##### 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 1934
 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR 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
(Address of principal executive offices)
    
    77002
(Zip Code)
 Registrants telephone number, including area code:
(713) 493-2020
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePART IItem 1. Financial StatementsConsolidated Schedule of Investments as of May 31, 2009
    
    
    2Consolidated Schedule of Investments as of November 30, 2008
    
    
    5Consolidated Statement of Assets and Liabilities as of May 31, 2009 and November 30, 2008
    
    
    9Consolidated Statement of Operations for the three and six months ended May 31, 2009 and May 31, 2008
    
    
    10Consolidated Statement of Changes in Net Assets for the six months ended May 31, 2009 and for the year ended November 30, 2008
    
    
    11Consolidated Statement of Cash Flows for the six months ended May 31, 2009 and May 31, 2008
    
    
    12Notes to Consolidated Financial Statements
    
    
    13Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    31Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    38PART IIItem 1. Legal Proceedings
    
    
    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
    
    
    39Exhibit 31.1Exhibit 31.2Exhibit 32.1
   1




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 AS OF MAY 31, 2009
 (amounts in 000s)
 (UNAUDITED)
 No. ofDescription
    
    Shares/Units
    
    
    ValueLong-Term Investments - 110.0%Equity Investments(a) - 91.1%United States  91.1%Publicly Traded MLP and MLP Affiliate(b)  33.0%Calumet Specialty Products Partners, L.P.
    
    
    39
    
    
    $
    510Capital Product Partners L.P.
    
    
    40
    
    
    
    398Copano Energy, L.L.C
    
    
    75
    
    
    
    1,188Copano Energy, L.L.C.  Unregistered, Class D Units(c)
    
    
    76
    
    
    
    1,077DCP Midstream Partners, LP
    
    
    95
    
    
    
    1,824Eagle Rock Energy Partners, L.P. (d)(e)
    
    
    1,013
    
    
    
    3,029Eagle Rock Energy Partners, L.P.  Unregistered (c)(d)(f)
    
    
    491
    
    
    
    1,340Enbridge Energy Management, L.L.C.(g)
    
    
    26
    
    
    
    991Enbridge Energy Partners L.P.
    
    
    93
    
    
    
    3,768Energy Transfer Equity, L.P.
    
    
    112
    
    
    
    2,955Energy Transfer Partners, L.P.
    
    
    47
    
    
    
    1,997Enterprise Products Partners L.P.
    
    
    209
    
    
    
    5,439Exterran Partners, L.P.
    
    
    83
    
    
    
    1,129Global
Partners LP.
    
    
    138
    
    
    
    2,270Holly Energy Partners, L.P.
    
    
    7
    
    
    
    202Inergy Holdings, L.P.
    
    
    9
    
    
    
    342Inergy, L.P.
    
    
    99
    
    
    
    2,520Kinder Morgan Management, LLC(g)
    
    
    34
    
    
    
    1,506K-Sea Transportation Partners L.P.
    
    
    9
    
    
    
    168Magellan Midstream Holdings, L.P.
    
    
    90
    
    
    
    1,895MarkWest Energy Partners, L.P.
    
    
    105
    
    
    
    1,884Martin Midstream Partners L.P.
    
    
    57
    
    
    
    1,080Navios Maritime Partners L.P.
    
    
    19
    
    
    
    195ONEOK Partners, L.P.
    
    
    13
    
    
    
    646OSG America L.P.
    
    
    47
    
    
    
    325Penn Virginia Resource Partners, L.P.
    
    
    21
    
    
    
    325Plains All American Pipeline, L.P.(h)
    
    
    103
    
    
    
    4,551Quicksilver Gas Services LP
    
    
    13
    
    
    
    174Regency Energy Partners LP
    
    
    154
    
    
    
    1,942Targa Resources Partners LP
    
    
    50
    
    
    
    662TC PipeLines, LP
    
    
    10
    
    
    
    352Teekay LNG Partners L.P.
    
    
    103
    
    
    
    1,968Teekay Offshore Partners L.P.
    
    
    49
    
    
    
    686TEPPCO Partners, L.P.
    
    
    15
    
    
    
    452Williams Partners L.P.
    
    
    139
    
    
    
    2,58152,371
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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF MAY 31, 2009
(amounts in 000s)
(UNAUDITED)
 No. ofDescription
    
    Shares/Units
    
    
    ValuePrivate MLP(c)(i)  58.0%Direct Fuels Partners, L.P.  Class A Common Units(h)
    
    
    2,500
    
    
    $
    33,750Direct Fuels Partners, L.P.  Class A Convertible Preferred Units(j)
    
    
    96
    
    
    
    1,881International Resource Partners LP
    
    
    1,500
    
    
    
    27,000Quest Midstream Partners, L.P. (h)
    
    
    350
    
    
    
    2,275VantaCore Partners LP(h)
    
    
    1,465
    
    
    
    27,09692,002Other Private Equity(i)  0.1%ProPetro Services, Inc.  Warrants(c)(k)
    
    
    2,905
    
    
    
    Trident Resources Corp.  Warrants(l)
    
    
    100
    
    
    
    7575Total Equity Investments (Cost $181,186)
    
    
    
    
    
    
    144,448
 Interest
    
    
    Maturity
    
    
    PrincipalRate
    
    
    Date
    
    
    AmountFixed Income Investments(i)  18.9%United States  17.6%Midstream  6.2%DCP Midstream, LLC
    
    
    9.75
    %
    
    
    3/15/19
    
    
    $
    1,000
    
    
    $
    1,043Knight, Inc.(m)
    
    
    6.50
    
    
    
    9/01/12
    
    
    
    7,530
    
    
    
    7,285Targa Resources, Inc.
    
    
    8.50
    
    
    
    11/01/13
    
    
    
    2,155
    
    
    
    1,5419,869Upstream  3.0%Hilcorp Energy Company
    
    
    7.75
    
    
    
    11/01/15
    
    
    
    5,585
    
    
    
    4,803Oilfield Services  5.8%Dresser, Inc.
    
    
    
    (n)
    
    
    5/04/15
    
    
    
    5,000
    
    
    
    3,200ProPetro Services, Inc.(c)
    
    
    
    (o)
    
    
    2/15/13
    
    
    
    35,000
    
    
    
    4,500Stallion Oilfield Services Ltd.
    
    
    
    (p)
    
    
    7/18/12
    
    
    
    5,000
    
    
    
    1,4509,150Other  2.6%Energy Future Holdings Corp. (q)
    
    
    
    (r)
    
    
    10/10/14
    
    
    
    4,737
    
    
    
    3,298Energy Future Holdings Corp. (q)
    
    
    10.50
    
    
    
    11/01/16
    
    
    
    2,000
    
    
    
    8004,098Total United States (Cost $62,332)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,920Canada(s)  1.3%Upstream  1.3%Athabasca Oil Sands Corp.(Cost $2,434)
    
    
    13.00
    
    
    
    7/30/11
    
    
    
    2,500
    
    
    
    2,133Total Fixed Income Investments (Cost $64,766)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,053Total Long-Term Investments (Cost $245,952)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,501
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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF MAY 31, 2009
(amounts in 000s)
(UNAUDITED)
 Interest
    
    
    MaturityDescription
    
    Rate
    
    
    Date
    
    ValueShort-Term Investments  6.0%Repurchase Agreements  6.0%J.P. Morgan
Securities Inc.
(Agreements dated
5/29/2009 to be
repurchased at
$9,537),
collateralized by
$9,818 in U.S.
Treasury notes (Cost
$9,537)
    
    
    0.10
    %
    
    
    6/01/09
    
    
    $
    9,537Total Investments  116.0% (Cost $255,489)
    
    
    
    
    
    
    
    
    
    
    184,038Senior Secured Revolving Credit Facility Borrowings
    
    
    
    
    
    
    
    
    
    
    (52,000
    )Other Assets in Excess of Total Liabilities
    
    
    
    
    
    
    
    
    
    
    26,559Net Assets
    
    
    
    
    
    
    
    
    
    $
    158,597
 
 (a)
    
    Unless otherwise noted, equity investments are common units/common shares.(b)
    
