent registered public accounting firm to provide any non-audit services
to the Adviser or any entity controlling, controlled by, or under common control
with the Adviser that provides ongoing services to the 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
registered public accounting firm. The Chairman of the Audit and Valuation
Committee of the Company may grant the pre-approval of any engagement of the
independent registered public accounting firm for non-audit services of less
than $10,000, and such delegated pre-approvals will be presented to the full
Audit and Valuation Committee at its next meeting for ratification. 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 Company's adoption of these policies and procedures, the
Audit and Valuation Committee of the Company has pre-approved all audit and
non-audit services provided to the Company by E&Y. None of these services
provided by E&Y were approved by the Audit and Valuation 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.
In 2007, the Adviser incurred approximately $10,000 in fees payable to E&Y
in connection with determining the Adviser's compliance with GIPS(R) standards
in 2006, and in addition, in 2006 the Adviser paid E&Y fees in the amount of
$20,500 in connection with determining the Adviser's compliance with AIMR-PPS(R)
standards in 2005 and 2004. Additionally, the Adviser paid E&Y in 2007 for
general tax consulting services in the amount of $12,000 for services delivered
in 2006. These non-audit services were not required to be preapproved by the
Company's Audit and Valuation Committee. No entity controlling, controlled by,
or under common control with the Adviser that provides ongoing services to the
Company has paid to E&Y or been billed for fees by E&Y for non-audit services
rendered to the Adviser or such entity during the fiscal years ended November
30, 2006 and November 30, 2007.
15
The Audit and Valuation Committee of the Company has considered whether
E&Y's provision of services (other than audit services) to the Company, the
Adviser or any entity controlling, controlled by, or under common control with
the Adviser 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.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
At December 31, 2007, 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) the number of shares of common stock of the Company
listed in the table below (or percentage of outstanding shares). Unless
otherwise indicated, each individual has sole investment and voting power with
respect to the shares listed in the table below.
Number of
Directors and Officers Common Shares Percent of Class(1)
---------------------- ------------- -----------------------
Independent Directors
Conrad S. Ciccotello(2) 2,859.26 *
John R. Graham(3) 5,165.37 *
Charles E. Heath(4) 3,874.03 *
Interested Directors and Officers
H. Kevin Birzer(5) 25,973.83 *
Terry C. Matlack(6) 9,366.07 *
David J. Schulte(7) 13,121.87 *
Zachary A. Hamel(8) 5,624.34 *
Kenneth P. Malvey(9) 8,200.89 *
Edward Russell 5,431.87 *
Directors and Officers as a Group 79,617.53 *
*Indicates less than 1%.
(1) Based on 8,858,168 shares of common stock outstanding as of December 31,
2007.
(2) Mr. Ciccotello holds 1,009.26 of these shares jointly with his wife.
Includes 250 shares of common stock that may be acquired through warrants
that are currently exercisable.
(3) These shares are held of record by the John R. Graham Trust U/A dtd 1/3/92,
John R. Graham, sole trustee and include warrants to purchase 1,000 shares
of common stock that may be acquired through warrants that are currently
exercisable.
(4) These shares are held of record by the Charles E Health Trust No. 1 dtd U/A
2/1/92, Charles E. Heath, co-trustee and include 750 shares of common stock
that may be acquired through warrants that are currently exercisable.
(5) Mr. Birzer holds 24,773.83 shares and 1,325 warrants jointly with his wife
and holds 1,200 shares for the benefit of his children in an account
established under the Kansas Uniform Transfer to Minor's Act for which his
wife is the custodian. Includes 1,325 shares of common stock that may be
acquired through warrants that are currently exercisable.
(6) These shares are held of record by the Matlack Living Trust dtd 12/30/2004,
for which Mr. Matlack and his wife are co-trustees and include 616 shares
of common stock that may be acquired through warrants that are currently
exercisable.
16
(7) Includes 1,128 shares of common stock that may be acquired through warrants
that are currently exercisable. Mr. Schulte holds 12,083 shares and 966
warrants jointly with his wife; 200 shares are held in accounts for
spouse's children for which she is the custodian and of which Mr. Schulte
disclaims beneficial ownership.
(8) Includes 416 shares of common stock that may be acquired through warrants
that are currently exercisable. (9) Mr. Malvey holds 100 shares for the
benefit of his child in an account for which he is the custodian, and
holds 166 warrants jointly with his wife; 1,500 shares are held by his
wife. Includes 347 shares of common stock that may be acquired through
warrants that are currently exercisable.
