##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, 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
    May 31, 2007ORo

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

20-4991752(State of
    Incorporation)

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

77002(Address of principal executive
    offices)

(Zip Code)   Registrants telephone number, including area code:
 (713) 493-2020
  (Former address since last
    report)
      þ o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
  
  PagePART IItem 1.

Financial StatementsConsolidated
    Schedule of Investments as of May 31, 2007


3Schedule of
    Investments as of November 30, 2006


6Consolidated
    Statement of Assets and Liabilities as of May 31, 2007 and
    November 30, 2006


9Consolidated
    Statement of Operations for the three and six months ended
    May 31, 2007


10Consolidated
    Statement of Changes in Net Assets for the six months ended
    May 31, 2007 and for the period September 21, 2006
    through November 30, 2006


11Consolidated
    Statement of Cash Flows for the six months ended May 31,
    2007


12Notes to
    Consolidated Financial Statements


13Item 2.

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


24Item 3.

Quantitative and
    Qualitative Disclosures about Market Risk


28Item 4.

Controls and
    Procedures


29PART IIItem 1.

Legal
    Proceedings


30Item 1A.

Risk
    Factors


30Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


30Item 3.

Defaults Upon
    Senior Securities


30Item 4.

Submission of
    Matters to a Vote of Security Holders


30Item 5.

Other
    Information


30Item 6.

Exhibits


31EXHIBIT 10.7EXHIBIT 10.8EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 99.1EXHIBIT 99.2   2




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED SCHEDULE OF INVESTMENTS
    AS OF MAY 31, 2007
 (amounts in 000s)
    (UNAUDITED)
  No. ofShares/Units/Warrants


ValueDescription:Long-Term
    Investments  73.1%Equity
    Investments(a)  49.2%Publicly Traded MLP and MLP
    Affiliate(b)  29.2%Atlas Pipeline Partners, L.P.


40


$
2,036BreitBurn Energy Partners
    L.P.


11



365BreitBurn Energy Partners
    L.P.  Unregistered(c)


73



2,287Calumet Specialty Products
    Partners, L.P.


108



5,555Capital Product Partners L.P.(d)


23



597Crosstex Energy, L.P.


14



504DCP Midstream Partners, LP


64



2,792Duncan Energy Partners L.P.


33



907Enbridge Energy Management,
    L.L.C.(e)(f)


40



2,206Enbridge Energy Partners L.P.


27



1,493Energy Transfer Equity, L.P.


136



5,514Enterprise Products Partners
    L.P.


180



5,653Global Partners LP


76



2,843Hiland Holdings GP, LP


10



324Hiland Partners, LP


31



1,675Inergy, L.P.


27



975Kinder Morgan Management, LLC(e)(f)


147



7,549Magellan Midstream Partners,
    L.P.


35



1,609MarkWest Energy Partners,
    L.P.


129



4,437Martin Midstream Partners
    L.P.


35



1,454NuStar Energy L.P.


12



774ONEOK Partners, L.P.


69



4,717Plains All American Pipeline,
    L.P.


103



6,366Regency Energy Partners LP


17



452Targa Resources Partners LP


43



1,417TC PipeLines, LP


22



880Teekay LNG Partners L.P.


47



1,690Teekay Offshore Partners L.P(e)


23



776TEPPCO Partners, L.P.


40



1,749Universal Compression Partners,
    L.P.


48



1,632Williams Partners L.P.


69



3,35574,583Private MLP 
    19.3%Millennium Midstream Partners,
    LP(c)(g)


2,375



43,615Millennium Midstream Partners,
    LP  Warrants(c)(h)


2,375



3,919VantaCore Partners LP(c)(i)


91



1,82549,359Other Private
    Equity  0.7%ProPetro Services,
    Inc.  Warrants(j)(k)


2,905



1,735Trident Resources
    Corp.  Warrants(l)


100



501,785Total Equity Investments (Cost
    $105,916)






125,727    3




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF MAY 31, 2007
 (amounts in 000s)
    (UNAUDITED)
  Interest


Maturity


PrincipalRate


Date


Amount


ValueDescription:Fixed Income
    Investments  23.9%Midstream 
    2.8%SemGroup, L.P.


