##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      FORM 10-Q
      þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED
    FEBRUARY 29, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
    FROM          TO    COMMISSION FILE NUMBER:
    814-00725
      KAYNE ANDERSON ENERGY
    DEVELOPMENT COMPANY
 (Exact name of registrant as
    specified in its charter)
   Maryland(State of Incorporation)

20-4991752(I.R.S. Employer
    Identification Number)717 Texas Avenue, Suite 3100
    Houston, Texas

77002(Zip Code)(Address of principal executive
    offices)    Registrants telephone number, including area code:
 (713) 493-2020
      þ o
    Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ




---



##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Financial StatementsConsolidated Schedule of Investments as of
    February 29, 2008


3Consolidated Schedule of Investments as of
    November 30, 2007


7Consolidated Statement of Assets and Liabilities
    as of February 29, 2008 and November 30, 2007


12Consolidated Statement of Operations for the
    three months ended February 29, 2008 and February 28,
    2007


13Consolidated Statement of Changes in Net Assets
    for the three months ended February 29, 2008 and for the
    year ended November 30, 2007


14Consolidated Statement of Cash Flows for the
    three months ended February 29, 2008 and February 28,
    2007


15Notes to Consolidated Financial Statements


16Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


32Item 3.


Quantitative and Qualitative Disclosures about
    Market Risk


37Item 4.


Controls and Procedures


38PART IIItem 1.


Legal Proceedings


39Item 1A.


Risk Factors


39Item 2.


Unregistered Sales of Equity Securities and Use
    of Proceeds


39Item 3.


Defaults Upon Senior Securities


39Item 4.


Submission of Matters to a Vote of Security
    Holders


39Item 5.


Other Information


39Item 6.


Exhibits


40EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   2




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED SCHEDULE OF INVESTMENTS
    AS OF FEBRUARY 29, 2008
 (amounts in 000s)
    (UNAUDITED)
  No. ofDescription:

Shares/Units


ValueLong-Term Investments  125.2%Equity Investments(a)  98.5%Publicly Traded MLP and MLP Affiliate(b)  35.1%Atlas Energy Resources, LLC


131


$
4,353Atlas Pipeline Partners, L.P


55



2,419BreitBurn Energy Partners L.P


73



1,603Buckeye Partners, L.P.


30



1,472Calumet Specialty Products Partners, L.P.


103



3,114Capital Product Partners L.P.


30



600Constellation Energy Partners LLC


65



1,370Copano Energy, L.L.C.


80



2,928Crosstex Energy, L.P.


31



993DCP Midstream Partners, LP


62



2,259Duncan Energy Partners L.P.


63



1,336Eagle Rock Energy Partners, L.P.


24



364El Paso Pipeline Partners, L.P.


20



469Enbridge Energy Management, L.L.C.(c)


51



2,660Enbridge Energy Partners L.P.


30



1,502Energy Transfer Equity, L.P.


32



1,078Energy Transfer Partners, L.P.


17



815Enterprise Products Partners L.P.


211



6,544Exterran Partners, L.P.


37



1,198Global Partners LP


119



3,262Hiland Partners, LP


31



1,569Inergy, L.P.


79



2,313Kinder Morgan Management, LLC(c)


12



678K-Sea Transportation Partners L.P.


11



379Legacy Reserves LP


25



541Magellan Midstream Partners, L.P.


63



2,737MarkWest Energy Partners, L.P.


76



2,612Martin Midstream Partners L.P.


50



1,680NuStar Energy L.P.


11



567ONEOK Partners, L.P


90



5,589OSG America L.P


46



640Penn Virginia Resource Partners, L.P.


16



439Plains All American Pipeline, L.P.(d)


103



4,907Regency Energy Partners LP


46



1,364SemGroup Energy Partners, L.P.


35



860Spectra Energy Partners, LP


35



856Targa Resources Partners LP


54



1,316TC PipeLines, LP


84



2,853Teekay LNG Partners L.P


69



2,074Teekay Offshore Partners L.P.


54



1,375TEPPCO Partners, L.P.


87



3,285Williams Partners L.P.


95



3,52682,499   3




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF FEBRUARY 29, 2008
    (amounts in 000s)
    (UNAUDITED)
  No. ofDescription:

Shares/Units


ValuePrivate MLP(e)(f)  63.3%Direct Fuels Partners, L.P.(g)


2,500


$
48,300Direct Fuels Partners, L.P.  Warrants(h)


2,500



4,200International Resource Partners LP


1,500



30,000Millennium Midstream Partners, LP


2,375



51,063Quest Midstream Partners, L.P.


350



6,650VantaCore Partners LP


441



8,825149,038Other Private Equity(e)  0.1%ProPetro Services, Inc.  Warrants(f)(i)


2,905



84Trident Resources Corp.  Warrants(j)


100



75159Total Equity Investments (Cost $214,441)






231,696     4




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF FEBRUARY 29, 2008
    (amounts in 000s)
    (UNAUDITED)
  Interest

Maturity


PrincipalDescription:

Rate

Date


Amount


ValueFixed Income Investments(e)  26.7%Midstream  5.4%SemGroup, L.P

8.75%


11/15/15


$
9,000


$
8,370Targa Resources, Inc.

8.50


11/01/13



4,580



4,24812,618Upstream  1.0%CDX Funding, LLC

(k)


3/31/13



2,550



2,2952,295Oilfield Services  17.1%Dresser, Inc.

(l)


5/04/15



5,000



4,350ProPetro Services, Inc.(f)

(m)


2/15/13



35,000



30,081Seitel, Inc.

9.75


2/15/14



2,000



1,660Stallion Oilfield Services Ltd.