    Unless otherwise noted, security is not treated as a qualifying asset under the 1940 Act. As
a business development company, the Company is generally prohibited from acquiring assets
other than qualifying assets unless at least 70% of its total assets (excluding deferred tax
assets) are qualifying assets under the 1940 Act. As of May 31, 2009, the percentage of the
Companys total assets (excluding deferred tax assets) that are qualifying assets was 72.6%.(c)
    
    Fair valued and restricted security (see Notes 2, 3 and 8).(d)
    
    Security is treated as a qualifying asset under the 1940 Act.(e)
    
    Common units are unregistered but may be sold pursuant to Rule 144.(f)
    
    Unregistered Common Units which were placed in escrow for a period of 18 months following the
sale of Millennium Midstream Partners, L.P. (sale was consummated on October 1, 2008).(g)
    
    Distributions are paid in-kind.(h)
    
    The Company believes that it is an affiliate of Plains All American, L.P., and that it may be
an affiliate of Direct Fuels Partners, L.P., VantaCore Partners LP, and Quest Midstream
Partners, L.P. (see Note 5).(i)
    
    Unless otherwise noted, security is treated as a qualifying asset under the 1940 Act.(j)
    
    The Class A Convertible Preferred Units are convertible into Class A Common Units on a
one-for-one basis at a price of $20.00 per unit.(k)
    
    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.(l)
    
    Warrants are non-income producing and expire on November 30, 2013.(m)
    
    Knight, Inc., formerly known as Kinder Morgan, Inc., is a privately held energy company with
midstream assets, including the general partner interest in Kinder Morgan Energy Partners,
L.P., a publicly traded MLP.(n)
    
    Floating rate senior secured second lien term loan facility. Security pays interest at a rate
of LIBOR + 575 basis points (6.09% as of May 31, 2009).(o)
    
    Floating rate senior secured second lien term loan facility. Securitys default interest rate
is LIBOR + 900 basis points, but the Company is not accruing interest income on this security
(see Note 2Investment Income).(p)
    
    Floating rate senior secured second lien term loan facility. Security pays interest at a rate
of LIBOR + 650 basis points (7.51% as of May 31, 2009).(q)
    
    Energy Future Holdings Corp., formerly TXU Corp., is a privately-held energy company with a
portfolio of competitive and regulated energy subsidiaries, including TXU Energy, Oncor and
Luminant.(r)
    
    Floating rate senior secured second lien term loan facility. Security pays interest at a rate
of LIBOR + 350 basis points (3.88% as of May 31, 2009).(s)
    
    Security is not treated as a qualifying asset under the 1940 Act.   4




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 CONSOLIDATED SCHEDULE OF INVESTMENTS
 AS OF NOVEMBER 30, 2008
 (amounts in 000s)
 No. ofDescription
    
    Shares/Units
    
    
    ValueLong-Term Investments - 112.0%Equity Investments(a) - 93.6%United States  93.6%Publicly Traded MLP and MLP Affiliate(b)  36.9%Atlas Energy Resources, LLC
    
    
    131
    
    
    $
    2,198Atlas Pipeline Partners, L.P.
    
    
    65
    
    
    
    471BreitBurn Energy Partners L.P.
    
    
    47
    
    
    
    399Calumet Specialty Products Partners, L.P.
    
    
    67
    
    
    
    613Capital Product Partners L.P.
    
    
    40
    
    
    
    346Constellation Energy Partners LLC
    
    
    35
    
    
    
    181Copano Energy, L.L.C
    
    
    75
    
    
    
    900Copano Energy, L.L.C.  Unregistered, Class D Units(c)
    
    
    76
    
    
    
    750Crosstex Energy, L.P.
    
    
    152
    
    
    
    907DCP Midstream Partners, LP
    
    
    74
    
    
    
    607Duncan Energy Partners L.P.
    
    
    54
    
    
    
    704Eagle Rock Energy Partners, L.P.
    
    
    27
    
    
    
    215Eagle Rock Energy Partners, L.P.  Unregistered(c)(d)(e)
    
    
    1,595
    
    
    
    11,823El Paso Pipeline Partners, L.P.
    
    
    18
    
    
    
    319Enbridge Energy Management, L.L.C.(f)
    
    
    24
    
    
    
    687Enbridge Energy Partners L.P.
    
    
    100
    
    
    
    2,821Energy Transfer Equity, L.P.
    
    
    65
    
    
    
    1,064Energy Transfer Partners, L.P.
    
    
    74
    
    
    
    2,438Enterprise Products Partners L.P.
    
    
    258
    
    
    
    5,524Exterran Partners, L.P.
    
    
    82
    
    
    
    894Global Partners LP.
    
    
    140
    
    
    
    1,596Hiland Partners, LP
    
    
    16
    
    
    
    167Holly Energy Partners, L.P.
    
    
    1
    
    
    
    4Inergy Holdings, L.P.
    
    
    20
    
    
    
    410Inergy, L.P.
    
    
    88
    
    
    
    1,469Kinder Morgan Management, LLC(f)
    
    
    35
    
    
    
    1,439K-Sea Transportation Partners L.P.
    
    
    12
    
    
    
    177Magellan Midstream Holdings, L.P.
    
    
    56
    
    
    
    1,678MarkWest Energy Partners, L.P.
    
    
    77
    
    
    
    981Martin Midstream Partners L.P.
    
    
    59
    
    
    
    1,042Navios Maritime Partners L.P.
    
    
    10
    
    
    
    43ONEOK Partners, L.P.
    
    
    82
    
    
    
    3,839OSG America L.P.
    
    
    46
    
    
    
    214Penn Virginia Resource Partners, L.P.
    
    
    41
    
    
    
    527Plains All American Pipeline, L.P.(g)
    
    
    103
    
    
    
    3,514
   5




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF NOVEMBER 30, 2008
(amounts in 000s)
 No. ofDescription
    
    Shares/Units
    
    
    ValuePublicly Traded MLP and MLP Affiliate(b)  (Continued)Regency Energy Partners LP
    
    
    66
    
    
    $
    602Spectra Energy Partners, LP
    
    
    28
    
    
    
    565Targa Resources Partners LP
    
    
    86
    
    
    
    742TC PipeLines, LP
    
    
    59
    
    
    
    1,337Teekay LNG Partners L.P.
    
    
    83
    
    
    
    1,166Teekay Offshore Partners L.P.
    
    
    59
    
    
    
    588TEPPCO Partners, L.P.
    
    
    61
    
    
    
    1,392Western Gas Partners, LP
    
    
    67
    
    
    
    902Williams Partners L.P.
    
    
    115
    
    
    
    1,609Williams Pipeline Partners L.P.
    
    
    20
    
    
    
    29760,161Private MLP(c)(h)  56.6%Direct Fuels Partners, L.P.(g)
    
    
    2,500
    
    
    
    37,500International Resource Partners LP
    
    
    1,500
    
    
    
    24,000Quest Midstream Partners, L.P. (g)
    
    
    350
    
    
    
    4,637VantaCore Partners LP(g)
    
    
    1,465
    
    
    
    25,99892,135Other Private Equity(h)  0.1%ProPetro Services, Inc.  Warrants(c)(i)
    
    
    2,905
    
    
    
    Trident Resources Corp.  Warrants(j)
    
    
    100
    
    
    
    7575Total Equity Investments (Cost $211,596)
    
    
    
    
    
    
    152,371
   6




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF NOVEMBER 30, 2008
(amounts in 000s)
 Interest
    
    
    Maturity
    
    
    PrincipalDescription
    
    Rate
    
    
    Date
    
    
    Amount
    
    
    ValueFixed Income Investments(h)  18.4%United States  17.2%Midstream  4.7%Knight, Inc.
    
    
    6.50
    %
    
    
    9/01/12
    
    
    $
    7,530
    
    
    $
    6,024Targa Resources, Inc.
    
    
    8.50
    
    
    
    11/01/13
    
    
    
    2,155
    
    
    
    1,185Targa Resources Investments, Inc.
    
    
    
    (k)
    
    
    2/09/15
    
    
    
    1,046
    
    
    
    4717,680Upstream  1.8%Hilcorp Energy Company
    
    
    7.75
    
    
    
    11/01/15
    
    
    
    4,000
    
    
    
    2,860Oilfield Services  9.7%Dresser, Inc.
    
    
    
    (l)
    
    
    5/04/15
    
    
    
    5,000
    
    
    
    3,150ProPetro Services, Inc.(c)
    
    
    
    (m)
    
    
    2/15/13
    
    
    
    35,000
    
    
    
    10,000Stallion Oilfield Services Ltd.
    
