pre14a
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:
þ Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
KAYNE ANDERSON MIDSTREAM/ENERGY FUND, INC.
(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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 it
was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identity 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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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Kayne Anderson Midstream/Energy Fund, Inc.
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 Midstream/Energy Fund, Inc.
(KMF or the Fund) on June 30, 2011
at 8:00 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 one director of the Fund, (ii) the
ratification of the selection of PricewaterhouseCoopers LLP as
the Funds independent registered public accounting firm
for 2011 and (iii) a proposal to authorize the Fund to sell
shares of its common stock at a net price below net asset value
per share, so long as the gross price (before underwriting fees,
commissions and offering expenses) is above its 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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32
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KAYNE ANDERSON MIDSTREAM/ENERGY FUND, INC.
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 one Class I
Director to serve until the Funds 2014 Annual Meeting of
Stockholders and until his successor is duly elected and
qualified. The director currently serving in Class I is
Kevin S. McCarthy. His current term will expire at the
Funds 2011 Annual Meeting of Stockholders and the
Funds Board of Directors has nominated him for re-election
at the meeting. The election of Mr. McCarthy requires the
affirmative vote of a majority of the votes cast by the holders
of the Funds common stock and preferred stock outstanding
as of May 16, 2011 (the Record Date), voting
together as a single class.
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Proposal Two the ratification of the selection
of PricewaterhouseCoopers LLP as the Funds 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 Funds common stock and preferred stock
outstanding as of the Record Date, voting together as a single
class.
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Proposal Three a proposal to authorize the Fund
to sell shares of its common stock at a net price less than net
asset value per share, so long as the gross price (before
underwriting fees, commissions and offering expenses) is above
its net asset value per share, subject to certain conditions,
for a period expiring on the date of the Funds 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 Funds transfer
agent as of the Record Date, and (2) the affirmative vote
of a majority of the votes cast by the holders of the
Funds common stock and preferred stock outstanding as of
the Record Date, voting together as a single class.
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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
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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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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/KmfSECFilings.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.
2
Kayne Anderson Midstream/Energy Fund, Inc.
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 Midstream/Energy Fund,
Inc.:
NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of
Stockholders of Kayne Anderson Midstream/Energy Fund, Inc., a
Maryland corporation (KMF or the Fund),
will be held on June 30, 2011 at
8:00 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 one Class I Director of the Fund, such director to
hold office until the 2014 Annual Meeting of Stockholders and
until his successor is duly elected and qualified;
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To ratify the selection of PricewaterhouseCoopers LLP as the
Funds independent registered public accounting firm for
the fiscal year ending November 30, 2011;
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To approve a proposal to authorize the Fund to sell shares of
its common stock at a net price less than net asset value per
share, so long as the gross price (before underwriting fees,
commissions and offering expenses) is above net asset value per
share; 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 Fund,
David J. Shladovsky
Secretary
May 19, 2011
Houston, Texas
3
Kayne Anderson Midstream/Energy Fund, Inc.
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 Midstream/Energy Fund, Inc.
(KMF or the Fund), 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
8:00 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 Fund, you are entitled to one vote for each
share of common stock and one vote for each share of preferred
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/KmfSECFilings.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 Fund 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
Funds stockholders should know in order to evaluate each
of the following proposals. The following table presents a
summary of the proposals for the Fund and the stockholders of
the Fund 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 one Class I Director of the Fund, such
director to hold office until the 2014 Annual Meeting of
Stockholders and until his successor is duly elected and
qualified.
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The holders of the Funds Common Stock (as defined herein)
and Preferred Stock (as defined herein), voting together as a
single class.
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2. To ratify the selection of PricewaterhouseCoopers LLP as
the Funds independent registered public accounting firm
for the fiscal year ending November 30, 2011.
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The holders of the Funds Common Stock and Preferred Stock,
voting together as a single class.
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3. To approve a proposal to authorize the Fund to sell
shares of its Common Stock at a net price less than net asset
value per share, so long as the gross price (before underwriting
fees, commissions and offering expenses) is above net asset
value per share.
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(i) The Registered Common Stockholders (as defined herein), and
(ii) the holders of the Funds Common Stock and Preferred
Stock, voting together as a single class.