(n)


7/18/12



5,000



4,22540,316Aggregates and Mining  3.2%VantaCore Partners LP(f)

(o)


5/21/14



7,500



7,5007,500Total Fixed Income Investments (Cost $67,494)












62,729Total Long-Term Investments (Cost $281,935)












294,425Short-Term Investments  3.4%Repurchase Agreements  3.4%Bear, Stearns & Co. Inc. (Agreements dated 2/29/08 to
    be repurchased at $8,087), collateralized by $8,329 in U.S.
    Treasury Bonds (Cost $8,057)

1.85


3/01/08







8,057Total Investments  128.6% (Cost $289,992)












302,482Senior Secured Revolving Credit Facility Borrowings












(67,500
)Other Assets in Excess of Other Liabilities












302Net Assets











$
235,284     (a)
    
    Unless otherwise noted, equity investments are common
    units/common shares.(b)
    
    Security is not treated as an eligible portfolio security for
    purposes of business development company (BDC)
    qualification.(c)
    
    Distributions are paid in-kind.(d)
    
    The Company believes that it may be an affiliate of Plains All
    American, L.P. (see Note 5).(e)
    
    Unless otherwise noted, security is treated as an eligible
    portfolio security for purposes of BDC qualification.(f)
    
    Fair valued and restricted security (see Notes 2, 3
    and 7).   5




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONCLUDED)
    AS OF FEBRUARY 29, 2008
    (amounts in 000s)
    (UNAUDITED)
   (g)
    
    The Class B common units are redeemable at the option of
    Direct Fuels Partners, L.P. at the price of $20.00 per unit.(h)
    
    Warrants are non-income producing, expire on June 8, 2017
    and provide the Company the right to purchase 2,500 Class A
    common units at a price of $20.00 per unit.(i)
    
    Warrants relate to the Companys floating rate senior
    secured second lien term loan facility with ProPetro Services,
    Inc. These warrants are non-income producing and expire on
    February 15, 2017.(j)
    
    Warrants are non-income producing and expire on
    November 30, 2013.(k)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 625 basis
    points (11.39% as of February 29, 2008).(l)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 575 basis
    points (8.82% as of February 29, 2008).(m)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 900 basis
    points (13.73% as of February 29, 2008).(n)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 450 basis
    points (7.61% as of February 29, 2008).(o)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 550 basis
    points (10.23% as of February 29, 2008).   6




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED SCHEDULE OF INVESTMENTS
    AS OF NOVEMBER 30, 2007
 (amounts in 000s)
  No. ofDescription:

Shares/Units


ValueLong-Term Investments(a)  133.3%Equity Investments(b)  96.1%Publicly Traded MLP and MLP Affiliate(c)(d) 
    37.8%Atlas Energy Resources, LLC  Unregistered(e)


131


$
3,905Atlas Pipeline Partners, L.P.


46



2,083BreitBurn Energy Partners L.P.  Unregistered(e)


73



2,102Buckeye Partners, L.P.


41



1,960Calumet Specialty Products Partners, L.P.


104



3,842Capital Product Partners L.P.(f)


24



593Constellation Energy Partners LLC  Unregistered(e)


65



2,184Copano Energy, L.L.C.


8



320Copano Energy, L.L.C.  Unregistered(e)


72



2,590Crosstex Energy, L.P.


24



815DCP Midstream Partners, LP


62



2,509Duncan Energy Partners L.P.


53



1,214Eagle Rock Energy Partners, L.P.


24



512El Paso Pipeline Partners, L.P(g)


9



218Enbridge Energy Management, L.L.C.(f)(h)


66



3,404Enbridge Energy Partners L.P.


17



858Energy Transfer Equity, L.P.


61



2,091Energy Transfer Partners, L.P.


17



896Enterprise Products Partners L.P.


220



6,875Exterran Partners, L.P.(i)


40



1,390Global Partners LP


114



3,137Hiland Holdings GP, LP


10



244Hiland Partners, LP


31



1,470Inergy, L.P.


64



2,051Kinder Morgan Management, LLC(f)(h)


111



5,572K-Sea Transportation Partners L.P.


12



429Legacy Reserves LP


35



754Magellan Midstream Partners, L.P.


65



2,859MarkWest Energy Partners, L.P.


95



3,113Martin Midstream Partners L.P.


50



1,908NuStar Energy L.P.(j)


11



647ONEOK Partners, L.P.


94



5,650OSG America L.P(g)


1



27Penn Virginia Resource Partners, L.P.


9



244Plains All American Pipeline, L.P.


103



5,374    7




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF NOVEMBER 30, 2007
    (amounts in 000s)
  No. ofDescription:

Shares/Units


ValueRegency Energy Partners LP


46


$
1,419SemGroup Energy Partners, L.P.


40



1,073Spectra Energy Partners, LP


32



791Targa Resources Partners LP


60



1,702TC PipeLines, LP


84



3,086Teekay LNG Partners L.P


77



2,277Teekay Offshore Partners L.P.(f)


54



1,398TEPPCO Partners, L.P.


80



3,158Williams Partners L.P.


95



3,92292,666Private MLP  56.2%Direct Fuels Partners, L.P.(e)(k)


2,500



46,675Direct Fuels Partners, L.P.  Warrants(e)(l)


2,500



4,575International Resource Partners LP(e)(m)


1,500



30,000Millennium Midstream Partners, LP(e)(n)


2,375



44,223Millennium Midstream Partners, LP  Warrants(e)(o)


2,375



3,278Quest Midstream Partners, L.P.(e)(p)


350



7,000VantaCore Partners LP(e)(q)


91



1,916137,667Other Private Equity  2.1%Knight, Inc.  Preferred Stock(r)


5



4,965ProPetro Services, Inc.  Warrants(e)(s)


2,905



109Trident Resources Corp.  Warrants(t)


100



755,149Total Equity Investments (Cost $220,334)






235,482     8




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF NOVEMBER 30, 2007
    (amounts in 000s)
  Interest

Maturity


PrincipalDescription:

Rate

Date


Amount


ValueFixed Income Investments  37.2%Midstream  7.2%SemGroup, L.P

8.75%


11/15/15


$
9,000


$
8,595Targa Resources, Inc.

8.50


11/01/13



4,580



4,488Targa Resources, Inc.

(u)


10/31/12



1,664



1,637Targa Resources, Inc.

(v)


10/31/12



2,983



2,93417,654Upstream  5.3%Beryl Oil and Gas LP

(w)


7/14/11



2,933



2,890CDX Funding, LLC

(x)


3/31/13



4,550



4,345SandRidge Energy Inc.

(y)


4/14/12



5,700



5,70012,935Oilfield Services  18.7%Dresser, Inc.

(z)


5/04/15



5,000



4,800ProPetro Services, Inc.(e)

(aa)


2/15/13



35,000



34,326Seitel, Inc.

9.75


2/15/14



2,000



1,730Stallion Oilfield Services Ltd.