    
    
    (n)
    
    
    7/18/12
    
    
    
    5,000
    
    
    
    2,62515,775Other  1.0%Energy Future Holdings Corp.
    
    
    
    (o)
    
    
    10/10/14
    
    
    
    2,500
    
    
    
    1,725Total United States (Cost $58,061)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,040Canada(p)  1.2%Upstream  1.2%Athabasca Oil Sands Corp.(Cost $2,434)
    
    
    13.00
    
    
    
    7/30/11
    
    
    
    2,500
    
    
    
    1,873Total Fixed Income Investments (Cost
$60,495)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,913Total Long-Term Investments (Cost $272,091)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,284Short-Term Investments  3.9%Repurchase Agreements  3.9%J.P. Morgan Securities Inc. (Agreements
dated 11/28/2008 to be repurchased at
$6,325), collateralized by $6,513 in U.S.
Treasury notes (Cost $6,325)
    
    
    0.10
    
    
    
    12/01/08
    
    
    
    
    
    
    
    6,325Total Investments  115.9% (Cost $278,416)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,609Senior Secured Revolving Credit Facility Borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,000
    )Other Assets in Excess of Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,078Net Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    162,687
   7




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF NOVEMBER 30, 2008
(amounts in 000s)
 
 (a)
    
    Unless otherwise noted, equity investments are common units/common shares.(b)
    
    Unless otherwise noted, security is not treated as a qualifying asset under the 1940 Act. As
a business development company, the Company is generally prohibited from acquiring assets
other than qualifying assets unless at least 70% of its total assets (excluding deferred tax
assets) are qualifying assets under the 1940 Act. As of November 30, 2008, the percentage of
the Companys total assets (excluding deferred tax assets) that are qualifying assets was
73.9%.(c)
    
    Fair valued and restricted security (see Notes 2, 3 and 8).(d)
    
    Security is treated as a qualifying asset under the 1940 Act.(e)
    
    The Companys investment in Eagle Rock Energy Partners, L.P. consists of 1,530 unregistered
common units, of which 582 unregistered common units ($4,069 fair value at November 30, 2008)
were placed in escrow for a period of 18 months following the sale of Millennium Midstream
Partners, L.P.(f)
    
    Distributions are paid in-kind.(g)
    
    The Company believes that it is an affiliate of Plains All American, L.P., and that it may be
an affiliate of Direct Fuels Partners, L.P., VantaCore Partners LP, and Quest Midstream
Partners, L.P. (see Note 5).(h)
    
    Unless otherwise noted, security is treated as a qualifying asset under the 1940 Act.(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 term loan facility. Interest is paid in-kind at a rate of LIBOR
+ 500 basis points (9.11% as of November 30, 2008)(l)
    
    Floating rate senior secured second lien term loan facility. Security pays interest at a rate
of LIBOR + 575 basis points (7.99% as of November 30, 2008).(m)
    
    Floating rate senior secured second lien term loan facility. Securitys default interest rate
is LIBOR + 900 basis points, but the Company is not accruing interest income on this security
(see Note 2Investment Income).(n)
    
    Floating rate senior secured second lien term loan facility. Security pays interest at a rate
of LIBOR + 600 basis points (8.51% as of November 30, 2008).(o)
    
    Floating rate senior secured second lien term loan facility. Security pays interest at a rate
of LIBOR + 350 basis points (5.27% as of November 30, 2008). Energy Future Holdings Corp.,
formerly TXU Corp., is a privately-held energy company with a portfolio of competitive and
regulated energy subsidiaries, including TXU Energy, Oncor and Luminant.(p)
    
    Security is not treated as a qualifying asset under the 1940 Act.   8




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
 (amounts in 000s, except share and per share amounts)
 May 31,
    
    
    November 30,2009
    
    
    2008(Unaudited)ASSETSInvestments, at fair value:Non-affiliated (Cost  $164,181 and $188,740, respectively)
    
    $
    104,948
    
    
    $
    110,635Affiliated (Cost  $81,771 and $83,351, respectively)
    
    
    69,553
    
    
    
    71,649Repurchase agreements (Cost  $9,537 and $6,325, respectively)
    
    
    9,537
    
    
    
    6,325Total investments (Cost  $255,489 and $278,416, respectively)
    
    
    184,038
    
    
    
    188,609Deposits with brokers
    
    
    
    
    
    
    123Deferred income tax asset
    
    
    29,453
    
    
    
    31,370Receivable for securities sold
    
    
    2,064
    
    
    
    688Interest, dividends and distributions receivable, net
    
    
    445
    
    
    
    403Debt issuance costs, prepaid expenses and other assets
    
    
    633
    
    
    
    981Total Assets
    
    
    216,633
    
    
    
    222,174LIABILITIESSenior secured revolving credit facility
    
    
    52,000
    
    
    
    57,000Payable for securities purchased
    
    
    4,348
    
    
    
    60Investment management fee payable
    
    
    778
    
    
    
    1,074Current income tax payable
    
    
    100
    
    
    
    100Accrued directors fees and expenses
    
    
    73
    
    
    
    76Accrued expenses and other liabilities
    
    
    737
    
    
    
    1,177Total Liabilities
    
    
    58,036
    
    
    
    59,487NET ASSETS
    
    $
    158,597
    
    
    $
    162,687NET ASSETS CONSIST OFCommon stock, $0.001 par value (200,000,000 shares authorized at May 31,
2009 and November 30, 2008; 10,102,986 shares issued and outstanding at
May 31, 2009 and November 30, 2008)
    
    $
    10
    
    
    $
    10Paid-in capital
    
    
    208,881
    
    
    
    215,953Accumulated net investment loss, net of income taxes, less dividends
    
    
    (4,558
    )
    
    
    (3,942
    )Accumulated net realized gains (losses) on investments, net of income taxes
    
    
    (126
    )
    
    
    7,464Net unrealized losses on investments, net of income taxes
    
    
    (45,610
    )
    
    
    (56,798
    )NET ASSETS
    
    $
    158,597
    
    
    $
    162,687NET ASSET VALUE PER SHARE
    
    $
    15.70
    
    
    $
    16.10
   9




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 (amounts in 000s)
 (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedMay 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008INVESTMENT INCOMEIncomeDividends and Distributions:Non-affiliated investments
    
    $
    1,855
    
    
    $
    2,225
    
    
    $
    4,533
    
    
    $
    4,260Affiliated investments
    
    
    1,950
    
    
    
    2,640
    
    
    
    3,899
    
    
    
    5,082Total dividends and distributions
    
    
    3,805
    
    
    
    4,865
    
    
    
    8,432
    
    
    
    9,342Return of capital
    
    
    (3,406
    )
    
    
    (4,697
    )
    
    
    (7,530
    )
    
    
    (9,019
    )Net dividends and distributions
    
    
    399
    
    
    
    168
    
    
    
    902
    
    
    
    323Interest and other income:Non-affiliated investments
    
    
    710
    
    
    
    829
    
    
    
    1,440
    
    
    
    3,234Affiliated investments
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    288Total interest and other income
    
    
    710
    
    
    
    1,021
    
    
    
    1,440
    
    
    
    3,522Total investment income
    
    
    1,109
    
    
    
    1,189
    
    
    
    2,342
    
    
    
    3,845ExpensesBase investment management fees
    
    
    776
    
    
    
    1,344
    
    
    
    1,553
    
    
    
    2,724Bad debt expense
    
    
    
    
    
    
    830
    
    
    
    
    
    
    
    830Professional fees
    
    
    209
    
    
    
    230
    
    
    
    433
    
    
    
    490Directors fees
    
    
    69
    
    
    
    92
    
    
    
    144
    
    
    
    164Administration fees
    
    
    29
    
    
    
    93
    
    
    
    82
    
    
    
    148Insurance
    
    
    41
    
    
    
    38
    
    
    
    78
    
    
    
    75Custodian fees
    
    
    17
    
    
    
    21
    
    
    
    32
    
    
    
    41Other expenses
    
    
    147
    
    
    
    96
    
    
    
    352
    
    
    
    279Total Expenses  Before Interest Expense
    
    
    1,288
    
    
    
    2,744
    
    
    