The table below indicates the persons known to the Company to own 5% or
more of its shares of common stock as of December 31, 2007. The beneficial
owners listed below share the power to vote and dispose of the shares listed in
the table below.
Number of Common
Name and Address Shares Percent of Class
---------------- ------ ----------------
Kenmont Investments Management, L.P. 948,322 (1) 10.4%
711 Louisiana, Suite 1750, Houston, TX 77002
Kensington Investment Group, Inc. 852,500(2) 9.6%
4 Orinda Way, Suite 200C, Orinda, CA 94563
(1) Information with respect to Kenmont entities is based on a Schedule
13G filed on May 11, 2007. Kenmont Investments Management, L.P.
("Kenmont") serves as investment manager to several entities that
beneficially own the Company's securities, each of which is more fully
described in that Schedule 13G. Includes 281,666 shares of common
stock that may be acquired through warrants that are currently
exercisable.
(2) Information with respect to Kensington Investment Group, Inc. and its
beneficial ownership is based on a Schedule 13G filed on January 14,
2008. Shares are owned indirectly by Kensington Investment Group, Inc.
in their capacity as general partner and investment adviser to private
investment partnerships and as the investment adviser to The
Kensington Funds, a Registered Investment Company.
At December 31, 2007, 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 with respect to the Fund Complex,
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 Adviser or its affiliates.
Aggregate Dollar Range of
Holdings in Funds Overseen by
Aggregate Dollar Range of Holdings Director in
Director in the Company (1)(2) Fund Complex (2)(3)
-------- --------------------- -------------------
Interested Persons
H. Kevin Birzer Over $100,000 Over $100,000
Terry C. Matlack Over $100,000 Over $100,000
Independent Persons
Conrad S. Ciccotello $10,001-$50,000 Over $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 31, 2007.
17
(2) No value included for warrants to purchase shares of the Company's common
stock held by the directors since the exercise price of the warrants
exceeded the closing price of the Company's common shares on the New York
Stock Exchange on December 31, 2007.
(3) Includes the Company, TYG, TYY, TYN, TTRF and TGOC. Amounts based on the
closing price of the common shares of the Company, TYG, TYY and TYN on the
New York Stock Exchange on December 31, 2007 and the most recent private
placement price of the common shares of TTRF and TGOC.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company has written policies and procedures in place for the review,
approval and monitoring of transactions involving the Company and certain
persons related to the Company. For example, the Company has a Code of Ethics
that requires any director, officer, manager or employee of the Company or the
Company's investment Adviser to disclose any personal interest that is, or might
be, in conflict with the interest of the Company, and the nature of the conflict
to the Company's Chief Compliance Officer for appropriate consideration. The
Code of Ethics also establishes personal trading procedures for the Company's
directors, officers and other access persons. Under the Code of Ethics, access
persons may not buy or sell securities of the Company or energy infrastructure
companies without preclearing the transaction with the Company's Chief
Compliance Officer, and are required to report their securities holdings and
securities transactions to the Chief Compliance Officer. As a business
development company, the 1940 Act also imposes regulatory restrictions on our
ability to engage in certain related party transactions. The Company has written
procedures which prohibit certain transactions with affiliates of the Company
and require board approval of certain transactions with affiliated persons of
the Company.
Tortoise Capital Advisors, L.L.C. is the Company's investment adviser. The
Adviser's address is 10801 Mastin Boulevard, Suite 222, Overland Park, Kansas
66210. Fountain Capital's ownership in the Adviser was transferred to FCM
Tortoise L.L.C. ("FCM"), a recently formed affiliate with the same principals as
Fountain Capital effective as of August 2, 2007. The transfer did not result in
a change in control of the Adviser. FCM has no operations and serves as a
holding company. FCM and KCEP control the Adviser through their equity ownership
and management rights in the Adviser. As of January 31, 2008, the Adviser had
approximately $2.9 billion of client assets under management. The Adviser may be
contacted at the address listed above.
Pursuant to the terms of an investment advisory agreement between the
Company and the Adviser, dated January 1, 2007 (the "Advisory Agreement"), the
Company pays the Adviser a fee consisting of two components - a base management
fee and an incentive fee. The base management fee is paid quarterly in arrears,
and is equal to 0.375% (1.5% annualized) of the Company's average monthly
Managed Assets (total assets, including any assets purchased with or
attributable to any borrowed funds, minus accrued liabilities other than (i)
deferred taxes, and (ii) debt entered into for the purpose of leverage) for such
quarter.
The incentive fee consists of two parts. The first part, the investment
income fee, is calculated and payable quarterly in arrears and will equal 15% of
the excess, if any, of the Company's net investment income for the fiscal
quarter over a quarterly hurdle rate equal to 2% (8% annualized) of the
Company's average monthly net assets for the quarter.