(bb)


7/18/12



5,000



4,92545,781Aggregates and Mining  6.0%VantaCore Partners LP(e)(cc)

9.00


5/21/27



7,000



7,350VantaCore Partners LP(e)

(dd)


5/21/14



7,500



7,50014,850Total Fixed Income Investments (Cost $89,779)












91,220Total Long-Term Investments (Cost $310,113)












326,702Short-Term Investments  10.2%U.S. Treasury Bills  5.8%U.S. Treasury Bills  (Cost $14,251)

3.075


2/28/08



14,358



14,250Repurchase Agreements  4.4%Bear, Stearns & Co. Inc. (Agreements dated 11/30/07 to
    be repurchased at $10,772), collateralized by $11,105 in U.S.
    Treasury Bonds (Cost $10,769)

3.15


12/01/07







10,769Total Short-Term Investments (Cost $25,020)












25,019Total Investments  143.5% (Cost $335,133)












351,721Senior Secured Revolving Credit Facility Borrowings












(85,000
)Treasury Secured Revolving Credit Facility Borrowings












(14,000
)Other Liabilities in Excess of Other Assets












(7,588
)Net Assets











$
245,133     9




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF NOVEMBER 30, 2007
    (amounts in 000s)
    (a)
    
    Unless otherwise noted, security is treated as an eligible
    portfolio security for purposes of BDC qualification.(b)
    
    Unless otherwise noted, equity investments are common
    units/common shares.(c)
    
    Security is not treated as an eligible portfolio security for
    purposes of BDC qualification.(d)
    
    Unless otherwise noted, a security is treated as a publicly
    traded partnership for regulated investment company
    (RIC) qualification purposes. To qualify as a RIC
    for tax purposes, the Company may directly invest up to 25% of
    its total assets in equity and debt securities of entities
    treated as publicly traded partnerships. At November 30,
    2007, the Company had 23.0% of its total assets invested in
    securities treated as publicly traded partnerships. From
    inception through the fiscal year ended November 30, 2007,
    it was the Companys intention to be treated as a RIC for
    tax purposes. On January 22, 2008, the Company announced
    that it would no longer intend to be treated as a RIC under the
    Code.(e)
    
    Fair valued and restricted security (see Notes 2, 3 and 7).(f)
    
    Security is not treated as a publicly traded partnership for RIC
    qualification purposes.(g)
    
    Security is currently non-income producing but is expected to
    pay distributions within the next 12 months.(h)
    
    Distributions are paid in-kind.(i)
    
    Prior to August 20, 2007, security was known as Universal
    Compression Partners, L.P., as disclosed on our Schedule of
    Investments as of November 30, 2006.(j)
    
    Prior to April 2, 2007, security was known as Valero L.P.,
    as disclosed on our Schedule of Investments as of
    November 30, 2006.(k)
    
    Class B common units are owned directly and indirectly by
    the Companys subsidiaries, KED DF Investment Partners, LP
    and KED DF Investment GP, LLC. The Class B common units are
    redeemable at the option of Direct Fuels Partners, L.P. at the
    price of $20.00 per unit.(l)
    
    Warrants are non-income producing, expire on June 8, 2017
    and provide the Company the right to purchase 2,500 Class A
    common units at a price of $20.00 per unit.(m)
    
    Common units are owned directly and indirectly by the
    Companys subsidiaries, KED LCP Investment Partners, LP and
    KED LCP Investment GP, LLC.(n)
    
    Class B common units are owned directly and indirectly by
    the Companys subsidiaries, KED MME Investment Partners, LP
    and KED MME Investment GP, LLC. The Class B common units
    are redeemable at the option of Millennium Midstream Partners,
    LP at the price of $20.00 per unit.(o)
    
    Warrants are non-income producing, expire on December 28,
    2016 and provide the Company the right to purchase 2,375
    Class A common units at a price of $20.00 per unit.(p)
    
    Common units are owned directly and indirectly by the
    Companys subsidiaries, KED MME Investment Partners, LP and
    KED MME Investment GP, LLC.(q)
    
    Common units are owned directly and indirectly by the
    Companys subsidiaries, KED VP Investment Partners, LP and
    KED VP Investment GP, LLC.(r)
    
    Preferred stock of Knight, Inc. (f.k.a, Kinder Morgan, Inc.)
    paying a fixed dividend rate of 8.33% until August 12, 2012
    and LIBOR + 390 basis points thereafter. The maturity date
    for this security is August 12, 2057.(s)
    
    Warrants relate to the Companys floating rate senior
    secured second lien term loan facility with ProPetro Services,
    Inc. These warrants are non-income producing and expire on
    February 15, 2017.    10




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONCLUDED)
    AS OF NOVEMBER 30, 2007
    (amounts in 000s)
   (t)
    
    Warrants are non-income producing and expire on
    November 30, 2013.(u)
    
    Floating rate letter of credit facility. Security pays interest
    at a rate of LIBOR less 12.5 basis points (5.07% as of
    November 30, 2007).(v)
    
    Floating rate senior secured first lien term loan facility.
    Security pays interest at a rate of LIBOR + 200 basis
    points (7.20% as of November 30, 2007).(w)
    
    Prior to May 23, 2007, security was known as Coldren
    Resources, Inc. Floating rate senior secured first lien term
    loan. Security pays interest at a rate of LIBOR + 400 basis
    points (9.70% as of November 30, 2007).(x)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 625 basis
    points (11.39% as of November 30, 2007).(y)
    
    Floating rate unsecured bridge loan facility. Security pays
    interest at a rate of LIBOR + 363 basis points (8.85% as of
    November 30, 2007).(z)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 575 basis
    points (11.13% as of November 30, 2007).(aa)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 900 basis
    points (14.23% as of November 30, 2007).(bb)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 450 basis
    points (9.38% as of November 30, 2007).(cc)
    
    Fixed rate subordinated convertible note. Security is
    convertible into 350,000 common units at a conversion price of
    $20.00 per common unit.(dd)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 550 basis
    points (10.73% as of November 30, 2007).    11




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED STATEMENT OF ASSETS AND
    LIABILITIES(amounts in 000s, except share and per share
    amounts)
  February 29,2008


November 30,(Unaudited)


2007ASSETSInvestments, at fair value:Non-affiliated (Cost  $277,504 and $305,604,
    respectively)

$
289,518


$
321,328Affiliated (Cost  $4,431 and $4,509, respectively)


4,907



5,374U.S. Treasury Bills, at fair value (Cost  $0 and
    $14,251, respectively)






14,250Repurchase agreements (Cost  $8,057 and $10,769,
    respectively)


8,057



10,769Total investments (Cost  $289,992 and $335,133,
    respectively)


302,482



351,721Deposits with brokers


122



121Receivable for securities sold


5,477



766Interest, dividends and distributions receivable


1,567



1,515Debt issuance costs, prepaid expenses and other assets


1,050



1,264Total Assets


310,698



355,387LIABILITIESSenior secured revolving credit facility


67,500



85,000Treasury secured revolving credit facility






14,000Payable for securities purchased


907



6,967Investment management fee payable


1,380



1,355Accrued directors fees and expenses


71



78Accrued expenses and other liabilities


882



863Deferred tax liability


4,674



1,991Total Liabilities


75,414



110,254NET ASSETS

$
235,284


$
245,133NET ASSETS CONSIST OFCommon stock, $0.001 par value (200,000,000 shares
    authorized at February 29, 2008 and November 30, 2007;
    10,050,446 shares issued and outstanding at
    February 29, 2008 and November 30, 2007, respectively)

