Edgar Filing: Kayne Anderson MLP Investment CO

N-30B-2

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MLP Investment Company

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KYN Quarterly Report

August 31, 2012

CONTENTS


	Page
Management Discussion		1
Schedule of Investments		6
Statement of Assets and Liabilities		9
Statement of Operations		10
Statement of Changes in Net Assets Applicable to Common Stockholders		11
Statement of Cash Flows		13
Financial Highlights		14
Notes to Financial Statements		17
Repurchase Disclosure		37

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This report of Kayne Anderson MLP Investment Company (“the Company”) 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 Company’s historical experience and its present expectations or projections indicated in any forward-looking statements. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; master limited partnership industry risk; leverage risk; valuation risk; interest rate risk; tax risk; and other risks discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”). You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to update or revise any forward-looking statements made herein. There is no assurance that the Company’s investment objectives will be attained.

KAYNE ANDERSON MLP INVESTMENT COMPANY

MANAGEMENT DISCUSSION

(UNAUDITED)

Company Overview

Kayne Anderson MLP Investment Company is a non-diversified, closed-end fund that commenced operations in September 2004. Our investment objective is to obtain a high after-tax total return by investing at least 85% of our total assets in energy-related master limited partnerships and their affiliates (“MLPs”) and in other companies that operate assets used in the gathering, transporting, processing, storing, refining, distributing, mining or marketing of natural gas, natural gas liquids, crude oil, refined petroleum products or coal (collectively with MLPs, “Midstream Energy Companies”).

As of August 31, 2012, we had total assets of $4.5 billion, net assets applicable to our common stock of $2.5 billion (net asset value per share of $28.66), and 88.2 million shares of common stock outstanding.

Our investments are principally in equity securities issued by MLPs, but we also invest in debt securities of MLPs and debt/equity securities of Midstream Energy Companies. As of August 31, 2012, we held $4.4 billion in equity investments and $35.6 million in debt investments.

Recent Events

On August 8, 2012, we completed a public offering of 5,000,000 shares of common stock at a price of $29.75 per share. The net proceeds of the offering were $142.8 million and were used to make additional portfolio investments and for general corporate purposes.

Our Top Ten Portfolio Investments as of August 31, 2012

Listed below are our top ten portfolio investments by issuer as of August 31, 2012.


Holding	Sector	Amount ($ millions)			Percent of Long-Term Investments
1. Enterprise Products Partners L.P.	Midstream MLP		$	404.9		9.2	%
2. Kinder Morgan Management, LLC	MLP Affiliate			324.1		7.3
3. Plains All American Pipeline, L.P.	Midstream MLP			296.4		6.7
4. MarkWest Energy Partners, L.P.	Midstream MLP			251.6		5.7
5. Energy Transfer Equity, L.P.	General Partner MLP			206.2		4.7
6. El Paso Pipeline Partners, L.P.	Midstream MLP			185.8		4.2
7. Williams Partners L.P.	Midstream MLP			184.3		4.2
8. Regency Energy Pertners LP	Midstream MLP			178.9		4.1
9. ONEOK Partners, L.P.	Midstream MLP			154.4		3.5
10. Enbridge Energy Partners, L.P.	Midstream MLP			136.3		3.1

			$	2,322.9		52.7	%

Results of Operations — For the Three Months Ended August 31, 2012

Investment Income. Investment income totaled $6.4 million for the quarter and consisted primarily of net dividends and distributions and interest income on our investments. Interest and other income was $1.1 million, and we received $59.4 million of cash dividends and distributions, of which $54.1 million was treated as return of capital during the quarter. Return of capital was increased by $3.3 million during the quarter due to 2011 tax reporting information that we received in fiscal 2012. We received $7.4 million of paid-in-kind dividends during the quarter, which are not included in investment income, but are reflected as an unrealized gain.