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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 Funds Common Stock and Preferred Stock,
voting together as a single class.
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5
PROPOSAL ONE
ELECTION OF DIRECTOR
Under the Funds 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 five directors as follows:
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Elected By
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Common
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Preferred
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Class
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Term*
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Directors
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Stockholders
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Stockholders
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I
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Partial term until 2011
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Kevin S. McCarthy
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X
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X
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II
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Partial term until 2012
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Barry R. Pearl
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X
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X
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William L. Thacker
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X
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III
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3-year term until 2013
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William R. Cordes
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X
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X
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Albert L. Richey
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X
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*
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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 director whose term is expiring at this years Annual
Meeting is the Class I director, Kevin S. McCarthy. The
Board has nominated him for re-election at the Annual Meeting,
to serve for a term of three years (until the 2014 Annual
Meeting of Stockholders) and until his successor has been duly
elected and qualified.
Pursuant to the terms of the Funds mandatory redeemable
preferred stock (the Preferred Stock), the holders
of Preferred Stock are entitled as a class, to the exclusion of
the holders of the Funds common stock, $0.001 par
value per share (the Common Stock), to elect two
directors of the Fund (the Preferred Directors). The
Board has designated William L. Thacker and Albert L. Richey as
the Preferred Directors.
The holders of the Funds Common Stock and Preferred Stock,
voting together as a single class, are being asked to vote for
Mr. McCarthy as Class I Director of the Fund.
The Board knows of no reason why the nominee listed below will
be unable to serve, and the nominee has consented to serve if
elected. If the nominee is 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 Mr. McCarthy as the
Funds director.
The following tables set forth the nominees and each
remaining directors name and year of birth; position(s)
with the Fund 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 nominee and directors
is 717 Texas Avenue, Suite 3100, Houston, TX 77002.
All the directors listed above currently serve on the Board of
Directors of Kayne Anderson Energy Development Company
(KED), 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 Fund, of Kayne Anderson or of
the Funds 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 Funds executive officers and
their compensation, please refer to Information About
Executive Officers and Compensation Discussion and
Analysis below.
NOMINEE
FOR DIRECTOR WHO IS AN INTERESTED PERSON
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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 Fund,
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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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Kevin S. McCarthy(1)
(born 1959)
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Chairman of the Board of Directors, President and Chief
Executive Officer of the Fund since inception. 3-year term as a
director (until the 2014 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
KED
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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(1)
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Mr. McCarthy is an
interested person of the Fund by virtue of his
employment relationship with Kayne Anderson.
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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 Fund,
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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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(Year Born)
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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 2013 Annual Meeting of
Stockholders). Served since inception.
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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:
KED
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. 2-year term (until the 2012 Annual Meeting of
Stockholders). Served since inception.
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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:
KED
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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Albert L. Richey
(born 1949)
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Director. 3-year term (until the 2013 Annual Meeting of
Stockholders). Served since inception.
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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:
KED
Boys & Girls Clubs of Houston
Boy Scouts of America
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William L. Thacker
(born 1945)
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Director. 2-year term (until the 2012 Annual Meeting of
Stockholders). Served since inception.
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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:
KED
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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(1)
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The 1940 Act requires the term
Fund Complex to be defined to include
closed-end funds advised by the Funds investment adviser,
KAFA, and included KYN, KYE, KMF and KED.
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8
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
Fund. For the fiscal year ended November 30, 2010:
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Each Independent Director received a $25,000 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 Directors served, as follows: $2,500 per Board
meeting (in person or via telephone); $1,500 per Audit Committee
meeting (in person or via telephone); and $500 for other
committee meetings (in person or via telephone). Committee
meeting fees were not paid unless the meeting was held on a day
when there was no Board meeting and the meeting exceeded 15
minutes in duration.
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The Independent Directors were reimbursed for expenses incurred
as a result of attendance at meetings of the Board and its
committees.
|
The following table sets forth the compensation paid by the Fund
during the fiscal year ended November 30, 2010 to the
Independent Directors. No compensation is paid to directors who
are interested persons. The Fund does not have a
retirement or pension plans or any compensation plans under
which the Funds equity securities were authorized for
issuance.