    2,674
    
    
    
    4,751Interest expense
    
    
    296
    
    
    
    862
    
    
    
    680
    
    
    
    2,546Total Expenses
    
    
    1,584
    
    
    
    3,606
    
    
    
    3,354
    
    
    
    7,297Net Investment Loss  Before Income Taxes
    
    
    (475
    )
    
    
    (2,417
    )
    
    
    (1,012
    )
    
    
    (3,452
    )Deferred income tax benefit
    
    
    204
    
    
    
    899
    
    
    
    396
    
    
    
    1,296Net Investment Loss
    
    
    (271
    )
    
    
    (1,518
    )
    
    
    (616
    )
    
    
    (2,156
    )REALIZED AND UNREALIZED GAINS (LOSSES)Net Realized Gains (Losses)Investments
    
    
    (9,936
    )
    
    
    1,403
    
    
    
    (12,483
    )
    
    
    3,489Foreign currency transactions
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    Options
    
    
    17
    
    
    
    
    
    
    
    17
    
    
    
    Deferred income tax benefit (expense)
    
    
    3,970
    
    
    
    (522
    )
    
    
    4,882
    
    
    
    (1,298
    )Net Realized Gains (Losses)
    
    
    (5,949
    )
    
    
    881
    
    
    
    (7,590
    )
    
    
    2,191Net Change in Unrealized Gains (Losses)Investments
    
    
    23,578
    
    
    
    9,229
    
    
    
    18,356
    
    
    
    5,133Foreign currency translations
    
    
    26
    
    
    
    
    
    
    
    28
    
    
    
    Options
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    Deferred income tax expense
    
    
    (9,056
    )
    
    
    (3,433
    )
    
    
    (7,196
    )
    
    
    (1,909
    )Deferred income tax expense  conversion to a
taxable corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,828
    )Net Change in Unrealized Gains (Losses)
    
    
    14,531
    
    
    
    5,796
    
    
    
    11,188
    
    
    
    (604
    )Net Realized and Unrealized Gains
    
    
    8,582
    
    
    
    6,677
    
    
    
    3,598
    
    
    
    1,587NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS
    
    $
    8,311
    
    
    $
    5,159
    
    
    $
    2,982
    
    
    $
    (569
    )
   10




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
 (amounts in 000s, except share amounts)
 Six Months Ended
    
    
    For the Year EndedMay 31,
    
    
    November 30,2009
    
    
    2008(Unaudited)OPERATIONSNet investment loss
    
    $
    (616
    )
    
    $
    (3,532
    )Net realized gains (losses)
    
    
    (7,590
    )
    
    
    7,483Net change in unrealized gains (losses)
    
    
    11,188
    
    
    
    (67,004
    )Net change in unrealized losses  conversion to taxable corporation
    
    
    
    
    
    
    (3,810
    )Net Increase (Decrease) in Net Assets Resulting from Operations
    
    
    2,982
    
    
    
    (66,863
    )DIVIDENDS AND DISTRIBUTIONSDividends
    
    
    
    
    
    
    Distributions  return of capital
    
    
    (7,072
    )      (1)
    
    
    (16,766
    )      (2)Dividends and Distributions
    
    
    (7,072
    )
    
    
    (16,766
    )CAPITAL STOCK TRANSACTIONSIssuance of 52,540 shares of common stock from reinvestment of dividends
    
    
    
    
    
    
    1,183Increase in Net Assets from Capital Stock Transactions
    
    
    
    
    
    
    1,183Total Decrease in Net Assets
    
    
    (4,090
    )
    
    
    (82,446
    )NET ASSETSBeginning of period
    
    
    162,687
    
    
    
    245,133End of period
    
    $
    158,597
    
    
    $
    162,687
 
 (1)
    
    This is an estimate of the characterization of the distributions paid to common stockholders
for the six months ended May 31, 2009 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 distributions 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)
    
    All distributions paid to common stockholders for the fiscal year ended November 30, 2008
were characterized as distributions (return of capital). This characterization is based on the
Companys earnings and profits.   11




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (amounts in 000s)
 (UNAUDITED)
 Six Months EndedMay 31,
    
    
    May 31,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet increase (decrease) in net assets resulting from operations
    
    $
    2,982
    
    
    $
    (569
    )Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:Purchase of long-term investments
    
    
    (14,264
    )
    
    
    (27,539
    )Sale of U.S. Treasury Bills
    
    
    
    
    
    
    14,250Proceeds from sale of long-term investments
    
    
    20,743
    
    
    
    47,952Sale (purchase) of short-term investments, net
    
    
    (3,212
    )
    
    
    3,492Realized losses (gains) on investments
    
    
    12,466
    
    
    
    (3,489
    )Return of capital distributions
    
    
    7,530
    
    
    
    9,019Unrealized gains on investments (excluding impact of $28 and $0 of
foreign currency translations)
    
    
    (18,356
    )
    
    
    (5,133
    )Deferred income tax provision
    
    
    1,918
    
    
    
    5,738Accretion of bond discount
    
    
    (337
    )
    
    
    (286
    )Decrease (increase) in deposits with brokers
    
    
    123
    
    
    
    (1
    )Decrease (increase) in receivable for securities sold
    
    
    (1,376
    )
    
    
    491Decrease (increase) in interest, dividends and distributions receivable
    
    
    (42
    )
    
    
    1,148Decrease in prepaid expenses and other assets
    
    
    348
    
    
    
    340Increase (decrease) in payable for securities purchased
    
    
    4,288
    
    
    
    (6,721
    )Decrease in investment management fee payable
    
    
    (296
    )
    
    
    (7
    )Decrease in accrued directors fees and expenses
    
    
    (3
    )
    
    
    (2
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    (440
    )
    
    
    111Net Cash Provided by Operating Activities
    
    
    12,072
    
    
    
    38,794CASH FLOWS FROM FINANCING ACTIVITIESRepayments of senior secured revolving credit facility
    
    
    (5,000
    )
    
    
    (17,000
    )Repayments of treasury secured revolving credit facility
    
    
    
    
    
    
    (14,000
    )Cash distributions to shareholders
    
    
    (7,072
    )
    
    
    (7,794
    )Net Cash Used in Financing Activities
    
    
    (12,072
    )
    
    
    (38,794
    )NET INCREASE (DECREASE) IN CASH
    
    
    
    
    
    
    CASH  BEGINNING OF PERIOD
    
    
    
    
    
    
    CASH  END OF PERIOD
    
    $
    
    
    
    $
    
 
      12




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (amounts in 000s, except option contracts written, share and per share amounts)
 (UNAUDITED)
 1. ORGANIZATION
  2. SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
 Interim Periods
 Principles of Consolidation
 Calculation of Net Asset Value
 Investment Valuation
   13




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
   
    
    Investment Team Valuation.The applicable investments are valued by senior
professionals of KA Fund Advisors, LLC (KAFA) responsible for the portfolio
investments.
    
    Investment Team Valuation Documentation.Preliminary valuation conclusions are
documented and discussed with senior management of KAFA. Such valuations are submitted to
the Valuation Committee (a committee of the board of directors) on a quarterly basis.
These valuations 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. Such adjustments may
occur on the date that the Company calculates the dividend reinvestment plan net asset
value.
    
    Valuation Committee.The Valuation Committee meets 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 are
subject to ratification by the board.
    
    Valuation Firm.No less frequently than quarterly, a third-party valuation firm
engaged by the board of directors reviews 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 consist of certain limited
procedures that the Company identified and requested them to perform. For the quarter
ended May 31, 2009, the independent valuation firm provided limited procedures on
investments in seven portfolio companies comprising approximately 53.7% of the total
investments (62.4% of net assets and 45.7% of total assets) at fair value as of May 31,
2009. 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 considers the valuations
provided by KAFA and the Valuation Committee and ratifies valuations for the applicable
securities at each quarterly board meeting. The board of directors considers the reports
provided by the third-party valuation firm in reviewing and determining in good faith the
fair value of the applicable portfolio securities.
   14




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
  e.g.
 SFAS No. 157. Fair Value Measurements
    Repurchase Agreements
 Security Transactions
 Return of Capital Estimates
  15




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
  Three Months Ended
    
    
    Six Months EndedMay 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Distributions received, estimated as return of capital portion
    
    
    89
    %
    
    
    97
    %
    
    
    89
    %
    
    
    97
    %Return of capital  attributable to Net Realized Gains
    
    $
    1,902
    
    
    $
    367
    
    
    $
    2,471
    
    
    $
    603Return of capital  attributable to Net Change in Unrealized
Gains
    
    
    1,504
    
    
    
    4,330
    
    
    
    5,059
    
    
    
    8,416Total return of capital
    
    $
    3,406
    
    
    $
    4,697
    
    
    $
    7,530
    
    
    $
    9,019
 Investment Income Financial Accounting and Reporting for High-Yield Debt
Securities by Investment Companies
  Distributions to Stockholders
  Income Taxes
 Accounting for
Income Taxes
  16




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
  Accounting for
Uncertainty in Income Taxes
 Indemnifications
 Foreign Currency Translations
    Option Writing
  17




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 3. FAIR VALUE
 SFAS No. 157. Fair Value Measurements
   
    
    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.
    