KAYNE ANDERSON MLP INVESTMENT COMPANY

MANAGEMENT DISCUSSION

(UNAUDITED)

Operating Expenses. Operating expenses totaled $29.9 million, including $14.5 million of investment management fees, $9.6 million of interest expense (including non-cash amortization of debt issuance costs of $0.5 million), and $1.0 million of other operating expenses. Management fees are calculated based on the average total assets under management. Preferred stock distributions for the quarter were $4.8 million (including non-cash amortization of $0.2 million).

Net Investment Loss. Our net investment loss totaled $15.9 million and included a deferred income tax benefit of $7.6 million.

Net Realized Gains. We had net realized gains from our investments of $32.4 million, net of $19.5 million of current and deferred tax expense.

Net Change in Unrealized Gains. We had a net change in unrealized gains of $217.7 million. The net change consisted of $346.9 million of unrealized gains from investments and a deferred tax expense of $129.2 million.

Net Increase in Net Assets Resulting from Operations. We had an increase in net assets resulting from operations of $234.2 million. This increase was comprised of a net investment loss of $15.9 million; net realized gains of $32.4 million; and net change in unrealized gains of $217.7 million, as noted above.

Distributions to Common Stockholders

We pay quarterly distributions to our common stockholders, funded in part by net distributable income (“NDI”) generated from our portfolio investments. NDI is the amount of income received by us from our portfolio investments less operating expenses, subject to certain adjustments as described below. NDI is not a financial measure under the accounting principles generally accepted in the United States of America (“GAAP”). Refer to the “Reconciliation of NDI to GAAP” section below for a reconciliation of this measure to our results reported under GAAP.

Income from portfolio investments includes (a) cash dividends and distributions, (b) paid-in-kind dividends received (i.e., stock dividends), (c) interest income from debt securities and commitment fees from private investments in public equity (“PIPE investments”) and (d) net premiums received from the sale of covered calls.

Operating expenses include (a) investment management fees paid to our investment adviser, (b) other expenses (mostly due to fees paid to other service providers), (c) interest expense and preferred stock distributions and (d) deferred income tax expense/benefit on net investment income/loss.

KAYNE ANDERSON MLP INVESTMENT COMPANY

MANAGEMENT DISCUSSION

(UNAUDITED)

Net Distributable Income (NDI)

(amounts in millions, except for per share amounts)


	Three Months Ended August 31, 2012
Distributions and Other Income from Investments
Dividends and Distributions	$	59.4
Paid-In-Kind Dividends		7.4
Interest and Other Income		1.1
Net Premiums Received from Call Options Written		0.7

Total Distributions and Other Income from Investments		68.6
Expenses
Investment Management Fee		(14.5	)
Other Expenses		(1.0	)
Interest Expense		(9.1	)
Preferred Stock Distributions		(4.6	)
Income Tax Benefit		7.6

Net Distributable Income (NDI)	$	47.0

Weighted Shares Outstanding		84.7
NDI per Weighted Share Outstanding	$	0.555

Distributions paid per Common Share⁽¹⁾	$	0.5375

(1)	The distribution of $0.5375 per share for the third quarter of fiscal 2012 was paid to common stockholders on October 12, 2012.

Payment of future distributions is subject to Board of Directors approval, as well as meeting the covenants of our debt agreements and terms of our preferred stock. In determining our quarterly distribution to common stockholders, our Board of Directors considers a number of factors that include, but are not limited to:

•

NDI generated in the current quarter;

•

Expected NDI over the next twelve months; and

•

Realized and unrealized gains generated by the portfolio.

On September 20, 2012, we declared a quarterly distribution of $0.5375 per common share for the fiscal third quarter (a total distribution of $47.4 million). The distribution represents an increase of 1.9% from the prior quarter’s distribution and an increase of 7.0% from the distribution for the quarter ended August 31, 2011. The distribution was paid on October 12, 2012 to common stockholders of record on October 5, 2012.