Director
Compensation Table
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Total Compensation(1)(2)
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Total Compensation
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from the
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Name
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from Registrant
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Fund Complex
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Independent Directors
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William R. Cordes
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$
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11,500
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$
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85,412
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Barry R. Pearl
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10,750
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78,338
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Albert L. Richey
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10,750
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81,750
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William L. Thacker
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6,250
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77,250
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Interested Director
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Kevin S. McCarthy
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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).
|
9
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, Pearl,
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 Funds website (www.kaynefunds.com). The
Audit Committee, among others, approves and recommends to the
Board the election, retention or termination of the Funds
independent auditors; approves services to be rendered by such
auditors; monitors and evaluates each auditors
performance; reviews the results of the Funds audit;
determines whether to recommend to the Board that the
Funds audited financial statements be included in the
Funds Annual Report; monitors the accounting and reporting
policies and procedures of the Fund and the Funds
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
Funds valuation procedures and the valuation of the
Funds 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
Funds 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
Funds 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 Funds 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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10
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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 Funds 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).
|
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 Funds 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 Fund 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 Fund, 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.
11
Board of
Director and Committee Meetings Held
The following table shows the number of meetings held for the
Fund from its inception on November 24, 2010 to the end of
the fiscal year ended November 30, 2010:
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Board of Directors
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1
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Audit Committee
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1
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Valuation Committee
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0
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Nominating Committee
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0
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*
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Organizational meeting held on
October 18, 2010, prior to the Funds inception date
of November 24, 2011.
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During the partial fiscal year ended November 30, 2011, all
directors (except Mr. Thacker who did not attend the full
Board meeting and the Audit Committee meeting) 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 Fund does not
currently have a policy with respect to Board member attendance
at annual meetings.
Please refer to Corporate Governance on
page 27 for a review of the Boards leadership
structure, role in risk oversight and other matters.
12
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 Fund in light of the Funds
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 of Directors 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 KED and the Fund,
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.
Kevin S. McCarthy. Mr. McCarthy is
Chairman, President and Chief Executive Officer of the Fund. In
this position, Mr. McCarthy has extensive knowledge of the
Fund, 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
KED, 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 Fund 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 KED, 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.
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
13
Board of Directors of KED. 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
KED, 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 KED. 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.
14
Required
Vote
The election of Mr. McCarthy as a Class I Director
under this proposal requires the affirmative vote of the holders
of a majority of the Funds Common Stock and Preferred
Stock outstanding as of the Record Date, voting together as a
single class. For purposes of this proposal, each share of
Common Stock, and each share of Preferred Stock, is entitled to
one vote.
Abstentions, if any, will have the same effect as votes against
the election of Mr. McCarthy 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 NOMINEE TO THE BOARD.
15
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
Fund 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 Fund since inception and has informed the Fund that it
has no direct or indirect material financial interest in the
Fund 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 Fund 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 Fund for the fiscal year ended
November 30, 2010 by PricewaterhouseCoopers LLP. The
inception date of the Fund was November 24, 2010.
Accordingly, the Fund existed for only part of one fiscal year.
|
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2010
|
|
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Audit Fees(1)
|
|
$
|
70,000
|
|
Audit-Related Fees(2)
|
|
|
35,000
|
|
Tax Fees(3)
|
|
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42,500
|
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All Other Fees
|
|
|
|
|
Aggregate Non-Audit Fees(4)
|
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|
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(1)
|
|
For professional services rendered
with respect to the audit of the Funds annual financial
statements.
|
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(2)
|
|
For professional services rendered
with respect to assurance and related services reasonably
related to the performance of the audits of the Funds
annual financial statements not included in Audit
Fees above.
|
|
(3)
|
|
For professional services for tax
compliance, tax advice and tax planning.
|
|
(4)
|
|
Neither the Fund, nor KAFA or any
entity controlling, controlled by, or under common control with
KAFA that provides ongoing services to the Fund, was billed by
PricewaterhouseCoopers LLP for any non-audit services during the
partial fiscal year ended November 30, 2010.