$
10


$
10Paid-in capital


228,086



231,535Accumulated net investment income (loss), net of income
    taxes, less dividends


(1,719
)


(409
)Accumulated net realized gains (losses) on investments, net
    of income taxes


1,291



(19
)Net unrealized gains on investments, net of income taxes


7,616



14,016NET ASSETS

$
235,284


$
245,133NET ASSET VALUE PER SHARE

$
23.41


$
24.39    12




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED STATEMENT OF OPERATIONS(amounts in 000s)
    (UNAUDITED)
  Three Months EndedFebruary 29,


February 28,2008


2007INVESTMENT INCOMEIncomeDividends and Distributions:Non-affiliated investments

$
4,390


$
838Affiliated investments


87



41Total dividends and distributions


4,477



879Return of capital


(4,322
)


(791
)Net dividends and distributions


155



88Interest


2,501



2,702Total investment income


2,656



2,790ExpensesBase investment management fees


1,380



1,058Incentive investment management fees






177Professional fees


260



156Directors fees


72



63Administration fees


55



56Insurance


37



38Custodian fees


20



15Other expenses


183



148Total Expenses  Before Base Investment Management Fee
    Waivers and Interest Expense


2,007



1,711Base investment management fee waivers






(303
)Interest expense


1,684



Total Expenses


3,691



1,408Net Investment Income (Loss)  Before Income
    Taxes


(1,035
)


1,382Deferred income tax benefit


397



41Net Investment Income (Loss)


(638
)


1,423REALIZED AND UNREALIZED GAINS (LOSSES)Net Realized GainsInvestments


2,086



901Deferred income tax expense


(776
)


Net Change in Realized Gains


1,310



901Net Change in Unrealized Gains (Losses)Investments


(4,096
)


8,090Deferred income tax benefit (expense)


1,524



(14
)Deferred income tax expense  conversion to a taxable
    corporation


(3,828
)


Net Change in Unrealized Gains (Losses)


(6,400
)


8,076Net Realized and Unrealized Gains (Losses)


(5,090
)


8,977NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
    OPERATIONS

$
(5,728
)

$
10,400    13




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS(amounts in 000s, except share amounts)
  Three MonthsEnded


For the YearFebruary 29,


Ended2008


November 30,(Unaudited)


2007OPERATIONSNet investment income (loss)

$
(638
)

$
3,606Net realized gains


1,310



5,523Net change in unrealized gains (losses)


(2,572
)


6,251Net change in unrealized losses  conversion to
    taxable corporation


(3,828
)


Net Increase (Decrease) in Net Assets Resulting from
    Operations


(5,728
)


15,380DIVIDENDS AND DISTRIBUTIONSDividends


(672
)(1)


(9,478
)(2)Distributions from net realized long-term capital gains






(1,573
)(2)Distributions  return of capital


(3,449
)(1)


(2,415
)(2)Dividends and Distributions


(4,121
)


(13,466
)CAPITAL STOCK TRANSACTIONSIssuance of 50,386 shares of common stock from reinvestment
    of dividends






1,272Underwriting discount and offering expenses






33Net Increase in Net Assets from Capital Stock Transactions






1,305Total Increase (Decrease) in Net Assets


(9,849
)


3,219NET ASSETSBeginning of period


245,133



241,914End of period

$
235,284


$
245,133     (1)
    
    This is an estimate of the characterization of a portion of the
    total dividends paid to common stockholders for the three months
    ended February 29, 2008 as either a dividend (ordinary
    income) or distribution (return of capital). This estimate is
    based on the Companys operating results during the period.
    The actual characterization of the common stock dividends made
    during the current year will not be determinable until after the
    end of the fiscal year when the Company can determine earnings
    and profits and, therefore, it may differ from the preliminary
    estimates.(2)
    
    The information presented in each of these items is a
    characterization of a portion of the total dividends paid to
    common stockholders for the fiscal year ended November 30,
    2007 as either dividends (ordinary income) or distributions
    (long-term capital gains or return of capital). This
    characterization is based on the Companys earnings and
    profits.   14




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS(amounts in 000s)
    (UNAUDITED)
  Three Months EndedFebruary 29,


February 28,2008


2007CASH FLOWS FROM OPERATING ACTIVITIESNet increase (decrease) in net assets resulting from operations

$
(5,728
)

$
10,400Adjustments to reconcile net increase in net assets resulting
    from operations to net cash provided by operating activities:Purchase of long-term investments


(11,784
)


(89,211
)Sale of U.S. Treasury Bills, net


14,250



Proceeds from sale of long-term investments


37,901



15,358Sale of short-term investments


2,712



72,797Realized gains on investments


(2,086
)


(901
)Return of capital distributions


4,322



791Unrealized losses (gains) on investments


4,096



(8,090
)Increase in deferred tax liability


2,683



Accretion of bond discount


(172
)


(46
)Increase in deposits with brokers


(1
)


(15
)Decrease (increase) in receivable for securities sold


(4,711
)


541Increase in interest, dividend and distributions receivable


(52
)


(8
)Decrease in prepaid expenses and other assets


214



212Decrease in payable for securities purchased


(6,060
)


Increase in investment management fee payable


25



354Increase (decrease) in accrued directors fees and expenses


(7
)


8Increase in accrued expenses and other liabilities


19



10Net Cash Provided by Operating Activities


35,621



2,200CASH FLOWS FROM FINANCING ACTIVITIESRepayments of senior secured revolving credit facility


(17,500
)


Repayments of treasury secured revolving credit facility


(14,000
)


Cash distributions to shareholders


(4,121
)


(2,200
)Net Cash Used in Financing Activities


(35,621
)


(2,200
)NET INCREASE (DECREASE) IN CASH






CASH  BEGINNING OF PERIOD






CASH  END OF PERIOD

$



$
          15




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(amounts in 000s, except per share amounts)
    (UNAUDITED) 1.
    ORGANIZATION    2.
    SIGNIFICANT
    ACCOUNTING POLICIES  Use of Estimates
  Interim Periods Form 10-Q Form 10-K
  Principles of Consolidation
      Calculation of Net Asset Value
  Investment Valuation
 16




