As filed with the Securities and Exchange Commission on July 30, 2008

Securities Act Registration No. 333-142859

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-2

þ		REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

o		PRE-EFFECTIVE AMENDMENT NO.

þ		POST-EFFECTIVE AMENDMENT NO. 2

Tortoise Capital Resources Corporation

11550 Ash Street, Suite 300
Leawood, Kansas 66211
(913) 981-1020

Agent For Service

David J. Schulte
11550 Ash Street, Suite 300
Leawood, Kansas 66211

Copies of Communications to:

Steven F. Carman, Esq.
Husch Blackwell Sanders LLP
4801 Main Street, Suite 1000
Kansas City, MO 64112
(816) 983-8000

     Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

     If any of the securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. þ

     It is proposed that this filing will become effective (check appropriate box):

     þ when declared effective pursuant to Section 8(c).

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS

Common Stock
Warrants to Purchase Common Stock
Common Stock Issuable upon Exercise of the Warrants

     We are a non-diversified closed-end management investment company focused on the U.S. energy infrastructure sector. We invest primarily in privately-held and micro-cap public energy companies operating in the midstream and downstream segments, and to a lesser extent the upstream segment of the U.S. energy infrastructure sector. Our goal is to provide our stockholders with a high level of total return, with an emphasis on dividends and dividend growth. We invest primarily in the equity securities of companies that we expect to pay us distributions on a current basis and provide us distribution growth. We have elected to be regulated as a business development company under the Investment Company Act of 1940.

     We are externally managed by Tortoise Capital Advisors, L.L.C., a registered investment adviser specializing in the energy sector that had approximately $2.7 billion of assets under management as of June 30, 2008, including the assets of three other publicly traded closed-end management investment companies.

     This prospectus relates to (i) the resale of up to 3,030,169 of our common shares, (ii) the resale of up to 943,849 warrants to purchase our common shares, and (iii) the issuance and sale of up to 943,849 of our common shares issuable upon the exercise of the warrants.

     The common shares and warrants offered for resale by this prospectus are offered for the accounts of the current holders of such common shares and warrants, whom we refer to as the selling holders. The selling holders may sell, on a continuous basis, the common shares, the warrants and the common shares issuable upon exercise of the warrants directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions. The common shares and warrants may be sold in one or more transactions at fixed prices, prevailing market prices at the time of sale, prices related to prevailing market prices, varying prices determined at the time of sale or negotiated prices. This offering is occurring pursuant to Rule 415 under the Securities Act of 1933. We will update the information in this prospectus to reflect any material changes occurring prior to the completion of this offering.

     We will not receive any of the proceeds from the common shares or warrants sold by the selling holders. We will, however, receive cash consideration equal to the exercise price of $15.00 per warrant in connection with the exercise of the warrants. We anticipate that the exercise of warrants will not occur unless the market value of our common shares exceeds the exercise price per warrant. We have agreed to bear specific expenses in connection with the registration and sale of the common shares and warrants being offered by the selling holders.

     Our common shares are listed on the New York Stock Exchange under the symbol “TTO.” On ________, 2008, the last reported sale price of our common shares on the New York Stock Exchange was $____. We do not intend to apply to list the warrants on any national securities exchange or the Nasdaq National Market. There can be no assurance that an active public market for the warrants will develop, or if such a market develops, it will be maintained.

     Investing in our common shares and warrants involves risks, including the risk of leverage, that are described in the “Risk Factors” section of this prospectus beginning on page 17.

     Please read this prospectus before investing, and keep it for future reference. The prospectus contains important information about us that a prospective investor should know before investing in our common shares or warrants. Shares of

closed-end management investment companies have in the past frequently traded at a discount to their net asset value. If our common shares trade at a discount to net asset value, it may increase the risk of loss for purchasers in this offering.

     We are required to file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. This information is available free of charge by contacting us at 11550 Ash Street, Suite 300, Leawood, Kansas 66211 or by telephone at 1-866-362-9331 or on our website at www.tortoiseadvisors.com/tto.cfm. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information. Information posted to our website is not incorporated by reference into this prospectus.

     Neither the Securities and Exchange Commission nor any state securities commission have approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is ______, 2008.

TABLE OF CONTENTS

		Page
Prospectus Summary			1
The Offering			8
Fees and Expenses			13
Selected Financial Data			15
Selected Quarterly Data			16
Forward-Looking Statement			17
Risk Factors			18
Use Of Proceeds			29
Price Range of Common Shares and Distributions			30
Capitalization			31
Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Senior Securities			40
The Company			40
Portfolio Companies			54
Portfolio Management			56
Management			57
Adviser			63
Certain Relationships And Related Transactions			73
Control Persons And Principal Stockholders			74
Dividend Reinvestment Plan			76
Determination Of Net Asset Value			78
Certain U.S. Federal Income Tax Considerations			81
Regulation			85
Description Of Capital Stock			88
Certain Provisions of Our Charter and Bylaws and the Maryland General Corporation Law			91
Selling Holders			95
Plan of Distribution			96
Independent Registered Public Accounting Firm			97
Administrator, Custodian, Transfer and Dividend Paying Agent and Registrar			97
Legal Matters			97
Available Information			97
Index to Financial Statements			F-1
Opinion of Venable LLP
Consent of Independent Registered Public Accounting Firm

You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with different information or to make any representations not contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. We will update the information in this prospectus to reflect any material changes occurring prior to the completion of this offering.

Name of Portfolio		Nature of its		Securities		Amount Invested				Fair Market Value				Current
Company (Segment)		Principal Business		Held by Us		(in millions)				(in millions)				Yield(1)
Abraxas Energy Partners, L.P. (Upstream)		Natural gas and oil exploitation and development in the Delaware and Gulf Coast Basins of Texas, Rockies and mid-continent region of the U.S.		Common Units		$	7.5			$	7.4				9.6	%
Eagle Rock Energy Partners, L.P. (Upstream/Midstream)(2)		Gatherer and processor of natural gas in north and east Texas and Louisiana and producer and developer of upstream assets located in 17 states		Common Units			12.1				11.4				8.7	%
EV Energy Partners, L.P. (Upstream)		Acquirer, producer and developer of oil and gas properties		Common Units			7.5				6.8				7.2	%
High Sierra Energy, LP (Midstream)		Marketer, processor and transporter of hydrocarbons with operations primarily in Colorado, Wyoming and Florida		Common Units			24.8				27.3				9.8	%
High Sierra Energy GP, LLC (Midstream)(3)		General Partner of High Sierra Energy, LP		GP Interest			2.0				2.8			2.3		%
International Resource Partners LP (Coal)		Operator of both metallurgical and steam coal mines in Central Appalachia		Class A Units			10.0				10.4				8.0	%
Legacy Reserves LP (Upstream)		Oil and natural gas exploitation and development in the Permian Basin		Limited Partner Units			4.5				6.1				11.5	%
LONESTAR Midstream Partners, LP (Midstream)(4)		Gatherer and processor of natural gas in six counties in Texas		Class A Units			24.9				26.2			8.4		%
LSMP GP, LP (Midstream)(4)		Indirectly owns General Partner of LONESTAR Midstream Partners, LP		GP LP Units			0.5				1.7			1.6		%
Millennium Midstream Partners, LP (Midstream)		Gatherer and processor of natural gas in Texas, Louisiana and offshore Gulf of Mexico		Class A Common Units and Incentive Distribution Rights			17.5				20.5				9.1	%
Mowood, LLC (Downstream)(5)		Natural gas distribution in central Missouri and landfill gas to energy projects		Equity Interest Subordinated Debt			3.5 7.1				4.1 7.1			10.0 12.0		% %
Quest Midstream Partners, L.P. (Midstream)		Operator of natural gas gathering pipelines in the Cherokee Basin and interstate natural gas transmission pipelines in Oklahoma, Kansas and Missouri		Common Units			22.2				20.1				9.0	%
VantaCore Partners LP (Aggregate)		Acquirer and operator of aggregate companies, with quarry and asphalt operations in Clarksville, Tennessee		Common Units and Incentive Distribution Rights			8.5				10.0			10.0		%
				Secured Credit Facility(6)			3.8				3.8			8.2		%
						$	156.4			$	165.7

FEES AND EXPENSES

     The following table is intended to assist you in understanding the various costs and expenses that an investor in this offering will bear directly or indirectly. We caution you that the percentages in the table below indicating annual expenses are estimates and may vary.

Stockholder transaction expenses (as a percentage of net assets attributable to common shares):

Sales load			0.00	%
Offering expenses			0.00	%(1)
Dividend reinvestment plan expenses			0.00	%(2)
Total stockholder transaction expenses paid			0.00	%
Annual expenses following this offering (as a percentage of net assets attributable to common shares)(3):
Management fee and capital gain incentive fee			2.27	%(4)
Leverage costs			1.17	%(5)
Other expenses			0.85	%(6)
Current income tax expense			—	%(7)
Deferred income tax expense			3.24	%(8)
Total annual expenses			7.53	%(9)
Less expense reimbursment			(0.34	)%(10)
Net annual expenses			7.19	%(9)

Example

     The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common shares. These amounts are based upon payment of annual operating expenses at the levels set forth in the table above except as indicated below.

		1 Year				3 Years				5 Years				10 Years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (11(12)		$	77			$	229			$	371			$	691

     The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. Moreover, while the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. A 5% annual return will not require payment of an incentive fee to our Adviser based on Net Investment Income, and thus no income incentive fee is included in this example. A 5% annual return may not, depending on the percentage of such return comprised of capital gains, require payment of a capital gains incentive fee to our Adviser. We have assumed the entire 5% annual return is comprised of capital gains and thus included a capital gains incentive fee in this example. See “Adviser — Examples of Quarterly Incentive Fee Calculation” for additional information concerning incentive fee calculations. In addition, while the example assumes reinvestment of all distributions at net asset value, participants in our dividend reinvestment plan may receive common shares valued at the market price in effect at that time. This price may be at, above or below net asset value. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