The second part of the incentive fee, the capital gains fee, will be
determined and payable in arrears as of the end of each fiscal year (or, upon
termination of the Advisory Agreement, as of the termination date), and will
equal (i) 15% of (a) the Company's net realized capital gains on a cumulative
basis from the commencement of the Company's operations on December 8, 2005 to
the end of each fiscal year, less (b) any unrealized capital depreciation at the
end of such fiscal year, less (ii) the aggregate amount of all capital gains
fees paid to the Adviser in prior fiscal years.
18
In November 2007, the Adviser agreed that it will reimburse the Company for
expenses incurred by the Company beginning September 1, 2007 and ending December
31, 2008 on a quarterly basis in an amount equal to an annual rate of 0.25% of
the Company's average monthly Managed Assets for that quarter. The Adviser also
terminated its right to receive the capital gains incentive fee described above,
to the extent, and only to the extent, such fee would be due as to that portion
of any scheduled periodic distributions made possible by the normally recurring
cash flow from the operations of portfolio companies ("Expected Distributions")
that is characterized by the Company as a return of capital for book purposes.
This does not apply to any portion of any distribution from a portfolio company
that is not an Expected Distribution. For the year ended November 30, 2007, the
portion of the capital gains incentive fee that was attributable to expected
distributions characterized by the Company as return of capital for book
purposes since its commencement of operations amounted to $1,326,001. In fiscal
year 2007, the Company incurred approximately $1,831,878 in base management fees
due to the Adviser under the Advisory Agreement, net of $94,181 in expenses
reimbursed by the Adviser. During the year ended November 30, 2007, the Company
accrued no investment income incentive fees, and accrued $307, 611 as a
provision for capital gains incentive fees. Pursuant to the Advisory Agreement,
the capital gains incentive fee is paid annually only if there are realization
events and only if the calculation defined in the agreement results in an amount
due. As of November 30, 2007, no amount was required to be paid for capital
gains incentive fees.
The Adviser's services under the Advisory Agreement will not be exclusive,
and it is free to furnish the same or similar services to other entities,
including businesses that may directly or indirectly compete with the Company so
long as its services to the Company are not impaired by the provision of such
services to others. The other funds and private accounts managed by the Adviser
may make investments similar to investments that the Company may pursue. Unlike
the other funds managed by the Adviser (other than TGOC), the Company generally
targets investments in companies that are privately-held or have market
capitalizations of less than $250 million, and that are earlier in their stage
of development. This may change in the future, however. Accordingly, the Adviser
and the members of its investment committee may have obligations to other
investors, the fulfillment of which might not be in the best interests of the
Company or its stockholders, and it is possible that the Adviser might allocate
investment opportunities to other entities, and thus might divert attractive
investment opportunities away from the Company. However, the Adviser intends to
allocate investment opportunities in a fair and equitable manner consistent with
the Company's investment objectives and strategies, and in accordance with
written allocation policies and procedures of the Adviser, so that the Company
will not be disadvantaged in relation to any other client.
Pursuant to the Advisory Agreement, the Adviser has consented to the
Company's use on a non-exclusive, royalty-free basis, of the name "Tortoise" in
the Company's name. The Company will have the right to use the "Tortoise" name
so long as the Adviser or one of its approved affiliates remains the Company's
investment Adviser. Other than with respect to this limited right, the Company
will have no legal right to the "Tortoise" name. This right will remain in
effect for so long as the Advisory Agreement with the Adviser is in effect and
will automatically terminate if the Advisory Agreement were to terminate for any
reason, including upon its assignment.
The Company has also entered into an Administration Agreement with the
Adviser pursuant to which the Adviser acts as the Company's administrator and
performs (or oversees or arranges for the performance of) the administrative
services necessary for the Company's operation, including without limitation
providing the Company with equipment, clerical, book keeping and record keeping
services. For these services the Company pays the Adviser a fee equal to equal
to 0.07% of the Company's aggregate average daily Managed Assets up to and
including $150 million, 0.06% of aggregate average daily Managed Assets on the
next $100 million, 0.05% of aggregate average daily Managed Assets on the next
$250 million and 0.02% on the balance of the Company's aggregate average daily
Managed Assets. The continuation of the administration agreement was approved by
the Board of Directors, including the independent directors, on November 12,
2007.
