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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM N-Q
 
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
 
INVESTMENT COMPANY ACT FILE NUMBER 811-21593
 
 
KAYNE ANDERSON MLP INVESTMENT COMPANY
 
(Exact name of registrant as specified in charter)
 
 
     
717 Texas Avenue, Suite 3100, Houston, Texas
  77002
 
 
(Address of principal executive offices)
  (Zip code)
 
David Shladovsky, Esq.
 
KA Fund Advisors, LLC, 717 Texas Avenue, Suite 3100, Houston, Texas 77002
 
(Name and address of agent for service)
 
Registrant’s telephone number, including area code:  (713) 493-2020
 
Date of fiscal year end:  November 30, 2011
 
Date of reporting period:  February 28, 2011
 
 

TABLE OF CONTENTS

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

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Item 1:   Schedule of Investments
 
KAYNE ANDERSON MLP INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2011
(amounts in 000’s, except number of option contracts)
(UNAUDITED)
 
                             
              No. of
 		       
Description
            Shares/Units     Value  
Long-Term Investments — 167.9%
               
Equity Investments(1) — 166.2%
               
Midstream MLP(2) — 117.0%
               
Boardwalk Pipeline Partners, LP
    510     $ 16,935  
Buckeye Partners, L.P. 
    691       44,789  
Buckeye Partners, L.P. — Unregistered, Class B Units(3)(4)
    535       29,903  
Chesapeake Midstream Partners, L.P. 
    1,154       30,038  
Copano Energy, L.L.C. 
    3,257       117,922  
Crestwood Midstream Partners LP
    1,132       34,085  
Crosstex Energy, L.P. 
    2,641       44,901  
DCP Midstream Partners, L.P. 
    1,599       67,590  
Duncan Energy Partners L.P.(5)
    511       20,820  
Eagle Rock Energy Partners, L.P. 
    237       2,300  
El Paso Pipeline Partners, L.P. 
    2,763       104,160  
Enbridge Energy Partners, L.P. 
    1,309       87,783  
Energy Transfer Partners, L.P. 
    2,094       114,839  
Enterprise Products Partners L.P. 
    6,574       286,617  
Exterran Partners, L.P. 
    1,627       48,308  
Global Partners LP
    1,825       49,830  
Holly Energy Partners, L.P. 
    635       37,893  
Magellan Midstream Partners, L.P. 
    3,582       216,495  
MarkWest Energy Partners, L.P. 
    3,490       156,687  
Martin Midstream Partners L.P. 
    240       9,511  
Niska Gas Storage Partners LLC
    725       14,687  
ONEOK Partners, L.P.(5)
    1,302       108,250  
PAA Natural Gas Storage, L.P. 
    261       6,367  
PAA Natural Gas Storage, L.P. — Unregistered(3)
    1,402       31,841  
Plains All American Pipeline, L.P.(6)
    2,876       188,317  
Regency Energy Partners L.P. 
    3,762       104,459  
Spectra Energy Partners, L.P. 
    813       26,715  
Sunoco Logistics Partners L.P. 
    283       25,076  
Targa Resources Partners L.P. 
    1,243       42,586  
Transmontaigne Partners L.P. 
    614       24,408  
Western Gas Partners L.P. 
    1,638       59,369  
Williams Partners L.P. 
    3,008       155,979  
                 
                          2,309,460  
                             
MLP Affiliates(2) — 13.9%
               
Enbridge Energy Management, L.L.C.(4)
    1,043       69,767  
Kinder Morgan Management, LLC(4)
    3,099       203,331  
                 
                          273,098  
                             
General Partner MLP — 13.6%
               
Alliance Holdings GP L.P. 
    1,092       60,213  
Energy Transfer Equity, L.P. 
    2,810       112,916  
Penn Virgina GP Holdings, L.P. 
    2,211       58,821  
Plains All American GP LLC — Unregistered(3)(6)
    24       36,974  
                 
                          268,924  
                             
Propane MLP — 8.4%
               
Inergy, L.P.(5)
    4,007       166,215  
                 

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KAYNE ANDERSON MLP INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2011
(amounts in 000’s, except number of option contracts)
(UNAUDITED)
 
                             
              No. of
 		       
Description
            Shares/Units     Value  
Shipping MLP — 7.5%
               
Capital Product Partners L.P. 
    2,646     $ 25,721  
Navios Maritime Partners L.P. 
    1,685       33,465  
Teekay LNG Partners L.P. 
    1,182       45,018  
Teekay Offshore Partners L.P. 
    1,536       44,194  
                 