|
Audit
Committee Pre-Approval Policies and Procedures
Before the auditor is engaged by the Fund to render audit,
audit-related or permissible non-audit services to the Fund,
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 Fund, Kayne
Anderson and any entity controlled by, controlling or under
common control with Kayne Anderson if such entity is an
investment adviser or is engaged in the business of providing
administrative, custodian, underwriting or transfer agent
services to the Fund or Kayne Anderson), if the nature of the
services to be provided relate directly to the Funds
operations or financial reporting, such non-audit
16
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 Fund and to Kayne Anderson (with respect to the Funds
operations and financial reporting). None of the services
rendered by PricewaterhouseCoopers LLP to the Fund 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 Fund, (2) the quality and integrity of
the Funds financial statements, (3) the Funds
compliance with regulatory requirements, and (4) the
independence and performance of the Funds independent
auditors and any internal auditors. Among other
responsibilities, the Audit Committee reviews, in its oversight
capacity, the Funds 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
Funds financial and internal controls. The Audit Committee
also selects, retains and evaluates and may replace the
Funds independent auditors and determines their
compensation, subject to ratification of the Board, if required.
The Audit Committee is currently composed of four 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 Funds 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 Funds independent
auditors and any internal auditors. The Audit Committee has
reviewed and discussed the Funds audited financial
statements with management. Management has represented to the
independent auditors that the Funds 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
Funds 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 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 Funds financial statements are complete
and accurate and presented in accordance with accounting
principles generally accepted in the U.S.
17
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
Funds 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
Barry R. Pearl
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 Funds
Common Stock and Preferred Stock outstanding as of the Record
Date, voting together as a single class. For purposes of this
proposal, each share of Common Stock and each share of Preferred
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 FUNDS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
18
PROPOSAL THREE
APPROVAL TO SELL SHARES OF COMMON STOCK AT A NET PRICE
BELOW NET ASSET VALUE PER SHARE, SUBJECT TO THE GROSS PRICE
(BEFORE UNDERWRITING FEES, COMMISSIONS AND OFFERING EXPENSES)
BEING GREATER THAN
NET ASSET VALUE PER SHARE
Summary
The 1940 Act prohibits the Fund 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 Funds common stockholders or
under certain other circumstances. The Fund may be presented
with potential investments that KAFA believes are sufficiently
attractive to justify selling shares of the Funds common
stock at a net price below its then-current NAV per share, which
could be made only if the Fund raises additional capital in that
manner. The Board is seeking the required stockholder approval
so the Fund may sell shares of its common stock at a net price
below its then-current NAV per share, so long as the gross price
(before underwriting fees, commissions and offering expenses) is
above its then-current NAV, subject to certain conditions
discussed below. If approved, the authorization would be
effective for a period expiring on the date of the Funds
2012 Annual Meeting of Stockholders, which is expected to be
held in June 2012.
Rationale
The Fund expects that it will be periodically presented with
opportunities to acquire securities at attractive prices that
may lead to an increase in the Funds long-term NAV,
including publicly traded securities purchased at a discount to
current market value in negotiated transactions. The Fund
believes that having the ability to issue its common stock at a
net 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
Funds long-term NAV per share.
These negotiated transactions often require the Fund to commit
capital in a relatively short period of time, and such
commitments cannot be contingent upon future financings. Because
the Fund generally attempts to remain fully invested and does
not intend to maintain cash for the purpose of making these
investments, the Fund 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 Funds Common Stock
The Funds 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 Funds 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
since the inception of the Fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset
|
|
Closing
|
|
Premium/
|
Date
|
|
Value
|
|
Price
|
|
(Discount)
|
|
February 28, 2011
|
|
$
|
26.23
|
|
|
$
|
24.82
|
|
|
|
(5
|
)%
|
November 30, 2010
|
|
|
23.80
|
|
|
|
25.00
|
|
|
|
5
|
|
Conditions
for Selling the Funds Common Stock at a Net Price Below
NAV, Subject to the Gross Price Being Greater than NAV
If this proposal is approved, the Fund does not anticipate
selling its common stock at a net price below its NAV unless it
has identified attractive near-term investment opportunities
that KAFA reasonably believes will
19
lead to a long-term increase in NAV. In determining whether or
not to sell additional shares of the Funds common stock at
a net price below the NAV per share, the Board of Directors will
have duties to act in the best interest of the Fund and its
stockholders. To the extent the Fund issues shares of its common
stock at a net price below NAV in a publicly registered
transaction, the Funds market capitalization and the
amount of its publicly tradable common stock will increase, thus
affording all common stockholders greater liquidity.