Reconciliation of NDI to GAAP

The difference between distributions and other income from investments in the NDI calculation and total investment income as reported in our Statement of Operations is reconciled as follows:

•

GAAP recognizes that a significant portion of the cash distributions received from MLPs is characterized as a return of capital and therefore excluded from investment income, whereas the NDI calculation includes the return of capital portion of such distributions.

•

NDI includes the value of dividends paid-in-kind, whereas such amounts are not included as investment income for GAAP purposes, but rather are recorded as unrealized gains upon receipt.

KAYNE ANDERSON MLP INVESTMENT COMPANY

MANAGEMENT DISCUSSION

(UNAUDITED)

•

NDI includes commitment fees from PIPE investments, whereas such amounts are generally not included in investment income for GAAP purposes, but rather are recorded as a reduction to the cost of the investment.

•

Many of our investments in debt securities were purchased at a discount or premium to the par value of such security. When making such investments, we consider the security’s yield to maturity, which factors in the impact of such discount (or premium). Interest income reported under GAAP includes the non-cash accretion of the discount (or amortization of the premium) based on the effective interest method. When we calculate interest income for purposes of determining NDI, in order to better reflect the yield to maturity, the accretion of the discount (or amortization of the premium) is calculated on a straight-line basis to the earlier of the expected call date or the maturity of the debt security.

•

We may sell covered call option contracts to generate income or to reduce our ownership of certain securities that we hold. In some cases, we are able to repurchase these call option contracts at a price less than the fee that we received, thereby generating a profit. The amount we received from selling call options, less the amount that we pay to repurchase such call option contracts is included in NDI. For GAAP purposes, premiums received from call option contracts sold is not included in investment income. See Note 2 — Significant Accounting Policies for a full discussion of the GAAP treatment of option contracts.

The treatment of expenses included in NDI also differs from what is reported in the Statement of Operations as follows:

•

The non-cash amortization or write-offs of capitalized debt issuance costs and preferred stock offering costs related to our financings is included in interest expense and distributions on mandatory redeemable preferred stock for GAAP purposes, but is excluded from our calculation of NDI. Interest or dividend premiums paid associated with the redemption of senior unsecured notes or preferred stock are included in interest expense and distributions on mandatory redeemable preferred stock for GAAP purposes, but excluded from our calculation of NDI.

•

NDI also includes recurring payments (or receipts) on interest rate swap contracts (excluding termination payments) whereas for GAAP purposes, these amounts are included in the realized gains/losses section of the Statement of Operations.

Liquidity and Capital Resources

Total leverage outstanding at August 31, 2012 of $1,264.0 million was comprised of $890.0 million of senior unsecured notes (“Senior Notes”) and $374.0 million of mandatory redeemable preferred stock. At August 31, 2012, there were no borrowings outstanding under our senior unsecured revolving credit facility (the “Credit Facility”). Total leverage represented 28% of total assets at August 31, 2012. As of October 25, 2012, we had $132.0 million borrowed under our Credit Facility, and we had $1.1 million of cash.

The Credit Facility has a $200.0 million commitment amount and matures on June 11, 2013. The interest rate may vary between LIBOR plus 1.75% and LIBOR plus 3.00%, depending on our asset coverage ratios. Outstanding loan balances accrue interest daily at a rate equal to one-month LIBOR plus 1.75% based on current asset coverage ratios. We pay a commitment fee of 0.40% per annum on any unused amounts of the Credit Facility. A full copy of our Credit Facility is available on our website, www.kaynefunds.com.

At August 31, 2012, our asset coverage ratios under the Investment Company Act of 1940, as amended (“the 1940 Act”), were 426% and 300% for debt and total leverage (debt plus preferred stock), respectively. We currently target an asset coverage ratio with respect to our debt of 375%, but at times may be above or below our target depending on market conditions.

KAYNE ANDERSON MLP INVESTMENT COMPANY

MANAGEMENT DISCUSSION

(UNAUDITED)

We had $890.0 million of Senior Notes outstanding at August 31, 2012. The Senior Notes mature between 2013 and 2022. As of the same date, we had $374.0 million of mandatory redeemable preferred stock outstanding, which is subject to mandatory redemption at various dates from 2017 through 2020.

