Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21750

 

 

Kayne Anderson Energy Total Return Fund, Inc.

(Exact name of registrant as specified in charter)

 

 

811 Main Street, 14^th Floor

Houston, Texas 77002

(Address of principal executive offices) (Zip code)

 

 

David Shladovsky, Esq.

KA Fund Advisors, LLC

811 Main Street, 14^th Floor

Houston, Texas 77002

(Name and address of agent for service)

 

 

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

Date of fiscal year end: November 30, 2015

Date of reporting period: February 28, 2015

 

 

 

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Table of Contents

TABLE OF CONTENTS

Item 1: Schedule of Investments

Item  2: Controls and Procedures

Item 3: Exhibits

SIGNATURES

EX-99.CERT

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Table of Contents

Item 1. Schedule of Investments.

KAYNE ANDERSON ENERGY TOTAL RETURN FUND, INC.

SCHEDULE OF INVESTMENTS

FEBRUARY 28, 2015

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

(UNAUDITED)

 

Description						No. of Shares/Units				Value
Long-Term Investments — 144.2%
Equity Investments(1) — 129.4%
United States — 118.8%
MLP(2)(3) — 35.9%
Alliance Holdings GP, L.P.							37			$	1,932
Antero Midstream Partners LP							162				4,220
Arc Logistics Partners LP							80				1,481
Buckeye Partners, L.P.(4)							165				12,812
Columbia Pipeline Partners LP(5)							76				2,116
CONE Midstream Partners LP							21				461
Crestwood Equity Partners LP							269				1,705
Crestwood Midstream Partners LP							824				12,343
CSI Compressco LP							48				828
DCP Midstream Partners, LP							515				20,500
Energy Transfer Equity, L.P.							130				8,297
Energy Transfer Partners, L.P.(6)(7)							461				27,440
EnLink Midstream Partners LP							321				8,632
Enterprise Products Partners L.P.(6)							580				19,345
EV Energy Partners, L.P.							242				3,663
Exterran Partners, L.P.							434				10,170
Foresight Energy LP							359				6,049
Global Partners LP							273				10,871
Holly Energy Partners, L.P.							66				2,203
Legacy Reserves L.P.							105				1,208
MarkWest Energy Partners, L.P.(4)(8)							270				17,523
Midcoast Energy Partners, L.P.							80				1,228
Mid-Con Energy Partners, LP							614				3,771
ONEOK Partners, L.P.							447				18,665
PBF Logistics LP							65				1,589
Plains All American Pipeline, L.P.(8)							887				44,270
QEP Midstream Partners, LP							222				3,619
Regency Energy Partners LP(7)							1,464				35,707
Shell Midstream Partners, L.P.							130				5,078
Sprague Resources LP							67				1,631
Summit Midstream Partners, LP							108				3,900
SunCoke Energy Partners, L.P.							305				7,748
Sunoco Logistics Partners L.P.							42				1,844
Targa Resources Partners LP							66				2,905
USA Compression Partners, LP							123				2,395
USD Partners LP							149				1,962
Western Gas Partners, LP(4)							127				8,812
Williams Partners L.P.							550				28,112
											347,035
Midstream Company— 32.6%
Kinder Morgan, Inc.(4)							4,194				172,011
NiSource Inc.(4)							50				2,146
ONEOK, Inc.							570				25,217
Plains GP Holdings, L.P.(8)(9)							1,219				34,902
SemGroup Corporation(4)							25				1,933

 

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KAYNE ANDERSON ENERGY TOTAL RETURN FUND, INC.

SCHEDULE OF INVESTMENTS

FEBRUARY 28, 2015

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

(UNAUDITED)

 