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
        
    Investment Team Valuation.  The applicable
    investments will initially be valued by the investment
    advisers senior professionals responsible for the
    portfolio investments.
    Investment Team Valuation
    Documentation.  Preliminary valuation conclusions
    will be documented and discussed with senior management of KAFA,
    the Companys investment adviser. Such valuations will be
    submitted to the Valuation Committee (a committee of the board
    of directors) on a quarterly basis. These valuations will stand
    for intervening periods of time unless a senior officer of KAFA
    determines that material adjustments to such preliminary
    valuations are appropriate to avoid valuations that are stale or
    do not represent fair value.
    Valuation Committee.  The Valuation Committee
    shall meet each quarter to consider new valuations presented by
    KAFA, if any, which were made in accordance with the Valuation
    Procedures in such quarter. The Valuation Committees
    valuation determinations will be subject to ratification by the
    board at its next regular meeting.
    Valuation Firm.  No less frequently than
    quarterly, a third-party valuation firm engaged by the board of
    directors will review the valuation methodologies and
    calculations employed for these securities. The independent
    valuation firm provides third-party valuation consulting
    services to the board of directors which consisted of certain
    limited procedures that the Company identified and requested
    them to perform. For the quarter ended February 29, 2008,
    the independent valuation firm provided limited procedures on
    investments in six portfolio companies comprising approximately
    61.7% of the total investments at fair value as of
    February 29, 2008. Upon completion of the limited
    procedures, the independent valuation firm concluded that the
    fair value of those investments subjected to the limited
    procedures did not appear to be unreasonable.
    Board of Directors Determination.  The board of
    directors will consider the valuations provided by KAFA and the
    Valuation Committee and ratify valuations for the applicable
    securities at each quarterly board meeting. The board of
    directors will consider the reports provided by the third-party
    valuation firm in reviewing and determining in good faith the
    fair value of the applicable portfolio securities.   17




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
      e.g.
  SFAS No. 157.
        Repurchase Agreements agreed-upon
 18




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
  Security Transactions
  Investment Income and Return of Capital
    Estimates
  For the three months ended February 29,
    2008.
  For the three months ended February 28,
    2007.
  Dividends and Distributions to Stockholders
  Income Taxes
     19




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
      Organizational and Offering Costs
  Indemnifications
  3.
    FAIR
    VALUE  SFAS No. 157.
      
    Level 1 Quoted unadjusted prices for
    identical instruments in active markets to which the Company has
    access at the date of measurement.
    Level 2 Quoted prices for similar
    instruments in active markets; quoted prices for identical or
    similar instruments in markets that are not active; and
    model-derived valuations in which all significant inputs and
    significant value drivers are observable in active markets.
    Level 2 inputs are those in markets for which there are few
    transactions, the prices are not current, little public
    information exists or instances where prices vary substantially
    over time or among brokered market makers. 20




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
   
    Level 3 Model derived valuations in
    which one or more significant inputs or significant value
    drivers are unobservable. Unobservable inputs are those inputs
    that reflect the Companys own assumptions that market
    participants would use to price the asset or liability based on
    the best available information.    Prices withQuoted Prices


Otherin Active


Observable


UnobservableMarkets


Inputs


InputsAssets at Fair Value

Total


(Level 1)


(Level 2)


(Level 3)Long-Term Investments

$
294,425


$
82,499


$
25,223


$
186,703       Long-TermAssets at Fair Value Using Unobservable Inputs (Level 3)

InvestmentsBalance  November 30, 2007

$
197,733Transfers out of Level 3


(10,781
)Realized gains (losses)


Unrealized losses, net


(249
)Purchases, issuances or settlements


Balance  February 29, 2008

$
186,703     4.
    INCOME
    TAXES    February 29,2008


November 30,(Unaudited)


2007Deferred tax assets:Organizational costs

$
(20
)

$
Net operating loss carryforwards


(573
)


(581
)Deferred tax liabilities:Net unrealized gains on investment securities


4,876



2,572Other temporary differences


391



Total net deferred tax liability

$
4,674


$
1,991  21




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
      February 29,2008


November 30,(Unaudited)


2007Gross unrealized appreciation of investments

$
23,540


$
21,716Gross unrealized depreciation of investments


(10,458
)


(5,308
)Net unrealized appreciation before tax

$
13,082


$
16,408             November 30,2007Undistributed ordinary income

$
Undistributed long-term capital gains


Net unrealized gains on investments


16,408Total distributable earnings

$
16,408  22




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
  5.
    AGREEMENTS
    AND AFFILIATIONS  Investment Management
    Agreement
    Base Management Fee.
    Incentive Fee.
   23




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
  payment-in-kind
          Portfolio Companies
     24




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
    Affiliated
    Investments.
  Plains All American, L.P.
  Non-Affiliated
    Investments.
    Millennium Midstream Partners, LP 
  VantaCore Partners LP 
  Direct Fuels Partners, L.P. 
 25




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
  International Resource Partners LP 
  Other Affiliations
  6.
    INVESTMENT
    TRANSACTIONS   26




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
  7.
    RESTRICTED
    SECURITIES  lock-up
    Number ofUnits,








FairWarrants, or








Value per


Percent


PercentType of

Principal ($)


Cost


Fair


Unit/


of Net


of TotalInvestment

Security

Restriction

(in 000s)


Basis


Value


Warrant


Assets


AssetsDirect Fuels Partners, L.P.

Class B
    Common Units(1)

(2)


2,500


$
42,984


$
48,300


$
19.32



20.5
%


15.5
%Direct Fuels Partners, L.P.

Class A Warrants(1)

(2)


2,500



4,700



4,200



1.68



1.8



1.4International Resource Partners LP

Class A
    Common Units(1)

(2)


1,500



28,794



30,000



20.00



12.8



9.7Millennium Midstream Partners, LP

Class A
    Common Units(1)

(2)


2,375



43,546



51,063



21.50



21.7



16.4ProPetro Services, Inc.

Warrants(1)

(2)


2,905



2,469



84



0.03



0.0



0.0ProPetro Services, Inc.

Term Loan(1)

(2)

$
35,000



32,182



30,081



n/a



12.8



9.7Quest Midstream Partners, L.P.

Common Units(1)

(2)


350



6,901



6,650



19.00



2.8



2.1VantaCore Partners LP

Common Units(1)

(2)


441



8,581



8,825



20.00



3.8



2.8VantaCore Partners LP

Term Loan(1)

(2)

$
7,500



7,500



7,500



n/a



3.2



2.4Total of securities valued by the board of directors

$
177,657


$
186,703







79.4
%


60.0
%CDX Funding, LLC

Term Loan(3)

(2)(4)

$
2,550


$
2,604


$
2,295



n/a



1.0
%


0.7
%Dresser, Inc.

