def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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Form, Schedule or Registration Statement No.: |
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Date Filed: |
Kayne Anderson Energy Development Company
717 Texas Avenue, Suite 3100
Houston, TX 77002
1-877-657-3863
May 19,
2011
Dear Fellow
Stockholder:
You are cordially invited to attend the 2011 Annual Meeting of
Stockholders of Kayne Anderson Energy Development Company
(KED or the Company) on June 30,
2011 at 8:30 a.m. Central Time at 717 Texas Avenue,
Suite 3100, Houston, TX 77002.
The matters scheduled for consideration at the meeting are
(i) the election of two directors of the Company,
(ii) the ratification of the selection of
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for 2011 and (iii) a
proposal to authorize the Company to sell shares of its common
stock at a price below net asset value per share, subject to
certain conditions, as more fully discussed in the enclosed
proxy statement.
Enclosed with this letter are (i) answers to questions you
may have about the proposals, (ii) the formal notice of the
meeting, (iii) the proxy statement, which gives detailed
information about the proposals and why the Board of Directors
recommends that you vote to approve them, and (iv) an
actual written proxy for you to sign and return. If you have any
questions about the enclosed proxy or need any assistance in
voting your shares, please call 1-877-657-3863.
Your vote is important. Please complete, sign, and date the
enclosed proxy card and return it in the enclosed envelope. This
will ensure that your vote is counted, even if you cannot attend
the meeting in person.
Sincerely,
Kevin S. McCarthy
Chairman of the Board of Directors,
CEO and President
TABLE
OF CONTENTS
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34
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KAYNE ANDERSON ENERGY DEVELOPMENT COMPANY
Q. WHAT AM I BEING ASKED TO VOTE FOR ON THIS
PROXY?
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A. |
This proxy contains three proposals:
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Proposal One the election of two Class II
Directors to serve until the Companys 2014 Annual Meeting
of Stockholders and until their successors are duly elected and
qualified. The directors currently serving in Class II are
William R. Cordes and Barry R. Pearl. Their current terms will
expire at the Companys 2011 Annual Meeting of Stockholders
and the Companys Board of Directors has nominated them for
re-election at the meeting. The election of Messrs. Cordes and
Pearl requires the affirmative vote of a majority of the votes
cast by the holders of the Companys common stock
outstanding as of May 16, 2011 (the Record
Date).
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Proposal Two the ratification of the selection
of PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for its fiscal year ending
November 30, 2011. Approval of Proposal Two requires
the affirmative vote of a majority of the votes cast by the
holders of the Companys common stock outstanding as of the
Record Date.
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Proposal Three a proposal to authorize the
Company to sell shares of its common stock at a price less than
net asset value per share, subject to certain conditions, for a
period expiring on the date of the Companys 2012 Annual
Meeting of Stockholders. Approval of Proposal Three
requires: (1) the affirmative vote of a majority of all
common stockholders on the records of the Companys
transfer agent as of the Record Date, and (2) the
affirmative vote of a majority of the votes cast by the holders
of the Companys common stock outstanding as of the Record
Date.
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Q. HOW DOES THE BOARD OF DIRECTORS SUGGEST THAT I
VOTE?
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The Board of Directors unanimously recommends that you vote
FOR all proposals on the enclosed proxy card.
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Q. HOW CAN I VOTE?
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If your shares are held in Street Name by a broker
or bank, you will receive information regarding how to instruct
your bank or broker to vote your shares. If you are a
stockholder of record, you may authorize the persons named as
proxies on the enclosed proxy card to cast the votes you are
entitled to cast at the meeting by completing, signing, dating
and returning the enclosed proxy card. Stockholders of record or
their duly authorized proxies also may vote in person if able to
attend the meeting. However, even if you plan to attend the
meeting, we urge you to return your proxy card. That will ensure
that your vote is cast should your plans change.
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1
Q. CAN I VIEW THE PROXY STATEMENT AND ANNUAL REPORT ON
THE INTERNET?
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Yes. The proxy statement and Annual Report are available on
the Internet at
www.kaynefunds.com/KedSECFilings.php.
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This information summarizes information that is included in
more
detail in the proxy statement. We urge you to
read the proxy statement carefully.
If you have questions, call 1-877-657-3863.
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Kayne Anderson Energy Development Company
717 Texas Avenue, Suite 3100
Houston, TX 77002
1-877-657-3863
NOTICE OF 2011 ANNUAL MEETING
OF STOCKHOLDERS
To the Stockholders of Kayne Anderson Energy Development Company:
NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of
Stockholders of Kayne Anderson Energy Development Company, a
Maryland corporation (KED or the
Company), will be held on June 30, 2011 at
8:30 a.m. Central Time at 717 Texas Avenue,
Suite 3100, Houston, TX 77002, to consider and vote on the
following matters as more fully described in the accompanying
proxy statement.
Below are the proposals:
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1.
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To elect two Class II Directors of the Company, such
directors to hold office until the 2014 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified;
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2.
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To ratify the selection of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for
the fiscal year ending November 30, 2011;
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To approve a proposal to authorize the Company to sell shares of
its common stock at a price less than net asset value per share,
subject to certain conditions; and
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To transact any other business that may properly come before the
meeting or any adjournment or postponement thereof.
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Stockholders of record as of the close of business on
May 16, 2011 are entitled to notice of and to vote at the
2011 Annual Meeting of Stockholders (or any adjournment or
postponement of the meeting thereof).
By Order of the Board of Directors of the Company,
David J. Shladovsky
Secretary
May 19, 2011
Houston, Texas
3
Kayne Anderson Energy Development Company
717 Texas Avenue, Suite 3100
Houston, TX 77002
1-877-657-3863
PROXY
STATEMENT
2011
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 2011
This proxy statement is being sent to you by the Board of
Directors of Kayne Anderson Energy Development Company
(KED or the Company), a Maryland
corporation. The Board of Directors is asking you to complete,
sign, date and return the enclosed proxy card, permitting your
votes to be cast at the 2011 Annual Meeting of Stockholders (the
Annual Meeting) to be held on June 30, 2011 at
8:30 a.m. Central Time at 717 Texas Avenue,
Suite 3100, Houston, TX 77002. Stockholders of record at
the close of business on May 16, 2011 (the Record
Date) are entitled to vote at the Annual Meeting. As a
stockholder of the Company, you are entitled to one vote for
each share of common stock you hold on each matter on which
holders of such shares are entitled to vote. This proxy
statement and the enclosed proxy are first being mailed to
stockholders on or about May 26, 2011.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE 2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON JUNE 30, 2011: You should have received a copy of the Annual
Report for the fiscal year ended November 30, 2010. If you
would like another copy of the Annual Report, please write us at
the address shown at the top of this page or call us at
1-877-657-3863. The Annual Report will be sent to you without
charge. This proxy statement and our Annual Reports can be
accessed on our website at www.kaynefunds.com/KedSECFilings.php
or on the Securities and Exchange Commissions (the
SEC) website (www.sec.gov).
KA Fund Advisors, LLC (KAFA), a subsidiary of
Kayne Anderson Capital Advisors, L.P. (KACALP and
together with KAFA, Kayne Anderson), externally
manages and advises the Company pursuant to an investment
management agreement. KAFA is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended.
Kayne Anderson is a leading investor in both public and private
energy companies. At February 28, 2011, Kayne Anderson
managed approximately $12.5 billion, including
$10.7 billion in securities of energy/infrastructure
companies. Kayne Anderson may be contacted at the address listed
above.
4
This proxy statement sets forth the information that the
Companys stockholders should know in order to evaluate
each of the following proposals. The following table presents a
summary of the proposals for the Company and the stockholders of
the Company whose votes are being solicited with respect to each
proposal. Please refer to the discussion of each proposal in
this proxy statement for information regarding votes required
for the approval of each proposal.
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Proposals
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Who votes on the proposals?
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1. To elect two Class II Directors of the Company,
such directors to hold office until the 2014 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified.
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The holders of the Companys common stock, $0.001 par
value per share (the Common Stock).
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2. To ratify the selection of PricewaterhouseCoopers LLP as
the Companys independent registered public accounting firm
for the fiscal year ending November 30, 2011.
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The holders of the Companys Common Stock.
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3. To approve a proposal to authorize the Company to sell
shares of its Common Stock at a price less than net asset value
per share, subject to certain conditions.
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(i) The Registered Common Stockholders (as defined herein),
and (ii) the holders of the Companys Common Stock.
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4. To transact any other business that may properly come
before the meeting or any adjournment or postponement thereof.
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The holders of the Companys Common Stock.
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5
PROPOSAL ONE
ELECTION OF DIRECTORS
Under the Companys charter, the Board of Directors (the
Board) is divided into three classes (Class I,
Class II and Class III) of approximately equal
size. The Board currently has six directors as follows:
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Class
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Term*
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Directors
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I
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3-year term until 2013
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Albert L. Richey
Robert V. Sinnott
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II
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3-year term until 2011
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William R. Cordes
Barry R. Pearl
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III
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3-year term until 2012
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Kevin S. McCarthy
William L. Thacker
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Each director serves a three-year
term until the Annual Meeting of Stockholders for the designated
year and until his or her successor has been duly elected and
qualified.
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The directors whose terms are expiring at this years
Annual Meeting are the Class II directors,
William R. Cordes and Barry R. Pearl. The Board has
nominated them for re-election at the Annual Meeting, to serve
for a term of three years (until the 2014 Annual Meeting of
Stockholders) and until their successors have been duly elected
and qualified.
The holders of the Companys Common Stock are being asked
to vote for Messrs. Cordes and Pearl as Class II Directors
of the Company.
The Board knows of no reason why the nominees listed below will
be unable to serve, and the nominees have consented to serve if
elected. If the nominees are unable to serve or for good cause
will not serve because of an event not now anticipated, the
persons named as proxies may vote for another person designated
by the Board. The persons named as proxies on the accompanying
proxy card intend to vote at the Annual Meeting (unless
otherwise directed) FOR the election of Messrs. Cordes and Pearl
as the Companys directors.
The following tables set forth each nominees and each
remaining directors name and year of birth; position(s)
with the Company and length of time served; principal
occupations during the past five years; and other directorships
held during the past five years. The address for the nominees
and directors is 717 Texas Avenue, Suite 3100, Houston, TX
77002.