8.75
%


11/15/15


$
4,500


$
4,708Targa Resources, Inc.


(m
)


10/31/12



486



490Targa Resources, Inc.


(n
)


10/31/12



2,004



2,0197,217Upstream 
    2.7%CDX Funding, LLC


(o
)


3/31/13



4,550



4,686Coldren Resources, Inc.


(p
)


7/14/11



416



419Coldren Resources, Inc.


(q
)


7/14/11



1,850



1,8646,969Other Energy 
    18.4%ProPetro Services, Inc.(k)


(r
)


2/15/13



35,000



32,531VantaCore Partners LP(k)(s)


9.00



5/21/27



7,000



7,000VantaCore Partners LP(k)


(t
)


5/21/14



7,500



7,50047,031Total Fixed Income Investments
    (Cost $60,351)














61,217Total Long-Term Investments
    (Cost $166,267)














186,944Short-Term
    Investments  26.4%Repurchase
    Agreements  26.4%Bear, Stearns & Co. Inc.
    (Agreements dated 5/31/07 to be repurchased at $67,419) ,
    collateralized by $69,362 in U.S. Treasury Notes (Cost $67,410)


5.08



6/01/07







67,410Total Investments 
    99.5% (Cost $233,677)














254,354Other Assets in Excess of Total
    Liabilities














1,169Net Assets













$
255,523    4




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    CONSOLIDATED SCHEDULE OF INVESTMENTS (CONCLUDED)
    AS OF MAY 31, 2007
    (amounts in 000s except per unit amounts)
    (UNAUDITED)
    (a)
    
    Unless otherwise noted, equity investments are common
    units/common shares.(b)
    
    Unless otherwise noted, 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 May 31, 2007, the Company had 24.8%
    of its total assets invested in securities treated as publicly
    traded partnerships. It is the Companys intention to be
    treated as a RIC for tax purposes.(c)
    
    Fair valued securities, restricted from public sale. (see
    Notes 2 and 5).(d)
    
    Security is currently non-income producing but is expected to
    pay distributions within the next 12 months.(e)
    
    Security is not treated as a publicly traded partnership for RIC
    qualification purposes.(f)
    
    Distributions are paid in-kind.(g)
    
    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.(h)
    
    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.(i)
    
    Common units are owned directly and indirectly by the
    Companys subsidiaries, KED VP Investment Partners, LP and
    KED VP Investment GP, LLC.(j)
    
    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.(k)
    
    Fair valued security (see Note 2).(l)
    
    Warrants are non-income producing and expire on
    November 30, 2013.(m)
    
    Floating rate letter of credit facility. Security pays interest
    at a rate of LIBOR less 12.5 basis points (5.23% as of
    May 31, 2007).(n)
    
    Floating rate senior secured first lien term loan facility.
    Security pays interest at a rate of LIBOR + 200 basis
    points (7.35% as of May 31, 2007).(o)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 625 basis
    points (11.57% as of May 31, 2007).(p)
    
    Floating rate letter of credit facility. Security pays interest
    at a rate of LIBOR less 12.5 basis points (5.23% as of
    May 31, 2007).(q)
    
    Floating rate senior secured first lien term loan. Security pays
    interest at a rate of LIBOR + 400 basis points (9.35% as of
    May 31, 2007).(r)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 900 basis
    points (14.35% as of May 31, 2007).(s)
    
    Fixed rate subordinated convertible note. Security is
    convertible into 350,000 common units at a conversion price of
    $20.00 per common unit.(t)
    
    Floating rate senior secured term loan facility. Security pays
    interest at a rate of LIBOR + 550 basis points (10.86% as
    of May 31, 2007).   5




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYSCHEDULE OF INVESTMENTS
    AS OF NOVEMBER 30, 2006
 (amounts in 000s)
  No. ofShares/Units/Warrants


ValueDescription:Long-Term
    Investments  44.0%Equity
    Investments(a)  26.4%Publicly Traded MLP and MLP
    Affiliate  26.0%Atlas Pipeline Partners, L.P.