Description						No. of Shares/Units				Value
Midstream Company (continued)
Spectra Energy Corp.(4)							319			$	11,318
Targa Resources Corp.(4)							113				11,205
The Williams Companies, Inc.(4)							955				46,849
VTTI Energy Partners LP(9)							394				10,184
											315,765
Marine — 24.5%
Capital Product Partners L.P.(9)							2,058				19,138
Capital Product Partners L.P. — Class B Units(9)(10)(11)							3,333				34,033
Dynagas LNG Partners LP(9)							1,256				25,088
GasLog Partners LP(9)							92				2,345
Golar LNG Partners LP(9)							1,653				43,160
Höegh LNG Partners LP(9)							396				8,883
Kirby Corporation(4)(12)							80				6,166
KNOT Offshore Partners LP(9)							961				21,576
Navios Maritime Holdings Inc. — 8.625% Series H Preferred Shares							102				2,202
Navios Maritime Midstream Partners L.P.(9)							665				9,538
Navios Maritime Partners L.P.(9)							565				6,927
Seaspan Corporation — 7.95% Series D Preferred Shares							353				9,186
Seaspan Corporation — 8.25% Series E Preferred Shares							175				4,536
Teekay Corporation(4)							100				4,424
Teekay Offshore Partners L.P.(9)							1,799				39,463
											236,665
MLP Affiliate — 18.3%
Enbridge Energy Management, L.L.C.(4)(13)							4,744				176,840
											176,840
Other Energy Company — 6.2%
Abengoa Yield plc							264				8,650
Dominion Resources, Inc.(4)							28				2,019
HollyFrontier Corporation(4)							97				4,245
Marathon Petroleum Corporation(4)							84				8,852
NRG Yield, Inc.(4)							42				2,150
PBF Energy Inc.(4)							73				2,282
Phillips 66(4)							176				13,801
Seadrill Partners LLC(9)							381				5,832
TerraForm Power, Inc.							52				1,813
Tesoro Corporation(4)							25				2,296
Valero Energy Corporation(4)							138				8,513
											60,453
Upstream Income Trust — 1.3%
Enduro Royalty Trust							873				4,260
Pacific Coast Oil Trust							1,339				7,683
VOC Energy Trust							266				1,447
											13,390
Total United States (Cost — $730,208)											1,150,148

 

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KAYNE ANDERSON ENERGY TOTAL RETURN FUND, INC.

SCHEDULE OF INVESTMENTS

FEBRUARY 28, 2015

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

(UNAUDITED)

 

Description						No. of Shares/Units				Value
Canada — 10.6%
Upstream Income Trust — 7.0%
ARC Resources Ltd.(6)							343			$	6,629
Baytex Energy Corp.(6)							455				7,433
Bonavista Energy Corporation							1,169				6,692
Crescent Point Energy Corp.(6)							1,136				28,030
Pengrowth Energy Corporation							5,840				19,389
											68,173
Midstream Company — 3.6%
AltaGas Ltd.							60				2,159
Enbridge Inc.(4)							253				11,729
Gibson Energy Inc.(6)							48				1,014
Inter Pipeline Ltd.							120				3,176
Pembina Pipeline Corporation							406				12,955
TransCanada Corporation(4)							80				3,506
											34,539
Total Canada (Cost — $153,702)											102,712
Total Equity Investments (Cost — $883,910)											1,252,860

		Interest Rate				Maturity Date				Principal Amount				Value
Debt Instruments — 14.8%
United States — 13.6%
Upstream — 12.0%
American Eagle Energy Corporation(14)			11.000	%			9/1/19			$	4,800			$	2,064
American Energy-Woodford, LLC			9.000				9/15/22				1,500				1,005
BlackBrush Oil & Gas, L.P.			(15)				7/30/21				12,700				10,287
California Resources Corporation			6.000				11/15/24				7,500				6,722
Canbriam Energy Inc.			9.750				11/15/19				2,250				2,250
Chief Oil & Gas LLC			(16)				8/8/21				4,000				3,740
CrownRock, L.P.			7.125				4/15/21				500				502
CrownRock, L.P.			7.750				2/15/23				3,875				4,011
Endeaver Energy Resources, L.P.			7.000				8/15/21				2,250				2,194
Energy & Exploration Partners, Inc.			(17)				1/22/19				997				848
Goodrich Petroleum Corporation			8.875				3/15/19				4,950				2,203
Halcón Resources Corporation			9.750				7/15/20				9,760				7,564
Jupiter Resources Inc.			8.500				10/1/22				10,000				8,150
Laredo Petroleum, Inc.			9.500				2/15/19				10,000				10,450
Magnum Hunter Resources Corporation			9.750				5/15/20				13,900				12,441
Midstates Petroleum Company, Inc.			10.750				10/1/20				5,150				3,296
Midstates Petroleum Company, Inc.			9.250				6/1/21				6,750				4,269
Parsley Energy Inc.			7.500				2/15/22				6,025				6,206
Resolute Energy Corporation			8.500				5/1/20				4,900				1,409
RKI Exploration & Production, LLC			8.500				8/1/21				14,865				14,196
RSP Permian, Inc.			6.625				10/1/22				1,200				1,213
Teine Energy Ltd.			6.875				9/30/22				2,500				2,237
Triangle USA Petroleum Corporation			6.750				7/15/22				800				660
Vantage Energy, LLC			(18)				12/31/18				8,930				7,948
															115,865

