June 16,
2009
Division
of Investment Management
United
States Securities and Exchange Commission
100 F
Street, N.E.
Washington,
DC 20549
Attn: Mr. Larry
L. Greene
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Re:
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Tortoise
North American Energy Corporation (the
“Company”)
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File Numbers
811-21700; 333-158403
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To the
Commission:
On April
3, 2009, the Company filed with the Securities and Exchange Commission (the
“Commission”) a registration statement on Form N-14 (the "Registration
Statement") relating to the proposed reorganization (the "Reorganization") of
Tortoise Gas and Oil Corporation ("TGO" and together with the Company, each a
"Fund" and collectively the "Funds") with and into the Company. On
May 13, 2009, the Company received comments on the Registration Statement from
Larry L. Greene of the Commission staff by telephone call with the
undersigned. The following sets forth the comments of the Commission
staff and the Company’s responses to those comments. Unless otherwise
noted, all page references are to the Registration Statement. The
Company has simultaneously filed Pre-Effective Amendment No. 1 to the
Registration Statement to respond to the comments received from the Commission
staff.
Accounting
Comments
1. Comment: The
disclosure provides that the Company may not be able to utilize the deferred tax
asset of TGO. Please adjust the table titled "Capitalization" on page
32 and the Pro Forma Statement of Assets and Liabilities so that the amount of
TGO's deferred tax asset is removed from assets.
Response: The
referenced table is historical in that it reflects the capitalization of the
Funds as of November 30, 2008, and the pro forma capitalization of the combined
fund as if the Reorganization had occurred on that date. As of
November 30, 2008, only TGO had a deferred tax asset. Thus, the
disclosure in the table is complete and correct and has not been
revised.
In addition, the
Company does not believe that removing the amount of the deferred tax asset for
TGO from assets in the Pro Forma Statement of Assets and Liabilities accurately
reflects the financial position of TGO or the combined fund. As noted
above, only TGO had a deferred tax asset as of November 30,
2008. Each Fund had a deferred tax asset as of February
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28,
2009. Each Fund will calculate its deferred taxes as part of its net
asset value calculation at the time the Reorganization is completed, and, as is
set forth in the disclosure, the deferred tax asset of either Fund could be
higher or lower than its deferred tax asset as of February 28,
2009. The combined fund will have its own deferred tax calculation
and will calculate the amount of any deferred tax asset when it calculates its
first net asset value following the Reorganization. The pro forma
amount of this deferred tax asset for the combined fund could be greater than
the sum of the two Fund's deferred tax assets as of February 28,
2009. The Company believes this may be the case even if TGO's
deferred tax asset is zero. The Company has included disclosure
regarding the potential that the Reorganization may be taxable to provide full
disclosure of all possible outcomes.
2. Comment: In
the table titled "Fees and Expenses for Common Stockholders of the Funds as of
November 30, 2008" on page 3, please explain the marked decrease in the amount
of "Other Expenses" for the combined fund as compared to either fund
individually.
Response: The
marked decrease in the ratio of “Other Expenses” included in the referenced
table is primarily due to the anticipated elimination of substantial duplicative
fixed expenses as well as the ability to reach breakpoints on certain variable
expenses (e.g., administration, etc.) due to greater combined assets, reflected
as a percent of the larger combined net asset base following the proposed
Reorganization.
3. Comment: The
line items in the table titled "Capitalization" on page 32 do not correspond
with the Pro Forma Financial Statements. Please simplify the table to
show just total net assets.
Response: The
disclosure has been revised as requested.
4. Comment: Please
revise the table titled "Capitalization" on page 32 so that the costs of the
reorganization are reflected as an adjustment.
Response: The
disclosure has been revised as requested.
5. Comment: Please
revise the table titled "Capitalization" on page 32 so that the amount of all
deferred advisory fees are reflected as an adjustment. Please also
add disclosure to the proxy statement explaining the deferred advisory
fees.
Response: The
deferred advisory fees are reflected in “Accumulated net investment income
(loss) net of income taxes” within the reference table, as these fees
have been expensed as incurred throughout the existence of TGO, but not yet
paid. The payment of these fees will not have an impact on the referenced table
other than resulting in a decrease in assets and offsetting elimination of the
deferred advisory fee payable. The management fee paid by TGO,
including the deferred management fee, is explained in detail beginning on page
30 of Pre-Effective
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Amendment
No. 1 under the
heading “Compensation and Expenses—Tortoise Gas and Oil
Corporation.”
6. Comment: Please
add "Net Asset Value per Share" as a line item to the table titled
"Capitalization" on page 32.
Response: The
disclosure has been revised as requested.