All the directors listed above except Mr. Sinnott currently
serve on the Board of Directors of Kayne Anderson
Midstream/Energy Fund, Inc. (KMF), and
Mr. McCarthy also serves on the Board of Directors of Kayne
Anderson MLP Investment Company (KYN) and Kayne
Anderson Energy Total Return Fund, Inc. (KYE). KYN,
KYE, KMF and KED are closed-end investment companies registered
under the Investment Company Act of 1940, as amended (the
1940 Act) that are advised by KAFA.
The directors who are not interested persons, as
defined in the 1940 Act, of the Company, Kayne Anderson or the
Companys underwriters in offerings of its securities from
time to time as defined in the 1940 Act are referred to herein
as Independent Directors. None of the Independent
Directors nor any of their immediate family members, has ever
been a director, officer or employee of Kayne Anderson or its
affiliates.
6
For information regarding the Companys executive officers
and their compensation, please refer to Information About
Executive Officers and Compensation Discussion and
Analysis below.
NOMINEES
FOR DIRECTOR WHO ARE NOT INTERESTED PERSONS
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Position(s)
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Held with
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Number of
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Other
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the Company,
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Portfolios in
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Directorships
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Proposed
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Fund Complex(1)
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Held by Director
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Name
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Term of Office/
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Principal Occupations
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Overseen by
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During Past
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(Year Born)
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Time of Service
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During Past Five Years
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Director
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Five Years
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William R. Cordes
(born 1948)
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Director. 3-year term (until the 2014 Annual Meeting of
Stockholders). Served since 2008.
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Retired from Northern Border Pipeline Company in March 2007
after serving as President from October 2000 to March 2007.
Chief Executive Officer of Northern Border Partners, L.P. from
October 2000 to April 2006. President of Northern Natural Gas
Company from 1993 to 2000. President of Transwestern Pipeline
Company from 1996 to 2000.
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2
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Current:
KMF
Boardwalk Pipeline Partners, LP (pipeline MLP)
Prior:
Northern Border Partners, L.P. (midstream MLP)
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Barry R. Pearl
(born 1949)
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Director. 3-year term (until the 2014 Annual Meeting of
Stockholders). Served since 2006.
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Executive Vice President of Kealine, LLC, a private developer
and operator of petroleum infrastructure facilities (and its
affiliate WesPac Energy LLC, an energy infrastructure
developer), since February 2007. Provided management consulting
services from January 2006 to February 2007. President of Texas
Eastern Products Pipeline Company, LLC (TEPPCO) (the
general partner of TEPPCO Partners, L.P.) from February 2001 to
December 2005. Chief Executive Officer and director of TEPPCO
from May 2002 to December 2005; and Chief Operating Officer from
February 2001 to May 2002.
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2
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Current:
KMF
Targa Resources Partners LP (midstream MLP)
Magellan Midstream Partners, L.P. (midstream MLP)
Prior:
Seaspan Corporation (containership chartering)
TEPPCO Partners, L.P. (midstream MLP)
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The 1940 Act requires the term
Fund Complex to be defined to include
closed-end funds advised by the Companys investment
adviser, KAFA, and included KYN, KYE, KMF and KED.
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7
REMAINING
DIRECTORS WHO ARE NOT INTERESTED PERSONS
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Position(s)
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Number of
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Other
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Held with
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Portfolios in
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the Company,
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Fund Complex
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Held by Director
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Name
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Principal Occupations
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(Year Born)
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During Past Five Years
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Director
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Five Years
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Albert L. Richey
(born 1949)
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Director. 3-year term (until the 2013 Annual Meeting of
Stockholders). Served since 2006.
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Vice President of Anadarko Petroleum Corporation since December
2008; Vice President of Corporate Development from December 2005
to December 2008; Vice President and Treasurer from 1995 to
2005; and Treasurer from 1987 to 1995.
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2
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Current:
KMF
Boys & Girls Clubs of Houston
Boy Scouts of America
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William L. Thacker
(born 1945)
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Director. 3-year term (until the 2012 Annual Meeting of
Stockholders). Served since 2006.
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Retired from the Board of TEPPCO in May 2002 after serving as
Chairman from March 1997 to May 2002; Chief Executive Officer
from January 1994 to May 2002; and President, Chief Operating
Officer and Director from September 1992 to January 1994.
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2
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Current:
KMF
Copano Energy, L.L.C. (midstream MLP)
GenOn Energy, Inc. (electricity generation and sales)
Prior:
Pacific Energy Partners, L.P. (midstream MLP)
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8
REMAINING
DIRECTORS WHO ARE INTERESTED PERSONS
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Position(s)
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Number of
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Other
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Held with
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Portfolios in
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Directorships
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the Company,
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Fund Complex
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Held by Director
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Name
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Term of Office/
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Principal Occupations
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Overseen by
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During Past
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(Year Born)
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Time of Service
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During Past Five Years
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Director
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Five Years
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Kevin S. McCarthy(1) (born 1959)
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Chairman of the Board of Directors, President and Chief
Executive Officer of the Company since inception. 3-year term as
a director (until the 2012 Annual Meeting of Stockholders),
elected annually as an officer.
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Senior Managing Director of KACALP since June 2004 and of KAFA
since 2006. President and Chief Executive Officer of KYN, KYE,
KED and KMF since inception (KYN inception in 2004, KYE
inception in 2005, KED inception in 2006 and KMF inception in
2010). Global Head of Energy at UBS Securities LLC from November
2000 to May 2004.
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4
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Current:
KYN
KYE
KMF
Range Resources Corporation (oil and natural gas company)
International Resource Partners LP (coal mining MLP)
Direct Fuels Partners, L.P. (transmix refining and fuels distribution)
ProPetro Services, Inc. (oilfield services)
K-Sea Transportation Partners LP (shipping MLP)
Prior:
Clearwater Natural Resources, L.P. (coal mining MLP)
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Robert V. Sinnott(2)
(born 1949)
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Director. 3-year term (until the 2013 Annual Meeting of
Stockholders). Served since 2006.
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President, Chief Executive Officer and Senior Managing Director
of Energy Investments of KACALP since 1992.
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1
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Current:
Plains All American Pipeline, L.P. (pipeline MLP)
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(1)
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Mr. McCarthy is an
interested person of the Company by virtue of his
employment relationship with Kayne Anderson.
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(2)
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Mr. Sinnott is an
interested person of the Company because he is
employed as the President of KACALP.
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9
DIRECTOR
COMPENSATION
Directors and officers who are interested persons by
virtue of their employment by Kayne Anderson, including all
executive officers, serve without any compensation from the
Company. For the fiscal year ended November 30, 2010:
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Each Independent Director received a $55,000 annual retainer for
serving as a director.
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The chairperson of the Audit Committee received additional
compensation of $5,000 annually.
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In addition, each Independent Director received fees for
attending meetings of the Board and its committees on which such
Independent Director served, as follows: $2,000 per Board
meeting (in person or via telephone); $1,000 per Audit Committee
meeting (in person or via telephone); and $1,000 for other
committee meetings (in person or via telephone). Committee
meeting fees were not paid unless the meeting was held on a day
when there was no Board meeting and the meeting exceeded 15
minutes in duration.
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The Independent Directors were reimbursed for expenses incurred
as a result of attendance at meetings of the Board and its
committees.
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The following table sets forth the compensation paid by the
Company during the fiscal year ended November 30, 2010 to
the Independent Directors. No compensation is paid to directors
who are interested persons. The Company does not
have a retirement or pension plans or any compensation plans
under which the Companys equity securities were authorized
for issuance.
Director
Compensation Table
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Total Compensation(1)(2)
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Total Compensation
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from the
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Name
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from Registrant
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Fund Complex
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Independent Directors
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William R. Cordes
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$
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73,912
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$
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85,412
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Barry R. Pearl
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68,088
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78,338
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Albert L. Richey
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71,000
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81,750
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William L. Thacker
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71,000
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77,250
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Interested Directors
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Kevin S. McCarthy
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None
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None
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Robert V. Sinnott
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None
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None
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(1)
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Compensation from KED and KMF
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(2)
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KMF commenced operations on
November 24, 2010, thereby incurring directors fees
that were considerably lower than they would have been had KMF
been in operation for the full fiscal year. If KMF had been in
operation for the full fiscal year, the Independent Directors
would have received estimated total compensation from the
Fund Complex as follows: William R. Cordes ($120,412),
Barry R. Pearl ($111,588), Albert L. Richey ($114,500) and
William L. Thacker ($115,500).
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10
COMMITTEES
OF THE BOARD OF DIRECTORS
The Board currently has three standing committees: the Audit
Committee, the Valuation Committee and the Nominating, Corporate
Governance and Compensation Committee (the Nominating
Committee).
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Audit Committee. Messrs. Cordes, Richey and
Thacker, each an Independent Director, serve on the Audit
Committee. Mr. Cordes currently serves as Chairman of the
Audit Committee. The Audit Committee operates under a written
charter (the Audit Committee Charter), which was
adopted and approved by the Board and established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of
1934, as amended (the 1934 Act). The Audit
Committee Charter conforms to the applicable listing standards
of the New York Stock Exchange (the NYSE). The Audit
Committee Charter is available on the Companys website
(www.kaynefunds.com). The Audit Committee, among others,
approves and recommends to the Board the election, retention or
termination of the Companys independent auditors; approves
services to be rendered by such auditors; monitors and evaluates
each auditors performance; reviews the results of the
Companys audit; determines whether to recommend to the
Board that the Companys audited financial statements be
included in the Companys Annual Report; monitors the
accounting and reporting policies and procedures of the Company
and the Companys compliance with regulatory requirements;
and responds to other matters as outlined in the Audit Committee
Charter. Each Audit Committee member is independent
under the applicable NYSE listing standard.
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Valuation Committee. Messrs. Pearl, Richey,
Thacker and McCarthy serve on the Valuation Committee. The
Valuation Committee is responsible for the oversight of the
Companys valuation procedures and the valuation of the
Companys securities in accordance with such procedures.
The Valuation Committee operates under a written charter adopted
and approved by the Board, a copy of which is available on the
Companys website (www.kaynefunds.com).
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Nominating Committee. Messrs. Cordes,
Pearl, Richey and Thacker, each an Independent Director, are
members of the Nominating Committee. The Nominating Committee is
responsible for appointing and nominating Independent Directors
to the Board. Each Nominating Committee member is
independent under the applicable NYSE listing
standards. The Nominating Committee operates under a written
charter adopted and approved by the Board (the Nominating
Committee Charter), a copy of which is available on the
Companys website (www.kaynefunds.com). The Nominating
Committee has not established specific, minimum qualifications
that must be met by an individual for the Nominating Committee
to recommend that individual for nomination as a director. The
Nominating Committee expects to seek referrals for candidates to
consider for nomination from a variety of sources, including
current directors, the Companys management, investment
adviser and counsel, will consider nominees properly recommended
by stockholders, and may also engage a search firm to identify
or evaluate or assist in identifying or evaluating candidates.