Term Loan(3)

(2)(4)

$
5,000



4,782



4,350



n/a



1.8



1.4Seitel, Inc.

Corporate Bond(3)

(2)

$
2,000



1,975



1,660



n/a



0.7



0.5SemGroup, L.P.

Corporate Bond(3)

(2)

$
9,000



8,935



8,370



n/a



3.6



2.7Stallion Oilfield Services Ltd.

Term Loan(3)

(2)(4)

$
5,000



4,910



4,225



n/a



1.8



1.4Targa Resources, Inc.

Corporate Bond(3)

(2)

$
4,580



4,606



4,248



n/a



1.8



1.4Trident Resources Corp.

Warrants(3)

(2)(4)


100



411



75


$
0.75



0.0



0.0Total of securities valued by prices provided by market maker or
    independent pricing service

$
28,223


$
25,223







10.7
%


8.1
%Total of all restricted securities

$
205,880


$
211,926







90.1
%


68.1
%     (1)
    
    Restricted security that represents Level 3 categorization
    under SFAS No. 157 where reliable market quotes are
    not readily available. Security is valued in accordance with the
    procedures established by the board of directors as more fully
    described in Note 2  Significant Accounting
    Policies.(2)
    
    Unregistered security of a private company.(3)
    
    Restricted security that represents Level 2 categorization
    under SFAS No. 157. Security is valued using prices
    provided by a principal market maker, syndicate bank or an
    independent pricing service as more fully described in
    Note 2  Significant Accounting Policies.(4)
    
    Corporate bank loan or equity warrant with a fair market value
    determined by the mean of the bid and ask prices provided by a
    syndicate bank or principal market maker. These securities have
    limited trading volume and are not listed on a national
    exchange. The syndicate bank or principal market maker is the
    active exchange for such security. 27




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
     Number ofUnits,








FairWarrants, or








Value per


Percent


PercentType of

Principal ($)





Fair


Unit/


of Net


of TotalInvestment

Security

Restriction

(in 000s)


Cost Basis


Value


Warrant


Assets


AssetsAtlas Energy Resources, LLC

Common Units(1)

(2)(3)(4)


91


$
2,211


$
2,706


$
29.72



1.1
%


0.8
%Atlas Energy Resources, LLC

Common Units(1)

(2)(3)


40



995



1,199



30.15



0.5



0.3BreitBurn Energy Partners L.P.

Common Units(1)

(3)


73



2,271



2,102



28.89



0.9



0.6Constellation Energy Partners LLC

Common Units(1)

(2)(3)(5)


36



1,236



1,217



33.40



0.5



0.3Constellation Energy Partners LLC

Common Units(1)

(2)(3)


29



1,001



967



33.56



0.5



0.3Copano Energy, L.L.C.

Common Units(1)

(2)(3)


72



2,500



2,590



35.91



1.1



0.7Direct Fuels Partners, L.P.

Class B
    Common Units(1)

(6)


2,500



44,109



46,675



18.67



19.0



13.1Direct Fuels Partners, L.P.

Class A Warrants(1)

(6)


2,500



4,700



4,575



1.83



1.9



1.3International Resource Partners LP

Class A
    Common Units(1)

(6)


1,500



29,393



30,000



20.00



12.2



8.4Millennium Midstream Partners, LP

Class B
    Common Units(1)

(6)


2,375



40,635



44,223



18.62



18.0



12.4Millennium Midstream Partners, LP

Class A Warrants(1)

(6)


2,375



3,919



3,278



1.38



1.3



0.9ProPetro Services, Inc.

Warrants(1)

(6)


2,905



2,469



109



0.04



0.0



0.0ProPetro Services, Inc.

Term Loan(1)

(6)

$
35,000



32,092



34,326



n/a



14.0



9.7Quest Midstream Partners, L.P.

Common Units(1)

(6)


350



7,000



7,000



20.00



2.9



2.1VantaCore Partners LP

Common Units(1)

(2)(6)


91



1,770



1,916



21.00



0.8



0.5VantaCore Partners LP

Convertible Note(1)

(6)

$
7,000



7,030



7,350



n/a



3.0



2.1VantaCore Partners LP

Term Loan(1)

(6)

$
7,500



7,500



7,500



n/a



3.0



2.1Total of securities valued by the board of directors

$
190,831


$
197,733







80.7
%


55.6
%Beryl Oil and Gas LP

Term Loan(7)

(6)(8)

$
2,933


$
2,960


$
2,890



n/a



1.2
%


0.8
%CDX Funding, LLC

Term Loan(7)

(6)(8)

$
4,550



4,645



4,345



n/a



1.8



1.2Dresser, Inc.

Term Loan(7)

(6)(8)

$
5,000



4,775



4,800



n/a



2.0



1.4Knight, Inc.

Preferred Stock(7)

(6)


5



5,031



4,965



n/a



2.0



1.4SandRidge Energy Inc.

Bridge Loan(7)

(6)(8)

$
5,700



5,699



5,700



n/a



2.3



1.6Seitel, Inc.

Corporate Bond(7)

(6)

$
2,000



1,972



1,730



n/a



0.7



0.5SemGroup, L.P.

Corporate Bond(7)

(6)

$
9,000



8,935



8,595



n/a



3.5



2.4Stallion Oilfield Services Ltd.

Term Loan(7)

(6)(8)

$
5,000



4,906



4,925



n/a



2.0



1.4Targa Resources, Inc.

Corporate Bond(7)

(6)

$
4,580



4,604



4,488



n/a



1.8



1.3Targa Resources, Inc.

Letter of Credit(7)

(6)(8)

$
1,664



1,660



1,637



n/a



0.7



0.5Targa Resources, Inc.

Term Loan(7)

(6)(8)

$
2,983



3,001



2,934



n/a



1.2



0.8Trident Resources Corp.