		We pay our 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 our average monthly Managed Assets 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 our Net Investment Income for the fiscal quarter over a quarterly hurdle rate equal to 2% (8% annualized) of our average monthly Net Assets for the quarter. For purposes of calculating the investment income fee, “Net Investment Income” means interest income (including accrued interest that we have not yet received in cash), dividend and distribution income from equity investments (but excluding that portion of cash distributions that are treated as return of capital), and any other income (including any fees such as commitment, origination, syndication, structuring, diligence, monitoring, and consulting fees or other fees that we receive from portfolio companies) accrued during the fiscal quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable by us, any interest expense, any accrued income taxes related to Net Investment Income and dividends paid on issued and outstanding preferred stock, if any, but excluding the incentive fees payable to our Adviser). No investment income fee was paid or earned prior to December 8, 2006. 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 investment advisory agreement, as of the termination date), and will equal (i) 15% of (a) our net realized capital gains, excluding the impact of current and deferred income taxes, on a cumulative basis from the commencement of our operations on December 8, 2005 to the end of each fiscal year, less (b) any unrealized capital depreciation, excluding the impact of deferred income taxes, at the end of such fiscal year, less (ii) the aggregate amount of all capital gains fees paid to our Adviser in prior years. During the fiscal year ended November 30, 2007, we accrued $307,611 as a provision for capital gains incentive fees (net of $1,326,001 which represents the portion of the capital gains incentive fee attributable to expected distributions that were characterized by the Company as return of capital for book purposes and terminated as described below). The provision for capital gains incentive fees resulted from the increase in fair value and unrealized appreciation on investments. 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. We may have capital gains and interest income that could result in the payment of an incentive fee to our Adviser in the first year after completion of this offering. Although we cannot predict whether we will meet the necessary performance targets, we have assumed $307,611 as a provision for capital gains incentive fees in this table.
		In November 2007, our Adviser agreed to reimburse us an amount equal to 0.25% of our average monthly Managed Assets on a quarterly basis beginning September 1, 2007 and ending December 31, 2008. The Adviser also agreed to terminate its right to receive the capital gains incentive fee described above, 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 our portfolio companies (“Expected Distributions”) that is characterized by us 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.
(5)		Leverage Costs in the table reflect our borrowings and rates payable thereon as of May 31, 2008. As of May 31, 2008 we had an outstanding balance of approximately $33.8 million under our secured credit facility. The funds we borrow under the credit facility accrue interest at a rate equal to 1.75% plus the one month LIBOR quoted by U.S. Bank from Telerate Page 3759, which interest rate was 4.21% as of May 31, 2008.
(6)		“Other expenses” includes our estimated overhead expenses, including payments to our transfer agent, our administrative agent and legal and accounting expenses. The holders of our common shares indirectly bear the cost associated with such other expenses.
(7)		For our fiscal year ended November 30, 2007, we accrued $261,667 in current tax benefit primarily related to net investment loss offsetting prior year net investment income. However, as we cannot predict whether we will incur current income tax benefit or expense in the future, we have assumed a current income tax expense of 0% in this table.
(8)		For our fiscal year ended November 30, 2007, we accrued $ 3,932,763 in net deferred tax expense primarily related to our net investment losses and realized and unrealized gains on investments. Deferred income tax expense represents an estimate of our potential tax liability if we were to recognize the unrealized appreciation of our portfolio assets, which occurred during the fiscal year ended November 30, 2007, based on the market value and basis of our assets as of November 30, 2007. Actual income tax expense (if any) will be incurred over many years, depending on if and when investment gains are realized, the then-current basis of assets, the level of net loss carryforwards (if any) and other factors.
(9)		The table presented above estimates what our annual expenses would be, stated as a percentage of our net assets attributable to our common shares. The table presented below, unlike the table presented above, estimates what our annual expenses would be stated as a percentage of our Managed Assets and excludes current and deferred income tax expenses. In addition, the table presented below, unlike the table presented above, excludes incentive fees as we cannot predict whether we will meet the necessary performance targets to earn such fees. As a result, our estimated total annual expenses would be as follows:

 

Management fee			1.50	%
Leverage costs (a)			0.87	%
Other expenses(b)			0.63	%
Total annual expenses (excluding incentive fees and current and deferred income tax expenses)			3.00	%
Less expense reimbursement(c)			(0.25	)%
Net annual expenses (excluding incentive fees and current and deferred income tax expenses)			2.75	%

 

(a)		Leverage Costs are calculated as described in footnote (5) above.

(b)		“Other expenses” includes our estimated overhead expenses, including payments to our transfer agent, our administrative agent and legal and accounting expenses. The holders of our common shares indirectly bear the cost associated with such other expenses.
(c)		Our Advisor has contractually agreed to reimburse us an amount equal to 0.25% of our average monthly Managed Assets on a quarterly basis beginning September 1, 2007 and ending December 31, 2008.

Example

     The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common shares. These amounts are based upon payment of annual operating expenses (excluding incentive fees payable under the investment advisory agreement and current and deferred income tax expenses) at the levels set forth in the table above.

		1 Year				3 Years				5 Years				10 Years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return		$	29			$	92			$	157			$	332

(10)		Our Advisor his contractually agreed to reimburse us an amount equal to 0.25% of our average monthly Managed Assets on a quarterly basis beginning September 1, 2007 and ending December 31, 2008.
(11)		Includes deferred income tax expense, See footnote (8) above for more details.
(12)		The example does not include sales loads or estimated offering costs.

SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Senior Securities” and the financial statements and related notes included in this prospectus. Financial information presented below has been derived from our financial statements audited by Ernst & Young LLP, our independent registered public accounting firm which are included herein. The historical data is not necessarily indicative of results to be expected for any future period.

						Period from
						December 8,
		Year Ended				2005
		November 30,				to November 30,
		2007				2006(1)
Statements of operations data:
Investment income		$	3,034,944			$	2,119,843
Base management fees (2)			2,233,670				634,989
All other expenses (3)			2,902,561				360,156
Total expenses		$	5,136,231			$	995,145
Less expense reimbursement by Adviser			94,181				—
Current and deferred tax expense, net			(3,671,096	)			(516,055	)
Net realized gain (loss) on investments before current tax benefit			260,290				(1,462	)
Unrealized gain on investments before deferred tax expense			10,561,888				328,858
Increase in net assets resulting from operations		$	5,143,976			$	936,039
Per common share data:
Dividends and distributions to common stockholders		$	0.67			$	0.34
Net increase in stockholder’s equity resulting from operations
Basic and diluted		$	0.66			$	0.30
Net asset value		$	13.76			$	13.70

		November 30,				November 30,
		2007				2006
Statements of assets and liabilities data:
Short-term investments		$	219,502			$	5,431,414
Long-term investments			158,416,831				37,144,100
Other assets			319,052				357,498
Total assets		$	158,955,385			$	42,933,012
Total liabilities			37,042,419				604,610
Total net assets		$	121,912,966			$	42,328,402

SELECTED QUARTERLY DATA
(Unaudited)

      The selected quarterly data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Senior Securities” and the financial statements and related notes included in this prospectus. The selected quarterly data presented below is unaudited. The historical data is not necessarily indicative of results to be expected for any future period.

		February 28,				May 31,				August 31,				November 30,				February 28,				May 31,				August 31,				November 30,				February 29,				May 31,
		2006 (1)				2006				2006				2006				2007				2007				2007				2007				2008				2008
Investment income		$	403,505			$	347,496			$	448,124			$	920,718			$	391,635			$	545,856			$	802,674			$	1,294,779			$	1,105,680			$	746,130
Base management fees			136,796				169,367				163,364				165,462				380,067				468,012				512,894				565,086				585,253				589,996
Capital gain incentive fees (2)			—				—				—				—				487,627				1,008,867				(170,648	)			(1,018,235	)			(279,665	)			1,367,168
All other expenses (3)			97,926				81,929				87,010				93,291				1,233,225				207,967				523,335				938,034				748,185				698,109
Expense reimbursement by Adviser			—				—				—				—				—				—				—				(94,181	)			(91,647	)			(104,228	)
Net expenses		$	234,722			$	251,296			$	250,374			$	258,753			$	2,100,919			$	1,684,846				$865,581			$	390,704			$	962,126			$	2,551,045
Current and deferred tax benefit (expense), net			(61,100	)			(34,855	)			(163,679	)			(256,421	)			(795,916	)			(2,128,190)				469,929				(1,216,919	)			1,255,578				685,869
Net realized gain (loss) on investments before current tax benefit			—				—				—				(1,462	)			—				13,712				—				246,578				—				—
Unrealized gain (loss) on investments before deferred tax expense			—				—				297,054				31,804				2,921,990				6,725,778				(1,137,647	)			2,051,767				(3,447,707	)			11,445,014
Increase (decrease) in net assets resulting from operations		$	107,683			$	61,345			$	331,125			$	435,886			$	416,790			$	3,472,310				$(730,625	)		$	1,985,501				(2,048,575	)			5,976,862
Basic per share increase (decrease) in net assets resulting from operations		$	0.03			$	0.02			$	0.11			$	0.14			$	0.09			$	0.39			$	(0.08	)		$	0.26			$	(0.23	)		$	0.67

FORWARD-LOOKING STATEMENTS

     The matters discussed in this prospectus, as well as in future oral and written statements by our management, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments, achieve certain levels of return, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this prospectus include statements as to:

	•		our future operating results;
	•		our business prospects and the prospects of our existing and prospective portfolio companies;
	•		the impact of investments that we expect to make;
	•		our informal relationships with third parties;
	•		the dependence of our future success on the general economy and the domestic energy infrastructure sector;
	•		the ability of our portfolio companies to achieve their objectives;
	•		our ability to make investments consistent with our investment objective, including with respect to the size, nature and terms of our investments;
	•		our expected financings;
	•		our regulatory structure;
	•		our ability to operate as a business development company;
	•		the adequacy of our cash resources and working capital and our anticipated use of proceeds;
	•		the timing of cash flows, if any, from the operations of our portfolio companies; and
	•		the size or growth prospects of the energy infrastructure sector or any category thereof.

     For a discussion of factors that could cause our actual results to differ from forward-looking statements contained in this prospectus, please see the discussion under “Risk Factors.” You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this prospectus. The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933.

RISK FACTORS

     An investment in our common shares or warrants should not constitute a complete investment program for any investor and involves a high degree of risk. Due to the uncertainty in our investments, there can be no assurance that we will achieve our investment objective. You should carefully consider the risks described below before making an investment decision.

Risks Related to Our Operations

   We have a limited operating history.

     We were incorporated in Maryland on September 8, 2005. We are subject to all of the business risks and uncertainties associated with any business, including the risk that we will not achieve our investment objective and that the value of an investment in our common shares or warrants could decline substantially.

Our Adviser will serve as investment adviser to other funds, which may create conflicts of interest not in the best interest of us or our stockholders.

     Our Adviser was formed in October 2002 and has been managing investments in portfolios of MLPs securities in the energy sector since that time, including management of the investments of TYG since February 27, 2004, TYY since May 31, 2005, TYN since October 31, 2005, TTRF since June 2007, and TGOC since July 2007. From time to time the Adviser may pursue areas of investments in which the Adviser has more limited experience.

     Our investment committee is the same for, and all of our Adviser’s employees provide services for, other funds managed by the Adviser. Our Adviser’s services under the investment advisory agreement are not exclusive, and it is free to furnish the same or similar services to other entities, including businesses that may directly or indirectly compete with us so long as its services to us are not impaired by the provision of such services to others. In addition, the other funds and private accounts managed by our Adviser may make investments similar to investments that we may pursue. Unlike the other funds managed by our Adviser (other than one of the two privately held closed-end investment companies), we generally target investments in companies that are privately-held or have capitalizations of less than $250 million, and that are earlier in their stage of development. We also focus on privately-held and micro-cap public energy companies operating in the midstream and downstream segment, and to a lesser extent the upstream segment, of the U.S. energy infrastructure sector. One of the two privately held closed-end investment companies managed by the Adviser focuses on privately-held companies and publicly traded MLPs in the upstream, and to a lesser extent the midstream, gas and oil segments of the energy sector and could contemplate an investment that falls within our investment focus. Accordingly, our 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 us or our stockholders, and it is possible that our Adviser might allocate investment opportunities to other entities, limiting attractive investment opportunities available to us. However, our Adviser intends to allocate investment opportunities in a fair and equitable manner consistent with our investment objectives and strategies, and in accordance with written allocation policies and procedures of our Adviser, so that we will not be disadvantaged in relation to any other client.

   We are dependent upon our Adviser’s key personnel for our future success.

