nvcsrs
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21750
Kayne Anderson Energy Total Return Fund, Inc.
(Exact name of registrant as specified in charter)
|
|
|
1800 Avenue of the Stars, Second Floor, Los Angeles, California
|
|
90067 |
|
(Address of principal executive offices)
|
|
(Zip code) |
David Shladovsky, Esq.
KA Fund Advisors, LLC, 1800 Avenue of the Stars, Second Floor, Los Angeles, California 90067
(Name and address of agent for service)
Registrants telephone number, including area code: (310) 556-2721
Date of fiscal year end: November 30, 2007
Date of reporting period: May 31, 2007
Form N-CSR is to be used by management investment companies to file reports with the
Commission not later than 10 days after the transmission to stockholders of any report that is
required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of
1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the
Commission will make this information public. A registrant is not required to respond to the
collection of information contained in Form N-CSR unless the Form displays a currently valid Office
of Management and Budget (OMB) control number. Please direct comments concerning the accuracy of
the information collection burden estimate and any suggestions for reducing the burden to
Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The report of Kayne Anderson Energy Total Return Fund, Inc. (the Registrant) to stockholders
for the semi-annual period ended May 31, 2007 is attached below.
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
8
|
|
|
|
|
9
|
|
|
|
|
10
|
|
|
|
|
11
|
|
|
|
|
12
|
|
|
|
|
14
|
|
|
|
|
23
|
|
|
|
|
24
|
|
|
|
|
24
|
|
|
|
|
24
|
|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This report contains forward-looking statements
as defined under the U.S. federal securities laws.
Generally, the words believe, expect,
intend, estimate,
anticipate, project, will
and similar expressions identify forward-looking statements,
which generally are not historical in nature. Forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to materially differ from the
Funds historical experience and its present expectations
or projections indicated in any forward-looking statement. These
risks include, but are not limited to, changes in economic and
political conditions; regulatory and legal changes; energy
industry risk; commodity pricing risk; leverage risk; valuation
risk; non-diversification risk; interest rate risk; tax risk;
and other risks discussed in the Funds filings with the
SEC. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made. The
Fund undertakes no obligation to update or revise any
forward-looking statements made herein. There is no assurance
that the Funds investment objectives will be attained.
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
|
Description
|
|
Shares/Units
|
|
Value
|
|
|
Long-Term
Investments 130.4%
|
|
|
|
|
|
|
|
|
Equity
Investments(a) 111.9%
|
|
|
|
|
|
|
|
|
United States
87.0%
|
|
|
|
|
|
|
|
|
MLP(b)(c)
30.6%
|
|
|
|
|
|
|
|
|
Atlas Energy Resources, LLC
|
|
|
75
|
|
|
$
|
2,674
|
|
Atlas Pipeline Partners, L.P.
|
|
|
170
|
|
|
|
8,558
|
|
BreitBurn Energy Partners
L.P.
|
|
|
34
|
|
|
|
1,163
|
|
BreitBurn Energy Partners
L.P. Unregistered(d)
|
|
|
121
|
|
|
|
3,810
|
|
Calumet Specialty Products
Partners, L.P.
|
|
|
222
|
|
|
|
11,393
|
|
Capital Product Partners L.P.(e)(f)
|
|
|
128
|
|
|
|
3,251
|
|
Crosstex Energy, L.P.
|
|
|
111
|
|
|
|
3,916
|
|
Crosstex Energy, L.P.
Senior Subordinated Units(d)(e)
|
|
|
356
|
|
|
|
11,522
|
|
DCP Midstream Partners, LP
|
|
|
57
|
|
|
|
2,482
|
|
Energy Transfer Partners,
L.P.
|
|
|
95
|
|
|
|
5,802
|
|
Enterprise Products Partners
L.P.
|
|
|
1,429
|
|
|
|
44,751
|
|
Ferrellgas Partners, L.P.
|
|
|
38
|
|
|
|
943
|
|
Global Partners LP
|
|
|
123
|
|
|
|
4,623
|
|
Hiland Partners, LP
|
|
|
56
|
|
|
|
3,030
|
|
Holly Energy Partners, L.P.
|
|
|
102
|
|
|
|
5,136
|
|
Inergy, L.P.
|
|
|
168
|
|
|
|
6,104
|
|
Legacy Reserves LP
|
|
|
35
|
|
|
|
1,036
|
|
Magellan Midstream Partners,
L.P.
|
|
|
256
|
|
|
|
11,857
|
|
Martin Midstream Partners
L.P.
|
|
|
198
|
|
|
|
8,240
|
|
Natural Resource Partners
L.P. Subordinated Units
|
|
|
97
|
|
|
|
3,524
|
|
NuStar Energy L.P.
|
|
|
108
|
|
|
|
7,105
|
|
ONEOK Partners, L.P.
|
|
|
166
|
|
|
|
11,430
|
|
Penn Virginia Resource Partners,
L.P.
|
|
|
152
|
|
|
|
4,545
|
|
Plains All American Pipeline,
L.P.
|
|
|
1,387
|
|
|
|
85,896
|
|
Regency Energy Partners LP
|
|
|
299
|
|
|
|
7,761
|
|
Sunoco Logistics Partners
L.P.
|
|
|
107
|
|
|
|
6,545
|
|
Targa Resources Partners LP
|
|
|
48
|
|
|
|
1,583
|
|
TC PipeLines, LP
|
|
|
274
|
|
|
|
11,152
|
|
Teekay LNG Partners L.P.
|
|
|
89
|
|
|
|
3,222
|
|
Teekay Offshore Partners L.P.(f)
|
|
|
124
|
|
|
|
4,137
|
|
TEPPCO Partners, L.P.
|
|
|
62
|
|
|
|
2,734
|
|
Universal Compression Partners,
L.P.
|
|
|
201
|
|
|
|
6,861
|
|
Williams Partners L.P.
|
|
|
26
|
|
|
|
1,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
298,053
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
2
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2007
(amounts in 000s)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
|
Description
|
|
|
|
|
|
|
|
Shares/Units
|
|
Value
|
|
|
MLP Affiliate(c)
23.9%
|
|
|
|
|
|
|
|
|
Atlas America, Inc.
|
|
|
70
|
|
|
$
|
3,451
|
|
Crosstex Energy, Inc.
|
|
|
1,057
|
|
|
|
31,669
|
|
Enbridge Energy Management,
L.L.C.(g)
|
|
|
599
|
|
|
|
33,237
|
|
Energy Transfer Equity, L.P.(h)
|
|
|
320
|
|
|
|
13,019
|
|
Hiland Holdings GP, LP(h)
|
|
|
86
|
|
|
|
2,666
|
|
Kinder Morgan Management, LLC(g)
|
|
|
2,731
|
|
|
|
139,900
|
|
MarkWest Hydrocarbon, Inc.
|
|
|
64
|
|
|
|
3,812
|
|
ONEOK, Inc.
|
|
|
94
|
|
|
|
5,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232,839
|
|
|
|
|
|
|
|
|
|
|
Marine
Transportation 23.5%
|
|
|
|
|
|
|
|
|
Aries Maritime Transport Limited
|
|
|
1,043
|
|
|
|
9,384
|
|
Arlington Tankers Ltd.
|
|
|
731
|
|
|
|
19,652
|
|
Danaos Corporation
|
|
|
222
|
|
|
|
7,088
|
|
Diana Shipping Inc.
|
|
|
932
|
|
|
|
21,233
|
|
Double Hull Tankers, Inc.
|
|
|
1,517
|
|
|
|
24,117
|
|
Eagle Bulk Shipping Inc.
|
|
|
626
|
|
|
|
13,943
|
|
Euroseas Ltd.
|
|
|
204
|
|
|
|
2,720
|
|
Genco Shipping & Trading
Limited
|
|
|
706
|
|
|
|
26,865
|
|
Nordic American Tanker Shipping
Limited
|
|
|
308
|
|
|
|
12,135
|
|
OceanFreight Inc.(e)
|
|
|
651
|
|
|
|
13,484
|
|
Omega Navigation Enterprises,
Inc.
|
|
|
764
|
|
|
|
17,866
|
|
Quintana Maritime Limited
|
|
|
1,141
|
|
|
|
17,840
|
|
Seaspan Corporation
|
|
|
985
|
|
|
|
29,230
|
|
Ship Finance International Limited
|
|
|
354
|
|
|
|
10,999
|
|
Teekay Shipping Corporation
|
|
|
28
|
|
|
|
1,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228,248
|
|
|
|
|
|
|
|
|
|
|
Coal 4.4%
|
|
|
|
|
|
|
|
|
Alpha Natural Resources, Inc.(i)
|
|
|
116
|
|
|
|
2,239
|
|
Arch Coal, Inc.(j)
|
|
|
280
|
|
|
|
11,310
|
|
CONSOL Energy Inc.(j)
|
|
|
119
|
|
|
|
5,772
|
|
Foundation Coal Holdings, Inc.(j)
|
|
|
139
|
|
|
|
6,161
|
|
Massey Energy Company
|
|
|
118
|
|
|
|
3,414
|
|
See
accompanying notes to financial statements.