Warrants(7)

(6)(8)


100



411



75


$
0.75



0.0



0.0Total of securities valued by prices provided by market maker or
    independent pricing service

$
48,599


$
47,084







19.2
%


13.3
%Total of all restricted securities

$
239,430


$
244,817







99.9
%


68.9
%     (1)
    
    Restricted security where reliable market quotes are not readily
    available. Security is valued in accordance with the procedures
    established by the board of directors as more fully described in
    Note 2  Significant Accounting Policies.(2)
    
    Security subject to
    lock-up
    agreement.(3)
    
    Security of a publicly-traded company that is unregistered.(4)
    
    These exchange listed Common Units were converted from
    Class D units on November 14, 2007.(5)
    
    These exchange listed Common Units were converted from
    Class F units on November 12, 2007.(6)
    
    Unregistered security of a private company.(7)
    
    Restricted security that is valued using prices provided by a
    principal market maker, syndicate bank or an independent pricing
    service as more fully described in Note 2 
    Significant Accounting Policies. 28




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
   (8)
    
    Corporate bank loan or equity warrant with a fair market value
    determined by the mean of the bid and ask prices provided by a
    syndicate bank or principal market maker. These securities have
    limited trading volume and are not listed on a national
    exchange. The syndicate bank or principal market maker is the
    active exchange for such security.  8.
    SENIOR
    SECURED AND TREASURY SECURED REVOLVING CREDIT
    FACILITIES        Investment Facility 
 29




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (CONTINUED)
 (amounts in 000s, except per share amounts)
    (UNAUDITED)
    9.
    FINANCIAL
    HIGHLIGHTS    February 29,2008


November 30,


November 30,(Unaudited)


2007


2006Per Share of Common StockNet asset value, beginning of period

$
24.39


$
24.19


$
23.32Income (Loss) from
    Operations(1)Net investment income (loss)


(0.06
)


0.36



0.09Net realized and unrealized gain (loss) on investments


(0.13
)


1.18



0.78Net change in unrealized losses  conversion to
    taxable corporation


(0.38
)






Total income (loss) from investment operations


(0.57
)


1.54



0.87Dividends and
    Distributions(2)(3)Dividends


(0.07
)


(0.95
)


Distributions from net realized long-term capital gains






(0.15
)


Distributions  return of capital


(0.34
)


(0.24
)


Total Dividends and Distributions


(0.41
)


(1.34
)


Net asset value, end of period

$
23.41


$
24.39


$
24.19Market value per share, end of period

$
23.76


$
23.14


$
22.32Total investment return based on market
    value(4)


4.6
%


9.3
%


(10.7
)%Supplemental Data and
    Ratios(5)Net assets, end of period

$
235,284


$
245,133


$
241,914Ratio of expenses to average net assets, including investment
    management fee waivers and deferred income taxes


10.9
%


4.2
%


2.6
%Ratio of expenses to average net assets, excluding investment
    management fee waivers and deferred income taxes


6.3
%


3.8
%


3.1
%Ratio of expenses to average net assets, excluding investment
    management fee waivers, deferred income taxes and interest
    expense


3.4
%


2.8
%


3.1
%Ratio of net investment income (loss) to average net assets


(1.1
)%


1.5
%


1.9
%Net increase (decrease) in net assets resulting from operations
    to average net assets


(2.4
)%(6)


6.2
%


3.7
%(6)Portfolio turnover rate


3.8
%(7)


28.8
%(7)


5.6
%(7)Average amount of borrowings outstanding under the Credit
    Facilities

$
90,962


$
32,584



Average amount of borrowings outstanding per share of common
    stock during the period

$
9.05


$
3.25



  30




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (CONCLUDED)
 (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
    (1)
    
    Based on average shares of common stock of 10,050,446 for the
    three months ended February 29, 2008, 10,014,496 for the
    year ended November 30, 2007 and 10,000,060 for the period
    of September 21, 2006 through November 30, 2006.(2)
    
    The information presented in this item is a current estimate of
    the characterization of a portion of the total dividends paid to
    common stockholders for the three months ended February 29,
    2008. The estimate is based on the Companys operating
    results during the period.(3)
    
    The information presented in each of these items is a
    characterization of a portion of the total dividends paid to
    common stockholders for the fiscal year ended November 30,
    2007 as either dividends (ordinary income) or distributions
    (long-term capital gains or return of capital). This
    characterization is based on the Companys earnings and
    profits.(4)
    
    Not annualized for the three months ended February 29, 2008
    and for the period September 21, 2006 through
    November 30, 2006. Total investment return is calculated
    assuming a purchase of common stock at the market price on the
    first day and a sale at the current market price on the last day
    of the period reported. The calculation also assumes
    reinvestment of dividends, if any, at actual prices pursuant to
    the Companys dividend reinvestment plan.(5)
    
    Unless otherwise noted, ratios are annualized.(6)
    
    Not annualized.(7)
    
    Not annualized for the three months ended February 29, 2008
    and for the period September 21, 2006 through
    November 30, 2006. For the three months ended
    February 29, 2008, calculated based on the purchases of
    long-term investments of $11,784 divided by the quarterly
    average long-term investment balance of $310,564. For the fiscal
    year ended November 30, 2007, calculated based on the sales
    of long-term investments of $64,736 divided by the quarterly
    average long-term investment balance of $224,548. For the period
    September 21, 2006 through November 30, 2006,
    calculated based on the sales of long-term investments of $3,153
    divided by the quarterly average long-term investment balance of
    $56,730.  10.
    COMMON
    STOCK    11.  SUBSEQUENT
    EVENT
   31




---



##### Table of Contents



ITEM 2.  MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.  The following discussions should be read together with the
    unaudited consolidated financial statements and the notes
    thereto included in this report and with the audited
    consolidated financial statements and notes thereto included in
    our Annual Report on
    Form 10-K.
  Forward-Looking
    Statements
  Form 10-Q
  
    Our future operating results;
    Our business prospects and the prospects of our portfolio
    companies and their ability to achieve their objectives;
    Our ability to make investments consistent with our investment
    objective;
    The impact of investments that we expect to make;
    Our contractual arrangements and relationships with third
    parties;
    The dependence of our future success on the general economy and
    its impact on the energy industry;
    Our expected debt and equity financings and investments;
    The adequacy of our cash resources and working capital; and
    The timing of cash flows, if any, from the operations of our
    portfolio companies.    Overview
       32




---



##### Table of Contents



Portfolio
    and Investment Activity
        Percent of Long-Term InvestmentsFebruary 29,


November 30,2008


2007Publicly Traded MLP and MLP Affiliate


28.0
%


28.4
%Private MLP


50.6
%


42.1
%Other Private Equity


0.1
%


1.6
%Fixed Income Investments


21.3
%


27.9
%100.0
%


100.0
%      33




---



##### Table of Contents



Our
    Top Ten Portfolio Investments as of February 29,
    2008
  (1)
  PercentPublic/



Amount


of TotalInvestment

Private

Sector

($ in millions)


Assets1.


Direct Fuels Partners,
    L.P.(2)

Private

Midstream  Specialty
    Refining and Distribution

$
52.5



16.9
%2.


Millennium Midstream Partners,
    LP(3)

Private

Midstream  Gas Gathering
    and Processing


51.1



16.43.


ProPetro Services,
    Inc.(4)

Private

Oilfield Services


30.2



9.74.