7. Comment: In
the Pro Forma Combined Schedule of Investments please further explain the
adjustments noted by the asterisk prior to the footnotes.
Response: The
disclosure has been revised as requested.
8. Comment: Please
further explain the capitalization adjustment in footnote four to the Pro Forma
Combined Statement of Assets and Liabilities.
Response: The
disclosure has been revised as requested.
9. Comment: Footnote
two to the Pro Forma Combined Statement of Operations provides that adjustments
to operating expenses are due to "the elimination and reduction of duplicative
expenses as a result of the Reorganization." This does not explain
all reductions. Please revise footnote two to provide a complete
explanation of the reduction in operating expenses.
Response: The
disclosure has been revised as requested.
10. Comment: In
Note 2 "Investment Valuation" in the Notes to Pro Forma Combined Financial
Statements, please include all of the disclosure required by Statement of
Financial Accounting Standards No. 157.
Response: The
disclosure has been revised as requested.
Non Accounting
Comments
1. Comment: Please
confirm that the disclosure in the filing meets the type size requirements of
Rule 420 under Regulation C of the 1933 Act.
Response: The
Company hereby makes such confirmation.
2. Comment: In
the first line of the stockholder letter please clarify that stockholders are
being provided with a joint registration statement/proxy.
Response: The
disclosure has been revised as requested.
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3. Comment: In
various places the disclosure contemplates fee waivers for 2010 and
2011. Please revise the disclosure to clarify whether these fee
waivers are for the calendar or fiscal years 2010 and 2011.
Response: The
disclosure has been revised as requested.
4. Comment: The
disclosure provides that the total net asset value of the new shares of the
Company to be issued will equal the net asset value of the shares of TGO
outstanding on the business day prior to closing of the reorganization, less the
costs of the reorganization attributable to those common
shares. Please consider whether the proposed offering will be below
net asset value in violation of Section 23 of the 1940 Act.
Response: Shares
of the Company will be issued at net asset value in exchange for the net assets
of TGO. The shares of the Company issued in the Reorganization will
not be issued below net asset value, as the costs of the Reorganization will be
included in the calculation of the Company's net asset value used to determine
the number of shares of the Company to be issued to stockholders of
TGO.
5. Comment: Please
revise the answer to the Q&A question "Why is the Reorganization being
recommended?" so that the potential risks of the reorganization are
addressed.
Response: The
disclosure has been revised as requested.
6. Comment: The
answer to the Q&A question "Why is the Reorganization being recommended?"
provides a specific percentage total when discussing operating expense
savings. Please explain how this percentage is derived and whether
including such a percentage is appropriate.
Response: The
percentage in question is derived from the Pro Forma Combined Financial
Statements included as Appendix B to the Statement of Additional
Information. This fact is disclosed immediately prior to the
presentation of the percentage in question and the Company has revised the
disclosure to make the source more clear. The Company believes that
it has fully disclosed the source of the percentage in question and that it
provides meaningful information to stockholders.
7. Comment: The
answer to the Q&A question "Why is the Reorganization being recommended?"
discusses additional management fee waivers. Please (i) explain why
the waivers are contingent upon the consummation of the Reorganization, (ii)
confirm that the Adviser will not be able to recoup or recapture any of the
waived amounts, and (iii) revise the disclosure to add a cross reference to
disclosure that highlights that because the fee paid to the Adviser is based on
managed assets, the Adviser's determination to utilize leverage may conflict
with the best interests of the Company and its stockholders.
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Response: The
Company currently pays the Adviser a fee equal on an annual basis to 1.0% of its
average monthly managed assets. Under a fee waiver agreement with the
Company, however, the Adviser has contractually agreed to waive 0.10% of such
fee through December 31, 2009. In order to provide stockholders the
benefit of the Company's current fee structure for another year upon
consummation of the Reorganization, and then not immediately increase the fee
structure by the entire previously waived amount, the Adviser has agreed to (i)
a 0.10% management fee waiver effective January 1, 2010 through December 31,
2010, and (ii) a waiver of 0.05% effective January 1, 2011 through December 31,
2011. The Adviser will not be able to recoup or recapture any fees
foregone as a result of these waivers. The requested cross reference
has been added to the disclosure.
8. Comment: The
answer to the Q&A question "Why is the Reorganization being recommended?"
provides that the larger market capitalization of the combined fund may provide
an opportunity for enhanced market liquidity over the
long-term. Please explain whether there is any empirical support for
this claim.
Response: This
claim is based in part on the experience of the Adviser in managing other
closed-end funds, including Tortoise Energy Infrastructure Corporation and
Tortoise Energy Capital Corporation, each of which has a larger market
capitalization and larger average daily trading volume than the
Company. Although the Adviser expects enhanced liquidity, please note
that the disclosure only provides that the reorganization may result in enhanced
liquidity.