3
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2007
(amounts in 000s)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
|
Description
|
|
|
|
|
|
|
|
Shares/Units
|
|
Value
|
|
|
Coal
(Continued)
|
|
|
|
|
|
|
|
|
Peabody Energy Corporation(j)
|
|
|
261
|
|
|
$
|
14,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,973
|
|
|
|
|
|
|
|
|
|
|
Royalty Trust
4.6%
|
|
|
|
|
|
|
|
|
Cross Timbers Royalty Trust
|
|
|
71
|
|
|
|
3,139
|
|
Hugoton Royalty Trust
|
|
|
356
|
|
|
|
9,701
|
|
MV Oil Trust
|
|
|
579
|
|
|
|
13,143
|
|
Permian Basin Royalty Trust
|
|
|
723
|
|
|
|
9,934
|
|
San Juan Basin Royalty Trust
|
|
|
266
|
|
|
|
8,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,535
|
|
|
|
|
|
|
|
|
|
|
Total United States (Cost
$627,610)
|
|
|
|
|
|
|
846,648
|
|
|
|
|
|
|
|
|
|
|
Canada
24.9%
|
|
|
|
|
|
|
|
|
Royalty Trust
24.9%
|
|
|
|
|
|
|
|
|
ARC Energy Trust
|
|
|
798
|
|
|
|
17,083
|
|
Baytex Energy Trust
|
|
|
431
|
|
|
|
8,664
|
|
Bonavista Energy Trust
|
|
|
824
|
|
|
|
24,370
|
|
Bonterra Energy Income Trust
|
|
|
98
|
|
|
|
2,731
|
|
Canetic Resources Trust
|
|
|
1,356
|
|
|
|
21,393
|
|
Crescent Point Energy Trust
|
|
|
1,420
|
|
|
|
27,334
|
|
Enerplus Resources Fund
|
|
|
413
|
|
|
|
20,149
|
|
Fairborne Energy Trust
|
|
|
842
|
|
|
|
7,385
|
|
Fairquest Energy Limited(i)(k)
|
|
|
100
|
|
|
|
343
|
|
Focus Energy Trust
|
|
|
487
|
|
|
|
9,139
|
|
Fording Canadian Coal Trust
|
|
|
151
|
|
|
|
4,375
|
|
Harvest Energy Trust
|
|
|
302
|
|
|
|
8,853
|
|
NAL Oil & Gas Trust
|
|
|
809
|
|
|
|
10,169
|
|
Pengrowth Energy Trust
|
|
|
354
|
|
|
|
6,586
|
|
Penn West Energy Trust
|
|
|
808
|
|
|
|
28,147
|
|
Peyto Energy Trust
|
|
|
693
|
|
|
|
13,239
|
|
Progress Energy Trust
|
|
|
305
|
|
|
|
4,197
|
|
Shiningbank Energy Income Fund
|
|
|
692
|
|
|
|
8,891
|
|
Vermilion Energy Trust
|
|
|
323
|
|
|
|
10,704
|
|
See
accompanying notes to financial statements.
4
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2007
(amounts in 000s)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
|
Description
|
|
|
|
|
|
|
|
Shares/Units
|
|
Value
|
|
|
Royalty Trust
(Continued)
|
|
|
|
|
|
|
|
|
Zargon Energy Trust
|
|
|
311
|
|
|
$
|
8,199
|
|
|
|
|
|
|
|
|
|
|
Total Canada (Cost
$229,132)
|
|
|
|
|
|
|
241,951
|
|
|
|
|
|
|
|
|
|
|
Total Equity Investments (Cost
$856,742)
|
|
|
|
|
|
|
1,088,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Maturity
|
|
|
Principal
|
|
|
|
|
|
Rate
|
|
|
Date
|
|
|
Amount
|
|
|
|
|
Fixed Income
Investments 18.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
16.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
Transportation 2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Navios Maritime Holdings,
Inc.
|
|
|
9.500
|
%
|
|
|
12/15/14
|
|
|
|
$ 10,500
|
|
|
|
11,143
|
|
OMI Corporation
|
|
|
7.625
|
|
|
|
12/01/13
|
|
|
|
4,000
|
|
|
|
4,120
|
|
Ship Finance International Limited
|
|
|
8.500
|
|
|
|
12/15/13
|
|
|
|
7,651
|
|
|
|
7,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal 2.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alpha Natural Resources, Inc.
|
|
|
10.000
|
|
|
|
6/01/12
|
|
|
|
9,825
|
|
|
|
10,550
|
|
Arch Western Finance, LLC
|
|
|
6.750
|
|
|
|
7/01/13
|
|
|
|
2,000
|
|
|
|
1,992
|
|
Massey Energy Company
|
|
|
6.625
|
|
|
|
11/15/10
|
|
|
|
1,980
|
|
|
|
1,960
|
|
Massey Energy Company
|
|
|
6.875
|
|
|
|
12/15/13
|
|
|
|
5,500
|
|
|
|
5,273
|
|
Peabody Energy Corporation(l)
|
|
|
4.750
|
|
|
|
12/15/66
|
|
|
|
6,500
|
|
|
|
7,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Energy
10.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers Energy Inc.
|
|
|
9.000
|
|
|
|
1/15/14
|
|
|
|
8,870
|
|
|
|
9,180
|
|
ATP Oil & Gas Corporation
|
|
|
(m)
|
|
|
|
4/14/10
|
|
|
|
10,000
|
|
|
|
10,100
|
|
Carrizo Oil & Gas,
Inc.
|
|
|
(n)
|
|
|
|
7/21/10
|
|
|
|
19,908
|
|
|
|
20,108
|
|
CDX Funding, LLC
|
|
|
(o)
|
|
|
|
3/31/13
|
|
|
|
8,750
|
|
|
|
9,012
|
|
Clayton Williams Energy, Inc.
|
|
|
7.750
|
|
|
|
8/01/13
|
|
|
|
5,000
|
|
|
|
4,675
|
|
Coldren Resources, Inc.
|
|
|
(p)
|
|
|
|
7/14/11
|
|
|
|
793
|
|
|
|
799
|
|
Coldren Resources, Inc.
|
|
|
(q)
|
|
|
|
7/14/11
|
|
|
|
4,872
|
|
|
|
4,908
|
|
Dynegy Holdings Inc.
|
|
|
7.500
|
|
|
|
6/01/15
|
|
|
|
1,000
|
|
|
|
993
|
|
Dynegy Holdings Inc.
|
|
|
7.750
|
|
|
|
6/01/19
|
|
|
|
2,000
|
|
|
|
1,980
|
|
Mariner Energy, Inc.
|
|
|
7.500
|
|
|
|
4/15/13
|
|
|
|
9,000
|
|
|
|
8,978
|
|
Mariner Energy, Inc.
|
|
|
8.000
|
|
|
|
5/15/17
|
|
|
|
5,000
|
|
|
|
5,100
|
|
Petrohawk Energy Corporation
|
|
|
9.125
|
|
|
|
7/15/13
|
|
|
|
9,500
|
|
|
|
10,213
|
|
Pioneer Natural Resources Company
|
|
|
5.875
|
|
|
|
7/15/16
|
|
|
|
2,500
|
|
|
|
2,293
|
|
SemGroup, L.P.
|
|
|
8.750
|
|
|
|
11/15/15
|
|
|
|
1,500
|
|
|
|
1,569
|
|
Targa Resources, Inc.
|
|
|
8.500
|
|
|
|
11/01/13
|
|
|
|
15,500
|
|
|
|
16,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total United States (Cost
$153,269)
|
|
|
156,223
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
5
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2007
(amounts in 000s, except option contracts written)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Maturity
|
|
|
Principal
|
|
|
|
|
Description
|
|
Rate
|
|
|
Date
|
|
|
Amount
|
|
|
Value
|
|
|
Canada
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty Trust
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harvest Operations Corp.
|
|
|
7.875
|
%
|
|
|
10/15/11
|
|
|
$
|
11,500
|
|
|
$
|
11,328
|
|
OPTI Canada Inc.
|
|
|
8.250
|
|
|
|
12/15/14
|
|
|
|
12,000
|
|
|
|
12,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Canada (Cost
$24,027)
|
|
|
24,078
|
|
|
|
|
|
|
Total Fixed Income Investments
(Cost $177,296)
|
|
|
180,301
|
|
|
|
|
|
|
Total Long Term Investments
(Cost $1,034,038)
|
|
|
1,268,900
|
|
|
|
|
|
|
Short-Term
Investment 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase
Agreement 0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bear, Stearns & Co. Inc.
(Agreement dated
5/31/07 to
be repurchased at $1,122), collateralized by $1,186 in U.S.
Treasury Bills) (Cost $1,121)
|
|
|
5.080
|
|
|
|
6/01/07
|
|
|
|
|
|
|
|
1,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments
130.5% (Cost $1,035,159)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,270,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
|
|
|
Contracts
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Option Contracts
Written(i)
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
Coal
|
|
|
|
|
|
|
|
|
Arch Coal, Inc., call option
expiring
6/16/07 @
$40.00
|
|
|
500
|
|
|
|
(68
|
)
|
CONSOL Energy Inc., call option
expiring
6/16/07 @
$45.00
|
|
|
500
|
|
|
|
(200
|
)
|
Foundation Coal Holdings, Inc.,
call option expiring
6/16/07 @
$40.00
|
|
|
1,000
|
|
|
|
(450
|
)
|
Peabody Energy Corporation, call
option expiring
6/16/07 @
$50.00
|
|
|
2,000
|
|
|
|
(920
|
)
|
|
|
|
|
|
|
|
|
|
Total Option Contracts Written
(Premiums received $1,037)
|
|
|
|
|
|
|
(1,638
|
)
|
Other Liabilities
|
|
|
|
|
|
|
(11,625
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
|
|
|
|
(13,263
|
)
|
Unrealized Appreciation on
Interest Rate Swap Contracts
|
|
|
|
|
|
|
4,005
|
|
Other Assets
|
|
|
|
|
|
|
12,369
|
|
|
|
|
|
|
|
|
|
|
Total Assets in Excess of Other
Liabilities
|
|
|
|
|
|
|
3,111
|
|
Preferred Stock at
Redemption Value
|
|
|
|
|
|
|
(300,000
|
)
|
|
|
|
|
|
|
|
|
|
Net Assets Applicable to Common
Stockholders
|
|
|
|
|
|
$
|
973,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Unless otherwise noted, equity investments are common
units/common shares. |
|
(b) |
|
Unless otherwise noted, securities are treated as a publicly
traded partnership for regulated investment company
(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. Although the Fund had 31.5% of
its net assets invested in securities treated as publicly traded
partnerships at May 31, 2007, the Fund had less than 25% of
its total assets invested in these securities. It is the
Funds intention to be treated as a RIC for tax purposes. |
See
accompanying notes to financial statements.