International Resource Partners
    LP(5)

Private

Coal


30.0



9.75.


VantaCore Partners
    LP(6)

Private

Aggregates and Mining


16.3



5.36.


SemGroup, L.P.

Private

Midstream


8.4



2.77.


Quest Midstream Partners,
    L.P.(7)

Private

Midstream


6.6



2.18.


Enterprise Products Partners L.P.

Public

Midstream


6.5



2.19.


ONEOK Partners, L.P.

Public

Midstream


5.6



1.810.


Plains All American Pipeline, L.P.

Public

Midstream


4.9



1.6TOTAL

$
212.1



68.3
%     (1)
    
    Total assets were $310.7 million as of February 29,
    2008.(2)
    
    Our investment in Direct Fuels Partners, L.P. includes 2,500,000
    Class B common units, which represents a 38% limited
    partnership interest, 2,500,000 Class A warrants and 200
    incentive distribution rights.(3)
    
    Our investment in Millennium Midstream Partners, LP includes
    2,375,000 Class A common units, which represents a 39%
    limited partnership interest, and 212 incentive distribution
    rights.(4)
    
    Our investment in ProPetro Services, Inc. includes a senior
    secured second lien term loan ($30.1 million) and 2,904,620
    warrants ($0.1 million).(5)
    
    Our investment in International Resource Partners LP includes
    1,500,000 Class A common units, which represents a 28%
    limited partnership interest and 10 incentive distribution
    rights.(6)
    
    Our investment in VantaCore Partners LP includes a senior
    secured second lien term loan ($7.5 million) and 441,250
    common units ($8.8 million), which represents a 23% limited
    partnership interest, and 1,422 incentive distribution rights.(7)
    
    Our investment in Quest Midstream Partners, L.P. includes
    350,000 common units, which represents a 2.5% limited
    partnership interest.  Results
    of Operations  For the three months ended
    February 29, 2008
    Investment Income.
  Operating Expenses.
 34




---



##### Table of Contents



Net Investment Loss.
  Net Realized Gains (Losses).
  Net Change in Unrealized Gains (Losses).
  Net Decrease in Net Assets Resulting from
    Operations.
  Results
    of Operations  For the three months ended
    February 28, 2007
    Investment Income.
  Operating Expenses.
  Net Investment Income.
  Net Realized Gain (Losses).
  Net Change in Unrealized Gains (Losses).
  Net Increase in Net Assets Resulting from
    Operations.
  Liquidity
    and Capital Resources
       35




---



##### Table of Contents



Contractual
    Obligations
  Investment Management Agreement.
      Payments by Period ($ in millions)Less Than 1








More Than 5Total


Year


1-3 Years


3-5 Years


YearsInvestment
    Facility(1)

$
67.5






$
67.5







     (1)
    
    At February 29, 2008, $32.5 million remained available
    for borrowing under our Investment Facility.  Dividends
   36




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Critical
    Accounting Policies
  Form 10-K Form 10-K.
 ITEM 3.  QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.    Interest Rate Risk.
     37




---



##### Table of Contents



Impact of Market Prices on Portfolio Investment
    Valuation.
   ITEM 4.  CONTROLS
    AND PROCEDURES.  Evaluation
    of Controls and Procedures.
  Form 10-Q, Rule 13a-15(e)
  Changes
    in Internal Control Over Financial Reporting
     38




---



##### Table of Contents



PART II ITEM 1.  LEGAL
    PROCEEDINGS.   ITEM 1A.  RISK
    FACTORS.  Form 10-K
 ITEM 2.  UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.   ITEM 3.  DEFAULTS
    UPON SENIOR SECURITIES.   ITEM 4.  SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS.   ITEM 5.  OTHER
    INFORMATION.   39




---



##### Table of Contents



ITEM 6.  EXHIBITS  Form 10-Q:
  ExhibitNumber

Description3
.1

Charter  Form of Articles of Amendment and
    Restatement*3
.2

Amended and Restated Bylaws.*4
.1

Form of Common Stock Certificate.*10
.1

Form of Investment Management Agreement between Registrant and
    KA Fund Advisors, LLC.*10
.2

Form of Administration Agreement between Registrant and Bear
    Stearns Funds Management Inc.*10
.3

Form of Custody Agreement between Registrant and The Custodial
    Trust Company.*10
.4

Form of Dividend Reinvestment Plan.*10
.5

Form of Transfer Agency Agreement between Registrant and
    American Stock Transfer & Trust Company.*10
.6

Form of Accounting Services Agreement between Registrant and
    Ultimus Fund Solutions, LLC.*10
.7

Senior Secured Revolving Credit Agreement between Registrant,
    the lenders party thereto, SunTrust Bank, as administrative
    agent for the lenders, and Citibank, N.A. as syndication agent,
    dated June 4, 2007.**10
.8

First Amendment to Senior Secured Revolving Credit Agreement
    between Registrant, the lenders party thereto, SunTrust Bank, as
    Administrative Agent for the Lenders, and Citibank N.A., as
    Syndication Agent, dated February 21, 2008.***31
.1

Certification by Chief Executive Officer pursuant to Exchange
    Act
    Rule 13a-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002  filed herewith31
.2

Certification by Chief Financial Officer pursuant to Exchange
    Act
    Rule 13a-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002  filed herewith32
.1

Certification by Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002  furnished herewith99
.1

Form of Amended Dividend Reinvestment Plan.**99
.2

Form of Fee Waiver Relating to Treasury Credit Investments
    between Registrant and KA Fund Advisors, LLC.**     *
    
    Previously filed as an exhibit to Registrants
    Pre-Effective Amendment No. 5 to its Registration Statement
    on
    Form N-2
    (File
    No. 333-134829)
    as filed with the Securities and Exchange Commission on
    September 18, 2006 and incorporated by reference herein.**
    
    Previously filed as an exhibit to Registrants Quarterly
    Report on
    Form 10-Q
    (File
    No. 814-00725),
    as filed with the Securities and Exchange Commission on
    July 16, 2007 and incorporated by reference herein.***
    
    Previously filed as an exhibit to Registrants Current
    Report on
    Form 8-K
    (File
    No. 814-00725)
    as filed with the Securities and Exchange Commission on
    February 27, 2008 and incorporated by reference herein. 40




---



##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
  SIGNATURES
      By:
    /s/  Kevin
    S. McCarthy  Kevin S. McCarthy
 Chairman of the Board of Directors,
 President and Chief Executive Officer
    By:
    /s/  Terry
    A. Hart  Terry A. Hart
 Chief Financial Officer and Treasurer
   41