KYN Kayne Anderson Energy Infrastructure Fund Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21593

 

 

Kayne Anderson MLP Investment Company

(Exact name of registrant as specified in charter)

 

 

717 Texas Avenue, Suite 3100,

Houston, Texas 77002

(Address of principal executive offices) (Zip code)

 

 

David Shladovsky, Esq.

KA Fund Advisors, LLC,

717 Texas Avenue, Suite 3100,

Houston, Texas 77002

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (713) 493-2020

Date of fiscal year end: November 30, 2012

Date of reporting period: February 29, 2012

 

 

 

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TABLE OF CONTENTS

 

Item 1: Schedule of Investments
Item 2: Controls and Procedures
Item 3: Exhibits
SIGNATURES
EX-99.CERT

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Item 1: Schedule of Investments

KAYNE ANDERSON MLP INVESTMENT COMPANY

SCHEDULE OF INVESTMENTS

FEBRUARY 29, 2012

(amounts in 000’s, except number of option contracts)

(UNAUDITED)

 

Description						No. of Shares/Units				Value
Long-Term Investments — 167.1%
Equity Investments (1)  — 164.3%
Midstream MLP (2)  — 110.8%
Boardwalk Pipeline Partners, LP							1,032			$	28,046
Buckeye Partners, L.P.							1,405				84,033
Buckeye Partners, L.P. — Class B Units (3)(4)							865				47,087
Chesapeake Midstream Partners, L.P.							1,325				37,830
Copano Energy, L.L.C.							1,533				56,994
Crestwood Midstream Partners LP							1,826				52,663
Crestwood Midstream Partners LP — Class C Units (3)(4)							1,134				29,990
Crosstex Energy, L.P.							1,200				20,637
DCP Midstream Partners, LP							2,024				98,567
El Paso Pipeline Partners, L.P.							4,345				159,336
Enbridge Energy Partners, L.P.							3,715				120,916
Energy Transfer Partners, L.P.							1,736				82,294
Enterprise Products Partners L.P.							7,396				383,685
Exterran Partners, L.P.							2,878				68,064
Global Partners LP							1,974				43,398
Holly Energy Partners, L.P.							387				23,725
Inergy Midstream, L.P.							1,064				22,547
Magellan Midstream Partners, L.P.							2,316				169,457
MarkWest Energy Partners, L.P.							3,920				234,456
Niska Gas Storage Partners LLC							1,671				15,772
NuStar Energy L.P.							301				18,283
Oiltanking Partners, L.P.							460				14,890
ONEOK Partners, L.P.							2,397				139,520
PAA Natural Gas Storage, L.P.							1,124				21,577
Plains All American Pipeline, L.P. (5)							3,161				261,423
Regency Energy Partners LP							6,393				169,425
Rose Rock Midstream, L.P.							315				7,514
Spectra Energy Partners, L.P.							596				19,673
Targa Resources Partners L.P.							1,873				79,682
TC PipeLines, LP							190				8,810
Tesoro Logistics LP							502				18,339
Transmontaigne Partners L.P.							393				13,632
Western Gas Partners L.P.							1,156				52,921
Williams Partners L.P.							2,509				156,076
											2,761,262
MLP Affiliate (2)  — 15.5%
Enbridge Energy Management, L.L.C. (4)							2,161				72,961
Kinder Morgan Management, LLC (4)							3,900				312,700
											385,661
General Partner MLP (2)  — 11.3%
Alliance Holdings GP L.P.							1,706				85,825
Energy Transfer Equity, L.P.							4,425				192,422
NuStar GP Holdings, LLC							74				2,592
											280,839

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KAYNE ANDERSON MLP INVESTMENT COMPANY

SCHEDULE OF INVESTMENTS

FEBRUARY 29, 2012

(amounts in 000’s, except number of option contracts)

(UNAUDITED)

 

Description										No. of Shares/Units				Value
Shipping MLP — 9.0%
Capital Product Partners L.P.											2,841			$	21,221
Golar LNG Partners LP											92				3,419
Navios Maritime Partners L.P.											1,950				31,258
Teekay LNG Partners L.P.											1,879				73,645
Teekay Offshore Partners L.P.											3,223				94,734
															224,277
Midstream — 7.6%
El Paso Corporation (6)											656				18,232
Kinder Morgan, Inc.											854				30,095
ONEOK, Inc.											421				34,808
Plains All American GP LLC — Unregistered (3)(5)											24				47,538
Targa Resources Corp.											276				12,280
The Williams Companies, Inc.											1,588				47,440
															190,393
Upstream MLP & Income Trust— 4.5%
BreitBurn Energy Partners L.P.											1,597				30,111
Chesapeake Granite Wash Trust											533				14,807
Legacy Reserves L.P.											535				15,437
LRR Energy, L.P.											243				4,912
Memorial Production Partners LP											318				5,908
Mid-Con Energy Partners, LP											338				8,214
SandRidge Permian Trust											1,028				24,930
VOC Energy Trust											344				7,459
															111,778
Coal MLP — 3.1%
Alliance Resource Partner, L.P.											12				883
Penn Virginia Resource Partners, L.P.											3,063				76,382
															77,265
Propane MLP — 2.4%
Inergy, L.P.											3,510				61,290
Other — 0.1%
Clearwater Trust (3)(5)(7)											N/A				3,250
Total Equity Investments (Cost — $2,408,532)															4,096,015
		Interest Rate				Maturity Date				Principal Amount
Debt Investments — 2.8%
Midstream — 1.6%
Crestwood Holdings Partners, LLC			(8)				10/1/16			$	5,549				5,660
Crestwood Midstream Partners LP			7.750	%			4/1/19				11,750				11,927
Niska Gas Storage Partners LLC			8.875				3/15/18				24,000				23,160
															40,747