The Fund will only sell shares of its common stock at a net
price below NAV per share if all of the following conditions are
met:
|
|
|
|
1.
|
The gross offering price per share, before deduction of
underwriting fees, commissions and offering expenses, will not
be less than the NAV per share of the Funds common stock,
as determined at any time within two business days before
pricing of the common stock to be sold in such offering.
|
|
|
2.
|
Immediately following each offering of common stock, after
deducting offering expenses and underwriting fees and
commissions, the NAV per share of the Funds 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 1% of such value per share of
all outstanding common stock as a result of such offering,
without regard to any other offering. The Fund 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 Funds common stock in excess of the 1% limitation.
|
|
|
3.
|
A majority of the Funds 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.
|
Factors
to Consider
Before voting on this proposal or giving proxies with regard to
this matter, common stockholders of the Fund should consider the
potentially dilutive effect of the issuance of shares of the
Funds common stock at a net price less than NAV per share
on the NAV per share of common stock then-outstanding. Any sale
of common stock at a net price below NAV would result in an
immediate dilution to existing common stockholders. Common
stockholders of the Fund should also consider that holders of
the Funds 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 Fund has an NAV of $27.00
per share with 21.4 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 $27.00
per share (equal to the NAV) would result in a net offering
price of $25.65 per share after deducting the underwriting fees,
commissions and expenses. The maximum number of shares that the
Fund could issue in this example is 5.4 million shares
before reaching the cap of 1% dilution to NAV per share, or
$0.27 per share.
Example 2. A gross offering price of $27.50
per share (above NAV) would result in a net offering price of
$26.125 per share after deducting the underwriting fees,
commissions and expenses. The maximum number of shares that the
Fund could issue in this example is approximately
9.5 million shares before reaching the cap of 1% dilution
to NAV per share, or $0.27 per share.
20
As discussed above, the Fund 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 1%. However, it is possible that the Fund could effect
multiple offerings of its common stock, each of which would meet
the 1% limitation, but which would cumulatively result in a
dilutive effect of greater than 1% of the NAV per share.
The issuance of additional shares of common stock will also have
an effect on the gross amount of management fees paid by the
Fund to KAFA. The Funds investment advisory agreement with
KAFA provides for a management fee payable to KAFA as
compensation for managing the investment portfolios of the Fund
computed as a percentage of assets under management. The
increase in a Funds 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 Fund 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 Funds asset base and number of shares
outstanding, the Fund 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
Funds Common Stock on the records of the Funds
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 Funds Common Stock and Preferred Stock
outstanding as of the Record Date, voting together as a single
class (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 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 Fund had only one
Registered Common Stockholder.
Stockholders should note that various affiliates of KAFA, such
as its officers and employees, are Registered Common
Stockholders of the Fund 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 Funds
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 FUND VOTE
FOR THE PROPOSAL TO ALLOW THE FUND TO SELL
SHARES OF ITS COMMON STOCK AT A NET PRICE BELOW NAV
21
PER SHARE, SO LONG AS THE GROSS PRICE IS ABOVE NAV PER SHARE,
SUBJECT TO CERTAIN CONDITIONS.
INFORMATION
ABOUT EXECUTIVE OFFICERS
The following table sets forth each executive officers
name and year of birth; position(s) with the Fund, term of
office, and length of time served; principal occupations during
the past five years; and directorships. The address for the
Funds 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 Fund,
|
|
|
|
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. Term as a director (until the 2011 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
KED
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
|
22
|
|
|
|
|
|
|
|
|
|
|
Position(s)
|
|
|
|
Number of
|
|
|
|
|
Held with
|
|
|
|
Portfolios in
|
|
|
|
|
the Fund,
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
J.C. Frey
(born 1968)
|
|
Executive Vice President, Assistant Treasurer and Assistant
Secretary. Elected annually. Served since inception.
|
|
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
|
|
|
|
|
|
|
|
|
|
James C. Baker
(born 1972)
|
|
Executive Vice President. Elected annually. Served since
inception.