19
The Adviser is controlled directly or indirectly by David J. Schulte, the
Company's Chief Executive Officer; Terry Matlack, a director and the Chief
Financial Officer and Assistant Treasurer of the Company; H. Kevin Birzer, a
director and Chairman of the Board of the Company; Zachary A. Hamel, Senior Vice
President of the Company and Kenneth P. Malvey, Senior Vice President and
Treasurer of the Company, among others. Each of these individuals are employed
by the Adviser and have indirect ownership and financial interests in the
Adviser. As a result, they may each be deemed to have an indirect material
interest in fees paid to the Adviser.
The Company has retained Duff & Phelps, LLC, an independent valuation firm,
to provide third party valuation consulting services which consist of certain
limited procedures that the Board has identified and requested they perform. The
Board of Directors is ultimately and solely responsible for determining the fair
value of the investments in good faith. At the time of their retention, the
Board of Directors was aware that both Duff & Phelps, LLC and Atlantic Asset
Management LLC ("Atlantic") were minority investments of Lovell Minnick Partners
LLC. Atlantic is a minority owner of Fountain Capital, an affiliate of the
Adviser, and holds a non-voting Class B economic interest in the Adviser.
The Adviser has entered into a sub-Advisory Agreement with Kenmont. Kenmont
is a registered investment Adviser with experience investing in privately-held
and public companies in the U.S. energy and power sectors. Kenmont provides
additional contacts and enhances the number and range of potential investment
opportunities in which the Company has the opportunity to invest. The Adviser
compensates Kenmont for the services it provides to the Company. The Adviser
also indemnifies and holds the Company harmless from any obligation to pay or
reimburse Kenmont for any fees or expenses incurred by Kenmont in providing such
services to the Company. Kenmont will be indemnified by the Adviser for certain
claims related to the services it provides and obligations assumed under the
sub-advisory agreement.
Kenmont Special Opportunities Master Fund L.P. (an affiliate of Kenmont)
purchased 666,666 of the Company's common shares and 166,666 of the Company's
warrants in the private placement completed in January 2006 and purchased $8.05
million, or 536,666 shares, of the Company's Series A Redeemable Preferred Stock
and 80,500 of the Company's warrants to purchase common shares in the private
placement completed in December 2006. Kenmont Special Opportunities Master Fund
L.P. subsequently transferred 161,500 of these common shares and 40,400 of these
warrants to its affiliate, Man Mac Miesque 10B, Limited Ltd. Man Mac Miesque
10B, Limited Ltd. purchased 230,000 shares of the Company's Series A Redeemable
Preferred Stock and 34,500 of the Company's warrants to purchase common shares
in the private placement in December 2006. On February 7, 2007, the Company
redeemed all of its outstanding preferred stock at $15.00 per share plus a 2
percent premium. Entities managed by Kenmont own approximately 7.5% of the
Company's outstanding common shares and warrants to purchase an additional
281,666 common shares.
ANNUAL MEETING MATTERS
Outstanding Stock. At the record date, the Company had 8,858,168 common
shares issued and outstanding.
How Proxies Will Be Voted. All proxies solicited by the Board of Directors
of the Company 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.
20
How To Vote. Complete, sign and date the enclosed proxy card and return it
in the enclosed envelope or attend the Annual Meeting and vote in person.
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 Adviser, 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
Adviser any additional compensation for their efforts to supplement proxy
solicitation.
Revoking a Proxy. You may revoke your proxy at any time by: (i) sending
prior to the meeting 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; (ii) properly executing and
sending prior to the meeting a later-dated proxy; or (iii) 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 constitutes a quorum. For
purposes of determining the presence or absence of a quorum, shares present at
the annual meeting that are not voted, or abstentions, and broker non-votes
(which occur when a broker has not received directions from customers and does
not have discretionary authority to vote the customers' shares) 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.
Availability of Annual Report. The Company's Annual Report includes its
annual report on Form 10-K for the year ended November 30, 2007 (without
exhibits) as filed with the SEC. The Company will furnish without charge upon
written request a copy of its annual report on Form 10-K. The annual report on
Form 10-K includes a list of all exhibits thereto. The Company will furnish
copies of such exhibits upon written request and payment of its reasonable
expenses in furnishing such exhibits. Each such request must include a good
faith representation that, as of the record date, the person making such request
was a beneficial owner of the Company's common shares entitled to vote at the
annual meeting of stockholders. Such written request should be directed to the
Company's Secretary, Tortoise Capital Resources Corporation, 10801 Mastin
Boulevard, Suite 222, Overland Park, Kansas 66210, (866)-362-9331.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires each of the Company's directors
and officers, the Adviser, affiliated persons of the Adviser 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 Adviser and affiliated persons of the Adviser
21
have complied with all applicable Section 16(a) filing requirements during the
last fiscal year, except that in the initial Form 3 filings for the Company's
directors and officers (other than Mr. Russell), their common share warrants
were inadvertently omitted. On August 29, 2007, Form 3 amendments were filed for
each of these individuals reporting their ownership of the Company's common
share warrants. To the knowledge of management of the Company, no person, other
than Kenmont Investments Management, L.P., is the beneficial owner (as defined
in Rule 16a-1 under the Exchange Act) of more than 10% of a class of the
Company's equity securities.