     We depend on the diligence, expertise and business relationships of the senior management of our Adviser. Our Adviser’s investment professionals and senior management will evaluate, structure, close and monitor our investments. Our future success will depend on the continued service of the senior management team of our Adviser. The departure of one or more investment professionals of our Adviser could have a material adverse effect on our ability to achieve our investment objective and on the value of our common shares and warrants. We will rely on certain employees of the Adviser who will be devoting significant amounts of their time to non-Company related activities of the Adviser. To the extent employees of the Adviser who are not committed exclusively to us are unable to, or do not, devote sufficient amounts of their time and energy to our affairs, our performance may suffer.

The incentive fee payable to our Adviser may create conflicting incentives.

     The incentive fee payable by us to our Adviser may create an incentive for our Adviser to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such a compensation arrangement. Because a portion of the incentive fee payable to our Adviser is calculated as a percentage of the amount of our net investment income that exceeds a hurdle rate, our Adviser may imprudently use leverage to increase the return on our investments. Under some circumstances, the use of leverage may increase the likelihood of default, which would disfavor the holders of our common shares. In addition, our Adviser will receive an incentive fee based, in part, upon net realized capital gains on our investments. Unlike the portion of the incentive fee based on net investment income, there is no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result, our Adviser may have an incentive to pursue investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative or long term securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns or longer return cycles.

     We may be required to pay an incentive fee even in a fiscal quarter in which we have incurred a loss. For example, if we have pre-incentive fee net investment income above the hurdle rate and realized capital losses, we will be required to pay the investment income portion of the incentive fee.

     The investment income portion of the incentive fee payable by us will be computed and paid on income that may include interest that has been accrued but not yet received in cash, and the collection of which is uncertain or deferred. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the investment income portion of the incentive fee will become uncollectible. Our Adviser will not be required to reimburse us for any such incentive fee payments.

Our Adviser and its management have limited experience operating under the constraints imposed on us as a BDC.

      The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70% of their total assets primarily in securities of private or thinly traded U.S. public companies, cash, cash equivalents, U.S. Government securities and other high quality debt investments that mature in one year or less. These constraints, among others, may hinder the Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective. Our Adviser’s experience operating under these constraints is limited to the period since our commencement of operations in 2005.

Because we expect to distribute substantially all of our income to our stockholders, we will continue to need additional capital to make new investments. If additional funds are unavailable or not available on favorable terms, our ability to grow and execute our business plan will be impaired.

     Our business will require a substantial amount of capital if we distribute substantially all of our income to our stockholders and we are to grow. We may acquire additional capital from the issuance of securities senior to our common shares, including additional borrowings or the issuance of additional senior securities. We may also acquire additional capital through the issuance of additional equity. However, we may not be able to raise additional capital in the future on favorable terms or at all. Our new credit facility contains a covenant precluding us from incurring additional debt. We may issue debt securities, other instruments of indebtedness or preferred stock, and we intend to borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the terms of our credit facility and the 1940 Act. The 1940 Act permits us to issue senior securities in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. Our ability to pay distributions or issue additional senior securities is restricted if our asset coverage ratio is not at least 200%, or put another way, the value of our assets (less all liabilities and indebtedness not represented by senior securities) must be at least twice that of any outstanding senior securities (plus the aggregate involuntary liquidation preference of any preferred stock). If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales may be disadvantageous. As a result of issuing senior securities, we will also be exposed to typical risks associated with leverage, including increased risk of loss. If we issue preferred securities which will rank “senior” to our common shares in our capital structure, the holders of such preferred securities may have separate voting rights and other rights, preferences or privileges more favorable than those of our common shares, and the issuance of such preferred securities could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for securityholders or otherwise be in our best interest.

     To the extent our ability to issue debt or other senior securities is constrained, we will depend on issuances of additional common shares to finance our operations. As a BDC, we generally are not be able to issue additional common shares at a price below net asset value (net of any sales load (underwriting discount)) without first obtaining required approvals of our stockholders and our independent directors which could constrain our ability to issue additional equity.

As a BDC, we are subject to limitations on our ability to engage in certain transactions with affiliates.

     As a BDC, we are prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our independent directors or the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our affiliate for purposes of the 1940 Act and we are generally prohibited from buying or selling any security from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits “joint” transactions with an affiliate, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person, or entering into joint transactions with such person, absent the prior approval of the SEC. Our Adviser and TYG have previously applied to the SEC for exemptive relief to permit TYG, TYY, TYN and other clients of our Adviser, including us, to co-invest in negotiated private placements of securities. Unless and until such an exemptive order is obtained, we will not co-invest with affiliates in negotiated private placement transactions.

If an investment that was initially believed to be a qualifying asset is later deemed not to have been a qualifying asset at the time of investment, we could lose our status as a BDC or be precluded from investing according to our current business plan.

     As a BDC, we must not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70 percent of our total assets are qualifying assets. If an investment that was originally believed to be a qualifying asset is later deemed not to have been a qualifying asset at the time of investment, our status as a BDC may be jeopardized or we may be precluded from investing according to our current business plan, either of which would have a material adverse effect on our business, financial condition and results of operations. We also may be required to dispose of investments, which could have a material adverse effect on us and our shareholders, because even if we were successful in finding a buyer, we may have difficulty in finding a buyer to purchase such investments on favorable terms or in a sufficient timeframe.

We may choose to invest a portion of our portfolio in investments that may be considered highly speculative and that could negatively impact our ability to pay distributions and cause you to lose part of your investment.

     The 1940 Act permits a BDC to invest up to 30% of its assets in investments that do not meet the test for “qualifying assets.” Such investments may be made by us with the expectation of achieving a higher rate of return or increased cash flow with a portion of our portfolio and may fall outside of our targeted investment criteria. These investments may be made even though they may expose us to greater risks than our other investments and may consequently expose our portfolio to more significant losses than may arise from our other investments. We may invest up to 30% of our total assets in assets that are non qualifying assets in among other things, high yield bonds, bridge loans, distressed debt, commercial loans, private equity, and securities of public companies or secondary market purchases of securities of target portfolio companies. Such investments could impact negatively our ability to pay you distributions and cause you to lose part of your investment.

   Our debt increases the risk of investing in us.

     We have a $50 million secured revolving credit facility with U.S. Bank National Association, as lender, agent and lead arranger, First National Bank of Kansas and Wells Fargo Bank, N.A. The credit facility matures on March 20, 2009. As of June 30, 2008, we had an outstanding balance of $36.5 million under the credit facility. The credit facility precludes us from incurring additional debt and we may face liquidity constraints as a result. We may in the future incur incremental debt to increase our ability to make investments. Lenders from whom we may borrow money or holders of our debt securities will have fixed dollar claims on our assets that are superior to the claims of our stockholders, and we have and may grant a security interest in our assets in connection with our debt. In the case of a liquidation event, those lenders or note holders would receive proceeds before our stockholders. In addition, debt, also known as leverage, magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities. Leverage is generally considered a speculative investment technique and the costs of any leverage transactions will be borne by our stockholders. In addition, because the base management fee we pay to our Adviser is based on Managed Assets (which includes any assets purchased with borrowed funds), our Adviser may imprudently borrow funds in an attempt to increase our managed assets and in conflict with our or our stockholders’ best interests. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common shares to increase more than it otherwise would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause the net asset value attributable to our common shares to decline more than it otherwise would have had we not leveraged. Similarly, any increase in our revenue in excess of interest expense on our borrowed funds would cause our net income to increase more than it would without

the leverage. Any decrease in our revenue would cause our net income to decline more than it would have had we not borrowed funds and could negatively affect our ability to make distributions on our common shares. Our ability to service any debt that we incur will depend largely on our financial performance and the performance of our portfolio companies and will be subject to prevailing economic conditions and competitive pressures.

     Illustration. The following table illustrates the effect of leverage on returns from an investment in our common shares assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

		Assumed Return on our Portfolio
		(net of expenses)
		-10%				-5%				0%				5%				10%
Corresponding return to stockholder(1)			(-19.8	)%			(-12.0	)%			(-4.2	)%			3.6	%			11.4	%

(1)		Assumes $166,650,847 in total assets, $33,800,000 debt outstanding, $121,517,762 in stockholders’ equity and an average cost of funds of 4.21%. Actual interest payments may be different.

We operate in a highly competitive market for investment opportunities.

     We compete with public and private funds, commercial and investment banks and commercial financing companies to make the types of investments that we plan to make in the U.S. energy infrastructure sector. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than us. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, allowing them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC.

Our quarterly results may fluctuate.

     We could experience fluctuations in our quarterly operating results due to a number of factors, including the return on our equity investments, the interest rates payable on our debt investments, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Our portfolio may be concentrated in a limited number of portfolio companies.

     We currently have investments in a limited number of portfolio companies. One or two of our portfolio companies may constitute a significant percentage of our total portfolio. An inherent risk associated with this investment concentration is that we may be adversely affected if one or two of our investments perform poorly or if we need to write down the value of any one investment. Financial difficulty on the part of any single portfolio company will expose us to a greater risk of loss than would be the case if we were a “diversified” company holding numerous investments.

Our investments in privately-held companies present certain challenges, including the lack of available information about these companies and a greater inability to liquidate our investments in an advantageous manner.

     We primarily make investments in privately-held companies. Generally, little public information will exist about these companies, and we will be required to rely on the ability of our Adviser to obtain adequate information to evaluate the potential risks and returns involved in investing in these companies. If our Adviser is unable to obtain all material information about these companies, including with respect to operational, regulatory, environmental, litigation and managerial risks, our Adviser may not make a fully-informed investment decision, and we may lose some or all of the money invested in these companies. In addition, our Adviser may inappropriately value the prospects of an investment, causing us to overpay for such investment and fail to receive an expected or projected return on its investment. Substantially all of these securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell such investments at advantageous times and prices or in a timely manner. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we previously have recorded our investments. We also may

face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we or one of our affiliates have material non-public information regarding such portfolio company.

Most of our portfolio investments are and will continue to be recorded at fair value as determined in good faith by our board of directors. As a result, there is and will continue to be uncertainty as to the value of our portfolio investments.

      Most of our investments are and will be in the form of securities or loans that are not publicly traded. The fair value of these investments may not be readily determinable. We will value these investments quarterly at fair value as determined in good faith by our board of directors. We have retained Duff & Phelps, LLC (an independent valuation firm) to provide third party valuation consulting services which consists of certain limited procedures that our board of directors has identified and requested they perform. For the period ended May 31, 2008, our board of directors requested Duff & Phelps, LLC to perform the limited procedures on investments in 10 portfolio companies comprising approximately 100% of the restricted investments at fair value as of May 31, 2008. Duff & Phelps, LLC’s limited procedures did not involve an audit, review, compilation or any other form of examination or attestation under the standards of the Public Company Accounting Oversight Board (United States). Upon completion of the limited procedures, Duff & Phelps, LLC concluded that the fair value of the investments subjected to the limited procedures did not appear to be unreasonable. Our board of directors is solely responsible for determining the fair value of the investments in good faith. The types of factors that may be considered in fair value pricing of an investment include the nature and realizable value of any collateral, the portfolio company’s earnings and ability to make payments, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow and other relevant factors. Because such valuations are inherently uncertain, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. As a result, we may not be able to dispose of our holdings at a price equal to or greater than the determined fair value, which could have a negative impact on our net asset value.

Our equity investments may decline in value.