9. Comment: The
answer to the Q&A question "Why is the Reorganization being recommended?"
contains a sentence beginning "As of February 28, 2009." A similar
sentence appears on page i but contains different numbers. Please
revise the disclosure to reconcile this difference.
Response: The
second referenced sentence provides information about the assets of the Funds,
while the first referenced sentence provides information about the market
capitalization of the Funds. This distinction is
intended.
10. Comment: The
answer to the Q&A question "Why is the Reorganization being recommended?"
provides that the leverage levels are "low" at each Fund. Please
revise the disclosure to explain why the leverage levels are considered
low. Please also consider revising the disclosure to explain to
investors the risks that result from the Company being more leveraged than
TGO.
Response: The
disclosure has been revised to eliminate the reference to "low" leverage
levels. As of April 30, 2009, leverage represented 17.5% of the
Company's assets and 17.1% of TGO's assets. Because the percentages
are so close, the Company does not believe the
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additional
disclosure suggested is necessary. The Company notes that the risks
of leverage are addressed under the heading "Leverage Risk."
11. Comment: The
answer to the Q&A question "Why is the Reorganization being recommended?"
discloses that "the level of distributions paid by the Company following the
Reorganization may be higher or lower than historical levels." Please
revise the disclosure to clarify what is meant by "historical
levels."
Response: The
disclosure has been revised as requested.
12. Comment: Please
confirm whether the Company intends to obtain a ruling or opinion regarding tax
matters in connection with the Reorganization.
Response: The
Company hereby confirms that it will receive an opinion of counsel as to tax
matters as a condition to closing the Reorganization.
13. Comment: Please
confirm whether the shift in investment focus for TGO mentioned in the answer to
the Q&A question "Why is the Reorganization being recommended?" has been
previously communicated to TGO stockholders.
Response: TGO
has communicated this shift in investment focus to its stockholders, including
in its 2008 Annual Report dated November 30, 2008.
14. Comment: When
discussing market liquidity in the answer to the Q&A question "Why is the
Reorganization being recommended?" please remove or clarify the phrase "similar
to an IPO."
Response: The
disclosure has been revised as requested.
15. Comment: In
the answer to the Q&A question "Why is the Reorganization being
recommended?" please add a caveat that there are no guarantees of net asset
value recovery and appreciation, or utilization of TGO's deferred tax asset when
discussing the alternatives to liquidation.
Response: The
disclosure has been revised as requested.
16. Comment: In
the answer to the Q&A question "Why is the Reorganization being
recommended?" Please clarify the term "absolute level of
distributions." Please add disclosure comparing the distribution
history of the Company and TGO.
Response: The
disclosure regarding "absolute level of distributions" has been revised as
requested. The Company does not believe that adding disclosure
regarding the distribution histories of the Company and TGO will be beneficial
to stockholders because it will not provide
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insight
into the anticipated per share distributions of the combined
fund. The disclosure does provide that the aggregate amount of
distributions received by stockholders of both Funds is not anticipated to
change following the Reorganization as a result of the
Reorganization. Furthermore, the disclosure provides that although
the distribution amounts paid per share on the common stock of each Fund differ,
because TGO common stockholders will receive shares of common stock of the
Company with an equivalent net asset value in the Reorganization, any such
differences in distribution amount should be offset by the number of shares of
common stock of the Company received in the Reorganization.
17. Comment: Please
delete the table contained in the answer to the Q&A question "What is the
potential impact to each Fund's expense ratio?" or move it so that it appears
after the table titled "Fees and Expenses for Common Stockholders of the Funds
as of November 30, 2008."
Response: The
disclosure has been revised as requested.
18. Comment: Please
confirm that the disclosure notes the fact that because the fee the Company pays
to the Adviser is based on managed assets, the Adviser's determination to
utilize leverage may conflict with the best interests of the combined fund and
its stockholders.
Response: Disclosure
on page 29 of Pre-Effective Amendment No. 1 highlights that because the fee paid
to the Adviser is determined on the basis of the Company's managed assets, the
Adviser's interest in determining whether to use leverage may conflict with the
interests of the Company and its stockholders.
19. Comment: Please
confirm whether or not the amount of deferred advisory fees is included in the
table titled "Fees and Expenses for Common Stockholders of the Funds as of
November 30, 2008." If the amount of deferred advisory fees is not
included in the table, please explain why they are not included.
Response:
The Company hereby confirms that the amount of deferred advisory fees is
included in the referenced table.
20. Comment: Please
consider whether the heading "Combined" in the table contained in the answer to
the Q&A question "Are the Fund's investment strategies similar?" should be
"Pro Forma Combined."