ADMINISTRATOR
The Company has entered into an Administration Agreement with the Adviser,
pursuant to which the Adviser performs (or oversees or arranges for the
performance of) the administrative services necessary for the Company's
operation, including without limitation providing equipment, clerical,
bookkeeping and record keeping services. The address of the Adviser is 10801
Mastin Boulevard, Suite 222, Overland Park, Kansas 66210.
STOCKHOLDER COMMUNICATIONS
Stockholders are able to send communications to the Board of Directors of
the Company. Communications should be addressed to the Secretary of the Company
at its principal office at 10801 Mastin Boulevard, Suite 222, Overland Park,
Kansas 66210. The Secretary will forward any communications received directly to
the Board of Directors.
CODE OF BUSINESS CONDUCT, CODE OF ETHICS
AND CORPORATE GOVERNANCE POLICY
The Company has adopted a code of business conduct, a code of ethics which
applies to the Company's principal executive officer and principal financial
officer and a corporate governance policy. The Company has also adopted a code
of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes personal
trading procedures for employees designated as access persons. Each is available
on the Company's website (www.tortoiseadvisers.com/tto.cfm) or in print to any
shareholder who requests it from the Secretary of the Company at 10801 Mastin
Boulevard, Suite 222, Overland Park, Kansas 66210. STOCKHOLDER PROPOSALS AND
NOMINATIONS FOR THE 2009 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 the Company's proxy
statement for its 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
_________, 2008. Such proposal must comply with all applicable requirements of
Rule 14a-8 of the Exchange Act. Timely submission of a proposal does not mean
the proposal will be included in the proxy material sent to stockholders.
Other Proposals and Nominations. If you want to nominate a director or
have other business considered at the Company's next annual meeting of
stockholders but do not want those items included in its proxy statement, you
must comply with the advance notice provision of the Company's Bylaws. Under the
Company's Bylaws, nominations for director or other business proposals to be
addressed at the Company's 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 _________,
2008 nor later than 5:00 p.m. Central Time on _________, 2008. 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,
22
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 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 applicable Company's Bylaws. A copy of the
Company's Bylaws may be obtained by contacting the Secretary of the Company at
866-362-9331 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 allowed to be brought before the
meeting.
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
Connie J. Savage
Secretary
__________, 2008
23
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE.
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[Tortoise Logo]
Proxy -- Tortoise Capital Resources Corporation
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS - APRIL 21, 2008
The undersigned holder of shares of Tortoise Capital Resources Corporation
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 Capital Resources
Corporation to be held on April 21, 2008 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)
Using a black ink pen, mark your votes with an X as shown in [ X ] this example.
Please do not write outside the designated areas.
Annual Meeting Proxy Card
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE.
- ----------------------------------------------------------------------------------------------------------------------------------------------------
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 - The Board of Directors recommends a vote "FOR" the
Nominee below. 1. Nominee:
FOR WITHHOLD
Conrad S. Ciccotello [ ] [ ]
B Issues - The Board of Directors recommends a 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: (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
prior to the 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 prior to
the pricing of the common stock to be sold, would not have been diluted by
greater than a total of 4% of the NAV per share of all outstanding common
stock; and (3) a majority of the Company's independent directors makes a
determination, based on information and a recommendation from the Company's
investment Adviser, 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. Approval of the Company's sale of warrants or options to acquire common
shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Ratification of Ernst & Young LLP as the Company's independent registered
public accounting firm to audit the financial statements of the Company for
the fiscal year ending November 30, 2008:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
C. Non-Voting Issues
Change of Name or Address - Please print new information below. Meeting Attendance
- -----------------------------------------------------------------------Mark box to the right __
if you plan to attend |__|
the Annual Meeting.
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D. Authorized Signatures - This section must be completed for your vote to
be counted. - Date and Sign Below Please sign exactly as your name
appears. If acting as attorney, executor, trustee, or in representative
capacity, sign name and indicate title.
Date (mm/dd/yyyy) - Signature 1 - Please keep signature Signature 2 - Please keep signature
Please print date below within the box. within the box.
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