6
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS (CONCLUDED)
MAY 31, 2007
(UNAUDITED)
|
|
|
(c) |
|
Includes Limited Liability Companies. |
|
(d) |
|
Fair valued securities, restricted from public sale. (See
Notes 2 and 5). |
|
(e) |
|
Security is currently not paying cash distributions but is
expected to pay cash distributions or convert to securites which
pay cash distributions within the next 12 months. |
|
(f) |
|
Security is not treated as a publicly-traded partnership for RIC
qualification purposes. |
|
(g) |
|
Distributions are
paid-in-kind. |
|
(h) |
|
Security is treated as a publicly-traded partnership for RIC
qualification purposes. |
|
(i) |
|
Security is non-income producing. |
|
(j) |
|
Security or a portion thereof is segregated as collateral on
option contracts written or interest rate swap contracts. |
|
(k) |
|
Fairquest Energy Limited was acquired by Fairborne Energy Trust
on June 4, 2007. |
|
(l) |
|
Convertible security. |
|
(m) |
|
Floating rate senior secured first lien term loan. Security pays
interest at a rate of LIBOR + 350 basis points (8.85% as of
May 31, 2007). |
|
(n) |
|
Floating rate senior secured second lien credit facility.
Security pays interest at a rate of LIBOR + 475 basis
points (10.10% as of May 31, 2007). |
|
(o) |
|
Floating rate senior secured second lien term loan facility.
Security pays interest at a rate of LIBOR + 625 basis
points (11.57% as of May 31, 2007). |
|
(p) |
|
Floating rate letter of credit facility. Security pays interest
at a rate of LIBOR less 12.5 basis points (5.24% as of
May 31, 2007). |
|
(q) |
|
Floating rate senior secured first lien term loan. Security pays
interest at a rate of LIBOR + 400 basis points (9.36% as of
May 31, 2007). |
See
accompanying notes to financial statements.
7
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2007
(amounts in 000s, except share and per share
amounts)
(UNAUDITED)
|
|
|
|
|
ASSETS
|
Investments, at fair value
(Cost $1,034,038)
|
|
$
|
1,268,900
|
|
Repurchase agreement
(Cost $1,121)
|
|
|
1,121
|
|
|
|
|
|
|
Total investments
(Cost $1,035,159)
|
|
|
1,270,021
|
|
Cash denominated in foreign
currency (Cost $473)
|
|
|
475
|
|
Deposits with brokers
|
|
|
248
|
|
Receivable for securities sold
(Cost $4,355)
|
|
|
4,355
|
|
Interest, dividends and
distributions receivable (Cost $7,198)
|
|
|
7,210
|
|
Prepaid expenses
|
|
|
81
|
|
Unrealized appreciation on
interest rate swap contracts
|
|
|
4,005
|
|
|
|
|
|
|
Total Assets
|
|
|
1,286,395
|
|
|
|
|
|
|
|
LIABILITIES
|
Payable for securities purchased
(Cost $9,470)
|
|
|
9,470
|
|
Investment management fee payable,
net of fee waiver
|
|
|
1,187
|
|
Call option contracts written, at
fair value (Premiums received $1,037)
|
|
|
1,638
|
|
Accrued directors fees and
expenses
|
|
|
50
|
|
Accrued expenses and other
liabilities
|
|
|
918
|
|
|
|
|
|
|
Total Liabilities
|
|
|
13,263
|
|
|
|
|
|
|
PREFERRED STOCK
|
|
|
|
|
Series A, $25,000 liquidation
value per share applicable to 4,000 outstanding shares
(7,000 shares authorized)
|
|
|
100,000
|
|
Series B, $25,000 liquidation
value per share applicable to 4,000 outstanding shares
(7,000 shares authorized)
|
|
|
100,000
|
|
Series C, $25,000 liquidation
value per share applicable to 4,000 outstanding shares
(7,000 shares authorized)
|
|
|
100,000
|
|
|
|
|
|
|
Total Preferred Stock
|
|
|
300,000
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON
STOCKHOLDERS
|
|
$
|
973,132
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON
STOCKHOLDERS CONSIST OF
|
|
|
|
|
Common stock, $0.001 par
value (32,443,513 shares issued, 32,102,867 shares
outstanding and 199,979,000 shares authorized)
|
|
$
|
32
|
|
Paid-in capital, less
distributions in excess of taxable income
|
|
|
743,314
|
|
Accumulated net investment income
less distributions not treated as tax return of capital
|
|
|
(2,644
|
)
|
Accumulated net realized gains
less distributions not treated as tax return of capital
|
|
|
(5,849
|
)
|
Net unrealized gains on
investments, foreign currency translations, options and interest
rate swap contracts
|
|
|
238,279
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON
STOCKHOLDERS
|
|
$
|
973,132
|
|
|
|
|
|
|
NET ASSET VALUE PER COMMON
SHARE
|
|
$
|
30.31
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
8
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2007
(amounts in 000s)
(UNAUDITED)
|
|
|
|
|
INVESTMENT INCOME
|
|
|
|
|
Income
|
|
|
|
|
Dividends and distributions (after
foreign taxes withheld of $1,990)
|
|
$
|
30,090
|
|
Return of capital
|
|
|
(11,280
|
)
|
|
|
|
|
|
Net dividends and distributions
|
|
|
18,810
|
|
Interest
|
|
|
7,688
|
|
|
|
|
|
|
Total Investment Income
|
|
|
26,498
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
Investment management fees
|
|
|
7,217
|
|
Administration fees
|
|
|
322
|
|
Professional fees
|
|
|
152
|
|
Custodian fees
|
|
|
142
|
|
Reports to stockholders
|
|
|
103
|
|
Directors fees
|
|
|
96
|
|
Insurance
|
|
|
89
|
|
Other expenses
|
|
|
318
|
|
|
|
|
|
|
Total Expenses Before
Investment Management Fee Waivers, Auction Agent Fees and
Interest Expense
|
|
|
8,439
|
|
Investment management fee waivers
|
|
|
(724
|
)
|
Auction agent fees
|
|
|
381
|
|
Interest expense
|
|
|
66
|
|
|
|
|
|
|
Total Expenses
|
|
|
8,162
|
|
|
|
|
|
|
Net Investment Income
|
|
|
18,336
|
|
|
|
|
|
|
REALIZED AND UNREALIZED
GAINS/(LOSSES)
|
|
|
|
|
Net Realized
Gains
|
|
|
|
|
Investments
|
|
|
2,513
|
|
Foreign currency transactions
|
|
|
12
|
|
Options
|
|
|
998
|
|
Income from interest rate swap
contracts
|
|
|
540
|
|
|
|
|
|
|
Net Realized Gains
|
|
|
4,063
|
|
|
|
|
|
|
Net Change in Unrealized
Gains/(Losses)
|
|
|
|
|
Investments
|
|
|
166,768
|
|
Foreign currency translations
|
|
|
32
|
|
Options
|
|
|
(146
|
)
|
Interest rate swap contracts
|
|
|
3,361
|
|
|
|
|
|
|
Net Change in Unrealized Gains
|
|
|
170,015
|
|
|
|
|
|
|
Net Realized and Unrealized
Gains
|
|
|
174,078
|
|
|
|
|
|
|
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS
|
|
|
192,414
|
|
DIVIDENDS TO PREFERRED
STOCKHOLDERS
|
|
|
(7,772
|
)
|
|
|
|
|
|
NET INCREASE IN NET ASSETS
APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM
OPERATIONS
|
|
$
|
184,642
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
9
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON STOCKHOLDERS
(amounts in 000s, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
For the Six
|
|
|
|
|
|
|
Months Ended
|
|
|
For the Fiscal
|
|
|
|
May 31, 2007
|
|
|
Year Ended
|
|
|
|
(Unaudited)
|
|
|
November 30, 2006
|
|
|
OPERATIONS
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
18,336
|
|
|
$
|
37,230
|
|
Net realized gains
|
|
|
4,063
|
|
|
|
14,040
|
|
Net change in unrealized gains
|
|
|
170,015
|
|
|
|
60,828
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Net Assets
Resulting from Operations
|
|
|
192,414
|
|
|
|
112,098
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS TO PREFERRED
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
(7,772
|
)(1)
|
|
|
(13,721
|
)(2)
|
|
|
|
|
|
|
|
|
|
DIVIDENDS/DISTRIBUTIONS TO
COMMON STOCKHOLDERS
Dividends from net investment income
|
|
|
(10,564
|
)(1)
|
|
|
(27,243
|
)(2)
|
Dividends from net realized gains
|
|
|
|
(1)
|
|
|
(25,762
|
)(2)
|
Distributions return
of capital
|
|
|
(18,052
|
)(1)
|
|
|
(1,088
|
)(2)
|
|
|
|
|
|
|
|
|
|
Dividends/Distributions to
Common Stockholders
|
|
|
(28,616
|
)
|
|
|
(54,093
|
)
|
|
|
|
|
|
|
|
|
|
CAPITAL STOCK
TRANSACTIONS
|
|
|
|
|
|
|
|
|
Underwriting discounts and
offering expenses associated with the issuance of common stock
|
|
|
|
|
|
|
165
|
|
Underwriting discounts and
offering expenses associated with the issuance of preferred stock
|
|
|
131
|
|
|
|
(3,508
|
)
|
Common stock purchased under the
share repurchase program (764,275 shares)
|
|
|
|
|
|
|
(17,640
|
)
|
Issuance of 423,629 from treasury
shares and 239,513, new shares of common stock from reinvestment
of distributions, respectively
|
|
|
10,912
|
|
|
|
5,799
|
|
|
|
|
|
|
|
|
|
|
Net Increase/(Decrease) in Net
Assets Applicable to Common Stockholders from Capital Stock
Transactions
|
|
|
11,043
|
|
|
|
(15,184
|
)
|
|
|
|
|
|
|
|
|
|
Total Increase in Net Assets
Applicable to Common Stockholders
|
|
|
167,069
|
|
|
|
29,100
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
806,063
|
|
|
|
776,963
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
973,132
|
|
|
$
|
806,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The information presented in each of these items is a current
estimate of the characterization of a portion of the total
dividends paid to preferred stockholders and common stockholders
for the six months ended May 31, 2007 as either dividend
(ordinary income) or distribution (return of capital). This
estimate is based on the Funds operating results during
the period. The actual characterization of the preferred stock
dividend and the common stock dividend made during the current
year will not be determinable until after the end of the
calendar year when the Fund can determine earnings and profits
and, therefore, it may differ from the preliminary estimates. |
|
(2) |
|
The information presented in each of these items is a
characterization of a portion of the total dividends paid to
preferred stockholders and common stockholders for the fiscal
year ended November 30, 2006 as either dividend (ordinary
income) or distribution (return of capital). This
characterization is based on the Funds earnings and
profits. |
See
accompanying notes to financial statements.