As set forth in the Nominating Committee Charter, in evaluating
candidates for a position on the Board, the Nominating Committee
considers a variety of factors, including, as appropriate:
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the candidates knowledge in matters relating to the
investment company or to the energy industry;
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any experience possessed by the candidate as a director or
senior officer of public companies;
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the candidates educational background;
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the candidates reputation for high ethical standards and
personal and professional integrity;
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any specific financial, technical or other expertise possessed
by the candidate, and the extent to which such expertise would
complement the Boards existing mix of skills and
qualifications;
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11
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the candidates perceived ability to contribute to the
ongoing functions of the Board, including the candidates
ability and commitment to attend meetings regularly and work
collaboratively with other members of the Board;
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the candidates ability to qualify as an independent
director for purposes of the 1940 Act, the candidates
independence from the Companys service providers and the
existence of any other relationships that might give rise to a
conflict of interest or the appearance of a conflict of
interest; and
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such other factors as the Nominating Committee determines to be
relevant in light of the existing composition of the Board and
any anticipated vacancies or other transitions (e.g.,
whether or not a candidate is an audit committee financial
expert under the federal securities laws).
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The Nominating Committee also considers diversity, including
gender, race and national origin, education, professional
experience, skills and viewpoints in identifying nominees for
director. The Nominating Committee does not have a formal policy
with respect to diversity; however, the Board and the Nominating
Committee believe that it is important that the Board members
represent diverse skills, backgrounds, experiences and
perspectives.
Prior to making a final recommendation to the Board, the
Nominating Committee may conduct personal interviews with the
candidates it believes to be the most qualified.
If there is no vacancy on the Board, the Board will not actively
seek recommendations from other parties, including stockholders.
When a vacancy on the Board occurs and nominations are sought to
fill such vacancy, the Nominating Committee may seek nominations
from those sources it deems appropriate in its discretion,
including the Companys stockholders.
The Nominating Committee considers nominees properly recommended
by stockholders. To submit a recommendation for nomination as a
candidate for a position on the Board, stockholders shall mail
the recommendation to the Secretary of the Company at 717 Texas
Avenue, Suite 3100, Houston, TX 77002. Such recommendation
shall include the following information: (a) evidence of
stock ownership of the person or entity recommending the
candidate; (b) a full description of the proposed
candidates background, including his or her education,
experience, current employment, and date of birth;
(c) names and addresses of at least three professional
references for the candidate; (d) information as to whether
the candidate is an interested person in relation to
the Company, as such term is defined in the 1940 Act, and such
other information that may be considered to impair the
candidates independence; and (e) any other
information that may be helpful to the Nominating Committee in
evaluating the candidate.
Any such recommendation must contain sufficient background
information concerning the candidate to enable the Nominating
Committee to make a proper judgment as to the candidates
qualifications. If a recommendation is received with
satisfactorily completed information regarding a candidate
during a time when a vacancy exists on the Board or during such
other time as the Nominating Committee is accepting
recommendations, the recommendation will be forwarded to the
Chair of the Nominating Committee and will be evaluated in the
same manner as other candidates for nomination. Recommendations
received at any other time will be kept on file until such time
as the Nominating Committee is accepting recommendations, at
which point they may be considered for nomination.
12
Board of
Director and Committee Meetings Held
The following table shows the number of meetings held for the
Company during the fiscal year ended November 30, 2010:
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Board of Directors
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4
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Audit Committee
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4
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Valuation Committee
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4
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Nominating Committee
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3
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During the 2010 fiscal year, each director attended at least 75%
of the aggregate of (1) the total number of meetings of the
Board and (2) the total number of meetings held by all
committees of the Board on which they served. The Company does
not currently have a policy with respect to board member
attendance at annual meetings.
Please refer to Corporate Governance on
page 29 for a review of the Boards leadership
structure, role in risk oversight and other matters.
13
INFORMATION
ABOUT EACH DIRECTORS QUALIFICATIONS,
EXPERIENCE, ATTRIBUTES OR SKILLS
The Board believes that each of its directors has the
qualifications, experience, attributes and skills
(Director Attributes) appropriate to their continued
service as directors of the Company in light of the
Companys business and structure. Each of the directors has
a demonstrated record of business
and/or
professional accomplishment that indicates that they have the
ability to critically review, evaluate and access information
provided to them. Certain of these business and professional
experiences are set forth in detail in the tables above under
Information Regarding Nominee and Directors. Each of
the directors has served on KEDs Board for a number of
years. In addition, all of the directors have served as members
of the board of other public companies, non-profit entities or
other organizations. They therefore have substantial boardroom
experience and, in their service to the Company, have gained
substantial insight into its operation and have demonstrated a
commitment to discharging oversight duties as directors in the
interests of stockholders.
In addition to the information provided in the tables above,
certain additional information regarding the directors and their
Director Attributes is provided below. The information provided
below, and in the tables above, is not all-inclusive. Many
Director Attributes involve intangible elements, such as
intelligence, integrity and work ethic, along with the ability
to work with other members of the Board, to communicate
effectively, to exercise judgment and to ask incisive questions,
and commitment to stockholder interests. The Board annually
conducts a self-assessment wherein the effectiveness of the
Board and individual directors is reviewed. In conducting its
annual self-assessment, the Board has determined that the
directors have the appropriate attributes and experience to
continue to serve effectively as directors of the Company.
Kevin S. McCarthy. Mr. McCarthy is
Chairman, President and Chief Executive Officer of the Company.
In this position, Mr. McCarthy has extensive knowledge of
the Company, its operations, personnel and financial resources.
Prior to joining Kayne Anderson in 2004, Mr. McCarthy was
most recently global head of energy at UBS Securities LLC. In
this role, he had senior responsibility for all of UBS
energy investment banking activities, including direct
responsibilities for securities underwriting and mergers and
acquisitions in the MLP industry. From 1995 to 2000,
Mr. McCarthy led the energy investment banking activities
of Dean Witter Reynolds and then PaineWebber Incorporated. He
began his investment banking career in 1984. In addition to his
directorships at KYN, KYE and KMF, he is also on the board of
directors of Range Resources Corporation, ProPetro Services,
Inc., International Resource Partners LP, Direct Fuel Partners,
L.P. and K-Sea Transportation Partners LP. Mr. McCarthy
earned a B.A. in Economics and Geology from Amherst College in
1981 and an M.B.A. in Finance from the Wharton School at the
University of Pennsylvania in 1984. Mr. McCarthys
position of influence and responsibility at the Company and at
KAFA, combined with his experience advising energy companies as
an investment banker, make him a valued member of the Board.
William R. Cordes. Mr. Cordes has worked
in the natural gas industry for more than 35 years,
including positions as Chief Executive Officer of Northern
Border Partners, L.P. (now ONEOK Partners, L.P.) and President
of Northern Natural Gas Company and Transwestern Pipeline
Company. Mr. Cordes began his career with Northern Natural
Gas Company in 1970, and held a number of accounting, regulatory
affairs and executive positions in the natural gas retail and
interstate pipeline divisions of the company. Mr. Cordes
currently serves on the Board of Directors of KMF, where he
serves as Chairman of the Audit Committee, and of Boardwalk
Pipeline Partners, LP, where he serves as a member of the Audit
and Conflicts Committee. He has served on the board of the
Interstate Natural Gas Association of America and as past
Chairman of the Midwest Energy Association. Mr. Cordes
graduated from the University of Nebraska with a degree in
Business Administration. Mr. Cordes extensive
executive experience in the MLP sector and the energy industry,
as well as his board experience as a director of several
energy-related companies, allows him to provide the Board with
insight into the energy industry in general and natural gas
pipelines in particular.
14
Barry R. Pearl. Mr. Pearl is Executive Vice
President of Kealine LLC (and its affiliate WesPac Energy LLC),
a private developer and operator of petroleum infrastructure
facilities. Mr. Pearl is a member of the Board of Directors
of KMF. Mr. Pearl is also a member of the Board of
Directors of Targa Resources Partners LP, where he serves as
Chairman of the Audit and Conflicts Committee, and of Magellan
Midstream Partners, L.P., where he serves as a member of the
Audit Committee. From 2006 to 2010 Mr. Pearl was a member
of the Board of Directors of Seaspan Corporation. Mr. Pearl
was elected President of Texas Eastern Products Pipeline
Company, LLC in February 2001 and Chief Executive Officer and
director of TEPPCO Partners, L.P. (TEPPCO) in May
2002, where he served until December 31, 2005.
Mr. Pearl was previously Chief Operating Officer of TEPPCO
from February 2001 until May 2002. Prior to joining TEPPCO,
Mr. Pearl was Vice President Finance and
Administration, Treasurer, Secretary and Chief Financial Officer
of Maverick Tube Corporation from June 1998. Mr. Pearl was
Senior Vice President and Chief Financial Officer of
Santa Fe Pacific Pipeline Partners, L.P. from 1995 until
1998, and Senior Vice President, Business Development from 1992
to 1995. Mr. Pearl is past Chairman of the Executive
Committee of the Association of Oil Pipelines. Mr. Pearl
graduated from Indiana University in 1970 with a Bachelor of
Arts degree in Mathematics. He received a Master of Arts degree
in Operations Research from Yale University in 1972 and a Master
in Business Administration degree from Denver University in
1975. In addition to his extensive executive experience in the
MLP sector and the energy industry, as well as his board
experience as a director of several energy-related companies,
Mr. Pearl brings to the Board many years of experience as
the chairman of the audit committees of several public companies.
Albert L. Richey. Mr. Richey is a Vice President at
Anadarko Petroleum Corporation. From December 2005 through
December 2008 he served as Vice President, Corporate
Development. Mr. Richey joined Anadarko in 1987 as Manager
of Treasury Operations. He was named Treasurer later that year
and was named Vice President in 1995. Mr. Richeys
background in the oil and gas industry includes The Offshore
Company (a predecessor company to Transocean Ltd.), United
Energy Resources and Sandefer Oil & Gas.