 

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KAYNE ANDERSON ENERGY TOTAL RETURN FUND, INC.

SCHEDULE OF INVESTMENTS

FEBRUARY 28, 2015

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

(UNAUDITED)

 

Description		Interest Rate				Maturity Date				Principal Amount				Value
Other Energy Company — 1.0%
Arch Coal, Inc.			7.250	%			6/15/21			$	13,500			$	3,983
Ocean Rig UDW Inc.			7.250				4/1/19				2,500				1,531
Peabody Energy Corporation			6.000				11/15/18				5,000				4,550
															10,064
Midstream— 0.4%
Stonewall Gas Gathering LLC			(19)				1/26/22				3,750				3,750
															3,750
Marine — 0.2%
Navios Maritime Holdings Inc.			7.375				1/15/22				2,500				2,356
Total United States (Cost — $163,413)															132,035
Canada — 1.2%
Upstream — 1.2%
Athabasca Oil Corporation			7.500				11/19/17				(20)				10,734
Baytex Energy Corp.			5.625				6/1/24				420				398
Total Canada (Cost—$13,211)															11,132
Total Debt Investments (Cost — $176,624)															143,167
Total Long-Term Investments (Cost — $1,060,534)															1,396,027
		Strike Price				Expiration Date				No. of Contracts				Value
Call Option Contracts Written (12)
United States
MLP
Buckeye Partners, L.P.		$	80.00				3/19/15				450				(18	)
MarkWest Energy Partners, L.P.			62.50				3/19/15				850				(306	)
MarkWest Energy Partners, L.P.			65.00				3/19/15				300				(63	)
MarkWest Energy Partners, L.P.			70.00				4/16/15				380				(41	)
Western Gas Partners, LP			75.00				3/19/15				150				(3	)
Western Gas Partners, LP			80.00				3/19/15				150				(1	)
															(432	)
Midstream Company
Kinder Morgan, Inc.			42.50				3/19/15				2,820				(42	)
Kinder Morgan, Inc.			42.50				4/16/15				3,000				(129	)
NiSource Inc.			44.00				4/16/15				300				(22	)
Spectra Energy Corp.			37.00				3/19/15				900				(16	)
SemGroup Corporation			75.00				3/19/15				250				(77	)
Targa Resources Corp.			100.00				3/19/15				250				(87	)
Targa Resources Corp.			105.00				3/19/15				120				(10	)
Targa Resources Corp.			110.00				3/19/15				130				(18	)
The Williams Companies, Inc.			47.00				3/19/15				600				(132	)
The Williams Companies, Inc.			48.00				3/19/15				300				(42	)
The Williams Companies, Inc.			49.00				3/19/15				300				(28	)
The Williams Companies, Inc.			50.00				3/19/15				300				(16	)
															(619	)

 

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KAYNE ANDERSON ENERGY TOTAL RETURN FUND, INC.

SCHEDULE OF INVESTMENTS

FEBRUARY 28, 2015

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

(UNAUDITED)

 