10
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 2007
(amounts in 000s)
(UNAUDITED)
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
|
|
Net increase in net assets
resulting from operations
|
|
$
|
192,414
|
|
Adjustments to reconcile net
increase in net assets resulting from operations to net cash
provided by operating activities:
|
|
|
|
|
Purchase of investments
|
|
|
(364,504
|
)
|
Proceeds from sale of investments
|
|
|
327,079
|
|
Proceeds from short-term
investments, net
|
|
|
37,159
|
|
Realized gains on investments,
options and interest rate swap contracts
|
|
|
(4,051
|
)
|
Return of capital distributions
|
|
|
11,280
|
|
Unrealized gains (excluding impact
on cash of $2 of foreign currency translations)
|
|
|
(170,013
|
)
|
Amortization of bond premium
|
|
|
260
|
|
Decrease in deposits with brokers
|
|
|
329
|
|
Decrease in receivable for
securities sold
|
|
|
2,302
|
|
Increase in interest, dividend and
distributions receivables
|
|
|
(522
|
)
|
Decrease in prepaid expenses
|
|
|
193
|
|
Decrease in payable for securities
purchased
|
|
|
(6,831
|
)
|
Increase in investment management
fee payable
|
|
|
158
|
|
Decrease in option contracts
written
|
|
|
(117
|
)
|
Increase in accrued expenses and
other liabilities
|
|
|
181
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities
|
|
|
25,317
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
Underwriting discount and offering
expenses associated with the issuance of shares of common and
preferred stock
|
|
|
131
|
|
Cash dividends paid to preferred
stockholders
|
|
|
(7,772
|
)
|
Cash dividends and distributions
paid to common stockholders
|
|
|
(17,704
|
)
|
|
|
|
|
|
Net Cash Used in Financing
Activities
|
|
|
(25,345
|
)
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(28
|
)
|
CASH BEGINNING OF
PERIOD
|
|
|
503
|
|
|
|
|
|
|
CASH END OF
PERIOD
|
|
$
|
475
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
Non-cash financing activities not included herein consist of
reinvestment of distributions pursuant to the Funds
dividend reinvestment plan of $10,912.
During the six months ended May 31, 2007, state taxes paid
were $119.
See
accompanying notes to financial statements.
11
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
(amounts in 000s, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
For the Six
|
|
|
|
|
|
June 28,
|
|
|
|
Months Ended
|
|
|
For the Fiscal
|
|
|
2005(1)
|
|
|
|
May 31,
|
|
|
Year Ended
|
|
|
through
|
|
|
|
2007
|
|
|
November 30,
|
|
|
November 30,
|
|
|
|
(Unaudited)
|
|
|
2006
|
|
|
2005
|
|
|
Per Share of Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of
period
|
|
$
|
25.44
|
|
|
$
|
24.13
|
|
|
$
|
23.84
|
(2)
|
Income from Investment
Operations(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
0.57
|
|
|
|
1.17
|
|
|
|
0.23
|
|
Net realized and unrealized gains
|
|
|
5.45
|
|
|
|
2.34
|
|
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from investment
operations
|
|
|
6.02
|
|
|
|
3.51
|
|
|
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Preferred
Stockholders(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment
income
|
|
|
(0.25
|
)
|
|
|
(0.44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends/Distributions
Common Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment
income
|
|
|
(0.33
|
)
|
|
|
(0.86
|
)
|
|
|
(0.23
|
)
|
Dividends from net realized gain
|
|
|
|
|
|
|
(0.81
|
)
|
|
|
(0.04
|
)
|
Distributions return
of capital
|
|
|
(0.57
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dividends/distributions Common Stockholders
|
|
|
(0.90
|
)
|
|
|
(1.70
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock
Transactions(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of common stock repurchased
|
|
|
|
|
|
|
0.05
|
|
|
|
|
|
Underwriting discounts and
offering costs on the issuance of common and preferred stock
|
|
|
|
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital stock transactions
|
|
|
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
30.31
|
|
|
$
|
25.44
|
|
|
$
|
24.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value per share of common
stock, end of period
|
|
$
|
28.65
|
|
|
$
|
25.00
|
|
|
$
|
21.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment return based on
common stock market
value(4)
|
|
|
18.63
|
%
|
|
|
27.17
|
%
|
|
|
(14.62
|
)%
|
Supplemental Data and
Ratios(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common
stockholders, end of period
|
|
$
|
973,132
|
|
|
$
|
806,063
|
|
|
$
|
776,963
|
|
Ratio of expenses to average net
assets, including investment management fee waivers
|
|
|
1.94
|
%
|
|
|
1.84
|
%
|
|
|
1.47
|
%
|
Ratio of expenses to average net
assets, excluding investment management fee waivers
|
|
|
2.11
|
%
|
|
|
2.11
|
%
|
|
|
1.72
|
%
|
Ratio of net investment income to
average net assets
|
|
|
4.35
|
%
|
|
|
4.64
|
%
|
|
|
2.31
|
%
|
Net increase in net assets
applicable to common stockholders resulting from operations to
average net assets
|
|
|
21.86
|
%(6)
|
|
|
12.26
|
%
|
|
|
2.36
|
%(6)
|
Portfolio turnover rate
|
|
|
28.59
|
%(7)
|
|
|
63.75
|
%(7)
|
|
|
23.18
|
%(7)
|
Auction Rate Preferred Stock, end
of period
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
|
|
|
Asset coverage of Auction Rate
Preferred Stock
|
|
|
424.38
|
%
|
|
|
368.69
|
%
|
|
|
|
|
Average amount of borrowings
outstanding per share of common stock during the period
|
|
$
|
0.06
|
|
|
$
|
0.08
|
|
|
|
|
|
See
accompanying notes to financial statements.
12
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS (CONCLUDED)
(amounts in 000s, except share and per share
amounts)
|
|
|
(1) |
|
Commencement of operations. |
|
(2) |
|
Initial public offering price of $25.00 per share less
underwriting discounts of $1.125 per share and offering costs of
$0.04 per share. |
|
(3) |
|
Based on average shares outstanding of 31,894,927; 31,809,344
and 32,204,000, for the six months ended May 31, 2007; for
the fiscal year ended November 30, 2006 and for the period
June 28, 2005 through November 30, 2005, respectively. |
|
(4) |
|
Not annualized for the six months ended May 31, 2007 and
for the period June 28, 2005 through November 30,
2005. Total investment return is calculated assuming a purchase
of common stock at the market price on the first day and a sale
at the current market price on the last day of the period
reported. The calculation also assumes reinvestment of
dividends, if any, at actual prices pursuant to the Funds
dividend reinvestment plan. |
|
(5) |
|
Unless otherwise noted, ratios are annualized for periods of
less than one full year. |
|
(6) |
|
Not annualized. |
|
(7) |
|
Not annualized for the six months ended May 31, 2007 and
for the period June 28, 2005 through November 30,
2005. For the six months ended May 31, 2007; for the fiscal
year ended November 30, 2006 and for the period
June 28, 2005 through November 30, 2005, calculated
based on the sales of long-term investments of $327,079;
$642,858 and $89,565 divided by the monthly average long-term
investment balance of $1,143,963; $1,008,403 and $386,316,
respectively. |
See
accompanying notes to financial statements.