As of August 31, 2012, our total leverage consisted of both fixed rate (88%) and floating rate (12%) obligations. At such date, the weighted average interest rate on our total leverage was 4.3%.

KAYNE ANDERSON MLP INVESTMENT COMPANY

SCHEDULE OF INVESTMENTS

AUGUST 31, 2012

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

(UNAUDITED)


Description	No. of Shares/Units		Value
Long-Term Investments — 174.4%
Equity Investments⁽¹⁾ — 173.0%
Midstream MLP⁽²⁾ —117.3%
Access Midstream Partners, L.P.		2,485	$	74,866
Boardwalk Pipeline Partners, LP		1,215		32,834
Buckeye Partners, L.P.⁽³⁾		1,700		84,015
Buckeye Partners, L.P. — Class B Units⁽³⁾⁽⁴⁾⁽⁵⁾		903		41,715
Copano Energy, L.L.C.		1,388		42,596
Crestwood Midstream Partners LP		2,401		59,073
Crestwood Midstream Partners LP — Class C Units⁽⁴⁾⁽⁵⁾		1,175		27,604
Crosstex Energy, L.P.		551		8,197
DCP Midstream Partners, LP		2,507		108,171
DCP Midstream Partners, LP⁽⁴⁾		338		14,126
El Paso Pipeline Partners, L.P.		5,133		185,770
Enbridge Energy Partners, L.P.		4,628		136,334
Energy Transfer Partners, L.P.		951		40,607
Enterprise Products Partners L.P.		7,582		404,882
Global Partners LP		2,054		51,630
Inergy, L.P.		4,047		87,243
Inergy Midstream, L.P.		1,164		27,123
Magellan Midstream Partners, L.P.⁽⁶⁾		1,602		132,927
MarkWest Energy Partners, L.P.⁽³⁾		4,739		251,627
Niska Gas Storage Partners LLC		1,887		23,907
NuStar Energy L.P.		723		36,659
ONEOK Partners, L.P.		2,718		154,419
Plains All American Pipeline, L.P.⁽³⁾		3,426		296,443
PVR Partners, L.P.⁽³⁾		4,647		113,191
Regency Energy Partners LP		7,733		178,939
Spectra Energy Partners, L.P.		348		11,144
Targa Resources Partners L.P.		1,634		66,193
Tesoro Logistics LP⁽⁶⁾		464		20,234
Western Gas Partners, LP		1,472		70,299
Williams Partners L.P.		3,573		184,292

				2,967,060

MLP Affiliate⁽²⁾ — 14.7%
Enbridge Energy Management, L.L.C.⁽⁵⁾		1,527		47,523
Kinder Morgan Management, LLC⁽⁵⁾		4,372		324,069

				371,592

General Partner MLP — 11.9%
Alliance Holdings GP L.P.		1,931		93,445
Energy Transfer Equity, L.P.		4,691		206,157

				299,602

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

SCHEDULE OF INVESTMENTS

AUGUST 31, 2012

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

(UNAUDITED)


Description	No. of Shares/Units		Value
Midstream — 9.3%
Kinder Morgan, Inc.		1,162	$	41,551
ONEOK, Inc.		1,510		67,218
Plains All American GP LLC — Unregistered⁽³⁾⁽⁴⁾		24		54,932
Targa Resources Corp.		214		9,688
The Williams Companies, Inc.		1,920		61,955

				235,344

Shipping MLP — 8.5%
Capital Product Partners L.P.		2,841		21,875
Golar LNG Partners LP		201		6,405
Navios Maritime Partners L.P.		1,876		27,147
Teekay LNG Partners L.P.		1,696		67,375
Teekay Offshore Partners L.P.		3,263		92,646