                          148,398  
                             
Midstream & Other — 3.9%
               
Clearwater Trust (3)(6)(7)
    N/A       3,980  
Kinder Morgan, Inc.(8)
    1,021       31,140  
Knightsbridge Tankers Ltd. 
    184       4,476  
ONEOK, Inc. 
    385       24,840  
Teekay Tankers Ltd. 
    1,168       12,483  
                 
                          76,919  
                             
Upstream MLP — 1.7%
               
EV Energy Partners, L.P. 
    254       11,603  
Legacy Reserves L.P. 
    701       21,751  
                 
                          33,354  
                             
Coal MLP — 0.2%
                           
Penn Virginia Resource Partners, L.P. 
    157       4,481  
                 
Total Equity Investments (Cost — $1,907,863)
    3,280,849  
         
                             
                             
    Interest
 		  Maturity
 		    Principal
 		       
    Rate   Date     Amount        
 
Debt Investments — 1.7%
                           
Midstream — 1.3%
                           
Crestwood Holdings Partners, LLC
  (9)     10/1/16     $ 6,151       6,366  
El Paso Corporation
      7.750%     1/15/32       5,000       5,294  
Genesis Energy, L.P.
      7.875     12/15/18       14,500       14,863  
                             
                          26,523  
                             
Upstream — 0.4%
                           
Breitburn Energy Partners L.P.
      8.625     10/15/20       6,375       6,702  
                             
Total Debt Investments (Cost — $31,993)
    33,225  
         
Total Long-Term Investments (Cost — $1,939,856)
    3,314,074  
         
Short-Term Investment — 0.4%
                           
Repurchase Agreements — 0.4%
                           
J.P. Morgan Securities Inc. (Agreement dated 2/28/11 to be repurchased at $7,161), collateralized by $10,380 in U.S. Treasury securities
(Cost — $7,161)
      0.050     3/1/11               7,161  
                             
Total Investments — 168.3% (Cost — $1,947,017)
    3,321,235  
         

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KAYNE ANDERSON MLP INVESTMENT COMPANY
SCHEDULE OF INVESTMENTS
FEBRUARY 28, 2011
(amounts in 000’s, except number of option contracts)
(UNAUDITED)
 
                             
              No. of
 		       
Description
            Contracts     Value  
 
Liabilities
                           
Call Option Contracts Written(10)
                           
Midstream MLP
                           
Duncan Energy Partners L.P., call option expiring 3/18/11 @ $40.00
    615     $ (55 )
ONEOK Partners, L.P., call option expiring 3/18/11 @ $80.00
    1,425       (492 )
                 
                          (547 )
                             
Propane MLP
                           
Inergy, L.P., call option expiring 3/18/11 @ $40.00
    1,386       (232 )
                 
Total Call Option Contracts Written (Premiums Received — $405)
    (779 )
Revolving Credit Facility
    (56,000 )
Senior Unsecured Notes
    (620,000 )
Mandatory Redeemable Preferred Stock at liquidation value
    (160,000 )
Deferred Tax Liability
    (494,428 )
Other Liabilities
    (27,409 )
         
Total Liabilities
    (1,358,616 )
Other Assets
    11,321  
         
Total Liabilities in Excess of Other Assets
    (1,347,295 )
         
Net Assets Applicable to Common Stockholders
  $ 1,973,940  
         
 
 
(1) Unless otherwise noted, equity investments are common units/common shares.
 
(2) Includes limited liability companies.
 
(3) Fair valued securities, restricted from public sale.
 
(4) Distributions are paid-in-kind.
 
(5) Security or a portion thereof is segregated as collateral on option contracts written.
 
(6) Kayne Anderson MLP Investment Company (the “Company”) believes that it may be an affiliate of the Clearwater Trust and that it is an affiliate of Plains All American Pipeline, L.P. and Plains All American GP LLC.
 
(7) On September 28, 2010, the Bankruptcy Court finalized the plan of reorganization of Clearwater Natural Resources, L.P. (“Clearwater”). As part of the plan of reorganization, the Company received an interest in the Creditors Trust of Miller Bros. Coal, LLC (“Clearwater Trust”) consisting of cash and a coal royalty interest as consideration for its unsecured loan to Clearwater.
 
(8) Security is not currently paying cash distributions but is expected to pay cash distributions within the next 12 months.
 