40


$
1,934BreitBurn Energy Partners L.P.(b)


12



259Calumet Specialty Products
    Partners, L.P.


113



4,294Crosstex Energy, L.P.


9



349DCP Midstream Partners, LP


64



2,141Enbridge Energy Management,
    L.L.C.(c)(d)


34



1,663Enbridge Energy Partners L.P.


30



1,494Energy Transfer Equity, L.P.


220



6,389Energy Transfer Partners,
    L.P.


3



175Enterprise Products Partners
    L.P.


195



5,502Global Partners LP


82



1,935Hiland Holdings GP, LP(b)


21



508Hiland Partners, LP


30



1,603Inergy, L.P.


27



794Kinder Morgan Management, LLC(c)(d)


212



9,746Magellan Midstream Partners,
    L.P.


30



1,161MarkWest Energy Partners,
    L.P.


64



3,639MarkWest Hydrocarbon, Inc.(c)


14



584Martin Midstream Partners
    L.P.


45



1,396Natural Resources Partners
    L.P.


4



220Natural Resources Partners
    L.P.   Subordinated Units


8



439ONEOK Partners, L.P.


84



5,101Plains All American Pipeline,
    L.P.


51



2,596Regency Energy Partners LP


17



469TC PipeLines, LP


18



587Teekay LNG Partners L.P.


47



1,490TEPPCO Partners, L.P.


42



1,646Universal Compression Partners,
    L.P.(b)


68



1,681Valero L.P.


16



867Williams Partners L.P.


60



2,32162,983Other Equity 
    0.4%Trident Resources
    Corp.  Warrants(e)


167



917Total Equity Investments (Cost
    $57,585)






63,900    6




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    SCHEDULE OF INVESTMENTS (CONTINUED)
    AS OF NOVEMBER 30, 2006
 (amounts in 000s)
  Interest


Maturity


PrincipalRate


Date


Amount


ValueDescription:Fixed Income
    Investments  17.6%United States 
    11.1%Midstream 
    6.2%SemGroup, L.P.


8.750
%


11/15/15


$
7,500


$
7,575Targa Resources, Inc.


(f
)


10/31/12



486



488Targa Resources, Inc.


(g
)


10/31/12



2,004



2,012Targa Resources, Inc.


(h
)


10/31/07



4,843



4,84914,924Upstream 
    4.9%CDX Funding, LLC


(i
)


3/31/13



6,300



6,355Coldren Resources, Inc.


(j
)


7/14/11



416



419Coldren Resources, Inc.


(k
)


7/14/11



2,584



2,603SandRidge Energy Inc.


(l
)


11/20/07



2,500



2,50611,883Total United States 
    (Cost $26,794)














26,807Canada 
    6.5%Upstream 
    6.5%Trident Exploration Corp.


(m
)


4/26/11



5,500



5,638Trident Resources Corp.


(n
)


11/22/11



10,000



10,200Total Canada  (Cost
    $14,401)














15,838Total Fixed Income Investments
    (Cost $41,195)














42,645Total Long-Term Investments
    (Cost $98,780)














106,545Short-Term
    Investments  55.9%Repurchase
    Agreement  55.9%Bear, Stearns & Co. Inc.
    (Agreement dated 11/30/06 to be repurchased at $135,154),
    collateralized by $139,055 in U.S. Treasury Strips (Cost
    $135,134)


5.270



12/01/06







135,134Total Investments 
    99.9% (Cost $233,914)














241,679Other Assets in Excess of Total
    Liabilities














235Net Assets













$
241,914    7




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    SCHEDULE OF INVESTMENTS (CONCLUDED)
    AS OF NOVEMBER 30, 2006
    (amounts in 000s)
    (a)
    
    Unless otherwise noted, equity investments are common
    units/common shares.(b)
    
    Security is currently non-income producing but is expected to
    pay distributions within the next 12 months.(c)
    