13
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS
MAY 31, 2007
(amounts in 000s, except option contracts written,
share and per share amounts)
(UNAUDITED)
Kayne Anderson Energy Total Return Fund, Inc. (the
Fund) was organized as a Maryland corporation on
March 31, 2005. The Fund is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as a
non-diversified closed-end investment company. The Funds
investment objective is to obtain a high total return with an
emphasis on current income. The Fund seeks to achieve this
objective by investing primarily in securities of companies
engaged in the energy industry, principally including
publicly-traded energy-related master limited partnerships and
limited liability companies taxed as partnerships
(MLPs), MLP affiliates, energy-related U.S. and
Canadian royalty trusts and income trusts (collectively,
royalty trusts) and other companies that derive at
least 50% of their revenues from operating assets used in, or
providing energy-related services for, the exploration,
development, production, gathering, transportation, processing,
storing, refining, distribution, mining or marketing of natural
gas, natural gas liquids (including propane), crude oil, refined
petroleum products or coal (collectively with MLPs, MLP
affiliates and royalty trusts, Energy Companies).
The Fund commenced investment operations on June 28, 2005
and, prior to such date, had no operations other than the sale
and issuance of 4,000 shares of common stock at an
aggregate purchase price of $100 to Kayne Anderson Capital
Advisors, L.P. (Kayne Anderson or the Former
Adviser) on May 27, 2005. Effective December 31,
2006, Kayne Anderson assigned the Investment Management
Agreement to its subsidiary, KA Fund Advisors, LLC
(KAFA or the Adviser). That assignment
occurred only for internal organizational purposes and did not
result in any change of corporate officers, portfolio management
personnel or control. The Funds shares of common stock are
listed on the New York Stock Exchange, Inc. (NYSE)
under the symbol KYE.
|
|
2.
|
Significant
Accounting Policies
|
A. Use of Estimates The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America
(GAAP) requires management to make estimates and
assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenue and expenses during the period. Actual results could
differ materially from those estimates.
B. Calculation of Net Asset Value The
Fund determines its net asset value as of the close of regular
session trading on the NYSE (normally
4:00 p.m. Eastern time) no less frequently than the
last business day of each month, and makes its net asset value
available for publication monthly. Net asset value is computed
by dividing the value of the Funds assets (including
accrued interest and dividends), less all of its liabilities
(including accrued expenses, dividends payable and any
borrowings) by the total number of common shares outstanding.
C. Investment Valuation Readily
marketable portfolio securities listed on any exchange other
than the NASDAQ Stock Market, Inc. (NASDAQ) are
valued, except as indicated below, at the last sale price on the
business day as of which such value is being determined. If
there has been no sale on such day, the securities are valued at
the mean of the most recent bid and asked prices on such day,
except for short sales and call option contracts written, for
which the last quoted asked price is used. Securities admitted
to trade on the NASDAQ are valued at the NASDAQ official closing
price. Portfolio securities traded on more than one securities
exchange are valued at the last sale price on the business day
as of which such value is being determined at the close of the
exchange representing the principal market for such securities.
Equity securities traded in the over-the-counter market, but
excluding securities admitted to trading on the NASDAQ, are
valued at the closing bid prices. Fixed income securities with a
remaining maturity of 60 days or more are valued by the
Fund using a pricing service. Fixed income securities maturing
within 60 days will be valued on an amortized cost basis.
The Fund holds securities that are privately issued or otherwise
restricted as to resale. For these securities, as well as any
other portfolio security held by the Fund for which reliable
market quotations are not readily available, valuations are
determined in a
14
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
manner that most fairly reflects fair value of the security on
the valuation date. Unless otherwise determined by the Board of
Directors, the following valuation process is used for such
securities:
|
|
|
|
|
Investment Team Valuation. The
applicable investments are initially valued by KAFA investment
professionals responsible for the portfolio investments.
|
|
|
|
Investment Team Valuation
Documentation. Preliminary valuation
conclusions are documented and discussed with senior management
of KAFA. Such valuations generally are submitted to the
Valuation Committee (a committee of the Funds Board of
Directors) or the Board of Directors on a monthly basis, and
stand for intervening periods of time.
|
|
|
|
Valuation Committee. The Valuation
Committee meets on or about the end of each month to consider
new valuations presented by KAFA, if any, which were made in
accordance with the Valuation Procedures in such month. Between
meetings of the Valuation Committee, a senior officer of KAFA is
authorized to make valuation determinations. The Valuation
Committees valuations stand for intervening periods of
time unless the Valuation Committee meets again at the request
of KAFA, the Board of Directors, or the Committee itself. All
valuation determinations of the Valuation Committee are subject
to ratification by the Board at its next regular meeting.
|
|
|
|
Valuation Firm. No less than quarterly,
a third-party valuation firm engaged by the Board of Directors
reviews the valuation methodologies and calculations employed
for these securities.
|
|
|
|
Board of Directors Determination. The
Board of Directors meets quarterly to consider the valuations
provided by KAFA and the Valuation Committee, if applicable, and
ratify valuations for the applicable securities. The Board of
Directors considers the report provided by the third-party
valuation firm in reviewing and determining in good faith the
fair value of the applicable portfolio securities.
|
Unless otherwise determined by the Board of Directors,
securities that are convertible into or otherwise will become
publicly tradable (e.g., through subsequent registration
or expiration of a restriction on trading) are valued through
the process described above, using a valuation based on the
market value of the publicly traded security less a discount.
The discount is initially equal in amount to the discount
negotiated at the time the purchase price is agreed to. To the
extent that such securities are convertible or otherwise become
publicly traded within a time frame that may be reasonably
determined, KAFA may determine an amortization schedule for the
discount in accordance with a methodology approved by the
Valuation Committee.
At May 31, 2007, the Fund held 1.6% of its net assets
applicable to common stockholders (1.2% of total assets) in
securities valued at fair value as determined pursuant to
procedures adopted by the Board of Directors, with an aggregate
fair value of $15,332.
Any option transaction that the Fund enters into may, depending
on the applicable market environments, have no value or a
positive/negative value. Exchange traded options and futures
contracts are valued at the closing price in the market where
such contracts are principally traded.
In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement on Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurements. This standard
establishes a single authoritative definition of fair value,
sets out a framework for measuring fair value and requires
additional disclosure about fair value measurements.
SFAS No. 157 applies to fair value measurements
already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The changes to
current generally accepted accounting principles from the
application of this Statement relate to the definition of fair
value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. As of May 31,
2007, the Fund does not believe the adoption of
SFAS No. 157 will impact the financial statement
amounts; however, additional disclosures may be required about
the inputs used to develop the measurements and the effect of
certain of the measurements on changes in net assets for the
period.
15
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
D. Repurchase Agreements The Fund has
agreed to purchase securities from financial institutions
subject to the sellers agreement to repurchase them at an
agreed-upon
time and price (repurchase agreements). The
financial institutions with whom the Fund enters into repurchase
agreements are banks and broker/dealers which KAFA considers
creditworthy. The seller under a repurchase agreement is
required to maintain the value of the securities as collateral,
subject to the agreement, at not less than the repurchase price
plus accrued interest. KAFA monitors daily the mark-to-market of
the value of the collateral, and, if necessary, requires the
seller to maintain additional securities, so that the value of
the collateral is not less than the repurchase price. Default by
or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delays in
connection with the disposition of the underlying securities.
E. Short Sales A short sale is a
transaction in which the Fund sells securities it does not own
(but has borrowed) in anticipation of or to hedge against a
decline in the market price of the securities. To complete a
short sale, the Fund may arrange through a broker to borrow the
securities to be delivered to the buyer. The proceeds received
by the Fund for the short sale are retained by the broker until
the Fund replaces the borrowed securities. In borrowing the
securities to be delivered to the buyer, the Fund becomes
obligated to replace the securities borrowed at their market
price at the time of replacement, whatever the price may be.
All short sales are fully collateralized. The Fund maintains
assets consisting of cash or liquid securities equal in amount
to the liability created by the short sale. These assets are
adjusted daily to reflect changes in the value of the securities
sold short. The Fund is liable for any dividends or
distributions paid on securities sold short.
The Fund may also sell short against the box
(i.e., the Fund enters into a short sale as described
above while holding an offsetting long position in the security
which it sold short). If the Fund enters into a short sale
against the box, the Fund segregates an equivalent
amount of securities owned as collateral while the short sale is
outstanding. At May 31, 2007, there were no open short
sales.
F. Option Writing When the Fund writes
an option, an amount equal to the premium received by the Fund
is recorded as a liability and is subsequently adjusted to the
current fair value of the option written. Premiums received from
writing options that expire unexercised are treated by the Fund
on the expiration date as realized gains from investments. The
difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions,
is also treated as a realized gain, or if the premium is less
than the amount paid for the closing purchase transaction, as a
realized loss. If a call option is exercised, the premium is
added to the proceeds from the sale of the underlying security
in determining whether the Fund has realized a gain or loss. If
a put option is exercised, the premium reduces the cost basis of
the securities purchased by the Fund. The Fund, as the writer of
an option, bears the market risk of an unfavorable change in the
price of the security underlying the written option. See
Note 6 for more detail on option contracts written.
G. Security Transactions and Investment Income
Security transactions are accounted for on the
date these securities are purchased or sold (trade date).
Realized gains and losses are reported on an identified cost
basis. Dividend and distribution income is recorded on the
ex-dividend date. Distributions received from the Funds
investments in MLPs and royalty trusts generally are comprised
of income and return of capital. For the six months ended
May 31, 2007, the Fund estimated that 90% of the MLP
distributions received and 5% of Canadian Royalty Trust
distributions received would be treated as a return of capital.