(9) Floating rate first lien senior secured term loan. Security pays interest at a rate of LIBOR + 850 basis points, with a LIBOR floor of 2% (10.50% as of February 28, 2011).
 
(10) Security is non-income producing.

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From time to time, certain of the Company’s investments may be restricted as to resale. For instance, private investments that are not registered under the Securities Act of 1933, as amended, cannot be offered for public sale in a non-exempt transaction without first being registered. In other cases, certain of the Company’s investments have restrictions such as lock-up agreements that preclude the Company from offering these securities for public sale.
 
At February 28, 2011, the Company held the following restricted investments.
 
                                                         
                  Number of
 		                         
                  Units,
 		                Percent
 		    Percent
 		 
        Acquisition
 		  Type of
 		    Principal ($)
 		    Cost
 		    Fair
 		    of Net
 		    of Total
 		 
Investment
  Security   Date   Restriction     (in 000s)     Basis     Value     Assets     Assets  
 
Level 3 Investments(1)
                                                       
Buckeye Partners, L.P. 
  Class B Units   1/18/2011     (2 )     535     $ 30,000     $ 29,903       1.5 %     0.9 %
Clearwater Trust
  Trust   (3)     (4 )     N/A       3,266       3,980       0.2       0.1  
PAA Natural Gas Storage, L.P. 
  Common Units   2/8/2011     (2 )     1,402       29,700       31,841       1.6       1.0  
Plains All American GP LLC
  Common Units   12/23/10     (4 )     24       34,928       36,974       1.9       1.1  
                                                         
        12/31/10                                                
Total
                          $ 97,894     $ 102,698       5.2 %     3.1 %
                                                         
Level 2 Investments(5)
                                                       
Breitburn Energy Partners L.P. 
  Senior Notes   10/1/10     (2 )   $ 6,375     $ 6,452     $ 6,702       0.3 %     0.2 %
Crestwood Holdings Partners LLC
  Bank Loan   9/29/10     (4 )     6,151       6,034       6,366       0.3       0.2  
Genesis Energy, L.P. 
  Senior Notes   11/12/10     (2 )     14,500       14,500       14,863       0.8       0.4  
                                                         
Total
                          $ 26,986     $ 27,931       1.4 %     0.8 %
                                                         
Total of all restricted securities
                          $ 124,880     $ 130,629       6.6 %     3.9 %
                                                         
 
 
(1) Securities are valued using inputs reflecting the Company’s own assumptions.
 
(2) Unregistered security of a public company.
 
(3) On September 28, 2010, the Bankruptcy Court finalized the plan of reorganization of Clearwater. As part of the plan of reorganization, the Company received an interest in the Clearwater Trust consisting of cash and a coal royalty interest as consideration for its unsecured loan to Clearwater.
 
(4) Unregistered security of a private company.
 
(5) These securities have a fair market value determined by the mean of the bid and ask prices provided by a syndicate bank, principal market maker or an independent pricing service. These securities have limited trading volume and are not listed on a national exchange.
 
At February 28, 2011, the cost basis of investments for federal income tax purposes was $1,799,152. At February 28, 2011, gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
 
         
Gross unrealized appreciation of investments
  $ 1,522,919  
Gross unrealized depreciation of investments
    (836 )
         
Net unrealized appreciation
  $ 1,522,083  
         
 
The identified cost basis of federal tax purposes is estimated based on information available from the Company’s portfolio companies. In some cases, this information is very limited. Accordingly, the actual cost basis may prove higher or lower than the estimated cost basis included above.
 
As required by the Fair Value Measurement and Disclosures of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, the Company has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination.
 
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 — Quoted unadjusted prices for identical instruments in active markets traded on a national exchange to which the Company has access at the date of measurement.
 
  •  Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
 
  •  Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information.
 
Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment. For instance, the Company’s repurchase agreements, which are collateralized by U.S. Treasury notes, are generally high quality and liquid; however, the Company reflects these repurchase agreements as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
 
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at February 28, 2011. The Company presents these assets by security type and description on its Schedule of Investments.
 