     The equity securities in which we invest may not appreciate or may decline in value. Thus, we may not be able to realize gains from our equity securities, and any gains that we do realize on the disposition of any equity securities may not be sufficient to offset any other losses we experience. As a result, the equity securities in which we invest may decline in value, which may negatively impact our ability to pay distributions and cause you to lose all or part of your investment.

An investment in MLPs will pose risks unique from other equity investments.

     An investment in MLP securities involves some risks that differ from an investment in the common stock of a corporation. Holders of MLP units have limited control and voting rights on matters affecting the partnership. Holders of units issued by an MLP are exposed to a remote possibility of liability for all of the obligations of that MLP in the event that a court determines that the rights of the holders of MLP units to vote to remove or replace the general partner of that MLP, to approve amendments to that MLP’s partnership agreement, or to take other action under the partnership agreement of that MLP would constitute “control” of the business of that MLP, or a court or governmental agency determines that the MLP is conducting business in a state without complying with the partnership statute of that state.

     Holders of MLP units are also exposed to the risk that they be required to repay amounts to the MLP that are wrongfully distributed to them. In addition, the value of our investment in an MLP will depend largely on the MLP’s treatment as a partnership for U.S. federal income tax purposes. If an MLP does not meet current legal requirements to maintain partnership status, or if it is unable to do so because of tax law changes, it would be treated as a corporation for U.S. federal income tax purposes. In that case, the MLP would be obligated to pay income tax at the entity level and distributions received by us generally would be taxed as dividend income. As a result, there could be a material reduction in our cash flow and there could be a material decrease in the value of our common shares.

Unrealized decreases in the value of debt investments in our portfolio may impact the value of our common shares and may reduce our income for distribution.

     As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by our board of directors. Decreases in the market values or fair values of our debt investments will be recorded as unrealized depreciation. Any unrealized depreciation in our investment portfolio could be an indication of a portfolio company’s inability to meet its obligations to us with respect to the loans whose market values or fair values decreased. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods.

When we are a minority equity or a debt investor in a portfolio company, we may not be in a position to control that portfolio company.

     When we make minority equity investments or invest in debt, we will be subject to the risk that a portfolio company may make business decisions with which we may disagree, and that the stockholders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our investments.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

     Portfolio companies in which we invest usually will have, or may be permitted to incur, debt that ranks senior to, or equally with, our investments, including debt investments. As a result, payments on such securities may have to be made before we receive any payments on our investments. For example, these debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to our investments. These debt instruments will usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. In the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying its senior creditors, a portfolio company may not have any remaining assets to use to repay its obligation to us or provide a full or even partial return of capital on an equity investment made by us. In the case of debt ranking equally with our investments, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

If our investments do not meet our performance expectations, you may not receive distributions.

     We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. See “Regulation.” Also, restrictions and provisions in any future credit facilities and debt securities may limit our ability to make distributions. We cannot assure you that you will receive distributions at a particular level or at all.

The lack of liquidity in our investments may adversely affect our business, and if we need to sell any of our investments, we may not be able to do so at a favorable price. As a result, we may suffer losses.

     We generally expect to invest in the equity of companies whose securities are not publicly traded, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. We also expect to invest in debt securities with terms of five to ten years and hold such investments until maturity. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. However, to maintain our status as a BDC, we may have to dispose of investments if we do not satisfy one or more of the applicable criteria under the regulatory framework. Our investments are usually subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.

We will be exposed to risks associated with changes in interest rates.

     Equity securities may be particularly sensitive to rising interest rates, which generally increase borrowing costs and the cost of capital and may reduce the ability of portfolio companies in which we own equity securities to either execute acquisitions or expansion projects in a cost-effective manner or provide us liquidity by completing an initial public offering or completing a sale. Fluctuations in interest rates will also impact any debt investments we make. Changes in interest rates may also negatively impact the costs of our outstanding borrowings, if any.

We may not have the funds to make additional investments in our portfolio companies.

     After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected yield on the investment.

Changes in laws or regulations or in the interpretations of laws or regulations could significantly affect our operations and cost of doing business.

     We are subject to federal, state and local laws and regulations and are subject to judicial and administrative decisions that affect our operations, including loan originations, maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures and other trade practices. If these laws, regulations or decisions change, we may have to incur significant expenses in order to comply, or we may have to restrict our operations. In addition, if we do not comply with applicable laws, regulations and decisions, or fail to obtain licenses that may become necessary for the conduct of our business, we may be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business, results of operations or financial condition.

Our internal controls over financial reporting may not be adequate, and our independent registered public accounting firm may not be able to certify as to their adequacy, which could have a significant and adverse effect on our business and reputation.

     We are evaluating our internal controls over financial reporting. We plan to design enhanced processes and controls to address any issues that might be identified. As a result, we expect to incur significant additional expenses in the near term, which will negatively impact our financial performance and our ability to make distributions. This process also will result in a diversion of management’s time and attention. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the

impact of the same on our operations and may not be able to ensure that the process is effective or that the internal controls are or will be effective in a timely manner. Beginning with our annual report for our fiscal year ended November 30, 2008, our management and independent registered public accounting firm will be required to report on our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and rules and regulations of the SEC thereunder. We will be required to review on an annual basis our internal controls over financial reporting, and to disclose on a quarterly basis changes that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. There can be no assurance that our quarterly reviews will not identify material weaknesses.

Risks Related to an Investment in the U.S. Energy Infrastructure Sector

Our portfolio is and will continue to be concentrated in the energy infrastructure sector, which will subject us to more risks than if we were broadly diversified.

     We invest primarily in privately-held and micro-cap public energy companies. Because we are specifically focused on the energy infrastructure sector, investments in our common shares may present more risks than if we were broadly diversified over numerous sectors of the economy. Therefore, a downturn in the U.S. energy infrastructure sector would have a larger impact on us than on an investment company that does not concentrate in one sector of the economy. The energy infrastructure sector can be significantly affected by the supply of and demand for specific products and services; the supply and demand for crude oil, natural gas, and other energy commodities; the price of crude oil, natural gas, and other energy commodities; exploration, production and other capital expenditures; government regulation; world and regional events and economic conditions. At times, the performance of securities of companies in the energy infrastructure sector may lag the performance of securities of companies in other sectors or the broader market as a whole.

The portfolio companies in which we invest are subject to variations in the supply and demand of various energy commodities.

     A decrease in the production of natural gas, natural gas liquids, crude oil, coal, refined petroleum products or other energy commodities, or a decrease in the volume of such commodities available for transportation, mining, processing, storage or distribution, may adversely impact the financial performance of companies in the energy infrastructure sector. Production declines and volume decreases could be caused by various factors, including catastrophic events affecting production, depletion of resources, labor difficulties, political events, OPEC actions, environmental proceedings, increased regulations, equipment failures and unexpected maintenance problems, failure to obtain necessary permits, unscheduled outages, unanticipated expenses, inability to successfully carry out new construction or acquisitions, import supply disruption, increased competition from alternative energy sources or related commodity prices. Alternatively, a sustained decline in demand for such commodities could also adversely affect the financial performance of companies in the energy infrastructure sector. Factors that could lead to a decline in demand include economic recession or other adverse economic conditions, higher fuel taxes or governmental regulations, increases in fuel economy, consumer shifts to the use of alternative fuel sources, changes in commodity prices or weather. It should be noted that many economists have predicted a recession will occur in the U.S. in 2008. The length and severity of such a recession, if any, and its impact on our portfolio companies cannot be determined.

Many companies in the energy infrastructure sector are subject to the risk that they, or their customers, will be unable to replace depleted reserves of energy commodities.

     Many companies in the energy infrastructure sector are either engaged in the production of natural gas, natural gas liquids, crude oil, refined petroleum products or coal, or are engaged in transporting, storing, distributing and processing these items on behalf of producers. To maintain or grow their revenues, many customers of these companies need to maintain or expand their reserves through exploration of new sources of supply, through the development of existing sources, through acquisitions, or through long-term contracts to acquire reserves. The financial performance of companies in the energy infrastructure sector may be adversely affected if the companies to which they provide service are unable to cost-effectively acquire additional reserves sufficient to replace the natural decline.

Our portfolio companies are and will be subject to extensive regulation because of their participation in the energy infrastructure sector.

     Companies in the energy infrastructure sector are subject to significant federal, state and local government regulation in virtually every aspect of their operations, including how facilities are constructed, maintained and operated, environmental and safety controls, and the prices they may charge for the products and services they provide. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future that likely would increase compliance costs and may adversely affect the financial performance of companies in the energy infrastructure sector and the value of our investments in those companies.

Our portfolio companies are and will be subject to the risk of fluctuations in commodity prices.

     The operations and financial performance of companies in the energy infrastructure sector may be directly affected by energy commodity prices, especially those companies in the energy infrastructure sector owning the underlying energy commodity. Commodity prices fluctuate for several reasons, including changes in market and economic conditions, the impact of weather on demand or supply, levels of domestic production and imported commodities, energy conservation, domestic and foreign governmental regulation and taxation and the availability of local, intrastate and interstate transportation systems. Volatility of commodity prices, which may lead to a reduction in production or supply, may also negatively impact the performance of companies in the energy infrastructure sector that are solely involved in the transportation, processing, storing, distribution or marketing of commodities. Volatility of commodity prices may also make it more difficult for companies in the energy infrastructure sector to raise capital to the extent the market perceives that their performance may be tied directly or indirectly to commodity prices. Historically, energy commodity prices have been cyclical and exhibited significant volatility.

Our portfolio companies are and will be subject to the risk of extreme weather patterns.

     Extreme weather patterns, such as hurricane Ivan in 2004 and hurricanes Katrina and Rita in 2005, could result in significant volatility in the supply of energy and power. This volatility may create fluctuations in commodity prices and earnings of companies in the energy infrastructure sector. Moreover, any extreme weather patterns, such as hurricanes Katrina and Rita, could adversely impact the assets and valuation of our portfolio companies.

Acts of terrorism may adversely affect us.

     The value of our common shares, warrants and our investments could be significantly and negatively impacted as a result of terrorist activities, such as the terrorist attacks on the World Trade Center on September 11, 2001; war, such as the war in Iraq and its aftermath; and other geopolitical events, including upheaval in the Middle East or other energy producing regions. The U.S. government has issued warnings that energy assets, specifically those related to pipeline infrastructure, production facilities and transmission and distribution facilities, might be specific targets of terrorist activity. Such events have led, and in the future may lead, to short-term market volatility and may have long-term effects on the U.S. economy and markets. Such events may also adversely affect our business and financial condition.

Risks Related to this Offering

The price of our common shares may be volatile and may decrease substantially.

     The trading price of our common shares following this offering may fluctuate substantially. The price of our common shares in the market after this offering may be higher or lower than the price you pay and the liquidity of our common shares may be limited, in each case depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include the following:

	•		changes in the value of our portfolio of investments;
	•		price and volume fluctuations in the overall stock market from time to time;
	•		significant volatility in the market price and trading volume of securities of BDCs or other financial services companies;
	•		our dependence on the domestic energy infrastructure sector;
	•		our inability to deploy or invest our capital;
	•		fluctuations in interest rates;
	•		increases in the taxable portion of distributions we receive on our equity investments;
	•		any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
	•		operating performance of companies comparable to us;
	•		changes in regulatory policies with respect to BDCs;
	•		our ability to borrow money or obtain additional capital;
	•		losing BDC status;
	•		actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;
	•		general economic conditions and trends;
	•		departures of key personnel; or
	•		the sale by the selling holders named in this prospectus of a substantial number of our common shares in the public market.