    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.
  Quoted Prices in
    
    
    Prices with Other
    
    
    One or MoreActive Markets
    
    
    Observable Inputs
    
    
    Unobservable InputsAssets at Fair Value
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Long-Term Investments
    
    $
    174,501
    
    
    $
    49,954
    
    
    $
    25,628
    
    
    $
    98,919Repurchase Agreements
    
    
    9,537
    
    
    
    
    
    
    
    9,537
    
    
    
    Total assets at fair value
    
    $
    184,038
    
    
    $
    49,954
    
    
    $
    35,165
    
    
    $
    98,919
  18




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
   Three Months EndedMay 31, 2009Balance  February 28, 2009
    
    $
    103,495Transfers out of Level 3
    
    
    (7,936
    )Realized gains
    
    
    Unrealized gains, net
    
    
    1,431Purchases, issuances or settlements
    
    
    1,929Balance  May 31, 2009
    
    $
    98,919
 Six Months EndedMay 31, 2009Balance  November 30, 2008
    
    $
    114,708Transfers out of Level 3
    
    
    (8,390
    )Realized gains
    
    
    Unrealized losses, net
    
    
    (9,328
    )Purchases, issuances or settlements
    
    
    1,929Balance  May 31, 2009
    
    $
    98,919
   4. INCOME TAXES
  May 31,
    
    
    November 30,2009
    
    
    2008(Unaudited)Deferred tax assets:Organizational costs
    
    $
    19
    
    
    $
    19Net operating loss carryforwards
    
    
    10,740
    
    
    
    4,846Net unrealized losses on investment securities
    
    
    21,906
    
    
    
    28,329Deferred tax liabilities:Basis reduction of investments in MLPs
    
    
    (3,212
    )
    
    
    (1,824
    )Total net deferred tax asset
    
    $
    29,453
    
    
    $
    31,370
  19




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
       May 31,
    
    
    November 30,2009
    
    
    2008(Unaudited)Gross unrealized appreciation of investments
    
    $
    5,912
    
    
    $
    2,205Gross unrealized depreciation of investments
    
    
    (65,107
    )
    
    
    (78,069
    )Net unrealized appreciation before tax
    
    $
    (59,195
    )
    
    $
    (75,864
    )
  20




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
  Three Months Ended
    
    
    Six Months EndedMay 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Deferred income tax benefit  net investment loss
    
    $
    204
    
    
    $
    899
    
    
    $
    396
    
    
    $
    1,296Deferred income tax benefit (expense)  realized losses (gains)
    
    
    3,970
    
    
    
    (522
    )
    
    
    4,882
    
    
    
    (1,298
    )Deferred income tax expense  unrealized gains
    
    
    (9,056
    )
    
    
    (3,433
    )
    
    
    (7,196
    )
    
    
    (1,909
    )Deferred income tax expense  conversion to a taxable corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,828
    )Income tax expense
    
    $
    (4,882
    )
    
    $
    (3,056
    )
    
    $
    (1,918
    )
    
    $
    (5,739
    )
  5. AGREEMENTS AND AFFILIATIONS
 Administration Agreement
  Investment Management Agreement
 Base Management Fee.
  21




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 Incentive Fee.
     Three Months Ended
    
    
    Six Months EndedMay 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Base management fees
    
    $
    776
    
    
    $
    1,344
    
    
    $
    1,553
    
    
    $
    2,724
 Portfolio Companies
  22




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
   Affiliated Investments.
 Direct Fuels Partners, L.P.
 Plains All American, L.P.
 Quest Midstream Partners, L.P. 
 VantaCore Partners LP 
  23




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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 Non-Affiliated Investments.
  6. OPTION CONTRACTS
  Number ofContracts
    
    
    PremiumOptions outstanding at beginning of period
    
    
    
    
    
    
    Options written
    
    
    665
    
    
    $
    97Options exercised
    
    
    (505
    )
    
    
    (80
    )Options expired
    
    
    (160
    )
    
    
    (17
    )Options outstanding at end of period
    
    
    
    
    
    $
    
  SFAS No. 161. Disclosures about Derivative
Instruments and Hedging Activities Accounting for Derivative Instruments and Hedging Activities
   Amount of Realized Gain Recognizedin Income on DerivativesDerivatives not accounted for as hedging
    
    Location of Gain
    
    
    For the Six Months Endedinstruments under SFAS No. 133
    
    on Derivatives Recognized in Income
    
    
    May 31, 2009Call options
    
    Net Realized Gain  Options
    
    $
    17
  24




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 7. INVESTMENT TRANSACTIONS
  For the six months endedMay 31,
    
    
    May 31,2009
    
    
    2008Securities purchased
    
    $
    14,264
    
    
    $
    27,539Securities sold, excluding U.S. Treasuries
    
    $
    20,743
    
    
    $
    47,952Sales of U.S. Treasuries
    
    
    
    
    
    
    14,250Total securities sold
    
    $
    20,743
    
    
    $
    62,202
 8. RESTRICTED SECURITIES
   Number ofUnits,Warrants, or
    
    
    
    
    
    
    
    
    
    
    Fair Value
    
    
    Percent
    
    
    PercentType of
    
    Principal ($)
    
    
    Cost
    
    
    Fair
    
    
    per Unit/
    
    
    of Net
    
    
    of TotalInvestment
    
    Security
    
    Restriction
    
    (in 000s)
    
    
    Basis
    
    
    Value
    
    
    Warrant
    
    
    Assets
    
    
    AssetsCopano Energy, L.L.C.
    
    Class D Units
    
    (1)
    
    
    76
    
    
    $
    2,000
    
    
    $
    1,077
    
    
    $
    14.14
    
    
    
    0.7
    %
    
    
    0.5
    %Direct Fuels Partners, L.P (2)
    
    Class A Common Units
    
    (3)
    
    
    2,500
    
    
    
    43,023
    
    
    
    33,750
    
    
    
    13.50
    
    
    
    21.3
    
    
    
    15.6Direct Fuels Partners, L.P.
    
    Class A Convertible Preferred Units
    
    (3)
    
    
    96
    
    
    
    1,929
    
    
    
    1,881
    
    
    
    19.50
    
    
    
    1.2
    
    
    
    0.9Eagle Rock Energy Partners, L.P.
    
    Common Units
    
    (1)(4)
    
    
    491
    
    
    
    5,705
    
    
    
    1,340
    
    
    
    2.73
    
    
    
    0.9
    
    
    
    0.6International Resource Partners LP (5)
    
    Class A Common Units
    
    (3)
    
    
    1,500
    
    
    
    26,154
    
    
    
    27,000
    
    
    
    18.00
    
    
    
    17.0
    
    
    
    12.5ProPetro Services, Inc.
    
    Warrants
    
    (3)
    
    
    2,905
    
    
    
    2,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ProPetro Services, Inc.
    
    Term Loan
    
    (3)
    
    $
    35,000
    
    
    
    32,761
    
    
    
    4,500
    
    
    
    n/a
    
    
    
    2.8
    
    
    
    2.1Quest Midstream Partners, L.P.
    