Mr. Richey received a Bachelor of Science degree in
Commerce in 1971 from the University of Virginia. In 1974, he
earned a Master of Business Administration degree from the
Darden Graduate School of Business at the University of
Virginia. He serves as a member of the Board of Directors for
KMF, the Boys & Girls Clubs of Houston and Boy Scouts
of America. In addition to his background in the energy
industry, Mr. Richeys professional experience related
to financial matters and his role as an executive in one of the
largest independent domestic exploration and production
companies equip him to offer further insights to the Board.
William L. Thacker. Mr. Thacker is the Chairman of
the Board of Directors of Copano Energy, L.L.C., and is a member
of the Compensation and Nominating and Governance Committees.
Mr. Thacker is a member of the Board of Directors of GenOn
Energy, Inc. where he serves as Chairman of the Compensation
Committee and of KMF. From April 2004 until November 2006 he was
also a member of the Board of Directors of Pacific Energy
Management, LLC, the general partner of Pacific Energy GP, LP,
which was in turn the general partner of Pacific Energy
Partners, L.P. He served as Chairman of the Nominating and
Governance Committee of Pacific Energy Management, LLC.
Mr. Thacker joined Texas Eastern Products Pipeline Company,
LLC (the general partner of TEPPCO) in September 1992 as
President, Chief Operating Officer and Director. He was elected
Chief Executive Officer in January 1994. In March 1997, he was
named to the additional position of Chairman of the Board, which
he held until his retirement in May 2002. Prior to joining Texas
Eastern Products Pipeline Company, LLC, Mr. Thacker was
President of Unocal Pipeline Company from 1986 until 1992.
Mr. Thacker is past Chairman of the Executive Committee of
the Association of Oil Pipelines and has served as a member of
the Board of Directors of the American Petroleum Institute.
Mr. Thacker holds a Bachelor of Mechanical Engineering
degree from the Georgia Institute of Technology and a Master of
Business Administration degree from Lamar University.
Mr. Thacker has extensive experience in the MLP sector and
the energy industry. In addition, Mr. Thacker brings to the
Board many years of experience as a board member of several
publicly-traded energy companies.
15
Robert V. Sinnott. Mr. Sinnott is President, Chief
Executive Officer and Senior Managing Director of Energy
Investments of KACALP. Mr. Sinnott is a member of the Board
of Directors of Plains All American Pipeline, L.P. He joined
Kayne Anderson in 1992. From 1986 to 1992, Mr. Sinnott was
Vice President and senior securities officer of Citibanks
Investment Banking Division, concentrating in high-yield
corporate buyouts and restructuring opportunities. From 1981 to
1986, he served as Director of Corporate Finance for United
Energy Resources, a pipeline company. Mr. Sinnott began his
career in the financial industry in 1976 as a
Vice President and Debt Analyst for Bank of America in its
oil and gas finance department. Mr. Sinnott graduated from
the University of Virginia in 1971 with a BA degree in
Economics. In 1976, he received an MBA degree in Finance from
Harvard University. Mr. Sinnotts extensive experience
investing in energy companies and serving as a board member of a
public MLP enable him to provide valuable insights to the Board.
Required
Vote
The election of Messrs. Cordes and Pearl as Class II
Directors under this proposal requires the affirmative vote of
the holders of a majority of the Companys Common Stock
outstanding as of the Record Date. For purposes of this
proposal, each share of Common Stock is entitled to one vote.
Abstentions, if any, will have the same effect as votes against
the election of Messrs. Cordes and Pearl although they will be
considered present for purposes of determining the presence of a
quorum at the Annual Meeting.
In uncontested elections of directors, brokers are permitted by
applicable regulations to vote shares as to which instructions
have not been received from the beneficial owners or the persons
entitled to vote. For this reason, it is anticipated that there
will be few, if any, broker non-votes in connection
with this proposal. However, broker non-votes, if any, will have
the same effect as a vote against the nominee, although they
would be considered present for purposes of determining a quorum.
BOARD
RECOMMENDATION
THE BOARD, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD.
16
PROPOSAL TWO
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee and the Board, including all of the
Independent Directors, have selected PricewaterhouseCoopers LLP
as the independent registered public accounting firm for the
Company for the year ending November 30, 2011 and are
submitting the selection of PricewaterhouseCoopers LLP to the
stockholders for ratification.
PricewaterhouseCoopers LLP has audited the financial statements
of the Company since inception and has informed the Company that
it has no direct or indirect material financial interest in the
Company or in Kayne Anderson.
A representative of PricewaterhouseCoopers LLP will be available
at the Annual Meeting to make a statement, if such
representative so desires, and to respond to stockholders
questions.
The Audit Committee normally meets two times each year with
representatives of PricewaterhouseCoopers LLP to discuss the
scope of their engagement, review the financial statements of
the Company and the results of their examination.
INDEPENDENT
ACCOUNTING FEES AND POLICIES
Audit and
Related Fees
The following table sets forth the approximate amounts of the
aggregate fees billed to the Company for the fiscal years ended
November 30, 2010 and 2009, respectively, by
PricewaterhouseCoopers LLP:
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2010
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2009
|
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Audit Fees(1)
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$
|
222,000
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|
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$
|
320,000
|
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Audit-Related Fees(2)
|
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Tax Fees(3)
|
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159,000
|
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|
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181,000
|
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All Other Fees
|
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Aggregate Non-Audit Fees(4)
|
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(1)
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For professional services rendered
with respect to the audit of the Companys annual financial
statements and the quarterly review of the Companys
financial statements.
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(2)
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For professional services rendered
with respect to assurance and related services reasonably
related to the performance of the audits of the Companys
annual financial statements not included in Audit
Fees above.
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(3)
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For professional services for tax
compliance, tax advice and tax planning.
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(4)
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Neither the Company, nor KAFA or
any entity controlling, controlled by, or under common control
with KAFA that provides ongoing services to the Company, was
billed by PricewaterhouseCoopers LLP for any non-audit services
during the fiscal years ended November 30, 2010 and 2009.
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Audit
Committee Pre-Approval Policies and Procedures
Before the auditor is engaged by the Company to render audit,
audit-related or permissible non-audit services to the Company,
either: (a) the Audit Committee shall pre-approve such
engagement; or (b) such engagement shall be entered into
pursuant to pre-approval policies and procedures established by
the Audit Committee. Before any non-audit services may be
provided by the auditor to Kayne Anderson or any entity in the
investment company complex (i.e., the Company, Kayne
Anderson and any entity controlled by, controlling or under
common control with Kayne Anderson if such entity is an
investment adviser or is
17
engaged in the business of providing administrative, custodian,
underwriting or transfer agent services to the Company or Kayne
Anderson), if the nature of the services to be provided relate
directly to the Companys operations or financial
reporting, such non-audit services must be pre-approved by the
Audit Committee. Any pre-approval policies and procedures
established by the Audit Committee must be detailed as to the
particular service and not involve any delegation of the Audit
Committees responsibilities to Kayne Anderson. The Audit
Committee may delegate to one or more of its members the
authority to grant pre-approvals. The pre-approval policies and
procedures shall include the requirement that the decisions of
any member to whom authority is delegated under this provision
shall be presented to the full Audit Committee at its next
scheduled meeting. Under certain limited circumstances,
pre-approvals are not required if certain de minimis
thresholds are not exceeded, as such thresholds are set
forth by the Audit Committee and in accordance with applicable
SEC rules and regulations.
For engagements with PricewaterhouseCoopers LLP, the Audit
Committee approved in advance all audit services and non-audit
services, if any, that PricewaterhouseCoopers LLP provided to
the Company and to Kayne Anderson (with respect to the
Companys operations and financial reporting). None of the
services rendered by PricewaterhouseCoopers LLP to the Company
or Kayne Anderson were pre-approved by the Audit Committee
pursuant to the pre-approval exception under
Rule 2.01(c)(7)(i)(C) or Rule 2.01(c)(7)(ii) of
Regulation S-X.
The Audit Committee has considered and concluded that the
provision of non-audit services rendered by
PricewaterhouseCoopers LLP to Kayne Anderson and any entity
controlling, controlled by, or under common control with Kayne
Anderson that were not required to be pre-approved by the Audit
Committee is compatible with maintaining PricewaterhouseCoopers
LLPs independence.
AUDIT
COMMITTEE REPORT
The Audit Committee of the Board of Directors (the
Board) is responsible for assisting the Board in
monitoring (1) the accounting and reporting policies and
procedures of the Company, (2) the quality and integrity of
the Companys financial statements, (3) the
Companys compliance with regulatory requirements, and
(4) the independence and performance of the Companys
independent auditors and any internal auditors. Among other
responsibilities, the Audit Committee reviews, in its oversight
capacity, the Companys annual financial statements with
both management and the independent auditors, and the Audit
Committee meets periodically with the independent auditors and
any internal auditors to consider their evaluation of the
Companys financial and internal controls. The Audit
Committee also selects, retains and evaluates and may replace
the Companys independent auditors and determines their
compensation, subject to ratification of the Board, if required.
The Audit Committee is currently composed of three Directors.
The Audit Committee operates under a written charter (the
Audit Committee Charter) adopted and approved by the
Board, a copy of which is available on the Companys
website (www.kaynefunds.com). Each Audit Committee member is
independent as defined by New York Stock Exchange
listing standards.
The Audit Committee, in discharging its duties, has met with and
held discussions with management and the Companys
independent auditors and any internal auditors. The Audit
Committee has reviewed and discussed the Companys audited
financial statements with management. Management has represented
to the independent auditors that the Companys financial
statements were prepared in accordance with accounting
principles generally accepted in the U.S. The Audit
Committee has also discussed with the independent auditors the
matters required to be discussed by the statement on Auditing
Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1, AU section 380), as adopted by the
Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has received the written disclosures and the
letter from the Companys independent auditors required by
applicable requirements of the Public Company Accounting
Oversight Board regarding the independent auditors
communications with the Audit Committee concerning independence,
and has discussed with the independent auditors the independent
auditors independence. As
18
provided in the Audit Committee Charter, it is not the Audit
Committees responsibility to determine, and the
considerations and discussions referenced above do not ensure,
that the Companys financial statements are complete and
accurate and presented in accordance with accounting principles
generally accepted in the U.S.
Based on the Audit Committees review and discussions with
management and the independent auditors, the representations of
management and the report of the independent auditors to the
Audit Committee, the Audit Committee has recommended that the
Board include the audited financial statements in the
Companys Annual Report on
Form N-CSR
for the fiscal year ended November 30, 2010 filed with the
Securities and Exchange Commission.