Investing in our common shares or warrants may involve an above average degree of risk.

     The investments we make may result in a higher amount of risk, volatility or loss of principal than alternative investment options. Our investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in our common shares or warrants may not be suitable for investors with lower risk tolerance.

We cannot assure you that the market price of our common shares will not decline following the offering.

     Shares of closed-end investment companies have in the past frequently traded at discounts to their net asset values and our stock may also be discounted in the market. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our common shares will trade above, at or below our net asset value. The risk of loss associated with this characteristic of closed-end investment companies may be greater for investors expecting to sell common shares purchased in this offering soon after the offering. In addition, if our common shares trade below their

net asset value, we will generally not be able to issue additional common shares at their market price without first obtaining the approval of our stockholder and our independent directors to such issuance.

We cannot assure you that an active public market for the warrants will develop.

     Currently, no public market exists for our warrants. We cannot assure you that one will develop or be sustained after this offering. We do not intend to apply to list the warrants on any national securities exchange or the Nasdaq National Market.

Provisions of the Maryland General Corporation Law and our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common shares and warrants.

     The Maryland General Corporation Law and our charter and bylaws contain provisions that may have the effect of discouraging, delaying or making difficult a change in control of our company or the removal of our incumbent directors. We will be covered by the Business Combination Act of the Maryland General Corporation Law to the extent that such statute is not superseded by applicable requirements of the 1940 Act. However, our board of directors has adopted a resolution exempting us from the Business Combination Act for any business combination between us and any person to the extent that such business combination receives the prior approval of our board, including a majority of our directors who are not interested persons as defined in the 1940 Act.

     Under our charter, our board of directors is divided into three classes serving staggered terms, which will make it more difficult for a hostile bidder to acquire control of us. In addition, our board of directors may, without stockholder action, authorize the issuance of shares of stock in one or more classes or series, including preferred stock. See “Description of Capital Stock.” Subject to compliance with the 1940 Act, our board of directors may, without stockholder action, amend our charter to increase the number of shares of stock of any class or series that we have authority to issue. The existence of these provisions, among others, may have a negative impact on the price of our common shares and warrants, and may discourage third party bids for ownership of our company. These provisions may prevent any premiums being offered to you for our common shares and warrants.

There will be dilution of the value of our common shares when the warrants are exercised.

     As a result of our private placements completed in 2006, warrants were issued permitting the holders thereof to acquire 957,130 of our common shares upon payment of the exercise price. The warrants represent the right to purchase, in the aggregate, approximately 11% of our common shares. These warrants are currently exercisable and are being registered for resale by this prospectus. The issuance of additional common shares upon the exercise of the warrants, if the warrants are exercised at a time when the exercise price is less than the net asset value per share of our common shares, will have a dilutive effect on the value of our common shares.

The warrants may have no value in bankruptcy.

     In the event a bankruptcy or reorganization is commenced by or against us, a bankruptcy court may hold that unexercised warrants are executory contracts subject to rejection by us with approval of the bankruptcy court. As a result, holders of the warrants may, even if sufficient funds are available, not be entitled to receive any consideration or may receive an amount less than they would be entitled to if they had exercised their warrants prior to the commencement of any such bankruptcy or reorganization.

As a holder of warrants, you will not receive distributions on our common shares.

     Holders of warrants will not have the right to receive any distributions so long as their warrants are unexercised.

There may be limitations on the ability of the holders of warrants to exercise their warrants and receive the underlying common shares.

     We have agreed to use our reasonable efforts to maintain an effective shelf registration statement on an appropriate form under the Securities Act covering the common shares, the warrants and the common shares issuable upon exercise of the warrants until the earlier of (i) the date on which the common shares, warrants and common shares issuable upon exercise of the warrants are sold in accordance with the intended distribution of such common shares or warrants, (ii) the date on which none of the shares of common shares or warrants are registrable securities, or (iii) the second anniversary of the effective date of the shelf registration statement of

which this prospectus is a part. During any period when the shelf registration statement is not effective, U.S. holders of the warrants will not be able to exercise their warrants unless they are an “accredited investor,” within the meaning of the Securities Act, and make certain representations to us in connection with their exercise.

     We cannot assure you that we will be able to keep the shelf registration statement continuously effective until all of the warrants have been exercised or expired. Common shares issued upon exercise of the warrants at a time when the shelf registration statement is not effective will be “restricted securities” for purposes of Rule 144 under the Securities Act and will be subject to restrictions on transfer.

USE OF PROCEEDS

     We will not receive any proceeds from the sale of the common shares or warrants by the selling holders. However, upon any exercise of the warrants, we will receive cash consideration equal to the exercise price of $15.00 per warrant. We anticipate that the exercise of warrants will occur when the market value of our common shares exceeds the exercise price per warrant. We anticipate that proceeds received by us from the exercise of the warrants, if any, will be used to retire all or a portion of our outstanding balance under our secured credit facility with any remainder used to fund investments in prospective portfolio companies in accordance with our investment objective and strategies described in this prospectus and for temporary working capital needs. Pending such uses and investments, we expect to invest these proceeds primarily in cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the date of investment.

PRICE RANGE OF COMMON SHARES AND DISTRIBUTIONS

     Our common shares began trading on the New York Stock Exchange under the symbol “TTO”on February 2, 2007. We completed the initial public offering of our common shares on February 7, 2007 at a price of $15.00 per share. Prior to our initial public offering, there was no public market for our common shares.

     The following table sets forth the range of high and low sales prices of our common shares as reported on the New York Stock Exchange, and the distributions declared by us for each fiscal quarter since our initial public offering.

														Premium/				Premium/
														Discount				Discount				Cash
						Price Range								of High Sales				of Low Sales				Distribution
		NAV(1)				High				Low				Price to NAV				Price to NAV				Per Share (2)
2008
First Quarter		$	13.28			$	13.05			$	11.00				(1.73	)%			(17.17	)%		$	0.25
Second Quarter		$	13.69			$	13.42			$	11.80				(1.97	)%			(13.81	)%		$	0.2625
June 1 through June 30, 2008		$	—			$	12.52			$	11.90				—	%			—	%		$	—
2007
First Quarter		$	13.84			$	15.03			$	14.50				8.60	%			4.77	%		$	0.10
Second Quarter		$	14.05			$	18.47			$	14.31				31.46	%			1.85	%		$	0.16
Third Quarter		$	13.77			$	18.99			$	13.79				37.91	%			0.15	%		$	0.18
Fourth Quarter		$	13.76			$	15.29			$	11.66				11.12	%			(15.26	)%		$	0.23

     The last reported price for our common shares on _______, 2008 was $_______ per share.

     Shares of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our common shares will trade at a discount from net asset value or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value will decrease. At times, our common shares have traded at a premium to net asset value and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether the shares offered hereby will trade at, above, or below net asset value.

     We intend, subject to adjustment in the discretion of our board of directors, to pay out substantially all of the amounts we receive as recurring cash or paid-in-kind distributions on equity securities we own and interest payments on debt securities we own, less current or anticipated operating expenses, current income taxes on our income and our leverage costs. On February 11, 2008, our Board of Directors declared, and on March 3, 2008 we paid, a $0.25 per share distribution to stockholders of record on February 21, 2008. On May 12, 2008, our Board of Directors declared, and on June 2, 2008 we paid, a $0.2625 per share distribution to stockholders of record on May 22, 2008.

     We have an “opt out” dividend reinvestment plan. As a result, unless a stockholder opts out, distributions will be reinvested in our common shares pursuant to our dividend reinvestment plan. See “Certain U.S. Federal Income Tax Considerations” and “Dividend Reinvestment Plan.” We anticipate that only a portion of distributions we make on the common shares will be treated as taxable dividend income to our stockholders. If you are an individual citizen or resident of the United States or a United States estate or trust for U.S. federal income tax purposes and meet certain holding period and other applicable requirements, the portion of such distributions treated as taxable dividend income will be “qualified dividend income” currently subject to a maximum 15% U.S. federal income tax rate. See “Certain U.S. Federal Income Tax Considerations — Taxation of U.S. Stockholders.”

     As a BDC, we are prohibited from paying distributions if doing so would cause us to fail to maintain the asset coverage ratios stipulated by the 1940 Act. Distributions also may be limited by the terms of our borrowings. It is our objective to invest our assets and structure our borrowings so as to permit stable and consistently growing distributions. However, there can be no assurances that we will achieve that objective or that our results will permit the payment of any cash distributions. For a more detailed discussion, see “Regulation.” See also “Certain U.S. Federal Income Tax Considerations.”

CAPITALIZATION

The following table sets forth (i) our actual capitalization as of May 31, 2008, (ii) our capitalization as adjusted to reflect $36.5 million outstanding under our secured credit facility as of June 30, 2008 and (iii) our capitalization as further adjusted to reflect the exercise of all 945,594 outstanding warrants. You should read this table together with “Use of Proceeds” and our statement of assets and liabilities included elsewhere in this prospectus.

		Actual								As Further
		May 31, 2008				As Adjusted				Adjusted
		(Unaudited)				(Unaudited)				(Unaudited)
Short-term debt:
Secured credit facility		$	33,800,000			$	36,500,000			$	22,316,090
Net Assets Applicable to Common Stockholders Consist of:
Warrants, no par value, 5,000,000 authorized; 945,594 issued and outstanding actual and as adjusted; 0 issued and outstanding as further adjusted		$	1,370,700			$	1,370,700			$	—
Capital Stock, $0.001 par value, 100,000,000 common shares authorized; 8,876,540 shares issued and outstanding actual and as adjusted; 9,822,134 common shares issued and outstanding as further adjusted			8,858				8,858				9,822
Additional paid-in capital			110,863,178				110,863,178				126,416,824
Accumulated net investment loss, net of deferred tax benefit			(2,595,817	)			(2,595,817	)			(2,595,817	)
Accumulated realized gain, net of deferred tax expense			160,474				160,474				160,474
Net unrealized appreciation of investments, net of deferred tax expense			11,710,369				11,710,369				11,710,369
Net assets applicable to common stockholders		$	121,517,762			$	121,517,762			$	135,701,672

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

     The following discussion should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this prospectus. In addition to historical information, the following discussion and other parts of this prospectus contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Risk Factors,” “Forward-Looking Statements” and elsewhere in this prospectus.

Overview

We invest in companies operating in the U.S. energy infrastructure sector, primarily in privately-held and micro-cap public companies focused on the midstream and downstream segments, and to a lesser extent the upstream segment. Our goal is to provide our stockholders with a high level of total return, with an emphasis on distributions. We target companies we believe will provide stable and growing cash flows as a result of their fee-based revenues and limited direct commodity price risk which in turn should provide our shareholders with a stable and growing distribution.

We have elected to be regulated as a BDC under the 1940 Act. We are classified as a closed-end, non-diversified management investment company under the 1940 Act. As a BDC, we are subject to numerous regulations and restrictions. Unlike most investment companies, we are, and intend to continue to be, taxed as a general business corporation under the Code.

Portfolio and Investment Activity

On April 2, 2008, we invested an additional $1,477,140 in LONESTAR Midstream Partners, LP and $22,860 in LSMP GP, LP.