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KAYNE ANDERSON MLP INVESTMENT COMPANY

SCHEDULE OF INVESTMENTS

FEBRUARY 29, 2012

(amounts in 000’s, except number of option contracts)

(UNAUDITED)

 

Description		Interest Rate				Maturity Date				Principal Amount				Value
Upstream — 0.7%
BreitBurn Energy Partners L.P.			7.875	%			4/15/22			$	2,250			$	2,368
Eagle Rock Energy Partners, L.P.			8.375				6/1/19				975				1,009
Linn Energy, LLC			6.250				11/1/19				13,500				13,500
															16,877
Coal MLP — 0.3%
Penn Virginia Resource Partners, L.P.			8.250				4/15/18				6,250				6,531
Other — 0.2%
Calumet Specialty Products Partners, L.P.			9.375				5/1/19				4,000				4,190
Calumet Specialty Products Partners, L.P.			9.375				5/1/19				2,000				2,095
															6,285
Total Energy Debt Investments (Cost — $68,794)															70,440
Total Long-Term Investments (Cost — $2,477,326)															4,166,455
										No. of Contracts
Liabilities
Call Option Contracts Written (9)
Midstream
El Paso Pipeline Partners, L.P., call option expiring 4/20/12 @ $37.50 (Premiums Received — $88)											1,000				(50	)
Revolving Credit Facility															(76,000	)
Senior Unsecured Notes															(775,000	)
Mandatory Redeemable Preferred Stock at Liquidation Value															(260,000	)
Deferred Tax Liability															(645,606	)
Other Liabilities															(200,244	)
Total Liabilities															(1,956,900	)
Other Assets															283,187
Total Liabilities in Excess of Other Assets															(1,673,713	)
Net Assets Applicable to Common Stockholders														$	2,492,742

 

(1)	Unless otherwise noted, equity investments are common units/common shares.

(2)	Includes limited liability companies.

(3)	Fair valued securities, restricted from public sale.

(4)	Distributions are paid-in-kind.

(5)	Kayne Anderson MLP Investment Company (the “Company”) believes that it is an affiliate of the Clearwater Trust, Plains All American Pipeline, L.P. and Plains All American GP LLC.

(6)	Security or a portion thereof is segregated as collateral on option contracts written.

(7)	The Company owns an interest in the Creditors Trust of Miller Bros. Coal, LLC (“Clearwater Trust”) consisting of a coal royalty interest.

(8)	Floating rate first lien senior secured term loan. Security pays interest at a rate of LIBOR + 850 basis points, with a 2% LIBOR floor (10.50% as of February 29, 2012).

(9)	Security is non-income producing.

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From time to time, certain of the Company’s investments may be restricted as to resale. For instance, private investments that are not registered under the Securities Act of 1933, as amended, cannot be offered for public sale in a non-exempt transaction without first being registered. In other cases, certain of the Company’s investments have restrictions such as lock-up agreements that preclude the Company from offering these securities for public sale.

At February 29, 2012, the Company held the following restricted investments:

 

Investment		Security		Acquisition Date		Type of Restriction		Number  of Units, Principal ($) (in  000’s)				Cost Basis				Fair Value				Percent of  Net Assets				Percent of  Total Assets
Level 3 Investments (1)
Buckeye Partners, L.P.		Class B Units		(2)		(3)			865				45,006			$	47,087				1.9	%			1.0	%
Clearwater Trust		Trust Interest		(4)		(5)			1				3,266				3,250				0.1				0.1
Crestwood Midstream Partners LP		Class C Units		4/1/11		(3)			1,134				26,007				29,990				1.2				0.7
Plains All American GP LLC (6)		Common Units		(2)		(5)			24				33,040				47,538				1.9				1.1
Total												$	107,319			$	127,865				5.1	%			2.9	%
Level 2 Investments (7)
BreitBurn Energy Partners L.P.		Senior Notes		1/10/12		(3)		$	2,250			$	2,231			$	2,368				0.1	%			0.1	%
Crestwood Holdings Partners LLC		Bank Loan		9/29/10		(5)			5,549				5,458				5,660				0.2				0.1
Crestwood Midstream Partners LP		Senior Notes		(2)		(3)			11,750				11,739				11,926				0.5				0.3
Linn Energy, LLC		Senior Notes		2/28/12		(3)			13,500				13,499				13,500				0.5				0.3
Total												$	32,927			$	33,454				1.3	%			0.8	%
Total of all restricted securities												$	140,246			$	161,319				6.4	%			3.7	%

 

(1)	Securities are valued using inputs reflecting the Company’s own assumptions.