    Security is not 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, 2006, the Company had 21.1% of its total
    assets invested in securities treated as publicly traded
    partnerships. It is the Companys intention to be treated
    as a RIC for tax purposes.(d)
    
    Distributions are paid in-kind.(e)
    
    Warrants relate to the floating rate unsecured term loan
    facility with Trident Resources Corp. These warrants are
    non-income producing and expire on November 30, 2013.(f)
    
    Floating rate letter of credit facility. Security pays interest
    at a rate of LIBOR + 225 basis points (7.62% as of
    November 30, 2006).(g)
    
    Floating rate senior secured first lien term loan facility.
    Security pays interest at a rate of LIBOR + 225 basis
    points (7.62% as of November 30, 2006).(h)
    
    Floating rate senior secured first lien bridge loan facility.
    Security pays interest at a rate of LIBOR + 225 basis
    points (7.62% as of November 30, 2006).(i)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 525 basis
    points (10.62% as of November 30, 2006).(j)
    
    Floating rate letter of credit facility. Security pays interest
    at a rate of LIBOR less 12.5 basis points (5.25% as of
    November 30, 2006).(k)
    
    Floating rate senior secured first lien term loan. Security pays
    interest at a rate of LIBOR + 400 basis points (9.39% as of
    November 30, 2006).(l)
    
    Floating rate senior unsecured bridge loan facility. Security
    pays interest at a rate of LIBOR + 450 basis points (11.00%
    as of November 30, 2006).(m)
    
    Floating rate senior secured second lien term loan facility.
    Security pays interest at a rate of LIBOR + 750 basis
    points (12.88% as of November 30, 2006).(n)
    
    Floating rate unsecured term loan facility. Interest is
    paid-in-kind
    at a rate of LIBOR + 1200 basis points (17.37% as of
    November 30, 2006).   8




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED STATEMENT OF ASSETS AND
    LIABILITIES
 (amounts in 000s, except share and per share
    amounts)
  May 31,2007


November 30,(Unaudited)


2006ASSETSInvestments, at fair value
    (Cost  $166,267 and $98,780, respectively)

$
186,944


$
106,545Repurchase agreements
    (Cost  $67,410 and $135,134, respectively)


67,410



135,134Total investments
    (Cost  $233,677 and $233,914, respectively)


254,354



241,679Deposits with brokers


118



101Receivable for securities sold


1,045



567Interest, dividends and
    distributions receivable


2,420



931Receivable for offering costs






200Prepaid expenses and other assets


65



126Total Assets


258,002



243,604LIABILITIESInvestment management fee payable,
    net of fee waivers


1,201



571Accrued directors fees and
    expenses


74



63Deferred tax liability


252



Accrued expenses and other
    liabilities


952



1,056Total Liabilities


2,479



1,690NET ASSETS

$
255,523


$
241,914NET ASSETS CONSIST OFCommon stock, $0.001 par
    value (200,000,000 shares authorized at May 31, 2007
    and November 30, 2006; 10,010,756 and
    10,000,060 shares issued and outstanding at May 31,
    2007 and November 30, 2006, respectively)

$
10


$
10Paid-in capital


233,528



233,216Undistributed net investment income






864Accumulated net realized gains on
    investments


1,658



59Net unrealized gains on investments


20,327



7,765NET ASSETS

$
255,523


$
241,914NET ASSET VALUE PER
    SHARE

$
25.52


$
24.19    9




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYCONSOLIDATED STATEMENT OF OPERATIONS
    FOR THE THREE AND SIX MONTHS ENDED MAY 31, 2007
 (amounts in 000s)
 (UNAUDITED)
  Three Months


Six MonthsEnded


EndedMay 31, 2007


May 31, 2007INVESTMENT INCOMEIncomeDividends and distributions

$
1,836


$
2,715Return of capital


(1,647
)


(2,438
)Net dividends and distributions


189



277Interest


2,816



5,518Total investment income


3,005



5,795ExpensesBase investment management fees


1,119



2,177Incentive investment management
    fees


232



409Professional fees


252



408Directors fees


74



137Administration fees


58



114Insurance


40



78Custodian fees


17



32Other expenses


21



169Total Expenses  Before
    Investment Management Fee Waivers


1,813



3,524Base investment management fee
    waivers


(319
)