As of May 31, 2008, the fair value of our investment portfolio (excluding short-term investments) totaled $165,725,072 including equity investments of $154,925,072 and debt investments of $10,800,000, across the following segments of the energy infrastructure sector:

     The following table summarizes our investments as of May 31, 2008:

Name of Portfolio		Nature of its		Securities		Amount Invested				Fair Value				Current
Company (Segment)		Principal Business		Held by Us		(in millions)				(in millions)				Yield (1)
Abraxas Energy Partners, L.P. (Upstream)		Natural gas and oil exploitation and development in the Delaware and Gulf Coast Basins of Texas, the Rockies and mid-continent region of the U.S.		Common Units		$	7.5			$	7.4				9.6	%
Eagle Rock Energy Partners, L.P. (Upstream/Midstream) (2)		Gatherer and processor of natural gas in north and east Texas and Louisiana and producer and developer of upstream assets located in 17 states		Common Units			12.1				11.4				8.7
EV Energy Partners, L.P. (Upstream)		Acquirer, producer and developer of oil and gas properties		Common Units			7.5				6.8				7.2
High Sierra Energy, LP (Midstream)		Marketer, processor, storer and transporter of hydrocarbons with operations primarily in Colorado, Wyoming and Florida		Common Units			24.8				27.3				9.8
High Sierra Energy GP, LLC (Midstream) (3)		General Partner of High Sierra Energy, LP		GP Interest			2.0				2.8				2.3
International Resource Partners LP (Coal)		Operator of both metallurgical and steam coal mines in Central Appalachia		Class A Units			10.0				10.4				8.0
Legacy Reserves LP (Upstream)		Oil and natural gas exploitation and development in the Permian Basin		Limited Partner Units			4.5				6.1				11.5
LONESTAR Midstream Partners, LP (Midstream) (4)		Gatherer and processor of natural gas in six counties in Texas		Class A Units			24.9				26.2				8.4
LSMP GP, LP (Midstream) (4)		Indirectly owns General Partner of LONESTAR Midstream Partners, LP		GP LP Units			0.5				1.7				1.6
Millennium Midstream Partners, LP (Midstream)		Gatherer and processor of natural gas in Texas, Louisiana and offshore Gulf of Mexico		Class A Common Units and Incentive Distribution Rights			17.5				20.5				9.1

Name of Portfolio		Nature of its		Securities		Amount Invested				Fair Value				Current
Company (Segment)		Principal Business		Held by Us		(in millions)				(in millions)				Yield (1)
Mowood, LLC (Downstream) (5)		Natural gas distribution in central Missouri and landfill gas to energy projects		Equity Interest			3.5				4.1				10.0
				Subordinated Debt			7.1				7.1				12.0
Quest Midstream Partners, L.P. (Midstream)		Operator of natural gas gathering pipelines in the Cherokee Basin and interstate natural gas transmission pipelines in Oklahoma, Kansas and Missouri		Common Units			22.2				20.1				9.0
VantaCore Partners LP (Aggregate)		Acquirer and operator of aggregate companies, with quarry and asphalt operations in Clarksville, Tennessee		Common Units and Incentive Distribution Rights			8.5				10.0				10.0
				Secured Credit Facility (6)			3.8				3.8				8.2
						$	156.4			$	165.7

Abraxas Energy Partners, L.P. (“Abraxas”)

Abraxas was formed with Abraxas Petroleum Corp.’s long-lived, low-decline natural gas and oil reserves located in the Delaware and Gulf Coast Basins of Texas, Rocky Mountains and mid-continent region of the U.S. Abraxas Petroleum Corp. is an independent publicly-traded energy company engaged in the exploration and production of natural gas and oil in the Permian Basin of West Texas, onshore Texas Gulf Coast, mid-continent region, Rocky Mountains and the southern Powder River Basin in eastern Wyoming. Abraxas’ principal office is located at 500 N. Loop 1604 East, Suite 100, San Antonio, TX 78232.

Eagle Rock Energy Partners, L.P. (“Eagle Rock Energy”)

Eagle Rock Energy is a publicly traded master limited partnership with midstream assets located in Texas and Louisiana and upstream assets in seventeen states. The company conducts its operations through Eagle Rock Pipeline, L.P. Eagle Rock Energy’s principal office is located at 14950 Heathrow Forest Pkwy., Suite 111, Houston, TX 77032.

EV Energy Partners, L.P. (“EV”)

EV is a publicly traded master limited partnership engaged in acquiring, producing and developing oil and gas properties. EV’s current properties are located in the Appalachian Basin, primarily in Ohio and West Virginia and in the Monroe Field in Northern Louisiana and Tennessee. EV’s principal office is located at 1001 Fannin Street, Suite 800, Houston, TX 77002.

High Sierra Energy, LP (“High Sierra”)

High Sierra is a holding company with diversified midstream energy assets focused on the processing, transportation, storage and marketing of hydrocarbons. The management team of High Sierra includes former executives and founders of midstream private and public companies focused on acquiring attractive assets at reasonable multiples. The company’s purchased assets include a natural gas liquids logistics and transportation business in Colorado, natural gas gathering and processing operations in Louisiana, a natural gas storage facility in Mississippi, an ethanol terminal in Nevada, crude and natural gas liquids trucking businesses in Kansas and Colorado, a well water processing facility in Wyoming and two asphalt processing, packaging and distribution terminals in Florida. High Sierra’s principal office is located at 3773 Cherry Creek Drive North, Suite 655, Denver, CO 80209.

High Sierra Energy GP, LLC (“High Sierra GP”)

High Sierra GP is the general partner of High Sierra. High Sierra GP’s principal office is located at 3773 Cherry Creek Drive North, Suite 655, Denver, CO 80209.

International Resource Partners LP (“IRP”)

IRP’s initial acquisition of surface and underground coal mine operations in southern West Virginia is comprised of metallurgical and steam coal reserves, a coal washing and preparation plant, rail load-out facilities and a sales and marketing subsidiary. IRP’s principal office is located at 725 5^th Avenue, New York, NY 10022.

Legacy Reserves LP (“Legacy”)

Legacy is a publicly traded master limited partnership focused on mature oil weighted properties in the Permian Basin in Western Texas that generate stable volumes of oil and natural gas with low rates of decline. Legacy focuses on the exploitation of proved developed reserves. Legacy’s principal office is located at 303 West Wall, Suite 1500, Midland, TX 79701.

LONESTAR Midstream Partners, LP (“Lonestar”)

Lonestar is a midstream limited partnership which provides gathering, dehydration, compression, and processing services to natural gas producers in six counties of the Barnett-Shale play. The company has the capacity to gather, compress and transport over 350,000 Mcfd through the company’s gathering systems. Our President holds one of four seats on Lonestar’s Board of Directors. Lonestar’s principal office is located at 300 E. John Carpenter Freeway, Suite 800, Irving, TX 75062.

LSMP GP, LP (“LSMP GP”)

LSMP GP indirectly owns the general partner of Lonestar. LSMP GP’s principal office is located at 300 E. John Carpenter Freeway, Suite 800, Irving, TX 75062.

Millennium Midstream Partners, LP (“Millennium”)

Millennium is a limited partnership focused on natural gas gathering and processing with assets in Texas, Louisiana and offshore in the Gulf of Mexico. Millennium’s gathering business consists of over 500 miles of pipelines and its processing business consists of interests in six plants. Millennium’s principal office is located at 10077 Grogans Mill Rd., Suite 200, The Woodlands, TX 77380.

Mowood, LLC (“Mowood”)

Mowood is a holding company whose assets include Omega Pipeline, LLC (“Omega”) and Timberline Energy, LLC (“Timberline”). Omega is a natural gas local distribution company located on the Fort Leonard Wood army base in southwest Missouri. Omega is in the third year of a ten-year contract with the Department of Defense pursuant to which it provides natural gas to Fort Leonard Wood. Timberline is an owner and developer of projects that convert landfill gas to energy. Mowood’s principal office is located at 14694 Orchard Parkway, Suite 200, Westminster, CO 80020

Quest Midstream Partners, L.P. (“Quest”)

Quest was formed by the spin-off of Quest Resource Corporation’s midstream coal bed methane natural gas gathering assets in the Cherokee Basin. Quest owns more than 1,800 miles of natural gas gathering pipelines (primarily serving Quest Energy Partners, L.P., an affiliate) and over 1,100 miles of interstate natural gas transmission pipelines in Oklahoma, Kansas and Missouri. Quest’s principal office is located at 210 Park Avenue, Suite 2750, Oklahoma City, OK 73102.

VantaCore Partners LP (“VantaCore”)

VantaCore was formed to acquire companies in the aggregate industry and currently owns a quarry and asphalt plant in Clarksville, Tennessee. Our President holds one of four seats on Vantacore’s Board of Directors. VantaCore’s principal office is located at 666 Fifth Avenue, 26^th Floor, New York, NY 10103.

Portfolio Company Monitoring

Our Adviser monitors each portfolio company to determine progress relative to meeting that company’s business plan and to assess the company’s strategic and tactical courses of action. This monitoring may be accomplished by attendance at Board of Directors meetings, the review of periodic operating reports and financial reports, an analysis of relevant reserve information and capital expenditure plans, and periodic consultations with engineers, geologists, and other experts. The performance of each portfolio company is also periodically compared to performance of similarly sized companies with comparable assets and businesses to assess performance relative to peers. Our Adviser’s monitoring activities are expected to provide it with the necessary access to monitor compliance with existing covenants, to enhance our ability to make qualified valuation decisions, and to assist our evaluation of the nature of the risks involved in each individual investment. In addition,

these monitoring activities should permit our Adviser to diagnose and manage the common risk factors held by our total portfolio, such as sector concentration, exposure to a single financial sponsor, or sensitivity to a particular geography.

As part of the monitoring process, our Adviser continually assesses the risk profile of each of our investments and rates them on a scale of (1) to (3) based on the following:  

	(1)		The portfolio company is performing at or above expectations and the trends and risk factors are generally favorable to neutral.
	(2)		The portfolio company is performing below expectations and the investment’s risk has increased materially since origination. The portfolio company is generally out of compliance with various covenants; however, payments are generally not more than 120 days past due.
	(3)		The portfolio company is performing materially below expectations and the investment risk has substantially increased since origination. Most or all of the covenants are out of compliance and payments are substantially delinquent. Investment is not expected to provide a full repayment of the amount invested.

As of May 31, 2008, all of our portfolio companies have a rating of (1).

Results of Operations

Comparison of the Three and Six Months Ended May 31, 2008 and May 31, 2007

Investment Income: Investment income totaled $746,130 and $1,851,810 for the three and six months ended May 31, 2008, respectively, an increase of $200,274 and $914,319, respectively, as compared to the three and six months ended May 31, 2007. The increase is primarily related to full investment of proceeds from the initial public offering and the credit facility. The weighted average yield (to cost) on our investment portfolio (excluding short-term investments) as of May 31, 2008 was 8.9 percent as compared to 8.8 percent at May 31, 2007.