Description		Strike Price				Expiration Date				No. of Contracts				Value
Marine
Kirby Corporation		$	85.00				3/19/15				800			$	(48	)
Teekay Corporation			50.00				3/19/15				750				(15	)
															(63	)
MLP Affiliate
Enbridge Energy Management, L.L.C.			40.00				3/19/15				1,950				(49	)
															(49	)
Other Energy Company
Dominion Resources, Inc.			75.00				3/19/15				140				(4	)
Dominion Resources, Inc.			77.50				3/19/15				140				(1	)
HollyFrontier Corporation			42.00				3/19/15				425				(97	)
HollyFrontier Corporation			43.00				3/19/15				175				(26	)
HollyFrontier Corporation			43.00				4/16/15				180				(39	)
HollyFrontier Corporation			44.00				4/16/15				180				(28	)
Marathon Petroleum Corporation			100.00				3/19/15				300				(201	)
Marathon Petroleum Corporation			105.00				3/19/15				543				(163	)
NRG Yield, Inc.			55.00				4/16/15				300				(25	)
PBF Energy Inc.			30.00				3/19/15				540				(138	)
Phillips 66			75.00				3/19/15				350				(165	)
Phillips 66			80.00				3/19/15				850				(123	)
Tesoro Corporation			87.50				3/19/15				125				(75	)
Tesoro Corporation			90.00				3/19/15				125				(52	)
Valero Energy Corporation			55.00				3/19/15				700				(505	)
Valero Energy Corporation			57.50				3/19/15				250				(114	)
Valero Energy Corporation			60.00				3/19/15				340				(94	)
Valero Energy Corporation			62.50				3/19/15				90				(12	)
															(1,862	)
Total United States (Premium Received — $2,053)															(3,025	)
Canada
Midstream Company
Enbridge Inc.			50.00				4/16/15				800				(36	)
TransCanada Corporation			45.00				4/16/15				800				(56	)
Total Canada (Premium Received — $141)															(92	)
Total Call Option Contracts Written (Premium Received — $2,194)															(3,117	)
Debt															(318,000	)
Mandatory Redeemable Preferred Stock at Liquidation Value															(120,000	)
Other Assets in Excess of Other Liabilities															12,996
Net Assets Applicable To Common Stockholders														$	967,906

 

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

 

(2)

Securities are treated as a publicly-traded partnership for RIC qualification purposes. To qualify as a RIC for tax purposes, the Fund may directly invest up to 25% of its total assets in equity and debt securities of entities treated as publicly-traded partnerships. The Fund had 24.5% of its total assets invested in publicly-traded partnerships at February 28, 2015. It is the Fund’s intention to be treated as a RIC for tax purposes.

 

(3)	Includes limited liability companies.

 

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KAYNE ANDERSON ENERGY TOTAL RETURN FUND, INC.

SCHEDULE OF INVESTMENTS

FEBRUARY 28, 2015

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

(UNAUDITED)

 

 

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

 

(5)	Security is not currently paying cash distributions but is expected to pay cash distributions within the next 12 months.

 

(6)	In lieu of cash distributions, the Fund has elected to receive distributions in additional units/stock through the issuer’s dividend reinvestment program.

 

(7)	On January 26, 2015, Regency Energy Partners LP entered into a definitive merger agreement with Energy Transfer Partners, L.P. The merger is expected to close in the second quarter of 2015.

 

(8)	The Fund believes that it is an affiliate of MarkWest Energy Partners, L.P., Plains All American Pipeline, L.P. and Plains GP Holdings, L.P.

 

(9)	This company is structured like an MLP, but is not treated as a publicly-traded partnership for regulated investment company (“RIC”) qualification purposes.

 

(10)	Fair valued security, restricted from public sale.

 

(11)

Class B Units are convertible on a one-for-one basis into common units of Capital Product Partners L.P. (“CPLP”) and are senior to the common units in terms of liquidation preference and priority of distributions. The Class B Units pay quarterly cash distributions of $0.21375 per unit and are convertible at any time at the option of the holder. If CPLP increases the quarterly cash distribution per common unit, the distribution per Class B Unit will increase by an equal amount. If CPLP does not redeem the Class B Units by May 2022, then the distribution increases by 25% per quarter to a maximum of $0.33345 per unit. CPLP may require that the Class B Units convert into common units after May 2015 if the common unit price exceeds $11.70 per unit, and the Class B Units are callable after May 2017 at a price of $9.27 per unit and after May 2019 at $9.00 per unit.

 

(12)	Security is non-income producing.

 

(13)	Dividends are paid-in-kind.

 

(14)

On March 2, 2015, American Eagle Corporation (“American Eagle”) elected to utilize the 30-day grace period under its indenture with respect to the interest payment that was due. On April 2, 2015, American Eagle entered into a Forbearance Agreement with a group of noteholders (including Kayne Anderson), which expires on May 15, 2015, and made a partial interest payment. The Fund received $110 as its share of the partial interest payment. As of February 28, 2015, the Fund had $270 of accrued interest income. During the second fiscal quarter, the Fund established a $160 reserve against the accrual that exceeded the partial interest payment.