				215,448

Other MLP — 5.5%
Calumet Specialty Products Partners, L.P.		346		9,877
Exterran Partners, L.P.		2,903		61,834
Hi-Crush Partners LP⁽⁷⁾		1,522		29,611
Northern Tier Energy LP⁽⁷⁾		865		15,831
PetroLogistics LP		1,784		22,814

				139,967

Upstream MLP & Income Trust — 5.1%
BreitBurn Energy Partners L.P.		2,206		43,177
Legacy Reserves L.P.		325		9,064
LRR Energy, L.P.		388		7,004
Memorial Production Partners LP		339		6,024
Mid-Con Energy Partners, LP		579		12,962
Pacific Coast Oil Trust		568		10,771
SandRidge Mississippian Trust II		808		16,816
SandRidge Permian Trust		893		17,837
VOC Energy Trust		347		6,224

				129,879

Coal MLP & Other — 0.4%
Alliance Resource Partners, L.P.		131		8,134
Clearwater Trust ^(3)(4)(8)		N/A		2,470

				10,604

Propane MLP — 0.3%
Suburban Propane Partners, L.P.		163		6,289

Total Equity Investments (Cost — $2,762,170)				4,375,785

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

SCHEDULE OF INVESTMENTS

AUGUST 31, 2012

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

(UNAUDITED)


Description	Interest Rate			Maturity Date		Principal Amount		Value
Description	Interest Rate			Maturity Date		Principal Amount		Value
Debt Investments — 1.4%
Midstream — 1.2%
Niska Gas Storage Partners LLC		8.875	%		3/15/18	$	29,000	$	29,725
PVR Partners, L.P.⁽³⁾		8.250			4/15/18		1,240		1,259

									30,984

Upstream — 0.2%
EP Energy LLC		9.375			5/1/20		4,250		4,627

Total Energy Debt Investments (Cost — $33,211)									35,611

Total Long-Term Investments (Cost — $2,795,381)									4,411,396


						No. of Contracts
Liabilities
Call Option Contracts Written⁽⁹⁾
Midstream
Magellan Midstream Partners, L.P., call option expiring 9/21/12 @ $80.00							600		(197	)
Tesoro Logistics LP, call option expiring 9/21/12 @ $40.00							200		(71	)

Total Call Option Contracts Written (Premiums Received — $85)									(268	)

Senior Unsecured Notes									(890,000	)
Mandatory Redeemable Preferred Stock at Liquidation Value									(374,000	)
Deferred Tax Liability									(632,685	)
Other Liabilities									(43,195	)

Total Liabilities									(1,940,148	)
Other Assets									57,933

Total Liabilities in Excess of Other Assets									(1,882,215	)

Net Assets Applicable to Common Stockholders								$	2,529,181

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

(2)	Includes limited liability companies.

(3)	The Company believes that it is an affiliate of Buckeye Partners, L.P., the Clearwater Trust, MarkWest Energy Partners, L.P., PVR Partners, L.P., Plains All American Pipeline, L.P. and Plains All American GP LLC. See Note 5 —Agreements and Affiliations.

(4)	Fair valued securities, restricted from public sale. See Notes 2, 3 and 7 in Notes to Financial Statements.

(5)	Distributions are paid-in-kind.

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

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

(8)	The Company owns an interest in the Creditors Trust of Miller Bros. Coal, LLC (“Clearwater Trust”) consisting of a coal royalty interest. See Notes 5 and 7 in Notes to Financial Statements.

(9)	Security is non-income producing.