|
|
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 Fund
and KAFA (the Funds external manager), KAFA is responsible
for supervising the investments and reinvestments of the
Funds 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
Fund 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 Funds regular
business are employees of KAFA or its affiliates. Accordingly,
the Fund does not pay salaries, bonuses or other compensation to
its executive officers. The Fund does not have employment
agreements with its executive officers. The Fund does not
provide pension or retirement benefits, perquisites, or other
personal benefits to its executive officers. The Fund does not
maintain compensation plans under which its equity securities
are authorized for issuance. The Fund 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 Fund.
The investment management agreement for the Fund does not
require KAFA to dedicate specific personnel to fulfilling its
obligation to the Fund under the investment management
agreement, or require KAFA personnel to dedicate a specific
amount of time to the management of the Fund. In their
capacities as
23
executive officers or employees of KAFA or its affiliates, they
devote such portion of their time to the Funds affairs as
required for the performance of KAFAs duties under the
investment management agreement.
The Funds executive officers are compensated by KAFA. The
Fund understands that KAFA takes into account the Funds
performance as a factor in determining the compensation of
certain of its senior managers, and such compensation may be
increased depending on the Funds performance. In addition
to compensation for services performed for the Fund, 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 Funds
executive officers that relates exclusively to their services to
the Fund.
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following tables set forth the number of shares of the
Funds Common Stock (as of February 28, 2011) and
Preferred Stock (as of February 28, 2011) beneficially
owned by the Funds current directors and executive
officers as a group, and certain other beneficial owners,
according to information furnished to the Fund by such persons.
Based on statements publicly filed with the SEC and other
information obtained from such persons, as of February 28,
2011, the Fund is aware of no persons who beneficially own more
than 5% of its outstanding Common Stock, and as of
February 28, 2011, the Fund is aware of three persons who
beneficially own more than 5% of its outstanding Preferred
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.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percent of
|
|
Name of Beneficial Owner of
Common Stock
|
|
Shares
|
|
|
Class(1)
|
|
|
Independent Directors
|
|
|
|
|
|
|
|
|
William R. Cordes
|
|
|
1,000
|
|
|
|
|
*
|
Barry R. Pearl
|
|
|
4,000
|
|
|
|
|
*
|
Albert L. Richey
|
|
|
5,000
|
|
|
|
|
*
|
William L. Thacker
|
|
|
2,000
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Interested Director
|
|
|
|
|
|
|
|
|
Kevin S. McCarthy(2)
|
|
|
20,000
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
Terry A. Hart
|
|
|
3,000
|
|
|
|
|
*
|
David. J. Shladovsky
|
|
|
|
|
|
|
|
*
|
J.C. Frey
|
|
|
20,000
|
|
|
|
|
*
|
James C. Baker
|
|
|
15,000
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
All Directors and Executive Officers as a Group
(9 persons)
|
|
|
70,000
|
|
|
|
|
*
|
|
|
|
*
|
|
Less than 1% of class.
|
|
(1)
|
|
Based on 21,304,000 shares of
common stock outstanding as of February 28, 2011.
|
|
(2)
|
|
Does not include 4,000 shares
of the Funds common stock held by KAFA, a subsidiary of
KACALP, a limited partnership in which Mr. McCarthy is a
Senior Managing Director and has ownership interests, because he
may not exercise voting or investment power with respect to such
shares. The Fund believes by virtue of these arrangements that
Mr. McCarthy should not be deemed to have indirect
beneficial ownership of such shares.
|
24
Preferred
Stock
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percent of
|
|
Name of Owner of Preferred
Stock
|
|
Shares
|
|
|
Class(1)
|
|
|
All Directors and Executive Officers as a Group (9 persons)
|
|
|
|
|
|
|
|
*
|
Sun Capital Advisers LLC and Affiliates
One Sun Life Executive Park
Wellesley Hills, MA
02481-5699
|
|
|
600,000
|
|
|
|
42.9
|
%
|
ING Investment Management and Affiliates
5780 Powers Ferry Road NW,
Suite 300 Atlanta, Georgia
30327-4347
|
|
|
400,000
|
|
|
|
28.6
|
%
|
Babson Capital Management LLC and Affiliates
1500 Main St, Suite 2200
P.O. Box 15189 Springfield, MA
01115-5189
|
|
|
360,000
|
|
|
|
25.7
|
%
|
|
|
|
*
|
|
Less than 1% of class.