 

(15)	Floating rate second lien secured term loan. Security pays interest at a rate of LIBOR + 650 basis points with a 1.00% LIBOR floor (7.50% as of February 28, 2015).

 

(16)	Floating rate second lien secured term loan. Security pays interest at a rate of LIBOR + 650 basis points with a 1.00% LIBOR floor (7.50% as of February 28, 2015).

 

(17)	Floating rate second lien secured term loan. Security pays interest at a rate of LIBOR + 675 basis points with a 1.00% LIBOR floor (7.75% as of February 28, 2015).

 

(18)	Floating rate second lien secured term loan. Security pays interest at a rate of LIBOR + 750 basis points with a 1.00% LIBOR floor (8.50% as of February 28, 2015).

 

(19)	Floating rate first lien secured term loan. Security pays interest at a rate of LIBOR + 775 basis points with a 1.00% LIBOR floor (8.75% as of February 28, 2015).

 

(20)	Principal amount is 14,830 Canadian dollars.

 

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

At February 28, 2015, the Fund held the following restricted investments:

 

Investment		Acquisition Date		Type of Restriction		Number of Units, Principal ($) (in 000s)				Cost Basis (GAAP)				Fair Value				Fair Value Per Unit				Percent of Net Assets				Percent of Total Assets
Level 2 Investments(1)
American Eagle Energy Corporation		8/13/14		(2)			4,800			$	4,759			$	2,064				n/a				0.2	%			0.1	%
American Energy-Woodford LLC		9/11/14		(3)			1,500				1,441				1,005				n/a				0.1				0.1
Athabasca Oil Corporation		(4)		(2)			(5)				13,210				10,734				n/a				1.1				0.8
Baytex Energy Corporation		12/22/14		(2)			420				358				398				n/a				0.0				0.0
BlackBrush Oil & Gas, L.P.		7/21/14		(3)			12,700				12,611				10,287				n/a				1.1				0.6
California Resources Corporation		(4)		(2)			7,500				6,533				6,722				n/a				0.7				0.5
Canbriam Energy Inc.		11/10/14		(3)			2,250				2,120				2,250				n/a				0.2				0.2
Chief Oil & Gas LLC		5/12/14		(3)			4,000				3,963				3,740				n/a				0.4				0.3
CrownRock, L.P.		12/30/14		(3)			500				472				502				n/a				0.1				0.0
CrownRock, L.P.		2/3/15		(3)			3,875				3,818				4,011				n/a				0.4				0.3
Endeaver Energy Resources, LP		(4)		(3)			2,250				1,988				2,194				n/a				0.3				0.2
Energy & Exploration Partners, Inc.		12/22/14		(3)			997				719				848				n/a				0.1				0.1
Jupiter Resources Inc.		9/11/14		(3)			10,000				9,596				8,150				n/a				0.8				0.5
Navios Maritime Holdings Inc.		(4)		(2)			2,500				2,587				2,356				n/a				0.2				0.2
Ocean Rig UDW Inc.		7/17/14		(2)			2,500				2,464				1,531				n/a				0.2				0.1
Parsley Energy Inc.		(4)		(2)			6,025				6,138				6,206				n/a				0.6				0.4
RKI Exploration & Production, LLC		(4)		(3)			14,865				14,675				14,196				n/a				1.5				1.0
RSP Permian, Inc.		9/23/14		(2)			1,200				1,200				1,213				n/a				0.1				0.1
Stonewall Gas Gathering LLC		1/26/15		(3)			3,750				3,564				3,750				n/a				0.4				0.3
Teine Energy Ltd.		9/9/14		(3)			2,500				2,482				2,237				n/a				0.2				0.2
Triangle USA Petroleum Corporation		7/15/14		(2)			800				800				660				n/a				0.1				0.0
Vantage Energy, LLC		(4)		(3)			8,930				8,875				7,948				n/a				0.8				0.6
Total										$	104,373			$	93,002								9.6	%			6.6	%
Level 3 Investments(6)
Capital Product Partners L.P.
Class B Units		5/21/12		(2)			3,333			$	24,697			$	34,033				10.21				3.5	%			2.4	%
Total of all restricted securities										$	129,070			$	127,038								13.1	%			9.0	%

 

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

 

(2)	Unregistered or restricted security of a publicly-traded company.