Submitted
by the Audit Committee:
William R. Cordes
Albert L. Richey
William L. Thacker
Required
Vote
The approval of this proposal requires the affirmative vote of a
majority of the votes cast by the holders of the Companys
Common Stock. For purposes of this proposal, each share of
Common Stock is entitled to one vote.
For purposes of the vote on this proposal, abstentions and
broker non-votes will not be counted as votes cast and will have
no effect on the result of the vote.
BOARD
RECOMMENDATION
THE BOARD, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANYS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
19
PROPOSAL THREE
APPROVAL TO SELL SHARES OF COMMON STOCK AT A
PRICE BELOW NET ASSET VALUE PER SHARE
Summary
The 1940 Act prohibits the Company from selling shares of its
common stock at a net price, after deducting underwriting fees,
commissions and offering expenses, below the current net asset
value (NAV) per share of such stock, except with the
consent of a majority of the Companys common stockholders
or under certain other circumstances. The Company may be
presented with potential investments that KAFA believes are
sufficiently attractive to justify selling shares of the
Companys common stock at a price below its then-current
NAV per share, which could be made only if the Company raises
additional capital in that manner. The Board is seeking the
required stockholder approval so the Company may sell shares of
its common stock at a price below its then-current NAV per
share, subject to certain conditions discussed below. If
approved, the authorization would be effective for a period
expiring on the date of the Companys 2012 Annual Meeting
of Stockholders, which is expected to be held in June 2012.
Rationale
The Company expects that it will be periodically presented with
opportunities to acquire securities at attractive prices that
may lead to an increase in the Companys long-term NAV,
including securities of privately-held companies and publicly
traded securities purchased at a discount to current market
value in negotiated transactions. The Company believes that
having the ability to issue its common stock at a price below
NAV could benefit its stockholders by providing it with the
flexibility to enter into such negotiated transactions, which
have the potential to increase the Companys long-term NAV
per share.
These negotiated transactions often require the Company to
commit capital in a relatively short period of time, and such
commitments cannot be contingent upon future financings. Because
the Company generally attempts to remain fully invested and does
not intend to maintain cash for the purpose of making these
investments, the Company may be unable to capitalize on
investment opportunities presented to it unless it is confident
that it can raise equity capital without seeking stockholder
approval on a case-by-case basis.
NAV and
Share Price History of the Companys Common Stock
The Companys common stock has traded both at a premium and
at a discount in relation to its NAV per share. The following
table sets forth a comparison of the Companys NAV per
share and the comparable closing price of its Common stock per
share, as reported on the NYSE, as of the last day of each
fiscal quarter for the past three years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/
|
Date
|
|
NAV
|
|
Closing Price
|
|
(Discount)
|
|
February 28, 2011
|
|
$
|
21.88
|
|
|
$
|
18.44
|
|
|
|
(16
|
)%
|
November 30, 2010
|
|
|
20.56
|
|
|
|
18.21
|
|
|
|
(11
|
)
|
August 31, 2010
|
|
|
19.14
|
|
|
|
14.59
|
|
|
|
(24
|
)
|
May 31, 2010
|
|
|
16.89
|
|
|
|
14.46
|
|
|
|
(14
|
)
|
February 28, 2010
|
|
|
17.03
|
|
|
|
15.07
|
|
|
|
(12
|
)
|
November 30, 2009
|
|
|
16.58
|
|
|
|
13.53
|
|
|
|
(18
|
)
|
August 31, 2009
|
|
|
16.02
|
|
|
|
11.64
|
|
|
|
(27
|
)
|
May 31, 2009
|
|
|
15.70
|
|
|
|
12.33
|
|
|
|
(21
|
)
|
February 28, 2009
|
|
|
15.23
|
|
|
|
9.09
|
|
|
|
(40
|
)
|
November 30, 2008
|
|
|
16.10
|
|
|
|
9.63
|
|
|
|
(40
|
)
|
August 31, 2008
|
|
|
22.19
|
|
|
|
22.85
|
|
|
|
3
|
|
May 31, 2008
|
|
|
23.51
|
|
|
|
23.87
|
|
|
|
2
|
|
20
Conditions
for Selling the Companys Common Stock at a Price Below
NAV
If this proposal is approved, the Company does not anticipate
selling its common stock at a price below its NAV unless it has
identified attractive near-term investment opportunities that
KAFA reasonably believes will lead to a long-term increase in
NAV. In determining whether or not to sell additional shares of
the Companys common stock at a price below the NAV per
share, the Board of Directors will have duties to act in the
best interest of the Company and its stockholders. To the extent
the Company issues shares of its common stock at a price below
NAV in a publicly registered transaction, the Companys
market capitalization and the amount of its publicly tradable
common stock will increase, thus affording all common
stockholders greater liquidity.
The Company will only sell shares of its common stock at a price
below NAV per share if both of the following conditions are met:
|
|
|
|
1.
|
A majority of the Companys Independent Directors makes a
determination, based on information and a recommendation from
KAFA, that they reasonably expect that the
investment(s) to be made with the net proceeds of such issuance
will lead to a long-term increase in NAV.
|
|
|
2.
|
Immediately following the offering of common stock, after
deducting offering expenses and underwriting fees and
commissions, the NAV per share of the Companys common
stock, as determined at any time within two business days before
pricing of such common stock offering, would not have been
diluted by greater than a total of 5% of such value per share of
all outstanding common stock. The Company will not be subject to
a maximum number of shares that can be sold or a defined minimum
sales price per share in any offering so long as the aggregate
number of shares offered and the price at which such shares are
sold in one or a series of related transactions together would
not result in dilution of the NAV per share of the
Companys common stock in excess of the 5% limitation.
|
Factors
to Consider
Before voting on this proposal or giving proxies with regard to
this matter, common stockholders of the Company should consider
the potentially dilutive effect of the issuance of shares of the
Companys common stock at a price less than NAV per share
on the NAV per share of common stock then-outstanding. Any sale
of common stock at a price below NAV would result in an
immediate dilution to existing common stockholders. Common
stockholders of the Company should also consider that holders of
the Companys common stock have no subscription,
preferential or pre-emptive rights to additional shares of the
common stock proposed to be authorized for issuance, and thus
any future issuance of common stock will dilute such
stockholders holdings of common stock as a percentage of
shares outstanding.
The two examples below assume that the Company has an NAV of
$21.88 per share with 10.3 million shares outstanding and
that the underwriting fees, commissions and expenses are 5% of
the gross offering price per share.
Example 1. A gross offering price of $19.69
per share (10% below NAV) would result in a net offering price
of $18.71 per share after deducting the underwriting fees,
commissions and expenses. The maximum number of shares that the
Company could issue in this example is 5.4 million shares
before reaching the cap of 5% dilution to NAV per share, or
$1.09 per share.
Example 2. A gross offering price of $17.50
per share (20% below NAV) would result in a net offering price
of $16.63 per share after deducting the underwriting fees,
commissions and expenses. The maximum number of shares that the
Company could issue in this example is approximately
2.7 million shares before reaching the cap of 5% dilution
to NAV per share, or $1.09 per share.
21
As discussed above, the Company will only sell shares of its
common stock at a net price below NAV per share so long as the
relevant offering would not result in dilution of the NAV per
share in excess of 5%. However, it is possible that the Company
could effect multiple offerings of its common stock, each of
which would meet the 5% limitation, but which would cumulatively
result in a dilutive effect of greater than 5% of the NAV per
share. The Company intends to consider any series of related
transactions as one transaction for the purposes of the 5% limit
on NAV dilution.
Example
of Dilutive Effect of Issuance of Shares Below
NAV
The following table illustrates the reduction to NAV and the
dilution experienced by Stockholder A following the sale of
1,000,000 shares of common stock at a gross offering price
of $19.69 per share (10% below NAV) and that underwriting fees,
commissions and expenses are equal to 5% of the gross offering
price per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to Sale
|
|
|
Following Sale
|
|
|
Percentage
|
|
|
|
Below NAV
|
|
|
Below NAV
|
|
|
Change
|
|
|
Reduction to NAV
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shares Outstanding
|
|
|
10,300,000
|
|
|
|
11,300,000
|
|
|
|
9.70
|
%
|
NAV per Share
|
|
$
|
21.88
|
|
|
$
|
21.60
|
|
|
|
−1.28
|
%
|
Dilution to Stockholder A
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Held by Stockholder A(1)
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
0.00
|
%
|
Percentage Held by Stockholder A
|
|
|
0.97
|
%
|
|
|
0.88
|
%
|
|
|
−9.28
|
%
|
NAV Attributable to Interests of Stockholder A
|
|
$
|
2,188,000
|
|
|
$
|
2,160,000
|
|
|
|
−1.28
|
%
|
|
|
|
(1)
|
|
Assumes that Stockholder A does not
purchase additional shares in the equity offering of shares
below NAV.
|
The issuance of the additional shares of common stock will also
have an effect on the gross amount of management fees paid by
the Company to KAFA. The Companys investment advisory
agreement with KAFA provides for a management fee payable to
KAFA as compensation for managing the investment portfolios of
the Company computed as a percentage of assets under management.
The increase in the Companys asset base that would result
from any issuance of shares of common stock proposed to be
authorized by common stockholders in this proposal would
increase assets of the Company under management, and would cause
a corresponding increase in the gross amount of management fees
paid to KAFA, but would not increase or decrease the management
fee as a percentage of assets under management. However, by
increasing the size of the Companys asset base and number
of shares outstanding, the Company may be able to reduce its
fixed expenses both as a percentage of total assets and on a per
share basis.
Required
Vote
The approval of this proposal requires:
|
|
|
|
(1)
|
the affirmative vote of a majority of all holders of the
Companys Common Stock on the records of the Companys
transfer agent (Registered Common Stockholders) as
of the Record Date (the Registered Common Stockholder
Vote), and
|
|
|
(2)
|
the affirmative vote of a majority of the votes cast by the
holders of the Companys Common Stock outstanding as of the
Record Date (the Majority Stockholder Vote).
|
For purposes of the Registered Common Stockholder Vote,
abstentions will have the effect of votes AGAINST
this proposal; and broker non-votes are not relevant for this
vote because Registered Common Stockholders are
stockholders of record with the transfer agent and,
therefore, do not hold their shares
22
through a broker. For purposes of the Majority Stockholder Vote,
abstentions will have the effect of votes AGAINST
this proposal, and broker non-votes will have no effect on the
outcome.