Net Expenses: Net expenses totaled $2,551,045 and $3,513,171 for the three and six months ended May 31, 2008, respectively, an increase of $866,199 and a decrease of $272,594, respectively, as compared to the three and six months ended May 31, 2007. The decrease for the six month period is primarily related to a reduction in the total capital gain incentive fee accrual, a decrease in leverage costs (during the six months ended May 31, 2007, we incurred a redemption premium and issuance costs on Series A Redeemable Preferred Stock, which was utilized as bridge financing to fund portfolio investments and was fully redeemed upon completion of our initial public offering), and the expense reimbursement from the Adviser. The increase in net expenses for the three month period is primarily related to an increase in the capital gains incentive fees payable of $1,367,168 for the quarter as a result of the increase in the fair value of investments, and interest expense on the credit facility. The provision for capital gains incentive fees results from an increase or decrease in fair value and is paid annually only if there are realization events and only if the calculation defined in the agreement results in an amount due.

Distributable Cash Flow: Our portfolio generates cash flow to us from which we pay distributions to stockholders. When our Board of Directors determines the amount of any distribution we expect to pay our stockholders, it will review distributable cash flow (“DCF”). DCF is distributions received from investments less our total expenses. The total distributions received from our investments include the amount received by us as cash distributions from equity investments, paid-in-kind distributions, and dividend and interest payments. The total expenses include current or anticipated operating expenses, leverage costs and current income taxes on our operating income. Total expenses do not include deferred income taxes or accrued capital gain incentive fees. Distributions paid to stockholders may exceed distributable cash flow for the period.

We disclose DCF in order to provide supplemental information regarding our results of operations and to enhance our investors’ overall understanding of our core financial performance and our prospects for the future. We believe that our investors benefit from seeing the results of DCF in addition to U.S. generally accepted accounting principles (“GAAP”) information. This non-GAAP information facilitates management’s comparison of current results with historical results of operations and with those of our peers. This information is not in accordance with, or an alternative to, GAAP and may not be comparable to similarly titled measures reported by other companies.

The following table represents DCF for the three and six months ended May 31, 2008 as compared to the three and six months ended May 31, 2007. DCF totaled $2,377,017 and $4,554,167 for the three and six months ended May 31, 2008, respectively, an increase of $1,056,345 and $3,210,036, respectively, as compared to the three and six months ended May 31,

2007. The increase is related to full investment of proceeds from the initial public offering and the credit facility, and increased distributions from our portfolio companies.

		For the three months				For the three months				For the six months				For the six months
Distributable Cash Flow		ended May 31, 2008				ended May 31, 2007				ended May 31, 2008				ended May 31, 2007
Total Distributions Received from Investments
Distributions from investments		$	2,773,933			$	1,425,467			$	5,394,648			$	2,029,154
Distributions paid in stock			484,200				—				937,720				—
Interest income from investments			301,944				162,404				615,353				290,876
Dividends from money market mutual funds			817				442,126				3,127				581,659
Other income			—				—				28,987				—
Total from Investments			3,560,894				2,029,997				6,979,835				2,901,689
Operating Expenses Before Leverage Costs and Current Taxes
Advisory fees (net of expense reimbursement by Adviser)			485,768				468,012				979,374				848,079
Other operating expenses (excluding capital gain incentive fees)			262,515				247,084				512,796				363,019
Total Operating Expenses			748,283				715,096				1,492,170				1,211,098
Distributable cash flow before leverage costs and current taxes			2,812,611				1,314,901				5,487,665				1,690,591
Leverage Costs			435,594				(5,771	)			933,498				346,460
Distributable Cash Flow		$	2,377,017			$	1,320,672			$	4,554,167			$	1,344,131
DCF/GAAP Reconciliation
Distributable Cash Flow		$	2,377,017			$	1,320,672			$	4,554,167			$	1,344,131
Adjustments to reconcile to Net Investment Loss, before Income Taxes Distributions paid in stock			(484,200	)			—				(937,720	)			—
Return of capital on distributions received from equity investments			(2,330,564	)			(1,484,141	)			(4,190,305	)			(1,964,198	)
Capital gain incentive fees			(1,367,168	)			(1,008,867	)			(1,087,503	)			(1,496,494	)
Loss on redemption of preferred stock			—				33,346				—				(731,713	)
Net Investment Loss, before Income Taxes		$	(1,804,915	)		$	(1,138,990	)		$	(1,661,361	)		$	(2,848,274	)

Distributions: The following table sets forth distributions for the six months ended May 31, 2008.

Record Date		Payment Date		Amount
February 21, 2008		March 3, 2008		$	0.2500
May 22, 2008		June 2, 2008		$	0.2625

The distribution of $0.2625 per share paid on June 2, 2008 represents achievement of our targeted annualized yield of 7 percent based upon the initial public offering price of $15.00 per share. A portion of this distribution is expected to be treated as return of capital for income tax purposes, although the ultimate determination will not be made until after our year-end. Based on current financial information, the distribution is estimated to consist of 100 percent of return of capital for book purposes.

Net Investment Loss: Net investment loss totaled $1,119,046 and $1,030,043 for the three and six months ended May 31, 2008, respectively, as compared to a net investment loss of $706,173 and $2,101,017, respectively, for the three and six months ended May 31, 2007. The variance in net investment loss is primarily related to net expenses as described above.

Net Realized and Unrealized Gain: We recognized $7,095,908 and $4,958,330 in net unrealized appreciation (after deferred taxes) for the three and six months ended May 31, 2008, respectively, as compared to $4,169,982 and $5,981,617 for the three and six months ended May 31, 2007, respectively. We had no realized gains for the three and six months ended May 31, 2008, as compared to a realized gain of $8,501 (after deferred taxes) for the three and six months ended May 31, 2007.

Recent Developments

On June 2, 2008, we paid a distribution in the amount of $0.2625 per common share, for a total of $2,330,092. Of this total, the dividend reinvestment amounted to $215,016.

On June 17, 2008, LONESTAR Midstream Partners LP, entered into a definitive agreement with Penn Virginia Resource Partners, L.P. (NYSE: PVR) for the sale of Lone Star Gathering LP’s (an affiliate of LONESTAR Midstream Partners, L.P.) gas gathering and transportation assets. LONESTAR Midstream Partners, LP is distributing substantially all of the sales proceeds to its limited partners.

We expect our portion of the proceeds to be $13.5 million in cash and 494,191 newly-issued unregistered common units of PVR, and approximately $1 million in cash payable on December 31, 2009. Additionally, there are two contingent payments of approximately $4.7 million and $5.0 million, payable in cash or common units of PVR (at purchasers’ election), each of which payments will be triggered if a defined geographic area in which a subset of the acquired assets are located reaches certain revenue targets by or before June 30, 2013.

We believe this transaction is an important step in validating our private investment thesis. The cash received from the transaction will allow us to pay down debt or redeploy capital in new or follow-on investments, while the PVR units received from the sale are expected to provide us future distribution growth.

Liquidity and Capital Resources

We expect to raise additional capital to support our future growth through equity offerings, rights offerings, and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act and our current credit facility and subject to market conditions. We generally may not issue additional common shares at a price below our net asset value (net of any sales load (underwriting discount)) without first obtaining approval of our stockholders and Board of Directors. We are restricted in our ability to incur additional debt by the terms of our credit facility.

On April 8, 2008, we filed an initial shelf registration statement with the Securities and Exchange Commission. When effective, the shelf will allow us to prudently raise additional capital.

Contractual Obligations

The following table summarizes our significant contractual payment obligations as of May 31, 2008.

						Fiscal				Fiscal				Fiscal				Fiscal				After
		Total				2008				2009				2010				2011				2011
Secured revolving credit facility (1)		$	33,800,000				—			$	33,800,000				—				—				—
		$	33,800,000				—			$	33,800,000				—				—				—

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Borrowings

On March 21, 2008, the Company secured an extension to its revolving credit facility and on March 28, 2008, amended the credit agreement to exclude Bank of Oklahoma and include Wells Fargo as a lender, and to increase the total credit facility to $50,000,000. The credit facility matures on March 20, 2009. The revolving credit facility has a variable annual interest rate equal to the one-month LIBOR plus 1.75 percent, a non-usage fee equal to an annual rate of 0.375 percent of the difference between the total credit facility commitment and the average outstanding balance at the end of each day for the preceding fiscal quarter, and is secured with all assets of the Company. The credit facility contains a covenant precluding the Company from incurring additional debt.

For the six months ended May 31, 2008, the average principal balance and interest rate for the period during which the credit facility was utilized were $34,273,770 and 5.12 percent, respectively. As of May 31, 2008, the principal balance outstanding was $33,800,000 at a rate of 4.21 percent.

Critical Accounting Policies

The financial statements included in this report are based on the selection and application of critical accounting policies, which require management to make significant estimates and assumptions. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex or subjective judgments. While our critical accounting policies are discussed below, Note 2 in the Notes to Financial Statements included in this report provides more detailed disclosure of all of our significant accounting policies.

Valuation of Portfolio Investments

The Company invests primarily in illiquid securities including debt and equity securities of privately-held companies. These investments generally are subject to restrictions on resale, have no established trading market and are fair valued on a quarterly basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Because of the inherent uncertainty of valuation, the fair values of such investments, which are determined in accordance with procedures approved by the Company’s Board of Directors, may differ materially from the values that would have been used had a ready market existed for the investments.

Interest and Fee Income Recognition

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. When investing in instruments with an original issue discount or payment-in-kind interest (in which case we choose payment-in-kind in lieu of cash), we will accrue interest income during the life of the investment, even though we will not necessarily be receiving cash as the interest is accrued. Commitment and facility fees generally are recognized as income over the life of the underlying loan, whereas due diligence, structuring, transaction service, consulting and management service fees for services rendered to portfolio companies generally are recognized as income when services are rendered.

Security Transactions and Investment Income Recognition

Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Distributions received from our equity investments generally are comprised of ordinary income, capital gains and return of capital from the portfolio company. We record investment income and returns of capital based on estimates made at the time such distributions are received. Such estimates are based on information available from each portfolio company and/or other industry sources. These estimates may subsequently be revised based on information received from the portfolio companies after their tax reporting periods are concluded, as the actual character of these distributions are not known until after our fiscal year-end.

Federal and State Income Taxation

We, as a corporation, are obligated to pay federal and state income tax on our taxable income. Our tax expense or benefit is included in the Statement of Operations based on the component of income or gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

SENIOR SECURITIES

     The following table sets forth information about our outstanding senior securities as of our fiscal year ended November 30, 2007. We did not have any senior securities outstanding as of the end of our first fiscal year ended November 30, 2006. The “ — ” indicates information which is not required to be disclosed for certain types of senior securities.

Involuntary

Total Amount

Liquidation

Outstanding Exclusive

Asset Coverage

Preference

Average Market

Title of Securities

of Treasury Securities

per Unit(1)

per Unit

Value per Unit

Secured Revolving Credit Facility(2)

$

30,550,000

$

4,991

—

n/a

THE COMPANY

     We invest primarily in privately-held and micro-cap public energy companies focused on the midstream and downstream segments, and to a lesser extent the upstream segment. We believe companies in the energy infrastructure generally produce stable cash flows as a result of their fee-based revenue and limited exposure to the risks associated with changes in commodity prices. Our goal is to provide our stockholders with a high level of total return, with an emphasis on dividends and dividend growth. We invest primarily in the equity securities of companies that we expect to pay us distributions on a current basis and provide us distribution growth.