 

(3)	Unregistered security of a private company.

 

(4)	Security was acquired at various dates during the three months ended February 28, 2015 and/or in prior fiscal years.

 

(5)	Principal amount is 14,830 Canadian dollars.

 

(6)	Securities are valued using inputs reflecting the Fund’s own assumptions.

At February 28, 2015, the cost basis of investments for federal income tax purposes was $1,075,076. At February 28, 2015, gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

 

Gross unrealized appreciation		$	461,086
Gross unrealized depreciation			(140,047	)
Net unrealized appreciation		$	321,039

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

As required by the Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 820”), the Fund has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.

 

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

 

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Level 2 — Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

 

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Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The following table presents the Fund’s assets and liabilities measured at fair value on a recurring basis at February 28, 2015 and the Fund presents these assets and liabilities by security type and description on its Schedule of Investments. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment.

 

		Total				Quoted Prices in Active Markets (Level 1)				Prices with Other Observable Inputs (Level 2)				Unobservable Inputs (Level 3)
Assets at Fair Value
Equity investments		$	1,252,860			$	1,218,827			$	—			$	34,033
Debt investments			143,167				—				143,167				—
Total assets at fair value		$	1,396,027			$	1,218,827			$	143,167			$	34,033
Liabilities at Fair Value
Call option contracts written		$	3,117			$	—			$	3,117			$	—

For the three months ended February 28, 2015, there were no transfers between Level 1 and Level 2.

The following table presents the Fund’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended February 28, 2015.

 

		Equity Investments
Balance — November 30, 2014		$	29,467
Purchases			—
Issuances			—
Transfers out to Level 1 and 2			—
Realized gains (losses)			—
Unrealized gains, net			4,566
Balance — February 28, 2015		$	34,033

The $4,566 of net unrealized gains presented in the table above for the three months ended February 28, 2015 relate to investments that are still held at February 28, 2015.

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As required by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification (ASC 815), the following are the derivative instruments and hedging activities of the Fund.

The following table sets forth the fair value of the Fund’s derivative instruments:

 

Derivatives Not Accounted for as Hedging Instruments		Statement of Assets and Liabilities Location		Fair Value as of February 28, 2015
Call options written		Call option contracts written		$(3,117)

The following table sets forth the effect of the Fund’s derivative instruments on the Fund’s operations:

 

Derivatives Not Accounted for as Hedging Instruments				For the Three Months Ended February 28, 2015
		Location of Gains/(Losses) on Derivatives Recognized in Income		Net Realized Gains/(Losses) on Derivatives Recognized in Income		Net Change in Unrealized Gains/(Losses) on Derivatives Recognized in Income
Call options written		Options		$1,287		$(1,356)

The Fund’s investments are concentrated in the energy sector. The focus of the Fund’s portfolio within the energy sector may present more risks than if the Fund’s portfolio were broadly diversified across numerous sectors of the economy. A downturn in the energy sector would have a larger impact on the Fund than on an investment company that does not concentrate in energy. The performance of securities in the energy sector may lag the performance of other industries or the broader market as a whole. Additionally, to the extent that the Fund invests a relatively high percentage of its assets in the securities of a limited number of issuers, the Fund may be more susceptible than a more widely diversified investment company to any single economic, political or regulatory occurrence. At February 28, 2015, the Fund had the following investment concentrations.

 

Category		Percent of Long-Term Investments
Securities of energy companies			97.1	%
Equity securities			89.7	%
Debt securities			10.3	%
Securities of MLPs(1)			37.5	%
Largest single issuer			12.3	%
Restricted securities			9.1	%

 

(1)	Securities of MLPs consist of master limited partnerships and limited liability companies taxed as partnerships.

Securities valuation policies and other investment related disclosures are hereby incorporated by reference to the Fund’s annual report previously filed with the Securities and Exchange Commission on form N-CSR on January 29, 2015 with a file number 811-21750.

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

Item 2. Controls and Procedures.

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

(b)  There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

The certifications for the principal executive officer and the principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act are filed as exhibits to this report.

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SIGNATURES

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

 

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