Response: The
referenced heading has been revised as suggested.
21. Comment: The
answer to the Q&A question "Will I have to pay any sales load, commission or
other similar fees in connection with the Reorganization?" discusses the
attribution of the expenses of the Reorganization. Please disclose
the basis for such attribution.
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Response: The
disclosure has been revised as requested.
22. Comment: Please
confirm that the disclosure explains the consequences of the Reorganization
being treated as a taxable transaction.
Response: Disclosure
under the heading "Federal Income Tax Consequence if the Transaction Fails to
Qualify as a Tax-Free Reorganization" on page 54 of Pre-Effective Amendment No.
1 explains the consequences of the Reorganization being treated as a taxable
transaction.
23. Comment: Please
move the table found in the Q&A Question "How will the deferred tax assets
of the Funds be treated in the Reorganization" so that it appears after the
table titled "Fees and Expenses for Common Stockholders of the Funds as of
November 30, 2008."
Response: The
disclosure has been revised as requested.
24. Comment: The
following comments relate to the table titled "Fees and Expenses for Common
Stockholders of the Funds as of November 30, 2008."
(a) Please
identify which Fund will be the Pro Forma Combined Fund.
(b) Please
note that a fee waiver must be in effect for a year from the date of the filing
in question to be reflected in the table. If the fee waiver is not in
effect for a year from the date of the filing in question it must be reflected
in the footnotes.
(c) Please
explain why the table is as of November 30, 2008.
(d) In
footnote three please disclose the basis for attributing expenses.
(e) Please
explain the rationale for including the table in footnote nine.
Response:
(a) The
disclosure has been revised as requested.
(b) The
Company’s current fee waiver of 0.10% expires on December 31, 2009. The Pro
Forma Combined Fund would continue the Company’s fee waiver for calendar year
2009 and also have a fee waiver of 0.10% in calendar year 2010 and 0.05% in
calendar year 2011. As these expense waivers continue for multiple years, the
Company has included these fee waivers for the Pro Forma Combined Fund in the
fee table and example. Additionally, so as to not overstate the
current Net Annual Expenses incurred by the Company on a standalone basis (and
thus overstate the reduction of Net Annual Expenses in the Pro Forma Combined
Fund) the Company has also included TYN's current fee waiver of 0.10% that
expires on December 31,
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2009. The
Company believes this is an appropriate reflection to make an "apples to apples"
comparison.
Detailed
footnotes have been added to the disclosure explaining how the waivers are being
applied to the fee table and example.
(c) The
table has been updated as of February 28, 2009, the end of the Company's most
recent fiscal quarter.
(d) The
disclosure has been revised as requested.
(e) The
table in footnote nine contains information about the change in operating
expenses expected as a result of the Reorganization as a percentage of managed
assets, as opposed to net assets as in the main table. As the fees
paid to the Adviser by the Funds are based on managed assets, the Company
believes that this table provides meaningful disclosure to
investors. In addition, the disclosure in footnote nine is consistent
with disclosure found in the filings of other funds managed by the Adviser and
agreed upon after significant discussion with the Commission staff.
25. Comment: Please
confirm that the treatment of abstentions and broker non-votes is disclosed with
respect to Proposal 3.
Response: Disclosure
regarding the treatment of abstentions and broker non-votes with respect to
Proposal 3 is found on page 66 of Pre-Effective Amendment No. 1.
26. Comment: Please
revise the disclosure to use the term "junk" when describing below investment
grade bonds.
Response: The
disclosure has been revised as requested.
27. Comment: Please
confirm whether the shift in investment focus for TGO is consistent with its
investment policies.
Response: TGO
hereby confirms that its current investment focus is consistent with its
fundamental and nonfundamental investment policies.
28. Comment: Disclosure
on page S-1 provides that neither Fund will issue senior securities or borrow
money expect as permitted by the 1940 Act. Please confirm that the
disclosure mentions what those limitations are, or revise the disclosure to
include such language.
Response: The
referenced 1940 Act limitations are disclosed on pages S-2 and S-3 of the
Reorganization Statement of Additional Information.
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29. Comment: Please
confirm whether any investments on the Pro Forma Schedule of Investments need to
be marked as securities that may need to be sold as a result of the
Reorganization.
Response: The
Company hereby confirms that no investments on the Pro Forma Schedule of
Investments need to be marked as securities that may need to be sold as a result
of the Reorganization.
* * * * *
If you
have any questions or comments, please contact the undersigned at (816) 983-8362
or Steve Carman at (816) 983-8153.
Eric J.
Gervais
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cc:
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Mr. Terry
C. Matlack
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Mr. Larry
L. Greene
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