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

STATEMENT OF ASSETS AND LIABILITIES

AUGUST 31, 2012

(amounts in 000’s, except share and per share amounts)

(UNAUDITED)


ASSETS
Investments at fair value:
Non-affiliated (Cost — $2,316,909)	$	3,567,003
Affiliated (Cost — $478,472)		844,393

Total investments (Cost — $2,795,381)		4,411,396
Cash		41,797
Deposits with brokers		268
Receivable for securities sold		2,609
Interest, dividends and distributions receivable		2,048
Deferred debt issuance and preferred stock offering costs and other assets		11,211

Total Assets		4,469,329


LIABILITIES
Payable for securities purchased		17,452
Investment management fee payable		14,487
Accrued directors’ fees and expenses		82
Call option contracts written (Premiums received — $85)		268
Accrued expenses and other liabilities		11,174
Deferred tax liability		632,685
Senior unsecured notes		890,000
Mandatory redeemable preferred stock, $25.00 liquidation value per share (14,960,000 shares issued and outstanding)		374,000

Total Liabilities		1,940,148

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS	$	2,529,181

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS CONSIST OF
Common stock, $0.001 par value (88,240,873 shares issued and outstanding, 185,040,000 shares authorized)	$	88
Paid-in capital		1,676,283
Accumulated net investment loss, net of income taxes, less dividends		(425,213	)
Accumulated realized gains on investments, options, and interest rate swap contracts, net of income taxes		264,104
Net unrealized gains on investments and options, net of income taxes		1,013,919

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS	$	2,529,181

NET ASSET VALUE PER COMMON SHARE	$	28.66

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

STATEMENT OF OPERATIONS

(amounts in 000’s)

(UNAUDITED)


	For the Three Months Ended August 31, 2012			For the Nine Months Ended August 31, 2012
INVESTMENT INCOME
Income
Dividends and distributions:
Non-affiliated investments	$	47,567		$	135,860
Affiliated investments		11,818			32,380

Total dividends and distributions		59,385			168,240
Return of capital		(54,094	)		(148,632	)

Net dividends and distributions		5,291			19,608
Interest and other income		1,126			3,344

Total investment income		6,417			22,952

Expenses
Investment management fees		14,487			41,999
Administration fees		201			615
Professional fees		153			441
Custodian fees		111			327
Reports to stockholders		132			318
Directors’ fees and expenses		87			256
Insurance		54			160
Other expenses		278			456

Total expenses — before interest expense, preferred distributions and taxes		15,503			44,572
Interest expense and amortization of debt issuance costs		9,574			28,419
Distributions on mandatory redeemable preferred stock and amortization of offering costs		4,842			13,487

Total expenses — before taxes		29,919			86,478

Net Investment Loss — Before Taxes		(23,502	)		(63,526	)
Current tax benefit		961			961
Deferred tax benefit		6,588			18,663

Net Investment Loss		(15,953	)		(43,902	)

REALIZED AND UNREALIZED GAINS (LOSSES)
Net Realized Gains (Losses)
Investments — non-affiliated		53,330			110,570
Investments — affiliated		(1,500	)		32
Options		62			1,067
Payments on interest rate swap contracts		—			(2,606	)
Current tax expense		(1,989	)		(1,989	)
Deferred tax expense		(17,472	)		(38,625	)

Net Realized Gains		32,431			68,449

Net Change in Unrealized Gains (Losses)
Investments — non-affiliated		266,787			262,799
Investments — affiliated		80,343			77,498
Options		(242	)		(276	)
Deferred tax expense		(129,158	)		(126,617	)

Net Change in Unrealized Gains		217,730			213,404

Net Realized and Unrealized Gains		250,161			281,853

NET INCREASE IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM OPERATIONS	$	234,208		$	237,951

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

(amounts in 000’s, except share amounts)


	For the Nine Months Ended August 31, 2012 (Unaudited)			For the Fiscal Year Ended November 30, 2011
OPERATIONS
Net investment loss, net of tax	$	(43,902	)	$	(49,953	)
Net realized gains, net of tax		68,449			110,193
Net change in unrealized gains, net of tax		213,404			91,626

Net Increase in Net Assets Resulting from Operations		237,951			151,866

DIVIDENDS AND DISTRIBUTIONS TO COMMON STOCKHOLDERS⁽¹⁾
Dividends		(45,537	)⁽²⁾		(89,963	)⁽³⁾
Distributions — return of capital		(79,478	)⁽²⁾		(51,663	)⁽³⁾