The vast majority of shareholders hold their shares beneficially
through brokers and are not Registered Common Stockholders. In
fact, as of February 28, 2011 the Company had five
Registered Common Stockholders.
Stockholders should note that various affiliates of KAFA, such
as its officers and employees, are Registered Common
Stockholders of the Company and intend to participate in the
Registered Common Stockholder Vote. Because there are so few
Registered Common Stockholders, these affiliates represent a
substantial percentage of the total number of the Companys
Registered Common Stockholders. For that reason, votes cast by
these affiliates will likely determine whether this proposal is
approved pursuant to the Registered Common Stockholder Vote. In
order to mitigate the conflict of interest these affiliates may
have in voting for this proposal pursuant to the Registered
Common Stockholder Vote, each such affiliate intends to vote in
favor of this proposal pursuant to the Registered Common
Stockholder Vote only if this proposal is approved pursuant to
the Majority Stockholder Vote. Using this method, the approval
of the proposal is likely to be determined by the Majority
Stockholder Vote.
BOARD
RECOMMENDATION
THE BOARD, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE
FOR THE PROPOSAL TO ALLOW THE COMPANY TO SELL
SHARES OF ITS COMMON STOCK AT A PRICE BELOW NAV PER SHARE.
23
INFORMATION
ABOUT EXECUTIVE OFFICERS
The following table sets forth each executive officers
name and year of birth; position(s) with the Company, term of
office, and length of time served; principal occupations during
the past five years; and directorships. The address for the
Companys offices is 717 Texas Avenue, Suite 3100,
Houston, TX 77002. All executive officers currently serve in
identical offices with KYN, KYE, KMF and KED.
Officers
|
|
|
|
|
|
|
|
|
|
|
Position(s)
|
|
|
|
Number of
|
|
|
|
|
Held with
|
|
|
|
Portfolios in
|
|
|
|
|
the Company,
|
|
|
|
Fund Complex
|
|
Other
|
Name
|
|
Term of Office/
|
|
Principal Occupations
|
|
Overseen by
|
|
Directorships
|
(Year Born)
|
|
Time of Service
|
|
During Past Five Years
|
|
Officer
|
|
Held by Officer
|
|
|
|
|
|
|
|
|
|
|
Kevin S. McCarthy
(born 1959)
|
|
Chairman of the Board of Directors, President and Chief
Executive Officer. 3-year term as a director (until the 2012
Annual Meeting of Stockholders), elected annually as an officer.
Served since inception.
|
|
Senior Managing Director of KACALP since June 2004 and of KAFA
since 2006. President and Chief Executive Officer of KYN, KYE,
KED and KMF since inception (KYN inception in 2004, KYE
inception in 2005, KED inception in 2006 and KMF inception in
2010). Global Head of Energy at UBS Securities LLC from November
2000 to May 2004.
|
|
4
|
|
KYN
KYE
KMF
Range Resources Corporation (oil and natural gas company)
International Resource Partners LP (coal mining MLP)
Direct Fuels Partners, L.P. (transmix refining and fuels distribution)
ProPetro Services, Inc. (oilfield services)
K-Sea Transportation Partners LP (shipping MLP)
|
|
|
|
|
|
|
|
|
|
Terry A. Hart
(born 1969)
|
|
Chief Financial Officer and Treasurer. Elected annually. Served
since inception.
|
|
Chief Financial Officer and Treasurer of KYN and KYE since
December 2005, of KED since June 2006, and of KMF since October
2010. Director of Structured Finance, Assistant Treasurer,
Senior Vice President and Controller of Dynegy, Inc. from 2000
to 2005.
|
|
4
|
|
None
|
|
|
|
|
|
|
|
|
|
David J. Shladovsky
(born 1960)
|
|
Secretary and Chief Compliance Officer. Elected annually. Served
since inception.
|
|
Managing Director and General Counsel of KACALP since 1997 and
of KAFA since 2006. Secretary and Chief Compliance Officer of
KYN since 2004, of KYE since 2005, of KED since 2006 and of KMF
since 2010.
|
|
4
|
|
None
|
24
|
|
|
|
|
|
|
|
|
|
|
Position(s)
|
|
|
|
Number of
|
|
|
|
|
Held with
|
|
|
|
Portfolios in
|
|
|
|
|
the Company,
|
|
|
|
Fund Complex
|
|
Other
|
Name
|
|
Term of Office/
|
|
Principal Occupations
|
|
Overseen by
|
|
Directorships
|
(Year Born)
|
|
Time of Service
|
|
During Past Five Years
|
|
Officer
|
|
Held by Officer
|
|
|
|
|
|
|
|
|
|
|
J.C. Frey
(born 1968)
|
|
Executive Vice President, Assistant Treasurer and Assistant
Secretary. Elected annually. Served as Assistant Treasurer and
Assistant Secretary since inception; served as Executive Vice
President since June 2008.
|
|
Senior Managing Director of KACALP since 2004 and of KAFA since
2006, and Managing Director of KACALP since 2000. Portfolio
Manager of KACALP since 2000, Co-Portfolio Manager, Vice
President, Assistant Secretary and Assistant Treasurer of KYN
since 2004, of KYE since 2005 and of KED since 2006. Executive
Vice President of KYN, KYE and KED since June 2008 and of KMF
since October 2010.
|
|
4
|
|
None
|
|
|
|
|
|
|
|
|
|
Ron M. Logan, Jr. (born 1960)
|
|
Senior Vice President. Elected annually. Served since September
2006.
|
|
Managing Director of KACALP and KAFA since September 2006.
Independent consultant to several leading energy firms. Senior
Vice President of Ferrellgas Inc. from 2003 to 2005. Vice
President of Dynegy Midstream Services from 1997 to 2002.
|
|
1
|
|
VantaCore Partners, LP (aggregates MLP)
|
|
|
|
|
|
|
|
|
|
James C. Baker
(born 1972)
|
|
Executive Vice President. Elected annually. Served as Vice
President from June 2005 to June 2008; served as Executive Vice
President since June 2008.
|
|
Senior Managing Director of KACALP and KAFA since February 2008,
Managing Director of KACALP and KAFA since December 2004 and
2006, respectively. Vice President of KYN and KYE from 2005 to
2008 and of KED from 2006 to 2008, and Executive Vice President
of KYN, KYE and KED since June 2008 and of KMF since October
2010.
|
|
4
|
|
ProPetro Services, Inc. (oilfield services)
Petris Technology, Inc. (data management for energy companies)
K-Sea Transportation Partners LP (shipping MLP)
|
COMPENSATION
DISCUSSION AND ANALYSIS
Pursuant to an investment management agreement between the
Company and KAFA (the Companys external manager), KAFA is
responsible for supervising the investments and reinvestments of
the Companys assets. KAFA, at its own expense, maintains
staff and employs personnel as it determines is necessary to
perform its obligations under the investment management
agreement. The Company pays various management fees to KAFA for
the advisory and other services performed by KAFA under the
investment management agreement.
The executive officers who manage the Companys regular
business are employees of KAFA or its affiliates. Accordingly,
the Company does not pay salaries, bonuses or other compensation
to its executive officers. The Company does not have employment
agreements with its executive officers. The Company does not
provide pension or retirement benefits, perquisites, or other
personal benefits to its executive officers. The Company
does not maintain compensation plans under which its equity
securities are authorized for issuance. The Company does not
have arrangements to make payments to its executive officers
upon their termination or in the event of a change in control of
the Company.
The investment management agreement for the Company does not
require KAFA to dedicate specific personnel to fulfilling its
obligation to the Company under the investment management
agreement, or require
25
KAFA personnel to dedicate a specific amount of time to the
management of the Company. In their capacities as executive
officers or employees of KAFA or its affiliates, they devote
such portion of their time to the Companys affairs as
required for the performance of KAFAs duties under the
investment management agreement.
The Companys executive officers are compensated by KAFA.
The Company understands that KAFA takes into account the
Companys performance as a factor in determining the
compensation of certain of its senior managers, and such
compensation may be increased depending on the Companys
performance. In addition to compensation for services performed
for the Company, certain of the executive officers receive
compensation for services performed for KAFAs various
investment funds. However, KAFA cannot segregate and identify
that portion of the compensation awarded to, earned by or paid
to the Companys executive officers that relates
exclusively to their services to the Company.
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following tables set forth the number of shares of the
Companys Common Stock (as of February 28, 2011)
beneficially owned by the Companys current directors and
executive officers as a group, and certain other beneficial
owners, according to information furnished to the Company by
such persons. Based on statements publicly filed with the SEC
and other information obtained from such persons, as of
February 28, 2011, the Company is aware of two persons who
beneficially own more than 5% of its outstanding Common Stock.
Beneficial ownership is determined in accordance with
Rule 13d-3
under the 1934 Act and, unless indicated otherwise,
includes voting or investment power with respect to the
securities.
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Percent of
|
Name of Beneficial Owner of
Common Stock
|
|
Shares
|
|
Class(1)
|
|
Independent Directors
|
|
|
|
|
|
|
|
|
William R. Cordes
|
|
|
2,000
|
|
|
|
|
*
|
Barry R. Pearl
|
|
|
4,000
|
|
|
|
|
*
|
Albert L. Richey
|
|
|
12,561
|
|
|
|
|
*
|
William L. Thacker
|
|
|
2,598
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Interested Director
|
|
|
|
|
|
|
|
|
Kevin S. McCarthy(2)
|
|
|
28,134
|
|
|
|
|
*
|
Robert V. Sinnott(2)
|
|
|
29,000
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
Terry A. Hart
|
|
|
1,382
|
|
|
|
|
*
|
David. J. Shladovsky
|
|
|
1,914
|
|
|
|
|
*
|
J.C. Frey
|
|
|
11,674
|
|
|
|
|
*
|
Ron M. Logan, Jr.
|
|
|
546
|
|
|
|
|
|
James C. Baker
|
|
|
10,784
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
All Directors and Executive Officers as a Group
(11 persons)
|
|
|
104,593
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Cedar Hill Associates, LLC
|
|
|
927,980
|
|
|
|
9.0
|
%
|
120 South LaSalle St, Suite 1750
Chicago, IL
60603-3447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burgundy Asset Management Ltd.
|
|
|
797,222
|
|
|
|
7.8
|
%
|
181 Bay Street, Suite 4510
Toronto, Ontario M5J 2T3
Canada
|
|
|
|
|
|
|
|
|
26
|
|
|
*
|
|
Less than 1% of class.
|
|
(1)
|
|
Based on 10,284,477 shares of
common stock outstanding as of February 28, 2011.