(622
)Total Expenses


1,494



2,902Net Investment
    Income  Before Income Taxes


1,511



2,893Deferred income tax benefit


57



98Net Investment Income


1,568



2,991REALIZED AND UNREALIZED
    GAINSNet Realized GainsInvestments


2,243



3,144Net Change in Unrealized
    GainsInvestments


4,822



12,912Deferred income tax expense


(336
)


(350
)Net Change in Unrealized Gains


4,486



12,562Net Realized and Unrealized
    Gains


6,729



15,706NET INCREASE IN NET ASSETS
    RESULTING FROM OPERATIONS

$
8,297


$
18,697    10




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


September 21,Ended May 31,


2006* through2007


November 30,(Unaudited)


2006OPERATIONSNet investment income

$
2,991


$
864Net realized gains


3,144



59Net change in unrealized gains


12,562



7,765Net Increase in Net Assets
    Resulting from Operations


18,697



8,688DIVIDENDS AND
    DISTRIBUTIONSDividends and distributions


(5,400
)(1)


CAPITAL STOCK
    TRANSACTIONSProceeds from initial public
    offering of 10,000,000 shares of common stock






250,000Issuance of 10,696 shares of
    common stock from reinvestment of dividends


277



Underwriting discount and offering
    expenses


35



(16,775
)Net Increase in Net Assets from
    Capital Stock Transactions


312



233,225Total Increase in Net
    Assets


13,609



241,913NET ASSETSBeginning of period


241,914



1End of
    period(2)

$
255,523


$
241,914     *
    
    Commencement of operations(1)
    
    The information presented in this item is a current estimate of
    the characterization of a portion of the total dividends paid to
    stockholders for the six months ended May 31, 2007 as
    ordinary income. This estimate is based on the Companys
    operating results during the period.(2)
    
    Includes undistributed net investment income of $864 for the
    period ended September 21, 2006 through November 30,
    2006.   11




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
 CONSOLIDATED STATEMENT OF CASH FLOWS
 FOR THE SIX MONTHS ENDED MAY 31, 2007
 (amounts in 000s)
 (UNAUDITED)
  CASH FLOWS FROM OPERATING
    ACTIVITIESNet increase in net assets
    resulting from operations

$
18,697Adjustments to reconcile net
    increase in net assets resulting from operations to net cash
    provided by operating activities:Purchase of investments


(112,729
)Proceeds from sale of investments


46,092Sale of short-term investments, net


67,724Realized gains on investments


(3,144
)Return of capital distributions


2,438Unrealized gains on investments


(12,912
)Increase in deferred tax liability


252Accretion of bond discount


(144
)Increase in deposits with brokers


(17
)Increase in receivable for
    securities sold


(478
)Increase in interest, dividend and
    distributions receivables


(1,489
)Decrease in receivable for
    offering costs


200Decrease in prepaid expenses and
    other assets


61Increase in investment management
    fee payable


630Increase in accrued
    directors fees and expenses


11Decrease in accrued expenses and
    other liabilities


(104
)Net Cash Provided by Operating
    Activities


5,088CASH FLOWS FROM FINANCING
    ACTIVITIESUnderwriting discount and offering
    expenses


35Cash distributions to shareholders


(5,123
)Net Cash Used in Financing
    Activities


(5,088
)NET CHANGE IN CASH


CASH  BEGINNING OF
    PERIOD


CASH  END OF
    PERIOD

$
     Supplemental disclosure of cash flow information:
     12




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANYNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
  1.
    ORGANIZATION    2.
    SIGNIFICANT
    ACCOUNTING POLICIES  Use of Estimates
  Interim Periods Form 10-Q Form 10-K
  Principles of Consolidation
     13




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##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
   Calculation of Net Asset Value
  Investment Valuation
  over-the-counter
    