The Fund recorded as return of capital the amount of $11,280 of
dividends and distributions received from its investments. This
resulted in an equivalent reduction in the cost basis of the
associated investments. Net Realized Gains and Net Change in
Unrealized Gains in the accompanying Statement of Operations
were increased by $1,909 and $9,371, respectively, attributable
to the recording of such dividends and distributions as
reduction in the cost basis of investments. The Fund records
investment income and return of capital based on estimates made
at the time such distributions are received. Such estimates are
based on historical information available from each MLP and
royalty trust and other industry sources. These estimates may
subsequently be revised based on information received from MLPs
and royalty trusts after their tax reporting periods are
concluded. Interest income is recognized on the accrual basis,
including amortization of premiums and accretion of discounts.
16
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
H. Dividends and Distributions to Stockholders
Dividends and distributions to common
stockholders are recorded on the ex-dividend date. The character
of dividends made during the year may differ from their ultimate
characterization for federal income tax purposes. Dividend and
distributions to stockholders of each series of the Funds
Auction Rate Preferred Stock are accrued on a daily basis and
are determined as described in Note 9 Preferred
Stock. The Funds dividends may be comprised of return of
capital and ordinary income, which is based on the earnings and
profits of the Fund. The Fund is unable to make final
determinations as to the tax character of the dividend until the
January after the end of the current fiscal year. The Fund will
inform its common stockholders of the tax character of dividends
during that fiscal year in January following such fiscal year.
I. Partnership Accounting Policy The
Fund records its pro-rata share of the income/(loss) and capital
gains/(losses), to the extent of dividends it has received,
allocated from the underlying partnerships and adjusts the cost
of the underlying partnerships accordingly. These amounts are
included in the Funds Statement of Operations.
J. Taxes It is the Funds intention
to continue to be treated as and to qualify each year for
special tax treatment afforded a Regulated Investment Company
under Subchapter M of the Internal Revenue Code. As long as the
Fund meets certain requirements that govern its source of
income, diversification of assets and timely distribution of
earnings to stockholders, the Fund will not be subject to
U.S. federal income tax.
Income and capital gain distributions made by Regulated
Investment Companies often differ from the aggregate GAAP basis
net investment income and net realized gains. For the Fund, the
principal reason for these differences is the return of capital
treatment of dividends and distributions from MLPs, royalty
trusts and certain other of its investments. As of
November 30, 2006, accumulated dividends and distributions
to preferred and common stockholders exceeded accumulated net
investment income and net realized gains for GAAP purposes by
$14,734. Net investment income and net realized gains for GAAP
purposes may differ from taxable income for federal income tax
purposes due to wash sales, disallowed partnership losses from
MLPs and foreign currency transactions. As of May 31, 2007,
the principal temporary differences were $5,401 of realized
losses that were recognized for book purposes, but disallowed
for tax purposes due to wash sale rules, and disallowed
partnership losses related to the Funds MLP investments.
For the fiscal year ended November 30, 2006, the tax
character of the total $54,093 dividends and distributions paid
to common stockholders was $53,005 (ordinary income) and $1,088
(return of capital). For the fiscal year ended November 30,
2006, the tax character of the $13,721 dividend paid to
preferred stockholders was ordinary income.
At May 31, 2007, the identified cost of investments for
Federal income tax purposes was $1,043,243, and the cash
received on option contracts written was $1,037. At May 31,
2007, gross unrealized appreciation and depreciation of
investments and options for Federal income tax purposes were as
follows:
|
|
|
|
|
Gross unrealized appreciation of
investments (including options)
|
|
$
|
237,839
|
|
Gross unrealized depreciation of
investments (including options)
|
|
|
(11,662
|
)
|
|
|
|
|
|
Net unrealized appreciation before
interest rate swap contracts and foreign currency related
translations
|
|
|
226,177
|
|
Unrealized appreciation on
interest rate swap contracts
|
|
|
3,988
|
|
Unrealized appreciation on foreign
currency related translations
|
|
|
11
|
|
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
230,176
|
|
|
|
|
|
|
Dividend income received by the Fund from sources within Canada
is subject to a 15% foreign withholding tax.
During the six months ended May 31, 2007, permanent tax
differences were reclassified from Accumulated net investment
income less distributions not treated as tax return of capital
to Paid-in capital, less distributions in excess of taxable
income on the Funds Statement of Assets and Liabilities.
17
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Interest income on Canadian corporate obligations may be subject
to a 10% withholding tax unless an exemption is met. The most
common exemption available is for corporate bonds that have a
tenure of at least 5 years, provided that not more than 25%
of the principal is repayable in the first five years and
provided that the borrower and lender are not
associated. Further, interest is exempt if derived
from debt obligations guaranteed by the Canadian government.
In June 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation 48
(FIN 48), Accounting for Uncertainty in
Income Taxes. This standard defines the threshold for
recognizing the benefits of tax-return positions in the
financial statements as more-likely-than-not to be
sustained by the taxing authority and requires measurement of a
tax position meeting the more-likely-than-not criterion, based
on the largest benefit that is more than 50% likely to be
realized. FIN 48 is effective as of the beginning of the
first fiscal year beginning after December 15, 2006. At
adoption, companies must adjust their financial statements to
reflect only those tax positions that are more-likely-than-not
to be sustained as of the adoption date. As of May 31,
2007, the Fund has not evaluated the impact that will result
from adopting FIN 48.
K. Foreign Currency Translations The
books and records of the Fund are maintained in
U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis: (i) market value
of investment securities, assets and liabilities at the rate of
exchange as of the valuation date; and (ii) purchases and
sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on
investments in equity and debt securities which is due to
changes in the foreign exchange rates from that which is due to
changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with
respect to such securities are included in the reported net
realized and unrealized gains and losses on investment
transactions balances.
Net realized foreign exchange gains or losses represent gains
and losses from transactions in foreign currencies and foreign
currency contracts, foreign exchange gains or losses realized
between the trade date and settlement date on security
transactions, and the difference between the amounts of interest
and dividends recorded on the Funds books and the
U.S. dollar equivalent of such amounts on the payment date.
Net unrealized foreign exchange gains or losses represent the
difference between the cost of assets and liabilities (other
than investments) recorded on the Funds books from the
value of the assets and liabilities (other than investments) on
the valuation date.
L. Offering Costs Offering costs
incurred in connection with the sale of shares of common stock
and the issuance of each series of the preferred stock were
charged to paid-in capital when the shares were issued.
M. Derivative Financial Instruments The
Fund uses derivative financial instruments (principally interest
rate swap contracts) to manage interest rate risk. The Fund has
established policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial
instrument activities. The Fund does not hold or issue
derivative financial instruments for speculative purposes. All
derivative financial instruments are recorded at fair value with
changes in value during the reporting period are included as
unrealized gains or losses in the Statement of Operations. The
Fund generally values its interest rate swap contracts based on
dealer quotations, if available, or by discounting the future
cash flows from the stated terms of the interest rate swap
agreement by using interest rates currently available in the
market.
N. Indemnifications Under the
Funds organizational documents, its officers and directors
are indemnified against certain liabilities arising out of the
performance of their duties to the Fund. In addition, in the
normal course of business, the Fund enters into contracts that
provide general indemnification to other parties. The
Funds maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made
against the Fund that have not yet occurred, and may not occur.
However, the Fund has not had prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
18
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
The Funds investment objective is to obtain a high level
of total return with an emphasis on current income paid to its
stockholders. Under normal circumstances, the Fund intends to
invest at least 80% of the aggregate of its net assets and
borrowings (total assets) in securities of Energy
Companies. The Fund invests in equity securities such as common
stocks, preferred stocks, convertible securities, warrants,
depository receipts, and equity interests in MLPs, MLP
affiliates, royalty trusts and other Energy Companies.
Additionally, the Fund may invest up to 30% of its total assets
in debt securities of Energy Companies. It may directly invest
up to 25% (or such higher amount as permitted by any applicable
tax diversification rules) of its total assets in equity or debt
securities of MLPs. The Fund may invest up to 50% of its total
assets in unregistered or otherwise restricted securities of
Energy Companies. It will not invest more than 15% of its total
assets in any single issuer. The Fund may, for defensive
purposes, temporarily invest all or a significant portion of its
assets in investment grade securities, short-term debt
securities and cash or cash equivalents. To the extent the Fund
uses this strategy, it may not achieve its investment objectives.
|
|
4.
|
Agreements
and Affiliations
|
A. Investment Management Agreement The
Fund has entered into an Investment Management Agreement with
KAFA under which the Adviser, subject to the overall supervision
of the Funds Board of Directors, manages the day-to-day
operations of, and provides investment advisory services to, the
Fund. For providing these services, the Adviser receives a
management fee from the Fund.
Pursuant to the Investment Management Agreement, the Fund has
agreed to pay the Adviser, as compensation for the services
rendered by it, a management fee, payable monthly, equal on an
annual basis to 1.25% of the average monthly total assets of the
Fund. During the second year of investment activities (from
June 30, 2006 until June 29, 2007), KAFA has
contractually agreed to waive or reimburse the Fund for fees and
expenses in an amount equal on an annual basis to 0.125% of its
average monthly total assets. For the six months ended
May 31, 2007, the fee waiver amounted to $724.