    Common Units
    
    (3)
    
    
    350
    
    
    
    6,625
    
    
    
    2,275
    
    
    
    6.50
    
    
    
    1.4
    
    
    
    1.0VantaCore Partners LP (6)
    
    Class A Common Units
    
    (3)
    
    
    1,465
    
    
    
    26,208
    
    
    
    27,096
    
    
    
    18.50
    
    
    
    17.1
    
    
    
    12.5Total of securities valued in accordance with procedures established by the board of directors(7)
    
    $
    146,874
    
    
    $
    98,919
    
    
    
    
    
    
    
    62.4
    %
    
    
    45.7
    %Athabasca Oil Sands Corp.
    
    Corporate Bond
    
    
    
    $
    2,500
    
    
    $
    2,434
    
    
    $
    2,133
    
    
    
    n/a
    
    
    
    1.3
    %
    
    
    1.0
    %DCP Midstream, LLC
    
    Corporate Bond
    
    
    
    $
    1,000
    
    
    
    992
    
    
    
    1,043
    
    
    
    n/a
    
    
    
    0.6
    
    
    
    0.5Dresser, Inc.
    
    Term Loan
    
    
    
    $
    5,000
    
    
    
    4,820
    
    
    
    3,200
    
    
    
    n/a
    
    
    
    2.0
    
    
    
    1.5Energy Future Holdings Corp.
    
    Term Loan
    
    
    
    $
    4,737
    
    
    
    3,534
    
    
    
    3,298
    
    
    
    n/a
    
    
    
    2.1
    
    
    
    1.5Energy Future Holdings Corp.
    
    Corporate Bond
    
    
    
    $
    2,000
    
    
    
    810
    
    
    
    800
    
    
    
    n/a
    
    
    
    0.5
    
    
    
    0.4Hilcorp Energy Company
    
    Corporate Bond
    
    
    
    $
    5,585
    
    
    
    5,184
    
    
    
    4,803
    
    
    
    n/a
    
    
    
    3.0
    
    
    
    2.2Knight, Inc.
    
    Corporate Bond
    
    
    
    $
    7,530
    
    
    
    7,110
    
    
    
    7,285
    
    
    
    n/a
    
    
    
    4.6
    
    
    
    3.3Stallion Oilfield Services Ltd.
    
    Term Loan
    
    
    
    $
    5,000
    
    
    
    4,931
    
    
    
    1,450
    
    
    
    n/a
    
    
    
    0.9
    
    
    
    0.7Targa Resources, Inc.
    
    Corporate Bond
    
    
    
    $
    2,155
    
    
    
    2,188
    
    
    
    1,541
    
    
    
    n/a
    
    
    
    1.0
    
    
    
    0.7Trident Resources Corp.
    
    Warrants
    
    
    
    
    100
    
    
    
    411
    
    
    
    75
    
    
    $
    0.75
    
    
    
    0.1
    
    
    
    Total of securities valued by prices provided by market maker or independent pricing service(3)(8)
    
    $
    32,414
    
    
    $
    25,628
    
    
    
    
    
    
    
    16.1
    %
    
    
    11.8
    %Total of all restricted securities
    
    
    
    
    
    
    
    
    
    $
    179,288
    
    
    $
    124,547
    
    
    
    
    
    
    
    78.5
    %
    
    
    57.5
    %
  25




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 
 (1)
    
    Unregistered security of a publicly-traded company.(2)
    
    The Companys investment in Direct Fuels Partners, L.P. includes 200 incentive distribution
rights (20% of total outstanding incentive distribution rights) for which the Company does not
assign a value.(3)
    
    Unregistered security of a private company.(4)
    
    Unregistered Common Units were placed in escrow for a period of 18 months following the sale
of Millennium Midstream Partners, L.P. (sale was consummated on October 1, 2008).(5)
    
    The Companys investment in International Resource Partners LP includes 10 incentive
distribution rights (10% of total outstanding incentive distribution rights) for which the
Company does not assign a value.(6)
    
    The Companys investment in VantaCore Partners LP includes 1,823 incentive distribution
rights (18% of total outstanding incentive distribution rights) for which the Company does not
assign a value.(7)
    
    Restricted securities that represent Level 3 categorization under SFAS No. 157 where reliable
market quotes are not readily available. Securities are valued in accordance with the
procedures established by the board of directors as more fully described in Note
2Significant Accounting Policies.(8)
    
    Restricted securities that represent Level 2 categorization under SFAS No. 157. Securities
with a fair market value determined by the mean of the bid and ask prices provided by a
syndicate bank, principal market maker or an independent pricing service as more fully
described in Note 2 Significant Accounting Policies. These securities have limited trading
volume and are not listed on a national exchange.  Number ofUnits,Warrants, or
    
    
    
    
    
    
    
    
    
    
    Fair Value
    
    
    Percent
    
    
    PercentType of
    
    Principal ($)
    
    
    Cost
    
    
    Fair
    
    
    per Unit/
    
    
    of Net
    
    
    of TotalInvestment
    
    Security
    
    Restriction
    
    (in 000s)
    
    
    Basis
    
    
    Value
    
    
    Warrant
    
    
    Assets
    
    
    AssetsCopano Energy, L.L.C.
    
    Class D Units
    
    (1)
    
    
    76
    
    
    $
    2,000
    
    
    $
    750
    
    
    $
    9.85
    
    
    
    0.5
    %
    
    
    0.3
    %Direct Fuels Partners, L.P (2)
    
    Class A Common Units
    
    (3)
    
    
    2,500
    
    
    
    45,048
    
    
    
    37,500
    
    
    
    15.00
    
    
    
    23.0
    
    
    
    16.9Eagle Rock Energy Partners, L.P.
    
    Common Units
    
    (1)
    
    
    1,013
    
    
    
    13,233
    
    
    
    7,754
    
    
    
    7.65
    
    
    
    4.8
    
    
    
    3.5Eagle Rock Energy Partners, L.P.
    
    Common Units
    
    (1)(4)
    
    
    582
    
    
    
    6,989
    
    
    
    4,069
    
    
    
    6.99
    
    
    
    2.5
    
    
    
    1.8International Resource Partners LP (5)
    
    Class A Common Units
    
    (3)
    
    
    1,500
    
    
    
    27,234
    
    
    
    24,000
    
    
    
    16.00
    
    
    
    14.8
    
    
    
    10.8ProPetro Services, Inc.
    
    Warrants
    
    (3)
    
    
    2,905
    
    
    
    2,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ProPetro Services, Inc.
    
    Term Loan
    
    (3)
    
    $
    35,000
    
    
    
    32,550
    
    
    
    10,000
    
    
    
    n/a
    
    
    
    6.1
    
    
    
    4.5Quest Midstream Partners, L.P.
    
    Common Units
    
    (3)
    
    
    350
    
    
    
    6,625
    
    
    
    4,637
    
    
    
    13.25
    
    
    
    2.8
    
    
    
    2.1VantaCore Partners LP (6)
    
    Class A Common Units
    
    (3)
    
    
    1,465
    
    
    
    27,526
    
    
    
    25,998
    
    
    
    17.75
    
    
    
    16.0
    
    
    
    11.7Total of securities valued in accordance with procedures established by the board of
directors(7)
    
    $
    163,674
    
    
    $
    114,708
    
    
    
    
    
    
    
    70.5
    %
    
    
    51.6
    %Athabasca Oil Sands Corp.
    
    Corporate Bond
    
    
    
    $
    2,500
    
    
    $
    2,434
    
    
    $
    1,873
    
    
    
    n/a
    
    
    
    1.2
    %
    
    
    0.9
    %Dresser, Inc.
    
    Term Loan
    
    
    
    $
    5,000
    
    
    
    4,805
    
    
    
    3,150
    
    
    
    n/a
    
    
    
    1.9
    
    
    
    1.4Energy Future Holdings Corp.
    
    Term Loan
    
    
    
    $
    2,500
    
    
    
    1,967
    
    
    
    1,725
    
    
    
    n/a
    
    
    
    1.1
    
    
    
    0.8Hilcorp Energy Company
    
    Corporate Bond
    
    
    
    $
    4,000
    
    
    
    3,811
    
    
    
    2,860
    
    
    
    n/a
    
    
    
    1.8
    
    
    
    1.3Knight, Inc.
    
    Corporate Bond
    
    
    
    $
    7,530
    
    
    
    7,055
    
    
    
    6,024
    
    
    
    n/a
    
    
    
    3.7
    
    
    
    2.7Stallion Oilfield Services Ltd.
    