|
|
(1)
|
|
Based on 1,400,000 shares
outstanding as of February 28, 2011.
|
The following table sets forth the dollar range of the
Funds 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 Fund 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)
|
|
Independent Directors
|
|
|
|
|
|
|
|
|
William R. Cordes
|
|
|
$10,001-$50,000
|
|
|
|
$50,001-$100,000
|
|
Barry R. Pearl
|
|
|
$50,001-$100,000
|
|
|
|
Over $100,000
|
|
Albert L. Richey
|
|
|
Over $100,000
|
|
|
|
Over $100,000
|
|
William L. Thacker
|
|
|
$10,001-$50,000
|
|
|
|
$50,001-$100,000
|
|
|
|
|
|
|
|
|
|
|
Interested Director
|
|
|
|
|
|
|
|
|
Kevin S. McCarthy
|
|
|
Over $100,000
|
|
|
|
Over $100,000
|
|
|
|
|
(1)
|
|
Dollar ranges are as follows: none;
$1-$10,000; $10,001-$50,000; $50,001-$100,000; over $100,000.
|
|
(2)
|
|
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.
|
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 Funds Common Stock or
Preferred 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 Fund, own, in the aggregate, approximately
$4.1 million of the Funds Common Stock.
25
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the
1934 Act require the Funds 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 Funds equity securities to file
Section 16(a) forms with the SEC and NYSE reporting their
affiliation with the Fund, their ownership and changes in their
ownership of the Funds shares. Those persons and entities
are required by SEC regulations to furnish the Fund 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
Fund believes that its directors and executive officers, KAFA,
affiliated persons of KAFA, and any persons holding more than
10% of the Funds Preferred Stock have complied with all
applicable Section 16(a) filing requirements during the
fiscal year ended November 30, 2010. To the knowledge of
the Funds management, no person owned beneficially more
than 10% of the Funds Common Stock during the fiscal year
ended November 30, 2010.
26
CORPORATE
GOVERNANCE
Board
Leadership Structure
The Funds business and affairs are managed under the
direction of its Board, including the duties performed for the
Fund pursuant to its investment management agreement. Among
other things, the Board sets broad policies for the Fund,
approves the appointment of the Funds investment adviser,
administrator and officers, and approves the engagement, and
reviews the performance of the Funds 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 Fund.
The Board currently consists of five 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
Funds 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
Fund.
Under the Funds 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 Fund 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 Fund and its stockholders.
Presently, Mr. McCarthy serves as Chairman of the Board.
Mr. McCarthy is an interested person of the
Fund, as defined in the 1940 Act, by virtue of his employment
relationship with Kayne Anderson. The Fund believes that
Mr. McCarthys history with the Fund, 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 Fund.
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 Fund at this time. Because the Chief Executive
Officer has the most extensive knowledge of the various aspects
of the Funds business and is directly involved in managing
both the
day-to-day
operations and long-term strategy of the Fund, 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 Fund. 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 Fund 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 providing oversight, the Board and its
committees receive reports on the Funds activities,
including those
27
related to the Funds investment portfolio and its
financial accounting and reporting. The Board also meets at
least quarterly with the Funds Chief Compliance Officer,
who reports on the compliance of the Fund with the federal
securities laws and the Funds internal compliance policies
and procedures. The meetings of the Audit Committee with the
Funds 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 Fund and Kayne Anderson to receive reports regarding the
management of the Fund, including those related to certain
investment and operational risks, and the Independent Directors
of the Fund are encouraged to communicate directly with senior
management.
The Fund 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 Fund 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 Fund 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 Fund 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 Fund. 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 Fund
at 717 Texas Avenue, Suite 3100, Houston, TX 77002. The
Secretary of the Fund will forward any communications received
directly to the Board.
Code of
Ethics
The Fund 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 Funds 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 Fund free of charge at
(877) 657-3863.