                                 
          Quoted Prices in
 		    Prices with Other
 		    Unobservable
 		 
          Active Markets
 		    Observable Inputs
 		    Inputs
 		 
    Total     (Level 1)     (Level 2)     (Level 3)(1)  
 
Assets at Fair Value
                               
Equity investments
  $ 3,280,849     $ 3,178,151     $ —     $ 102,698  
Debt investments
    33,225       —       33,225       —  
Repurchase agreements
    7,161       —       7,161       —  
                                 
Total assets at fair value
  $ 3,321,235     $ 3,178,151     $ 40,386     $ 102,698  
                                 
Liabilities at Fair Value
                               
Call option contracts written
  $ 779     $ —     $ 779     $ —  
                                 
 
 
(1) The Company’s investments in Level 3 represent its investments in Buckeye Partners, L.P. (Class B Units), Clearwater Trust, PAA Natural Gas Storage, L.P. (Unregistered Units), and Plains All American GP LLC.
 
The Company did not have any liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at February 28, 2011 or at November 30, 2010. For the three months ended February 28, 2011, there were no transfers between Level 1 and Level 2.
 
The following table presents the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended February 28, 2011.
 
         
    Long-Term
 		 
Assets at Fair Value Using Unobservable Inputs (Level 3)
  Investments  
 
Balance — November 30, 2010
  $ 63,514  
Transfers out of Level 3
    (88,999 )
Realized gains/(losses)
    —  
Unrealized gains, net
    4,415  
Purchases, issuances or settlements
    123,768  
         
Balance — February 28, 2011
  $ 102,698  
         
 
The $4,415 of unrealized gains presented in the table above for the three months ended February 28, 2011 related to investments that are still held at February 28, 2011.

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The purchases, issuances or settlements of $123,768 for the three months ended February 28, 2011 relate to the Company’s investments in Buckeye Partners, L.P. (Class B Units), Buckeye Partners, L.P. (Common Units), PAA Natural Gas Storage, L.P., Plains All American GP LLC and Clearwater Trust. The Company’s investments in the common units of Buckeye Partners, L.P., Inergy, LP and Magellan Midstream Partners, L.P. which are noted as a transfer out of Level 3 in the table above, became registered during the period.
 
As required by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification, the following are the derivative instruments and hedging activities of the Company. The total number of outstanding options at February 28, 2011 is indicative of the volume of this type of derivative for the period ended February 28, 2011.
 
The following table sets forth the fair value of the Company’s derivative instruments.
 
             
Derivatives Not Accounted for as
 		      Fair Value as of
Hedging Instruments   Statement of Assets and Liabilities Location   February 28, 2011
 
Call options
  Call option contracts written   ($ 779 )
 
The following table sets forth the effect of the Company’s derivative instruments.
 
                     
        For the Three Months
 		 
        Ended February 28, 2011  
              Change in
 		 
        Net Realized
 		    Unrealized
 		 
    Location of Gains/(Losses) on
 		  Gains/(Losses) on
 		    Gains/(Losses) on
 		 
    Derivatives
 		  Derivatives
 		    Derivatives
 		 
Derivatives Not Accounted for as
 		  Recognized in
 		  Recognized in
 		    Recognized in
 		 
Hedging Instruments   Income   Income     Income  
 
                     
Call options
  Options     1,579       (799 )

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Securities valuation policies and other investment related disclosures are hereby incorporated by reference to the Company’s annual report previously filed with the Securities and Exchange Commission on form N-CSR on February 4, 2011 with a file number 811-21593.
 
Other information regarding the Company is available in the Company’s most recent annual report. This information is also available on the Company’s website at www.kaynefunds.com; or on the website of the Securities and Exchange Commission, www.sec.gov.
 
Item 2: Controls and Procedures
 
(a) As of a date within 90 days from the filing date of this report, the principal executive officer and principal financial officer concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the Act)), were effective based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities and Exchange Act of 1934, as amended.
 
(b) There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrants last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrants internal control over financial reporting.
 
Item 3: Exhibits
 
1. The certifications of the registrant as required by Rule 30a-2(a) under the Act are exhibits to this report.

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
KAYNE ANDERSON MLP INVESTMENT COMPANY
 
/s/  Kevin S. McCarthy
Name: Kevin S. McCarthy
  Title:   Chairman of the Board of Directors,
President and Chief Executive Officer
Date:  April 29, 2011
 
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.
 
/s/  Kevin S. McCarthy
Name: Kevin S. McCarthy
  Title:   Chairman of the Board of Directors,
President and Chief Executive Officer
Date:  April 29, 2011
 
/s/  Terry A. Hart
Name: Terry A. Hart
  Title:   Chief Financial Officer and Treasurer
Date:  April 29, 2011