|
|
(2)
|
|
Does not include 60 shares of
the Companys common stock held by KAFA, a subsidiary of
KACALP, a limited partnership in which Messrs. McCarthy and
Sinnott are each a Senior Managing Director and each have
ownership interests, because neither of them individually or
acting together may exercise voting or investment power with
respect to such shares. The Company believes by virtue of these
arrangements that Messrs. McCarthy and Sinnott should not
be deemed to have indirect beneficial ownership of such shares.
|
The following table sets forth the dollar range of the
Companys equity securities and the aggregate dollar range
of equity securities in all of the closed-end funds overseen by
each director in the same Fund Complex beneficially owned
by the directors of the Company as of February 28, 2011
(beneficial ownership being determined in accordance with
Rule 16a-1(a)(2)
of the 1934 Act):
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
Dollar Range(1) of Equity
|
|
|
|
|
Securities in
|
|
|
|
|
Closed-End
|
|
|
Dollar Range(1) of
|
|
Funds Overseen
|
|
|
Our Equity
|
|
by Director in
|
Director
|
|
Securities
|
|
Fund Complex(2)
|
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Independent Directors
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William R. Cordes
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$10,001-$50,000
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$50,001-$100,000
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Barry R. Pearl
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$50,001-$100,000
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Over $100,000
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Albert L. Richey
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Over $100,000
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Over $100,000
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William L. Thacker
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$10,001-$50,000
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$50,001-$100,000
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Interested Director
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Kevin S. McCarthy
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Over $100,000
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Over $100,000
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Robert V. Sinnott
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Over $100,000
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Over $100,000
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(1)
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Dollar ranges are as follows: none;
$1-$10,000; $10,001-$50,000; $50,001-$100,000; over $100,000.
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(2)
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Mr. McCarthy is the only one
of our directors who also serves on the Boards of Directors of
KYN and KYE, both registered investment companies advised by
KAFA.
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As of February 28, 2011, the Independent Directors and
their respective immediate family members did not own
beneficially or of record any class of securities of Kayne
Anderson or any person directly or indirectly controlling,
controlled by, or under common control with Kayne Anderson. As
of February 28, 2011, the Independent Directors did not own
beneficially or of record any class of securities of the
underwriters of the offerings of the Companys Common Stock
or any class of securities of any person directly or indirectly
controlling, controlled by, or under common control with such
underwriters.
As of February 28, 2011, certain officers and certain
employees of Kayne Anderson, including all the executive
officers of Company, own, in the aggregate, approximately
$2.7 million of the Companys Common Stock.
27
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the
1934 Act require the Companys directors and executive
officers, investment adviser, affiliated persons of the
investment adviser and persons who own more than 10% of a
registered class of the Companys equity securities to file
Section 16(a) forms with the SEC and NYSE reporting their
affiliation with the Company, their ownership and changes in
their ownership of the Companys shares. Those persons and
entities are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based
solely on a review of those Section 16(a) forms furnished
to it, the Company believes that its directors and executive
officers, KAFA, and affiliated persons of KAFA have complied
with all applicable Section 16(a) filing requirements
during the fiscal year ended November 30, 2010. To the knowledge
of the Companys management, no person owned beneficially
more than 10% of the Companys Common Stock during the
fiscal year ended November 30, 2010.
28
CORPORATE
GOVERNANCE
Board
Leadership Structure
The Companys business and affairs are managed under the
direction of its Board, including the duties performed for the
Company pursuant to its investment management agreement. Among
other things, the Board sets broad policies for the Company,
approves the appointment of the Companys investment
adviser, administrator and officers, and approves the
engagement, and reviews the performance of the Companys
independent registered public accounting firm. The role of the
Board and of any individual director is one of oversight and not
of management of the
day-to-day
affairs of the Company.
The Board currently consists of six directors, four of whom are
Independent Directors. As part of each regular Board meeting the
Independent Directors meet separately from Kayne Anderson and,
as part of at least one Board meeting each year, with the
Companys Chief Compliance Officer. The Board reviews its
leadership structure periodically as part of its annual
self-assessment process and believes that its structure is
appropriate to enable the Board to exercise its oversight of the
Company.
Under the Companys Amended and Restated Bylaws, the Board
may designate a Chairman to preside over meetings of the Board
and meetings of stockholders, and to perform such other duties
as may be assigned to him or her by the Board. The Company does
not have an established policy as to whether the Chairman of the
Board shall be an Independent Director and believes that having
the flexibility to designate its Chairman and reorganize its
leadership structure from time to time is in the best interests
of the Company and its stockholders.
Presently, Mr. McCarthy serves as Chairman of the Board.
Mr. McCarthy is an interested person of the
Company, as defined in the 1940 Act, by virtue of his employment
relationship with Kayne Anderson. The Company believes that
Mr. McCarthys history with the Company, familiarity
with the Kayne Anderson investment platform and extensive
experience in the field of energy-related investments qualifies
him to serve as the Chairman of the Board. The Board has
determined that the composition of the Audit and Nominating
Committees being Independent Directors only is an appropriate
means to address any potential conflicts of interest that may
arise from the Chairmans status as an interested person of
the Company. The Board believes that its Board leadership
structure having the Chief Executive Officer serve
as Chairman of the Board and Audit and Nominating Committees
comprised solely of Independent Directors is the
optimal structure for the Company at this time. Because the
Chief Executive Officer has the most extensive knowledge of the
various aspects of the Companys business and is directly
involved in managing both the
day-to-day
operations and long-term strategy of the Company, the Board has
determined that Mr. McCarthy is the most qualified
individual to lead the Board and serve in the key position as
Chairman. The Board has also concluded that this structure
allows for efficient and effective communication with the Board.
Currently, the Board does not have a designated lead Independent
Director. Instead, all of the Independent Directors play an
active role serving on the Board. The Independent Directors
constitute a majority of the Board and are closely involved in
all material deliberations related to the Company. The Board
believes that, with these practices, each Independent Director
has an equal stake in the Boards actions and oversight
role and equal accountability to the Company and its
stockholders.
Board
Role in Risk Oversight
The Board oversees the services provided by Kayne Anderson,
including certain risk management functions. Risk management is
a broad concept comprised of many disparate elements (such as,
for example, investment risk, issuer and counterparty risk,
compliance risk, operational risk and business continuity risk).
Consequently, Board oversight of different types of risks is
handled in different ways, and the Board implements its risk
oversight function both as a whole and through Board committees.
In the course of
29
providing oversight, the Board and its committees receive
reports on the Companys activities, including those
related to the Companys investment portfolio and its
financial accounting and reporting. The Board also meets at
least quarterly with the Companys Chief Compliance
Officer, who reports on the compliance of the Company with the
federal securities laws and the Companys internal
compliance policies and procedures. The meetings of the Audit
Committee with the Companys independent registered public
accounting firm also contribute to Board oversight of certain
internal control risks. In addition, the Board meets
periodically with representatives of the Company and Kayne
Anderson to receive reports regarding the management of the
Company, including those related to certain investment and
operational risks, and the Independent Directors of the Company
are encouraged to communicate directly with senior management.
The Company believes that Board roles in risk oversight must be
evaluated on a
case-by-case
basis and that the Boards existing role in risk oversight
is appropriate. Management believes that the Company has robust
internal processes in place and a strong internal control
environment to identify and manage risks. However, not all risks
that may affect the Company can be identified or processes and
controls developed to eliminate or mitigate their occurrence or
effects, and some risks are beyond any control of the Company or
Kayne Anderson, its affiliates or other service providers.
Diversity
in Nominees for Director
The Nominating Committee evaluates candidates
qualifications for Board membership. The Nominating Committee
takes into account the diversity of a particular candidate and
the overall diversity of the Board when considering and
evaluating candidates for Director. While the Nominating
Committee has not adopted a particular definition of diversity
or a particular policy with regard to the consideration of
diversity in identifying candidates, when considering a
candidates and the Boards diversity, the Nominating
Committee generally considers the manner in which each
candidates leadership, independence, interpersonal skills,
financial acumen, integrity and professional ethics, educational
and professional background, prior director or executive
experience, industry knowledge, business judgment and specific
experiences or expertise would compliment or benefit the Board
and, as a whole, contribute to the ability of the Board to
oversee the Company. The Nominating Committee may also consider
other factors or attributes as it may determine appropriate in
its judgment. The Nominating Committee believes that the
significance of each candidates background, experience,
qualifications, attributes or skills must be considered in the
context of the Board as a whole. As a result, the Nominating
Committee has not established any litmus test or quota relating
to diversity that must be satisfied before an individual may
serve as a director. The Board believes that Board effectiveness
is best evaluated at a group level, through its annual
self-assessment process. Through this process, the Board
considers whether the Board as a whole has an appropriate level
of sophistication, skill and business acumen and the appropriate
range of experience and background.
Communications
Between Stockholders and the Board of Directors
Stockholders may send communications to the Board.
Communications should be addressed to the Secretary of the
Company at 717 Texas Avenue, Suite 3100, Houston, TX 77002.
The Secretary of the Company will forward any communications
received directly to the Board.
Code of
Ethics
The Company has adopted a code of ethics, as required by federal
securities laws, which applies to, among others, its directors
and officers. A text-only version of the Companys code of
ethics is available on the EDGAR Database on the SECs
internet web site at www.sec.gov. In addition, copies of the
code of ethics may be obtained from the Company free of charge
at
(877) 657-3863.
30
OTHER
MATTERS
The Board knows of no other matters that are intended to be
brought before the meeting. If other matters are properly
presented at the Annual Meeting, the proxies named in the
enclosed form of proxy will vote on those matters in their sole
discretion.
MORE
INFORMATION ABOUT THE MEETING
Outstanding
Stock
At the Record Date, the Company had 10,302,464 shares of common
stock issued and outstanding.
To the knowledge of the Companys management:
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As of February 28, 2011, two entities held beneficially
more than 5% of the Companys outstanding Common Stock.
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As of February 28, 2011, no directors owned 1% or more of
the Companys outstanding Common Stock.
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As of February 28, 2011, officers and directors of the
Company owned, as a group, less than 1% of the Companys
outstanding Common Stock.
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How
Proxies Will Be Voted
All proxies solicited by the Board of Directors that are
properly executed and received at or prior to the Annual
Meeting, and that are not revoked, will be voted at the Annual
Meeting. Votes will be cast in accordance with the instructions
marked on the enclosed proxy card. If no instructions are
specified, the persons named as proxies will cast such votes in
accordance with each Boards recommendations. The Company
knows of no other matters to be presented at the Annual Meeting.