28
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 Fund had the following numbers of shares
of stock issued and outstanding:
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Class of Stock
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Shares Outstanding
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Common Stock
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21,405,539
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Preferred Stock
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1,400,000
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To the knowledge of the Funds management:
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As of February 28, 2011, no persons held beneficially more
than 5% of the Funds outstanding Common Stock.
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As of February 28, 2011, three persons held beneficially
more than 5% of the Funds outstanding Preferred Stock.
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As of February 28, 2011, none of our directors owned 1% or
more of the Funds outstanding Common Stock.
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As of February 28, 2011, none of our directors owned 1% or
more of the Funds outstanding Preferred Stock.
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As of February 28, 2011, officers and directors of the Fund
owned, as a group, less than 1% of the Funds outstanding
Common Stock.
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As of February 28, 2011, directors and officers of the Fund
owned, as a group, less than 1% of the Funds outstanding
Preferred 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 the Boards recommendations. The Fund 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.
29
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 Fund. The Fund may
also reimburse banks, brokers and others for their reasonable
expenses in forwarding proxy solicitation material to the
beneficial owners of the Funds 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 Funds representatives, Kayne Anderson,
the Funds transfer agent, or by brokers or their
representatives or by a solicitation firm that may be engaged by
the Fund to assist in proxy solicitations. If a proxy solicitor
is retained by the Fund, the costs associated with all proxy
solicitation are expected to be approximately $4,000. The Fund
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 Fund at 717 Texas Avenue, Suite 3100,
Houston, TX 77002; (2) properly executing and sending a
later-dated proxy to the Secretary of the Fund 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
Fund. Its principal office is located at 717 Texas Avenue,
Suite 3100, Houston, TX 77002.
30
ADMINISTRATOR
Ultimus Fund Solutions, LLC (the Administrator)
provides certain administrative services for the Fund, 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 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
Funds 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
Fund sharing an address who currently receive multiple copies of
proxy materials and annual report of the Fund at the same
addresses and would like to request householding of
their communications should contact their brokers.
31
STOCKHOLDER
PROPOSALS
The Amended and Restated Bylaws currently in effect for the Fund
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 Funds
proxy statement, written notice containing the information
required by the current Bylaws must be delivered to the
Secretary of the Fund 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 Fund
intended to be considered at the 2012 Annual Meeting must be
received by the Secretary of the Fund 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 Fund 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 Fund 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
32
PROXY
KAYNE ANDERSON MIDSTREAM/ENERGY FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE 2011 ANNUAL MEETING OF STOCKHOLDERS JUNE 30, 2011
The undersigned stockholder of Kayne Anderson Midstream/Energy Fund, Inc., a Maryland corporation
(the Fund), 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 Fund (the Annual Meeting) to be held at 717 Texas Avenue, Suite
3100, Houston, TX 77002, on June 30, 2011, at 8:00 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.
▼ PLEASE DETACH AT PERFORATION BEFORE MAILING ▼
KAYNE ANDERSON MIDSTREAM/ENERGY FUND, INC.
ANNUAL MEETING PROXY CARD
AUTHORIZED SIGNATURES
THIS SECTION MUST BE COMPLETED
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 MIDSTREAM/ENERGY FUND, INC.
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.
1. |
THE ELECTION OF ONE CLASS I DIRECTOR FOR A TERM OF THREE YEARS AND UNTIL HIS SUCCESSOR IS ELECTED
AND QUALIFIED. |
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o
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FOR THE NOMINEE LISTED BELOW
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o
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WITHHOLD FROM THE NOMINEE LISTED BELOW |
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NOMINEE: KEVIN S. McCARTHY |
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2. |
THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE FUNDS 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 |
3. |
THE APPROVAL OF A PROPOSAL TO AUTHORIZE THE FUND TO SELL SHARES OF ITS COMMON STOCK AT A
NET PRICE BELOW THE NET ASSET VALUE PER SHARE, SUBJECT TO THE GROSS PRICE (BEFORE UNDERWRITING
FEES, COMMISSIONS AND OFFERING EXPENSES) BEING GREATER 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 |
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. |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The proxy statement and the Funds most recent Annual Report are available
on the internet at www.kaynefunds.com/KmfSECFilings.php.