For purposes of calculating the management fee, the
average total assets for each monthly period are
determined by averaging the total assets at the last business
day of that month with the total assets at the last business day
of the prior month (or as of the commencement of operations for
the initial period if a partial month). The total assets of the
Fund shall be equal to its average monthly gross asset value
(which includes assets attributable to or proceeds from the
Funds use of preferred stock, commercial paper or notes
issuances and other borrowings), minus the sum of the
Funds accrued and unpaid dividends on any outstanding
common stock and accrued and unpaid dividends on any outstanding
preferred stock and accrued liabilities (other than liabilities
associated with borrowing or leverage by the Fund). Liabilities
associated with borrowing or leverage include the principal
amount of any borrowings, commercial paper or notes that issued
by the Fund, the liquidation preference of any outstanding
preferred stock, and other liabilities from other forms of
borrowing or leverage such as short positions and put or call
options held or written by the Fund.
B. Portfolio Companies From time to
time, the Fund may control or may be an
affiliate of one or more portfolio companies, each
as defined in the 1940 Act. In general, under the 1940 Act, the
Fund would be presumed to control a portfolio
company if the Fund owned 25% or more of its outstanding voting
securities and would be an affiliate of a portfolio
company if the Fund owned 5% or more of its outstanding voting
securities. The 1940 Act contains prohibitions and restrictions
relating to transactions between investment companies and their
affiliates (including the Funds investment adviser),
principal underwriters and affiliates of those affiliates or
underwriters.
The Fund believes that there is significant ambiguity in the
application of existing SEC staff interpretations of the term
voting security to complex structures such as
privately negotiated limited partnership interests of the kind
in which the Fund invests. As a result, it is possible that the
SEC staff may consider that certain securities investments in
private limited partnerships are voting securities under the
staffs prevailing interpretations of this
19
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
term. If such determination is made, the Fund may be regarded as
a person affiliated with and controlling the issuer(s) of those
securities for purposes of Section 17 of the 1940 Act.
In light of the ambiguity of the definition of voting
securities, the Fund does not intend to treat any class of
securities that it holds as voting securities unless
the security holders of such class have the ability, under the
partnership agreement, to remove the general partner (assuming a
sufficient vote of such securities, other than securities held
by the general partner, in favor of such removal) or the Fund
has an economic interest of sufficient size that otherwise gives
it the de facto power to exercise a controlling influence over
the partnership. The Fund believes this treatment is appropriate
given that the general partner controls the partnership, and
without the ability to remove the general partner or the power
to otherwise exercise a controlling influence over the
partnership due to the size of an economic interest, the
security holders have no control over the partnership.
C. Other Affiliates For the six months
ended May 31, 2007, KA Associates, Inc., an affiliate of
the Adviser, earned approximately $25 in brokerage commissions
from portfolio transactions executed on behalf of the Fund.
Certain of the Funds investments are restricted as to
resale and are valued as determined in accordance with
procedures established by the Board of Directors and more fully
described in Note 2 Significant Accounting
Policies. The table below shows the number of shares/units held,
the acquisition date, purchase price, aggregate cost, and fair
value as of May 31, 2007, value per share/unit of such
security, percent of net assets applicable to common
stockholders and percent of total assets which the security
comprises:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
|
Number of
|
|
|
Acquisition
|
|
|
Purchase
|
|
|
|
|
|
Fair
|
|
|
Value Per
|
|
|
of Net
|
|
|
of Total
|
|
Investment
|
|
Security
|
|
|
Shares/Units
|
|
|
Date
|
|
|
Price
|
|
|
Cost
|
|
|
Value
|
|
|
Share/Unit
|
|
|
Assets
|
|
|
Assets
|
|
|
BreitBurn Energy Partners L.P.
|
|
|
Common
Units(1)
|
|
|
|
121
|
|
|
|
5/24/07
|
|
|
$
|
3,878
|
|
|
$
|
3,878
|
|
|
$
|
3,810
|
|
|
$
|
31.44
|
|
|
|
0.4
|
%
|
|
|
0.3
|
%
|
Crosstex Energy, L.P.
|
|
|
Senior Subordinated Units
|
|
|
|
356
|
|
|
|
6/29/06
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
11,522
|
|
|
|
32.33
|
|
|
|
1.2
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,878
|
|
|
$
|
13,878
|
|
|
$
|
15,332
|
|
|
|
|
|
|
|
1.6
|
%
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Unregistered security.
|
|
|
6.
|
Option
Contracts Written
|
Transactions in written call options for the six months ended
May 31, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Premiums
|
|
|
|
Contracts
|
|
|
Received
|
|
|
Call Options Written
|
|
|
|
|
|
|
|
|
Options outstanding at beginning
of period
|
|
|
9,633
|
|
|
$
|
1,154
|
|
Options written
|
|
|
23,030
|
|
|
|
3,782
|
|
Options written terminated in
closing purchase transactions
|
|
|
(3,155
|
)
|
|
|
(262
|
)
|
Options exercised
|
|
|
(19,664
|
)
|
|
|
(2,852
|
)
|
Options expired
|
|
|
(5,844
|
)
|
|
|
(785
|
)
|
|
|
|
|
|
|
|
|
|
Options outstanding at end of
period
|
|
|
4,000
|
|
|
$
|
1,037
|
|
|
|
|
|
|
|
|
|
|
20
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
|
|
7.
|
Investment
Transactions
|
For the six months ended May 31, 2007, the Fund purchased
and sold securities in the amount of $364,504 and $327,079
(excluding short-term investments, options and interest rate
swaps), respectively.
The Fund has an uncommitted revolving credit line with Custodial
Trust Company (an affiliate of the administrator, Bear
Stearns Funds Management Inc.), under which the Fund may borrow
from Custodial Trust Company an aggregate amount of up to
the lesser of $200,000 or the maximum amount the Fund is
permitted to borrow under the 1940 Act, subject to certain
limitations imposed by the lender. The credit line is secured by
Fund assets held in custody by Custodial Trust Company. For
the six months ended May 31, 2007, the average amount
outstanding was $2,071 with a weighted average interest rate of
6.32%. As of May 31, 2007, the Fund had no outstanding
borrowings on the revolving credit line. Any loans under this
line are repayable on demand by the lender at any time.
On December 22, 2005 the Fund issued three series of
auction rate preferred stock (Preferred Stock) for a
total of $300,000. Each series (Series A, Series B and
Series C) consists of 4,000 outstanding shares and
each in the amount of $100,000. The Fund has authorized a total
of 21,000 shares of Preferred Stock. The Preferred Stock
has rights determined by the Board of Directors. The Preferred
Stock has a liquidation value of $25,000 per share plus any
accumulated, but unpaid dividends, whether or not declared.
Holders of the Preferred Stock are entitled to receive cash
dividend payments at an annual rate that may vary for each rate
period. The dividend rates of Series A, B and C Preferred
Stock as of May 31, 2007 were 5.02%, 5.20%, and 5.05%,
respectively. The weighted average dividend rates of
Series A, B and C Preferred Stock for the six months ended
May 31, 2007, were 5.12%, 5.14% and 5.12%, respectively.
Each rate includes the applicable rate based on the latest
results of the auction, and does not include commissions paid to
the auction agent in the amount of 0.25%. Under the 1940 Act,
the Fund may not declare dividends or make other distribution on
shares of common stock or purchases of such shares if, at any
time of the declaration, distribution or purchase, asset
coverage with respect to the outstanding preferred stock would
be less than 200%.
The Preferred Stock is redeemable in certain circumstances at
the option of the Fund. The Preferred Stock is also subject to a
mandatory redemption if the Fund fails to meet an asset coverage
ratio required by law, or fails to cure deficiency as stated in
the Funds rating agency guidelines in a timely manner.
The holders of Preferred Stock have voting rights equal to the
holders of common stock (one vote per share) and will vote
together with the holders of shares of common stock as a single
class except on matters affecting only the holders of preferred
stock or the holders of common stock.
|
|
10.
|
Interest
Rate Swap Contracts
|
The Fund has entered into interest rate swap contracts to
partially hedge itself from increasing interest expense on its
leverage resulting from increasing short-term interest rates. A
decline in interest rates may result in a decline in the value
of the swap contracts, which, everything else being held
constant, would result in a decline in the net assets of the
Fund. In addition, if the counterparty to the interest rate swap
contracts defaults, the Fund would not be able to use the
anticipated receipts under the swap contracts to offset the
interest payments on the Funds leverage. At the time the
interest rate swap contracts reach their scheduled termination,
there is a risk that the Fund would not be able to obtain a
replacement transaction or that the terms of the replacement
transaction would not be as favorable as on the expiring
transaction. In addition, if the Fund is required to terminate
any swap contract early, then the Fund could be required to make
a termination payment. As of May 31, 2007, the Fund has
entered into six
21
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
(CONCLUDED)
interest rate swap contracts with UBS AG as summarized below.
For all six swaps, the Fund receives a floating rate, based on
one-month LIBOR.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
Fixed Rate
|
|
|
Unrealized
|
|
Termination Dates
|
|
|
Amount
|
|
|
Paid by the Fund
|
|
|
Appreciation
|
|
|
|
11/01/2010
|
|
|
$
|
50,000
|
|
|
|
4.46
|
%
|
|
$
|
1,201
|
|
|
1/09/2011
|
|
|
|
25,000
|
|
|
|
4.75
|
|
|
|
377
|
|
|
11/01/2012
|
|
|
|
25,000
|
|
|
|
4.30
|
|
|
|
1,130
|
|
|
11/14/2013
|
|
|
|
25,000
|
|
|
|
5.00
|
|
|
|
353
|
|
|
11/16/2013
|
|
|
|
10,000
|
|
|
|
4.95
|
|
|
|
170
|
|
|
12/30/2015
|
|
|
|
25,000
|
|
|
|
4.85
|
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
160,000
|
|
|
|
|
|
|
$
|
4,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At May 31, 2007, the weighted average duration of the
interest rate swap contracts was 5.2 years and the weighted
average fixed interest rate was 4.65%. The Fund is exposed to
credit risk on each interest rate swap contract if the
counterparty should fail to perform under the terms of each
interest rate swap contract.