(2)	Securities acquired at various dates throughout the fiscal year ended November 30, 2011.

(3)	Unregistered or restricted security of a publicly tracked company.

(4)	On September 28, 2010, the Bankruptcy Court finalized the plan of reorganization of Clearwater. As part of the plan of reorganization, the Company received an interest in the Clearwater Trust consisting of cash and a coal royalty interest as consideration for its unsecured loan to Clearwater.

(5)	Unregistered security of a private company or trust.

(6)

In determining the fair value for Plains All American GP, LLC (“PAA GP”), the Company’s valuation is based on publicly available information. Robert V. Sinnott, the CEO of Kayne Anderson Capital Advisors, L.P. (“KACALP”), sits on PAA GP’s board of directors. Certain private investment funds managed by KACALP may value its investment in PAA GP based on non-public information, and, as a result, such valuation may be different than the Company’s valuation.

(7)	These securities have a fair market value determined by the mean of the bid and ask prices provided by an agent or syndicate bank, principal market maker or an independent pricing service. These securities have limited trading volume and are not listed on a national exchange.

At February 29, 2012, the cost basis of investments for federal income tax purposes was $2,313,393. At February 29, 2012, gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

 

Gross unrealized appreciation of investments		$	1,860,389
Gross unrealized depreciation of investments			(7,326	)
Net unrealized appreciation		$	1,853,063

The identified cost basis of federal tax purposes is estimated based on information available from the Company’s portfolio companies. In some cases, this information is very limited. Accordingly, the actual cost basis may prove higher or lower than the estimated cost basis included above.

As required by the Fair Value Measurement and Disclosures of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, the Company has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination.

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The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment.

 

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Level 1 — Quoted unadjusted prices for identical instruments in active markets traded on a national exchange to which the Company has access at the date of measurement.

 

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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.

 

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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.

The following table presents the Company’s assets measured at fair value on a recurring basis at February 29, 2012. The Company presents these assets by security type and description on its Schedule of Investments.

 

		Total				Quoted Prices in Active  Markets (Level 1)				Prices with  Other Observable Inputs (Level 2)				Unobservable Inputs (Level 3)
Assets at Fair Value
Equity investments		$	4,096,015			$	3,968,150			$	—			$	127,865
Debt investments			70,440				—				70,440				—
Total assets at fair value		$	4,166,455			$	3,968,150			$	70,440			$	127,865
Liabilities at Fair Value
Call option contracts written		$	50			$	—			$	50			$	—

The Company did not have any liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at February 29, 2012 or at November 30, 2011. For the three months ended February 29, 2012, there were no transfers between Level 1 and Level 2.

The following table presents the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended February 29, 2012.

 

		Equity Investments
Balance — November 30, 2011		$	164,129
Purchases			—
Issuances			1,427
Transfers out			(40,711	)
Realized gains (losses)			—
Unrealized gains, net			3,020
Balance — February 29, 2012		$	127,865

The $3,020 of unrealized gains presented in the table above for the three months ended February 29, 2012 related to investments that are still held at February 29, 2012.

The issuances of $1,427 relate to additional units received from Buckeye Partners, L.P. (Class B Units) and Crestwood Midstream Partners LP (Class C Units). The Company’s investments in the common units of Teekay Offshore Partners L.P., which is noted as a transfer out of Level 3 in the table above, became readily marketable during the three months ended February 29, 2012.

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As required by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification, the following are the derivative instruments and hedging activities of the Company.

The following table sets forth the fair value of the Company’s derivative instruments.

 

Derivatives Not Accounted for as Hedging Instruments		Statement of Assets and Liabilities Location		Fair Value as of February 29, 2012
Call options		Call option contracts written		$(50)

The following table set forth the effect of the Company’s derivative instruments.

 

Derivatives Not Accounted for as Hedging Instruments		Location of Gains/(Losses) on Derivatives Recognized in Income		For the Three Months Ended February 29, 2012
				Net Realized Gains/(Losses)  on Derivatives Recognized  in Income		Change in Unrealized Gains/(Losses) on Derivatives Recognized  in Income
Call options		Options		$356		$(55)

Securities valuation policies and other investment related disclosures are hereby incorporated by reference to the Company’s annual report previously filed with the Securities and Exchange Commission on form N-CSR on February 7, 2012 with a file number 811-21593.

Other information regarding the Company is available in the Company’s most recent annual report. This information is also available on the Company’s website at www.kaynefunds.com; or on the website of the Securities and Exchange Commission, www.sec.gov.

Item 2: Controls and Procedures

(a) As of a date within 90 days from the filing date of this report, the principal executive officer and principal financial officer concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the Act)), were effective based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities and Exchange Act of 1934, as amended.

(b) There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrants last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrants internal control over financial reporting.

Item 3: Exhibits

1. The certifications of the registrant as required by Rule 30a-2(a) under the Act are exhibits to this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.