However, if other proposals are properly presented at the Annual
Meeting, the votes entitled to be cast by the persons named as
proxies on the enclosed proxy card will cast such votes in their
sole discretion.
How to
Vote
If your shares are held in Street Name by a broker
or bank, you will receive information regarding how to instruct
your bank or broker to cast your votes. If you are a stockholder
of record, you may authorize the persons named as proxies on the
enclosed proxy card to cast the votes you are entitled to cast
at the meeting by completing, signing, dating and returning the
enclosed proxy card. Stockholders of record or their duly
authorized proxies may vote in person at the Annual Meeting.
However, even if you plan to attend the Annual Meeting, you
should still return your proxy card, which will ensure that your
vote is cast should your plans change.
Expenses
and Solicitation of Proxies
The expenses of preparing, printing and mailing the enclosed
proxy card, the accompanying notice and this proxy statement,
tabulation expenses and all other costs in connection with the
solicitation of proxies will be borne by the Company. The
Company may also reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation material to
the beneficial owners of the Companys shares. In order to
obtain the necessary quorum at the meeting, additional
solicitation may be made by mail, telephone, telegraph,
facsimile or personal interview by the Companys
representatives, Kayne Anderson, the Companys transfer
agent, or by brokers or their representatives or by a
solicitation firm that may be engaged by the Company to assist
in proxy solicitations. If a proxy solicitor is retained by the
Company, the costs associated
31
with all proxy solicitation are expected to be approximately
$4,000. The Company will not pay any of its representatives or
Kayne Anderson any additional compensation for their efforts to
supplement proxy solicitation.
Dissenters
or Appraisal Rights
Stockholders do not have dissenters or appraisal rights.
Revoking
a Proxy
At any time before it has been voted, you may revoke your proxy
by: (1) sending a letter revoking your proxy to the
Secretary of the Company at 717 Texas Avenue, Suite 3100,
Houston, TX 77002; (2) properly executing and sending a
later-dated proxy to the Secretary of the Company at the same
address; or (3) attending the Annual Meeting, requesting
return of any previously delivered proxy, and voting in person.
Broker
Non-Votes
Broker non-votes occur when a beneficial owner of shares held in
street name does not give instructions to the broker
holding the shares as to how to vote on matters deemed
non-routine. Generally, if shares are held in street
name, the beneficial owner of the shares is entitled to give
voting instructions to the broker holding the shares. If the
beneficial owner does not provide voting instructions, the
broker can still vote the shares with respect to matters that
are considered to be routine, but cannot vote the
shares with respect to non-routine matters. Under
the rules and interpretations of the NYSE,
non-routine matters are generally matters that may
substantially affect the rights or privileges of stockholders.
The ratification of the selection of the independent registered
public accounting firm is generally considered to be
routine, and brokers generally have discretionary
voting power with respect to such proposal.
Quorum
and Adjournment
The presence, in person or by proxy, of holders of shares
entitled to cast a majority of the votes entitled to be cast
(without regard to class) constitutes a quorum for the purposes
of the Annual Meeting. Abstentions and broker non-votes will be
counted for purposes of determining whether a quorum is present
at the Annual Meeting. If a quorum is not present in person or
by proxy at the Annual Meeting, the chairman of the Annual
Meeting may adjourn the meeting to a date not more than
120 days after the original Record Date without notice
other than announcement at the Annual Meeting.
INVESTMENT
ADVISER
KA Fund Advisors, LLC is the investment adviser for the
Company. Its principal office is located at 717 Texas Avenue,
Suite 3100, Houston, TX 77002.
ADMINISTRATOR
Ultimus Fund Solutions, LLC (the Administrator)
provides certain administrative services for the Company,
including but not limited to preparing and maintaining books,
records, and tax and financial reports, and monitoring
compliance with regulatory requirements. The Administrator is
located at 225 Pictoria Drive, Suite 450, Cincinnati, OH
45246.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g. brokers) to satisfy the delivery
requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the
32
same address by delivering a single proxy statement and annual
report addressed to those stockholders. This process, which is
commonly referred to as householding, potentially
means extra convenience for stockholders and cost savings for
companies.
This year, a number of brokers with account holders who are the
Companys stockholders will be householding its
proxy materials. These brokers will deliver a single copy of the
proxy statement and other proxy materials to multiple
stockholders sharing an address unless the brokers have received
contrary instructions from the affected stockholders. If you
have received notice from your broker that it will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate copy of proxy materials and
annual report, please notify your broker. Stockholders of the
Company sharing an address who currently receive multiple copies
of proxy materials and annual report of the Company at the same
addresses and would like to request householding of
their communications should contact their brokers.
33
STOCKHOLDER
PROPOSALS
The Amended and Restated Bylaws currently in effect for the
Company provide that in order for a stockholder to nominate a
candidate for election as a director at an annual meeting of
stockholders or propose business for consideration at such
meeting, which nomination or proposal is not to be included in
the Companys proxy statement, written notice containing
the information required by the current Bylaws must be delivered
to the Secretary of the Company at 717 Texas Avenue,
Suite 3100, Houston, TX 77002, not later than
5:00 p.m. Central Time on the 120th day, and not
earlier than the 150th day, prior to the first anniversary
of the date of mailing of the notice for the preceding
years annual meeting; provided, however that
in the event that the date of the annual meeting is advanced or
delayed by more than 30 days from the first anniversary of
the date of the preceding years annual meeting (and in the
case of the first annual meeting of stockholders), notice by the
stockholder to be timely must be so delivered not earlier than
the 150th day prior to the date of such annual meeting and
not later than 5:00 p.m. Central Time on the later of the
120th day prior to the date of such annual meeting or the
tenth day following the day on which public announcement of the
date of such meeting is first made.
Accordingly, a stockholder nomination or proposal for the
Company intended to be considered at the 2012 Annual Meeting
must be received by the Secretary of the Company on or after
December 28, 2011 and prior to 5:00 p.m. Central Time
on January 27, 2012. However, under the rules of the SEC,
if a stockholder wishes to submit a proposal for possible
inclusion in the 2012 proxy statement pursuant to
Rule 14a-8(e)
of the 1934 Act, the Company must receive it not less than
120 calendar days before the anniversary of the date the proxy
statement was released to stockholders for the previous
years annual meeting. Accordingly, a stockholders
proposal under
Rule 14a-8(e)
must be received by the Company on or before January 27,
2012 in order to be included in the proxy statement and proxy
card for the 2012 Annual Meeting. All nominations and proposals
must be in writing.
By Order of the Board of Directors
David J. Shladovsky
Secretary
May 19, 2011
34
APPENDIX
PROXY
KAYNE
ANDERSON ENERGY DEVELOPMENT COMPANY
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR
THE 2011 ANNUAL MEETING OF STOCKHOLDERS JUNE 30,
2011
The undersigned stockholder of Kayne Anderson Energy Development
Company, a Maryland corporation (the Company),
hereby appoints David J. Shladovsky and James C. Baker, or
either of them, as proxies for the undersigned, with full power
of substitution in each of them, to attend the 2011 Annual
Meeting of Stockholders of the Company (the Annual
Meeting) to be held at 717 Texas Avenue, Suite 3100,
Houston, TX 77002, on June 30, 2011, at
8:30 a.m. Central Time and any adjournment or
postponement thereof, to cast on behalf of the undersigned all
votes that the undersigned is entitled to cast at such Annual
Meeting and otherwise to represent the undersigned at the Annual
Meeting with all powers possessed by the undersigned if
personally present at the Annual Meeting. The undersigned hereby
acknowledges receipt of the Notice of the Annual Meeting and the
accompanying Proxy Statement, the terms of each of which are
incorporated by reference, and revokes any proxy heretofore
given with respect to such Annual Meeting.
If this Proxy is properly executed, the votes entitled to be
cast by the undersigned will be cast as instructed below, or if
no instruction is given, the votes entitled to be cast by the
undersigned will be cast for each of the proposals.
Additionally, the votes entitled to be cast by the undersigned
will be cast in the discretion of the Proxy holder on any other
matter that may properly come before the Annual Meeting or any
adjournment or postponement thereof.
YOUR VOTE IS
IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTMARKED ENVELOPE.
6
PLEASE DETACH AT PERFORATION BEFORE MAILING
6
KAYNE
ANDERSON ENERGY DEVELOPMENT COMPANY
ANNUAL MEETING PROXY CARD
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AUTHORIZED SIGNATURES
THIS SECTION MUST BE COMPLETED
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Please sign exactly as your name appears. If the
shares are held jointly, each holder should sign. When signing
as an attorney, executor, administrator, trustee, guardian,
officer of a corporation or other entity or in another
representative capacity, please indicate your full title under
signature(s).
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Signature
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Date
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Signature(s)(if held jointly):
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Date
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(continued
from reverse side)
PROXY
KAYNE
ANDERSON ENERGY DEVELOPMENT COMPANY
ANNUAL MEETING PROXY CARD
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED BELOW OR, IF NO CHOICE IS INDICATED, WILL
BE VOTED FOR EACH PROPOSAL.
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1. |
THE ELECTION OF TWO CLASS II DIRECTORS FOR A TERM OF THREE
YEARS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
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o FOR
THE NOMINEE LISTED BELOW
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o WITHHOLD
FROM THE NOMINEE LISTED BELOW
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NOMINEE: WILLIAM R. CORDES
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o FOR
THE NOMINEE LISTED BELOW
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o WITHHOLD
FROM THE NOMINEE LISTED BELOW
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NOMINEE: BARRY R. PEARL
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2. |
THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE FISCAL YEAR ENDING NOVEMBER 30, 2011.
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o
FOR
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o
AGAINST
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o
ABSTAIN
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3. |
THE APPROVAL OF A PROPOSAL TO AUTHORIZE THE COMPANY TO SELL
SHARES OF ITS COMMON STOCK AT A PRICE LESS THAN THE NET
ASSET VALUE PER SHARE.
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o
FOR
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o
AGAINST
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o
ABSTAIN
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4. |
TO VOTE AND OTHERWISE REPRESENT THE UNDERSIGNED ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF IN THE DISCRETION OF THE
PROXY HOLDER.
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Important
Notice Regarding the Availability of Proxy Materials for the
Annual Meeting:
The proxy statement and the Companys most recent Annual
Report are available
on the internet at
www.kaynefunds.com/KedSECFilings.php