The Fund has 199,979,000 shares of common stock authorized.
Of the 32,102,867 shares of common stock outstanding at
May 31, 2007, Kayne Anderson owned 4,000 shares.
Transactions in common shares for the six months ended
May 31, 2007, were as follows:
|
|
|
|
|
Shares outstanding at
November 30, 2006
|
|
|
31,679,238
|
|
Shares issued through reinvestment
of dividends and distributions
|
|
|
423,629
|
|
|
|
|
|
|
Shares outstanding at May 31,
2007
|
|
|
32,102,867
|
|
|
|
|
|
|
On July 12, 2007, the Fund paid a dividend to its common
stockholders in the amount of $0.47 per share, for a total of
$15,088. Of this total, pursuant to the Funds dividend
reinvestment plan, $5,268 was reinvested into the Fund, and in
connection with that reinvestment, 103,000 shares of common
stock were issued from treasury shares and 68,000 shares of
common stock were purchased in the open market.
22
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
(UNAUDITED)
Kayne Anderson Energy Total Return Fund, Inc. (the
Fund) considers privacy to be fundamental to our
relationship with our stockholders. We are committed to
maintaining the confidentiality, integrity and security of the
non-public personal information of our stockholders and
potential investors. Accordingly, we have developed internal
policies to protect confidentiality while allowing
stockholders needs to be met. This notice applies to
former as well as current stockholders and potential investors
who provide us with nonpublic personal information.
We may collect several types of nonpublic personal information
about stockholders or potential investors, including:
|
|
|
|
|
Information from forms that you may fill out and send to us or
one of our affiliates or service providers in connection with an
investment in the Fund (such as name, address, and social
security number).
|
|
|
|
Information you may give orally to us or one of our affiliates
or service providers.
|
|
|
|
Information about your transactions with us, our affiliates, or
other third parties, such as the amount stockholders have
invested in the Fund.
|
|
|
|
Information about any bank account stockholders or potential
investors may use for transfers between a bank account and an
account that holds or is expected to hold shares of our stock.
|
|
|
|
Information collected through an Internet cookie (an
information collecting device from a web server based on your
use of a web site).
|
We may disclose all of the information we collect, as described
above, to certain nonaffiliated third parties such as attorneys,
accountants, auditors and persons or entities that are assessing
our compliance with industry standards. Such third parties are
required to uphold and maintain our privacy policy when handling
your nonpublic personal information.
We may disclose information about stockholders or potential
investors at their request. We will not sell or disclose your
nonpublic personal information to anyone except as disclosed
above or as otherwise permitted or required by law.
Within the Fund and our affiliates, access to information about
stockholders and potential investors is restricted to those
personnel who need to know the information to service
stockholder accounts. The personnel of the Fund and our
affiliates have been instructed to follow our procedures to
protect the privacy of your information.
We reserve the right to change this privacy notice in the
future. Except as described in this privacy notice, we will not
use your personal information for any other purpose unless we
inform you how such information will be used at the time you
disclose it or we obtain your permission to do so.
23
KAYNE
ANDERSON ENERGY TOTAL RETURN FUND, INC.
(UNAUDITED)
The policies and procedures that the Fund uses to determine how
to vote proxies relating to its portfolio securities are
available:
|
|
|
|
|
without charge, upon request, by calling
(877) 657-3863;
|
|
|
|
on the Funds website,
http://www.kayneetr.com; or
|
|
|
|
on the website of the Securities and Exchange Commission,
http://www.sec.gov.
|
Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent period ended June 30
is available without charge, upon request, by calling
(877) 657-3863,
and on the SECs website at
http://www.sec.gov
(see
Form N-PX).
The Fund files a complete schedule of its portfolio holdings for
the first and third quarters of its fiscal year with the SEC on
Form N-Q.
The Funds
Forms N-Q
are available on the SECs website at
http://www.sec.gov
and may be reviewed and copied at the SECs Public
Reference Room in Washington, DC. Information on the operation
of the SECs Public Reference Room may be obtained by
calling 1-202-551-8090. The Fund also makes its
Forms N-Q
available on its website at
http://www.kayneetr.com.
SHARE
REPURCHASE DISCLOSURE
(UNAUDITED)
Notice is hereby given in accordance with Section 23(c) of
the Investment Company Act of 1940, as amended, that the Fund
may from time to time purchase shares of its common stock in the
open market.
RESULTS
OF ANNUAL MEETING OF STOCKHOLDERS
(UNAUDITED)
On June 15, 2007, the Fund held its annual meeting of
stockholders where the following matter was approved by
stockholders: (i) the election of two Class II
Directors of the Fund, consisting of Anne K. Costin, the nominee
elected by the Common and Auction Rate Preferred stockholders,
and Michael C. Morgan, the nominee elected by the Auction Rate
Preferred stockholders only. On this matter,
29,447,117 shares (Common and Auction Rate Preferred) were
cast in favor, no shares were cast against, and
224,950.35 shares abstained for the election of
Ms. Costin, and 11,117 shares (Auction Rate Preferred)
were cast in favor, no shares were cast against, and
36 shares abstained for the election of Mr. Morgan. As
a result of the vote on this matter, Anne K. Costin and Michael
C. Morgan were elected to serve as directors of the Fund for a
3-year term.
24
|
|
|
|
|
|
Directors and Corporate
Officers
|
|
|
Kevin S. McCarthy
|
|
Chairman of the Board of
Directors, President and Chief Executive Officer
|
Anne K. Costin
|
|
Director
|
Steven C. Good
|
|
Director
|
Gerald I. Isenberg
|
|
Director
|
Michael C. Morgan
|
|
Director
|
Terry A. Hart
|
|
Chief Financial Officer and
Treasurer
|
David J. Shladovsky
|
|
Secretary and Chief Compliance
Officer
|
J.C. Frey
|
|
Vice President, Assistant
Secretary and Assistant Treasurer
|
James C. Baker
|
|
Vice President
|
|
|
|
Investment Adviser
|
|
Administrator
|
KA Fund Advisors, LLC
|
|
Bear Stearns Funds Management Inc.
|
717 Texas Avenue, Suite 3100
|
|
383 Madison Avenue
|
Houston, TX 77002
|
|
New York, NY 10179
|
|
|
|
1800 Avenue of the Stars, Second
Floor
Los Angeles, CA 90067
|
|
Stock Transfer Agent and
Registrar
American Stock
Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
|
|
|
|
Custodian
|
|
Independent Registered Public
Accounting Firm
|
Custodial Trust Company
|
|
PricewaterhouseCoopers LLP
|
101 Carnegie Center
|
|
350 South Grand Avenue
|
Princeton, NJ 08540
|
|
Los Angeles, CA 90071
|
|
|
|
|
|
Legal Counsel
|
|
|
Paul, Hastings,
Janofsky & Walker LLP
55 Second Street, 24th Floor
San Francisco, CA 94105
|
For stockholder inquiries, registered stockholders should call
(800) 937-5449.
For general inquiries, please call
(877) 657-3863;
or visit us on the web at
http://www.kayneetr.com.
This report, including the financial statements herein, is made
available to stockholders of the Fund for their information. The
financial information included herein is taken from the records
of the Fund without examination by its independent registered
public accounting firm who do not express an opinion thereon. It
is not a prospectus, circular or representation intended for use
in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Please see the schedule of investments contained in the Report to Stockholders included under
Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies.
Not applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable
Item 9. Purchases of Equity Securities by Closed-End Management Companies and Affiliated
Purchasers.
None.
Item 10. Submission of Matters to a Vote of Security Holders.
None.
Item 11. Controls and Procedures.
(a) The Registrants principal executive officer and principal financial officer have
evaluated the Registrants disclosure controls and procedures as of a date within 90 days of this
filing and have concluded that the Registrants disclosure controls and procedures are effective,
as of such date, in ensuring that information required to be disclosed by the registrant in this
Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The Registrants principal executive officer and principal financial officer are aware of
no changes in the Registrants internal control over financial reporting that occurred during the
Registrants last fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the Registrants internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Separate certifications of Principal Executive and Financial Officers pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 attached as EX-99.CERT.
(b) Certification of Principal Executive and Financial Officers pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT.
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.
|
|
|
|
|
Kayne Anderson Energy Total Return Fund, Inc.
|
|
|
By: |
/S/ KEVIN S. MCCARTHY
|
|
|
|
Kevin S. McCarthy |
|
|
|
Chairman, President and Chief Executive Officer
(Principal Executive Officer) |
|
|
Date:
August 3, 2007
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.
|
|
|
|
|
|
|
|
By: |
/S/ KEVIN S. MCCARTHY
|
|
|
|
Kevin S. McCarthy |
|
|
|
Chairman, President and Chief Executive
Officer
(Principal Executive Officer) |
|
|
Date: August 3, 2007
|
|
|
|
|
|
|
|
By: |
/S/ TERRY A. HART
|
|
|
|
Terry A. Hart |
|
|
|
Chief Financial Officer and Treasurer
(Principal Financial Officer) |
|
|
Date: August 3, 2007