    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 KA
    Fund Advisors, LLC (KAFA). Such valuations will
    be submitted to the Valuation Committee (a committee of the
    board of directors) on a quarterly basis, and until
    determinations of the Valuation Committee are made with respect
    to such valuations, they will stand for intervening periods of
    time unless a senior officer of KAFA determines that 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. Between meetings of the Valuation
    Committee, a senior officer of KAFA is authorized to make
    valuation determinations. 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. Currently, the
    independent third-party valuation firm is Duff &
    Phelps, LLC.
    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 14




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
  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.      e.g.
         15




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
    Repurchase Agreements agreed-upon mark-to-market
  Short Sales
    i.e.
    Option Writing
    Security Transactions
 16




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
   Investment Income and Return of Capital
    Estimates
    Dividends and Distributions to
    Stockholders
  Partnership Accounting Policy
  Income Taxes
       17




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##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
     November 30,2006Undistributed ordinary income

$
997Undistributed capital gains


Unrealized appreciation


7,765Total distributable earnings

$
8,762       May 31,


November 30,2007


2006Gross unrealized appreciation of
    investments

$
21,831


$
7,919Gross unrealized depreciation of
    investments


(1,154
)


(154
)Net unrealized appreciation

$
20,677


$
7,765     Organizational and Offering Costs
  Indemnifications
 18




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##### Table of Contents



KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
   3.
    AGREEMENTS
    AND AFFILIATIONS  Investment Management Agreement
  Base Management Fee.
    Incentive Fee.
  payment-in-kind
 19




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
           Portfolio Companies
       20




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
   Millennium Midstream Partners, LP 
  VantaCore Partners LP 
  Other Affiliations
  and/or
  4.
    INVESTMENT
    TRANSACTIONS    5.
    RESTRICTED
    SECURITIES    Number ofShares/














Value perUnits/














Share/


Percent


PercentWarrants


Acquisition


Purchase





Fair


Unit/


of Net


of TotalInvestment

Security

(in 000s)


Date


Price


Cost


Value


Warrant


Assets


AssetsBreitBurn Energy Partners L.P.

Common Units


73



5/24/2007


$
2,328


$
2,328


$
2,287


$
31.44



0.9
%


0.9
%Millennium Midstream Partners, LP

Class B Common Units


2,375



12/28/2006



43,615



42,669



43,615



18.36



17.1



16.9Millennium Midstream Partners, LP

Warrants


2,375



12/28/2006



3,919



3,919



3,919



1.65



1.5



1.5VantaCore Partners LP

Common Units


91



5/22/2007



1,825



1,825



1,825



20.00



0.7



0.7$
51,687


$
50,741


$
51,646







20.2
%


20.0
%  21




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
  6.
    COMMON
    STOCK    Shares outstanding at
    November 30, 2006


10,000,060Shares issued through reinvestment
    of distributions


10,696Shares outstanding at May 31,
    2007


10,010,756   7.
    FINANCIAL
    HIGHLIGHTS    May 31,


November 30,2007


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

$
24.19


$
23.32Income from
    Operations(1)Net investment income


0.30



0.09Net realized and unrealized gain
    on investments


1.57



0.78Total income from investment
    operations


1.87



0.87Dividends and
    DistributionsDividends and distributions


(0.54
)


Net asset value, end of period

$
25.52


$
24.19Market value per share, end of
    period

$
26.41


$
22.32Total investment return based on
    market
    value(2)


20.88
%


(10.72
)%Supplemental Data and
    Ratios(3)Net assets, end of period

$
255,523


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


2.55
%


2.59
%Ratio of expenses to average net
    assets, excluding investment management fee waivers and deferred
    income taxes, if any


2.84
%


3.09
%Ratio of net investment income to
    average net assets


2.41
%


1.89
%Net increase in net assets
    resulting from operations to average net assets


7.52
%(4)


3.69
%(4)Portfolio turnover rate


28.42
%(5)


5.56
%(5)     (1)
    
    Based on average shares of common stock of 10,002,117 for the
    six months ended May 31, 2007 and 10,000,060 for the period
    of September 21, 2006 through November 30, 2006.(2)
    