    Term Loan
    
    
    
    $
    5,000
    
    
    
    4,922
    
    
    
    2,625
    
    
    
    n/a
    
    
    
    1.6
    
    
    
    1.2Targa Resources, Inc.
    
    Corporate Bond
    
    
    
    $
    2,155
    
    
    
    2,192
    
    
    
    1,185
    
    
    
    n/a
    
    
    
    0.7
    
    
    
    0.5Targa Resources Investments, Inc.
    
    Term Loan
    
    
    
    $
    1,046
    
    
    
    760
    
    
    
    471
    
    
    
    n/a
    
    
    
    0.3
    
    
    
    0.2Trident Resources Corp.
    
    Warrants
    
    
    
    
    100
    
    
    
    411
    
    
    
    75
    
    
    $
    0.75
    
    
    
    
    
    
    
    Total of securities valued by prices provided by market maker or independent pricing
service(3)(8)
    
    $
    28,357
    
    
    $
    19,988
    
    
    
    
    
    
    
    12.3
    %
    
    
    9.0
    %Total of all restricted securities
    
    
    
    
    
    
    
    
    
    $
    192,031
    
    
    $
    134,696
    
    
    
    
    
    
    
    82.8
    %
    
    
    60.6
    %
  26




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 
 (1)
    
    Unregistered security of a publicly-traded company.(2)
    
    The Companys investment in Direct Fuels Partners, L.P. includes 200 incentive distribution
rights (20% of total outstanding incentive distribution rights) for which the Company does not
assign a value.(3)
    
    Unregistered security of a private company.(4)
    
    Unregistered Common Units were placed in escrow for a period of 18 months following the sale
of Millennium Midstream Partners, L.P. (sale was consummated on October 1, 2008).(5)
    
    The Companys investment in International Resource Partners LP includes 10 incentive
distribution rights (10% of total outstanding incentive distribution rights) for which the
Company does not assign a value.(6)
    
    The Companys investment in VantaCore Partners LP includes 1,823 incentive distribution
rights (18% of total outstanding incentive distribution rights) for which the Company does not
assign a value.(7)
    
    Restricted securities that represent Level 3 categorization under SFAS No. 157 where reliable
market quotes are not readily available. Securities are valued in accordance with the
procedures established by the board of directors as more fully described in Note
2Significant Accounting Policies.(8)
    
    Restricted securities that represent Level 2 categorization under SFAS No. 157. Securities
with a fair market value determined by the mean of the bid and ask prices provided by a
syndicate bank, principal market maker or an independent pricing service as more fully
described in Note 2 Significant Accounting Policies. These securities have limited trading
volume and are not listed on a national exchange. 9. SENIOR SECURED AND TREASURY SECURED REVOLVING CREDIT FACILITIES
      27




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 Investment Facility 
      28




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 10. FINANCIAL HIGHLIGHTS
  May 31,
    
    
    November 30,
    
    
    November 30,
    
    
    November 30,2009
    
    
    2008
    
    
    2007
    
    
    2006(Unaudited)Per Share of Common Stock(1)Net asset value, beginning of period
    
    $
    16.10
    
    
    $
    24.39
    
    
    $
    24.19
    
    
    $
    23.32Net investment income (loss)
    
    
    (0.06
    )
    
    
    (0.35
    )
    
    
    0.36
    
    
    
    0.09Net realized and unrealized gain (loss) on investments
    
    
    0.36
    
    
    
    (5.89
    )
    
    
    1.18
    
    
    
    0.78Net change in unrealized losses  conversion to taxable corporation
    
    
    
    
    
    
    (0.38
    )
    
    
    
    
    
    
    Total income (loss) from investment operations
    
    
    0.30
    
    
    
    (6.62
    )
    
    
    1.54
    
    
    
    0.87Dividends(2)
    
    
    
    
    
    
    
    
    
    
    (0.95
    )
    
    
    Distributions from net realized long-term capital gains(2)
    
    
    
    
    
    
    
    
    
    
    (0.15
    )
    
    
    Distributions  return of capital(2)
    
    
    (0.70
    )
    
    
    (1.67
    )
    
    
    (0.24
    )
    
    
    Total Dividends and Distributions
    
    
    (0.70
    )
    
    
    (1.67
    )
    
    
    (1.34
    )
    
    
    Net asset value, end of period
    
    $
    15.70
    
    
    $
    16.10
    
    
    $
    24.39
    
    
    $
    24.19Market value per share, end of period
    
    $
    12.33
    
    
    $
    9.63
    
    
    $
    23.14
    
    
    $
    22.32Total investment return based on market value(3)
    
    
    35.6
    %
    
    
    (54.8
    )%
    
    
    9.3
    %
    
    
    (10.7
    )%Supplemental Data and Ratios(4)Net assets, end of period
    
    $
    158,597
    
    
    $
    162,687
    
    
    $
    245,133
    
    
    $
    241,914Ratio of expenses to average net assets:(5)Management fees
    
    
    2.0
    %
    
    
    2.4
    %
    
    
    2.0
    %
    
    
    1.7
    %Other expenses
    
    
    1.4
    %
    
    
    1.1
    %
    
    
    0.8
    %
    
    
    1.4
    %Subtotal
    
    
    3.4
    %
    
    
    3.5
    %
    
    
    2.8
    %
    
    
    3.1
    %Interest expense
    
    
    0.9
    %
    
    
    2.0
    %
    
    
    1.0
    %
    
    
    Management fee waivers
    
    
    
    
    
    
    
    
    
    
    (0.4
    )%
    
    
    (0.5
    )%Bad debt expense
    
    
    
    
    
    
    0.4
    %
    
    
    
    
    
    
    Tax expense (benefit)
    
    
    2.5
    %
    
    
    (15.5
    )%
    
    
    0.8
    %
    
    
    Total expenses
    
    
    6.8
    %
    
    
    (9.6
    )%
    
    
    4.2
    %
    
    
    2.6
    %Ratio of net investment income (loss) to average net assets
    
    
    (0.8
    )%
    
    
    (1.6
    )%
    
    
    1.5
    %
    
    
    1.9
    %Net increase (decrease) in net assets resulting from operations to
average net assets
    
    
    1.9
    %(6)
    
    
    (31.1
    )%
    
    
    6.2
    %
    
    
    3.7
    %(6)Portfolio turnover rate
    
    
    8.2
    %(6)
    
    
    27.0
    %
    
    
    28.8
    %
    
    
    5.6
    %(6)Average net assets
    
    $
    156,236
    
    
    $
    214,818
    
    
    $
    248,734
    
    
    $
    235,199Average amount of borrowings outstanding under the Credit Facilities
    
    $
    54,445
    
    
    $
    75,563
    
    
    $
    32,584
    
    
    
    Average amount of borrowings outstanding per share of common stock
during the period
    
    $
    5.39
    
    
    $
    7.50
    
    
    $
    3.25
    
    
    
    
 
 (1)
    
    Based on average shares of common stock outstanding of 10,102,986 for the six months ended
May 31, 2009, 10,073,398 for year ended November 30, 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 for the six months ended May 31, 2009 is a current estimate of the
characterization of the distributions paid to common stockholders. The information presented
for each of the other periods is a characterization of a portion of the total distributions
paid to common stockholders as either dividends (ordinary
income) or distributions (return of capital). This characterization is based on the Companys
earnings and profits.  29




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in 000s, except option contracts written, share and per share amounts)
(UNAUDITED)
 (3)
    
    Not annualized for the six months ended May 31, 2009 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 distributions, if
any, at actual prices pursuant to the Companys dividend reinvestment plan.(4)
    
    Unless otherwise noted, ratios are annualized.(5)
    
    The following table sets forth the components of the ratio of expenses to average total
assets. For the PeriodEnded
    
    
    As of November 30,May 31, 2009
    
    
    2008
    
    
    2007
    
    
    2006(Unaudited)Management fees
    
    
    1.5
    %
    
    
    1.7
    %
    
    
    1.7
    %
    
    
    1.6
    %Other expenses
    
    
    1.0
    
    
    
    0.8
    
    
    
    0.7
    
    
    
    1.3Subtotal
    
    
    2.5
    %
    
    
    2.5
    %
    
    
    2.4
    %
    
    
    2.9
    %Interest expense
    
    
    0.6
    
    
    
    1.4
    
    
    
    0.9
    
    
    
    Management fee waivers
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    (0.4
    )Bad debt expense
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    Tax expense (benefit)
    
    
    1.8
    
    
    
    (11.1
    )
    
    
    0.7
    
    
    
    Total expenses
    
    
    4.9
    %
    
    
    (6.9
    )%
    
    
    3.6
    %
    
    
    2.5
    %Average total assets
    
    $
    215,637
    
    
    $
    302,007
    
    
    $
    290,922
    
    
    $
    246,802
 (6)
    
    Not annualized. 11. COMMON STOCK
  12. SUBSEQUENT EVENTS
    30




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##### 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
  
    
    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.
    