     Companies in the midstream segment of the energy infrastructure sector engage in the business of transporting, processing or storing natural gas, natural gas liquids, coal, crude oil, refined petroleum products and renewable energy resources. Companies in the downstream segment of the energy infrastructure sector engage in distributing or marketing such commodities and companies in the upstream segment of the energy infrastructure sector engage in exploring, developing, managing, or producing such commodities. Under normal conditions, we intend to invest at least 90% of our total assets (including assets obtained through leverage) in companies in the energy infrastructure sector. Companies in the energy infrastructure sector include (i) companies that derive a majority of their revenues from activities within the downstream, midstream and upstream segments of the energy infrastructure sector, and (ii) companies that derive a majority of their revenues from providing products or services to such companies. Our investments are expected to range between $5.0 million and $30.0 million per investment, although investment sizes may be smaller or larger than this targeted range.

     We raised approximately $46.3 million of gross proceeds ($42.5 million of net proceeds) through sales of 3,088,596 common shares and warrants to purchase 772,124 of our common shares, the last of which occurred in January 2006. We raised an additional $18.4 million of net proceeds for investment purposes in December 2006 in a private placement in which we sold 1,233,333 shares of Series A Redeemable Preferred Stock and warrants to purchase 185,006 of our common shares. We raised approximately $79.5 million of net proceeds in our initial public offering on February 7, 2007 through the sale of 5,740,000 of our common shares. On February 7, 2007, we redeemed all of the Series A Redeemable Preferred Stock at $15.00 per share plus a 2 percent premium, for a total redemption price of $18,870,000. None of our warrants were redeemed and all warrants expire on February 6, 2013. We have a $50.0 million secured revolving credit facility with U.S. Bank National Association, as lender, agent and lead arranger, First National Bank of Kansas and Wells Fargo Bank, N.A. The credit facility terminates on March 20, 2009. As of June 30, 2008, we had an outstanding balance of approximately $36.5 million under the credit facility.

     As of May 31, 2008, we have invested a total of $156.4 million in 13 portfolio companies in the U.S. energy infrastructure sector. Of the $156.4 million, we have invested $108.6 million in the midstream and downstream segments of the U.S. energy infrastructure sector, $25.6 million in the upstream segment of the U.S. energy infrastructure sector and $22.2 million in other segments of the U.S. energy infrastructure sector.

     The following table summarizes our investments in portfolio companies as of May 31, 2008. Eagle Rock Energy Partners, L.P., EV Energy Partners, L.P. and Legacy Reserves L.P. are publicly-traded.

Name of Portfolio		Nature of its		Securities		Amount Invested				Fair Market Value				Current
Company (Segment)		Principal Business		Held by Us		(in millions)				(in millions)				Yield(1)
Abraxas Energy Partners, L.P. (Upstream)		Natural gas and oil exploitation and development in the Delaware and Gulf Coast Basins of Texas, Rockies and mid-continent region of the U.S.		Common Units		$	7.5			$	7.4				9.6	%
Eagle Rock Energy Partners, L.P. (Upstream/Midstream)(2)		Gatherer and processor of natural gas in north and east Texas and Louisiana and producer and developer of upstream assets located in 17 states		Common Units			12.1				11.4				8.7	%
EV Energy Partners, L.P. (Upstream)		Acquirer, producer and developer of oil and gas properties		Common Units			7.5				6.8				7.2	%
High Sierra Energy, LP (Midstream)		Marketer, processor and transporter of hydrocarbons with operations primarily in Colorado, Wyoming and Florida		Common Units			24.8				27.3				9.8	%
High Sierra Energy GP, LLC (Midstream)(3)		General Partner of High Sierra Energy, LP		GP Interest			2.0				2.8			2.3		%
International Resource Partners LP (Coal)		Operator of both metallurgical and steam coal mines in Central Appalachia		Class A Units			10.0				10.4				8.0	%
Legacy Reserves LP (Upstream)		Oil and natural gas exploitation and development in the Permian Basin		Limited Partner Units			4.5				6.1				11.5	%
LONESTAR Midstream Partners, LP (Midstream)(4)		Gatherer and processor of natural gas in six counties in Texas		Class A Units			24.9				26.2			8.4		%
LSMP GP, LP (Midstream)(4)		Indirectly owns General Partner of LONESTAR Midstream Partners, LP		GP LP Units			0.5				1.7			1.6		%
Millennium Midstream Partners, LP (Midstream)		Gatherer and processor of natural gas in Texas, Louisiana and offshore Gulf of Mexico		Class A Common Units and Incentive Distribution Rights			17.5				20.5				9.1	%
Mowood, LLC (Downstream)(5)		Natural gas distribution in central Missouri and landfill gas to energy projects		Equity Interest Subordinated Debt			3.5 7.1				4.1 7.1			10.0 12.0		% %
Quest Midstream Partners, L.P. (Midstream)		Operator of natural gas gathering pipelines in the Cherokee Basin and interstate natural gas transmission pipelines in Oklahoma, Kansas and Missouri		Common Units			22.2				20.1				9.0	%
VantaCore Partners LP (Aggregate)		Acquirer and operator of aggregate companies, with quarry and asphalt operations in Clarksville, Tennessee		Common Units and Incentive Distribution Rights			8.5				10.0			10.0		%
				Secured Credit Facility(6)			3.8				3.8			8.2		%
						$	156.4			$	165.7

     We are an externally managed, non-diversified closed end investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are subject to numerous regulations and restrictions.

Our Adviser

     We are managed by Tortoise Capital Advisors, a registered investment adviser specializing in the energy sector that had approximately $2.7 billion of assets under management as of June 30, 2008, including the assets of three other publicly traded closed-end management investment companies. Our Adviser’s aggregate managed capital is among the largest of investment advisors managing closed-end management companies focused on the energy sector. Our adviser also manages the investments of TYG, TYY, TYN, TTRF and TGOC. TYG is a publicly-traded, non-diversified, closed-end management investment company focused primarily on investing in MLPs in the midstream segment of the energy infrastructure sector. TYY is a publicly-traded, non-diversified, closed-end management investment company focused primarily on investing in MLPs in the midstream segment of the energy infrastructure sector. TYN is a publicly-traded, non-diversified, closed-end management investment company focused primarily on investing in publicly traded Canadian upstream royalty trusts and midstream and downstream income trusts, and publicly traded U.S. MLPs. TTRF is a privately held, closed-end management investment company targeted at institutional investors and focused primarily on investing in MLPs in the midstream segment of the energy infrastructure sector. TGOC is a privately held, closed-end management investment company focused primarily on investing in companies in the upstream and midstream gas and oil segments of the energy sector. Our Adviser has limited experience managing a BDC, which is subject to different regulations than the other closed-end management investment companies managed by our Adviser. The members of our Adviser’s investment committee have an average of over 20 years of financial investment experience.

     FCM Tortoise, L.L.C. (“FCM”) and Kansas City Equity Partners LC (“KCEP”) control our Adviser through their equity ownership and management rights in our Adviser. FCM has no operations and serves as a holding company. FCM’s ownership interest was held by Fountain Capital Management, L.L.C. (“Fountain Capital”). Fountain Capital’s ownership in our Adviser was transferred to FCM, a recently formed entity with the same principals as Fountain Capital, effective as of August 2, 2007. The transfer did not result in a change in control of our Adviser.

     Our Adviser has 32 full time employees. Six of our Adviser’s investment professionals are responsible for the origination, structuring and managing of our investments. These six investment professionals have approximately 120 years of combined experience in energy, leveraged finance, investment banking and private equity investing. Each of our Adviser’s investment decisions will be reviewed and approved by its investment committee, which also acts as the investment committee for TYG, TYY, TYN, TTRF and TGOC.

If TYG, TYY, TYN, TTRF or TGOC were ever to target investment opportunities similar to ours, our Adviser intends to allocate investment opportunities in a fair and equitable manner consistent with our investment objective and strategies and in accordance with written allocation policies of our Adviser, so that we will not be disadvantaged in relation to any other client. See “Risk Factors — Risks Related to Our Operations.”

     Our Adviser has retained Kenmont as a sub-adviser. Kenmont is a Houston, Texas-based registered investment adviser with experience investing in privately-held and public companies in the U.S. energy and power sectors. Kenmont provides additional contacts to us and enhances our number and range of potential investment opportunities. The principals of Kenmont have collectively created and managed private equity portfolios in excess of $1.5 billion and have over 50 years of experience working for investment banks, commercial banks, accounting firms, operating companies and money management firms. Kenmont has no prior experience managing a BDC. Our Adviser compensates Kenmont for the services it provides to us. Our Adviser also indemnifies and holds us harmless from any obligation to pay or reimburse Kenmont for any fees or expenses incurred by Kenmont in providing such services to us. Entities managed by Kenmont own approximately 7.5% of our outstanding common shares and warrants to purchase an additional 281,666 of our common shares. See “Adviser — Sub-Adviser Arrangement.”

U.S. Energy Infrastructure Sector Focus

     We pursue our investment objective by investing principally in a portfolio of privately-held and micro-cap public companies in the U.S. energy infrastructure sector. The energy infrastructure sector can be broadly categorized as follows:

	•		Midstream — the gathering, processing, storing and transmission of energy resources and their byproducts in a form that is usable by wholesale power generation, utility, petrochemical, industrial and gasoline customers, including pipelines, gas processing plants, liquefied natural gas facilities and other energy infrastructure.
	•		Downstream — the refining, marketing and distribution of refined energy sources, such as customer-ready natural gas, natural gas liquids, propane and gasoline, to end-user customers, and customers engaged in the generation, transmission and distribution of power and electricity.
	•		Upstream — the development and extraction of energy resources, including natural gas and crude oil from onshore and offshore geological reservoirs as well as from renewable sources, including agricultural, thermal, solar, wind and biomass.

     We focus our investments in the midstream and downstream segments, and to a lesser extent the upstream segment, of the U.S. energy infrastructure sector. We also intend to allocate our investments among asset types and geographic regions within the U.S. energy infrastructure sector.

     We believe that the midstream segment of the U.S. energy infrastructure sector will provide attractive investment opportunities as a result of the following factors:

	•		Strong Supply and Demand Fundamentals. The U.S. is the largest consumer of crude oil and natural gas products, the third largest producer of crude oil and the second largest producer of natural gas products in the world. The United States Department of Energy’s Energy Information Administration, or EIA, annually projects that domestic natural gas and refined petroleum products consumption will increase by 0.8% and 1.1%, respectively, through 2030. The midstream energy infrastructure segment provides the critical link between the suppliers of crude oil, natural gas, refined products and other forms of energy, whether domestically-sourced or imported, and the end-user. Midstream energy infrastructure companies are typically asset-intensive, with minimal variable cost requirements, providing operating leverage that allows them to generate attractive cash flow growth even with limited demand-driven or supply-driven growth.
	•		Substantial Capital Requirements. We believe, based on industry sources, that approximately $20 billion of capital was invested in the midstream segment of the U.S. energy infrastructure sector during 2006. We believe that additional capital expenditures in the U.S. energy infrastructure sector will result from the signing of the Energy Policy Act of 2005 on August 8, 2005, which incorporates a number of incentives for additional investments in the energy infrastructure sector including business investment tax credits and accelerated tax depreciation.
	•		Substantial Asset Ownership Realignment. We believe that in the midstream and downstream segments of the U.S. energy infrastructure sector, the acquisition and divestiture market has averaged approximately $34 billion of annual transactions between 2001 and 2006. We believe that such activity, particularly in the midstream segment, will continue as: larger integrated companies with high cost structures continue to divest energy infrastructure assets to smaller, more entrepreneurial companies;