    Not annualized. 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. 22




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KAYNE
    ANDERSON ENERGY DEVELOPMENT COMPANY
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (amounts in 000s, except share, warrant, right and per
    share amounts)
    (UNAUDITED)
   (3)
    
    Unless otherwise noted, ratios are annualized.(4)
    
    Not annualized.(5)
    
    Not annualized. Calculated based on the sales of long-term
    investments of $46,092 and $3,153, respectively, divided by the
    monthly average long-term investment balance of $162,183 and
    $56,730, respectively.  8.
    SUBSEQUENT
    EVENTS           23




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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
    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
     24




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Portfolio
    and Investment Activity
         25




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##### Table of Contents



Our Top
    Ten Portfolio Investments as of May 31, 2007
    PercentPublic/



Amount


of TotalInvestment

Private

Sector

($ in millions)


Assets1.

Millennium Midstream Partners,
    LP(1)

Private

Midstream

$
47.5



18.4
%2.

ProPetro Services,
    Inc.(2)

Private

Oilfield Services


34.3



13.33.

VantaCore Partners
    LP(3)

Private

Aggregates, Mining and Other


16.3



6.34.

Kinder Morgan Management, LLC

Public

Midstream


7.5



2.95.

Plains All American Pipeline,
    L.P.

Public

Midstream


6.4



2.56.

Enterprise Products Partners
    L.P.

Public

Midstream


5.7



2.27.

Calumet Specialty Products
    Partners, L.P.

Public

Midstream


5.6



2.28.

Energy Transfer Equity, L.P.

Public

Midstream


5.5



2.19.

ONEOK Partners, L.P.

Public

Midstream


4.7



1.810.

SemGroup, L.P.

Private

Midstream


4.7



1.8TOTAL





$
138.2



53.5
%     (1)
    
    Our investment in Millennium Midstream Partners, LP
    (Millennium) includes 2,375,000 Class B common
    units, which represents a 39% limited partners interest;
    2,375,000 Class A warrants and 212 incentive distribution
    rights.(2)
    
    Our investment in ProPetro Services, Inc. includes a senior
    secured second lien term loan and 2,904,620 warrants.(3)
    
    Our investment in VantaCore Partners LP includes a senior
    secured term loan ($7.5 million); a subordinated
    convertible note ($7 million), and 91,250 common units
    ($1.8 million), which represents a 5% limited partners
    interest.  Results
    of Operations
    Investment Income.
  Operating Expenses.
  Net Investment Income.
  Net Realized Gains.
  Net Change in Unrealized Appreciation on
    Investments.
 26




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Net Increase in Net Assets Resulting from
    Operations.
  Liquidity
    and Capital Resources
                Contractual
    Obligations
   27




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##### Table of Contents



Dividends
      Critical
    Accounting Policies
  Form 10-K Form 10-K.
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.    Interest Rate Risk.
    Portfolio Investment Valuation.
   28




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ITEM 4.
    CONTROLS
    AND PROCEDURES.  Evaluation of Controls and
    Procedures. Rule 13a-15(e)
 29




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##### Table of Contents



PART II  ITEM 1.
    LEGAL
    PROCEEDINGS.    ITEM 1A.
    RISK
    FACTORS.  Form 10-K Form 10-K.
  Our
    internal control over financial reporting may not be adequate
    and our independent auditors may not be able to certify as to
    its adequacy, which could have a significant and adverse effect
    on our business and reputation.
    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.   30




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##### 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 Administrative Services
    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  filed herewith10
.8

Treasury 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  filed herewith31
.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  filed herewith99
.1

Form of Amended Dividend
    Reinvestment Plan  filed herewith99
.2

Form of Fee Waiver Relating to
    Treasury Credit Investments between Registrant and KA
    Fund Advisors, LLC  filed herewith     *
    
    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. 31




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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
 (Principal Executive Officer)
    By:
    /s/  Terry
    A. Hart  Terry A. Hart
 Chief Financial Officer and Treasurer
 (Principal Financial Officer)
   32