    We undertake no obligation to update or revise any forward-looking statements made
herein.
 Overview
    31




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##### Table of Contents



Portfolio and Investment Activity
   Number of Portfolio Companies at
    
    
    Percent of Long-Term Investments atMay 31,
    
    
    November 30,
    
    
    May 31,
    
    
    November 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Publicly Traded MLP and MLP Affiliate
    
    
    33
    
    
    
    43
    
    
    
    30.0
    %
    
    
    33.0
    %Private MLP
    
    
    4
    
    
    
    4
    
    
    
    52.7
    
    
    
    50.6Other Private Equity
    
    
    1
    
    
    
    1
    
    
    
    0.1
    
    
    
    0.0Fixed Income Investments
    
    
    9
    
    
    
    9
    
    
    
    17.2
    
    
    
    16.447
    
    
    
    57
    
    
    
    100.0
    %
    
    
    100.0
    %
  32




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##### Table of Contents



Our Top Ten Portfolio Investments as of May 31, 2009
  Public/
    
    Equity/
    
    
    
    Amount
    
    
    Percent ofInvestment
    
    Private
    
    Debt
    
    Sector
    
    ($ in millions)
    
    
    Total Assets(1)1. Direct Fuels Partners, L.P.(2)
    
    Private
    
    Equity
    
    Midstream
    
    $
    35.6
    
    
    
    16.4
    %2. VantaCore Partners LP(3)
    
    Private
    
    Equity
    
    Aggregates and Mining
    
    
    27.1
    
    
    
    12.53. International Resource Partners LP(4)
    
    Private
    
    Equity
    
    Coal
    
    
    27.0
    
    
    
    12.54. Knight, Inc.
    
    Private
    
    Debt
    
    Midstream
    
    
    7.3
    
    
    
    3.45. Enterprise Products Partners L.P.
    
    Public
    
    Equity
    
    Midstream
    
    
    5.4
    
    
    
    2.56. Hilcorp Energy Company
    
    Private
    
    Debt
    
    Upstream
    
    
    4.8
    
    
    
    2.27. Plains All American Pipeline, L.P.
    
    Public
    
    Equity
    
    Midstream
    
    
    4.6
    
    
    
    2.18. ProPetro Services, Inc.(5)
    
    Private
    
    Debt
    
    Oilfield Services
    
    
    4.5
    
    
    
    2.19. Eagle Rock Energy Partners, L.P.(6)
    
    Public
    
    Equity
    
    Midstream/Upstream
    
    
    4.4
    
    
    
    2.010. Energy Future Holdings Corp.
    
    Private
    
    Debt
    
    Other
    
    
    4.1
    
    
    
    1.9$
    124.8
    
    
    
    57.6
    %
 
 (1)
    
    Total assets were $216.6 million as of May 31, 2009.(2)
    
    Our investment in Direct Fuels Partners, L.P. includes 2,500,000 Class A Common Units and
96,448 Class A Convertible Preferred Units, which represents a 38% limited partnership
interest, and 200 incentive distribution rights (20% of total outstanding incentive
distribution rights).(3)
    
    Our investment in VantaCore Partners LP includes 1,464,673 Common Units, which represents a
39% limited partnership interest, and 1,823 incentive distribution rights (18% of total
outstanding incentive distribution rights).(4)
    
    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 (10%
of total outstanding incentive distribution rights).(5)
    
    Our investment in ProPetro Services, Inc. includes a senior secured second lien term loan
($35.0 million principal and $4.5 million fair value) and 2,904,620 warrants to which we have
assigned no value.(6)
    
    Following the sale of Millennium Midstream Partners, L.P. to Eagle Rock Energy Partners, L.P.
(Eagle Rock), which was completed on October 1, 2008, our investment initially consisted of
1,700,050 unregistered Common Units, of which 687,022 were placed in escrow for a period of 18
months. Following certain post-closing adjustments, our investment in Eagle Rock consists of
1,013,037 unregistered Common Units which may be sold pursuant to Rule 144 and 491,462
unregistered Common Units have been placed into escrow for up to 18 months from closing,
pending claims that could reduce Eagle Rocks purchase price of Millennium. Results of Operations  For the three and six months ended May 31, 2009
  Investment Income.
  33




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##### Table of Contents



Operating Expenses.
 Net Investment Loss.
 Net Realized Losses.
 Net Change in Unrealized Gains.
 Net Increase in Net Assets Resulting from Operations.
 Results of Operations  For the three and six months ended May 31, 2008
  Investment Income.
 Operating Expenses.
 Net Investment Loss.
 Net Realized Gains (Losses).
  34




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##### Table of Contents



Net Change in Unrealized Gains (Losses).
 Net Increase (Decrease) in Net Assets Resulting from Operations.
  Liquidity and Capital Resources
     Contractual Obligations
 Investment Management Agreement.
  35




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##### Table of Contents



Payments by Period ($ in Millions)Less Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsInvestment Facility(1)
    
    $
    52.0
    
    
    
    
    
    
    $
    52.0
    
    
    
    
    
    
    
    
 
 (1)
    
    The maximum amount that we can borrow under our credit facility is limited to the lesser of
the commitment amount of $100 million and our borrowing base. As of May 31, 2009, we had a
borrowing base of $74.4 million. Distributions
    Off-Balance Sheet Arrangements
  Critical Accounting Policies
   36




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
   Impact of Market Prices on Portfolio Investment Valuation.
   37




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Controls and Procedures.
  Changes in Internal Control Over Financial Reporting
    38




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##### Table of Contents



PART II
 
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 1A. RISK FACTORS
  
 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
  
 ITEM 6. EXHIBITS
   39




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##### Table of Contents



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
    
    
    Administration Agreement between Registrant and Ultimus Fund Solutions, LLC.**10.3
    
    
    Form of Custody Agreement between Registrant and The Custodial Trust Company (as assigned
to JPMorgan Chase Bank, N.A.).*10.4
    
    
    Form of Amended 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.*****10.9
    
    
    Second 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 September 19, 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 herewith.31.2
    
    
    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 herewith.32.1
    
    
    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 herewith.99.1
    
    
    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 Current Report on
Form 8-K (File No. 814-00725), as filed with the Securities and
Exchange Commission on March 6, 2009 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 April 9, 2009 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.******
    
    Previously filed as an exhibit to Registrants Quarterly Report on
Form 10-Q (File No. 814-00725) as filed with the SEC on October 10,
2008 and incorporated by reference herein.  40




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##### Table of Contents



KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
 
 SIGNATURES
  KAYNE ANDERSON ENERGY DEVELOPMENT COMPANYDate: July 9, 2009
    By:
    /s/  Kevin S. McCarthyKevin S. McCarthyChairman of the Board of Directors,
President and Chief Executive OfficerDate: July 9, 2009
    By:
    /s/  Terry A. HartTerry A. HartChief Financial Officer and Treasurer  41




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##### Table of Contents



EXHIBIT INDEX
 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
    
    
    Administration Agreement between Registrant and Ultimus Fund Solutions, LLC.**10.3
    
    
    Form of Custody Agreement between Registrant and The Custodial Trust Company (as assigned
to JPMorgan Chase Bank, N.A.).*10.4
    
    
    Form of Amended 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.*****10.9
    
    
    Second 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 September 19, 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 herewith.31.2
    
    
    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 herewith.32.1
    
    
    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 herewith.99.1
    
    
    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 Current Report on
Form 8-K (File No. 814-00725), as filed with the Securities and
Exchange Commission on March 6, 2009 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 April 9, 2009 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.******
    
    Previously filed as an exhibit to Registrants Quarterly Report on
Form 10-Q (File No. 814-00725) as filed with the SEC on October 10,
2008 and incorporated by reference herein.  42