Dividends and Distributions to Common Stockholders		(125,015	)		(141,626	)

CAPITAL STOCK TRANSACTIONS
Issuance of common stock offerings of 12,500,000 and 5,700,000 shares of common stock, respectively		385,075			174,306
Underwriting discounts and offering expenses associated with the issuance of common stock		(16,067	)		(7,322	)
Issuance of 610,664 and 958,808 newly issued shares of common stock from reinvestment of dividends and distributions, respectively		17,634			26,488

Net Increase in Net Assets Applicable to Common Stockholders from Capital Stock Transactions		386,642			193,472

Total Increase in Net Assets Applicable to Common Stockholders		499,578			203,712

NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS
Beginning of period		2,029,603			1,825,891

End of period	$	2,529,181		$	2,029,603

(1)

Distributions on the Company’s mandatory redeemable preferred stock are treated as an operating expense under GAAP and are included in the calculation of net investment loss. See Note 2 — Significant Accounting Policies. The Company estimates that the distribution in the amount of $12,811 paid to mandatory redeemable preferred stockholders during the nine months ended August 31, 2012 will be a dividend (ordinary income). This estimate is based solely on the Company’s operating results during the period and does not reflect the expected result during the fiscal year. The actual characterization of the mandatory redeemable preferred stock distributions made during the period will not be determinable until after the end of the fiscal year when the Company can determine earnings and profits. Therefore, the characterization may differ from the preliminary estimates. Distributions in the amount of $11,451 paid to mandatory redeemable preferred stockholders for the fiscal year ended November 30, 2011, were characterized as qualified dividend income. This characterization is based on the Company’s earnings and profits.

(2)

This is an estimate of the characterization of the distributions paid to common stockholders for the nine months ended August 31, 2012 as either a dividend (eligible to be treated as qualified dividend income) or distributions (return of capital). This estimate is based on the Company’s operating results during the period. The actual characterization of the common stock distributions made during the period will not be determined until after the end of the fiscal year when the Company can determine earnings and profits. Therefore, the characterization may differ from the preliminary estimates.

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS

(amounts in 000’s, except share amounts)

(3)

The information presented in each of these items is a characterization of a portion of the total dividends and distributions paid to common stockholders for the fiscal year ended November 30, 2011 as either dividends (eligible to be treated as qualified dividend income) or distributions (return of capital). This characterization is based on the Company’s earnings and profits.

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED AUGUST 31, 2012

(amounts in 000’s)

(UNAUDITED)


CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations	$	237,951
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Net deferred tax expense		146,579
Return of capital distributions		148,632
Net realized gains		(109,063	)
Net unrealized gains		(340,021	)
Accretion of bond discounts, net		(109	)
Purchase of long-term investments		(1,230,012	)
Proceeds from sale of long-term investments		642,986
Decrease in deposits with brokers		6
Increase in receivable for securities sold		(1,357	)
Increase in interest, dividends and distributions receivable		(1,164	)
Amortization of deferred debt issuance costs		1,402
Amortization of mandatory redeemable preferred stock issuance costs		676
Decrease in other assets, net		347
Increase in payable for securities purchased		8,770
Increase in investment management fee payable		2,573
Increase in accrued directors’ fees and expenses		3
Decrease in call option contracts written, net		(36	)
Decrease in accrued expenses and other liabilities		(6,736	)

Net Cash Used in Operating Activities		(498,573	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares of common stock, net of offering costs		369,008
Proceeds from offering of senior unsecured notes		175,000
Proceeds from issuance on mandatory redeemable preferred stock		120,000
Redemption of senior unsecured notes		(60,000	)
Redemption of mandatory redeemable preferred stock		(6,000	)
Costs associated with issuance of credit facility		(75	)
Costs associated with issuance of senior unsecured notes		(1,411	)
Costs associated with issuance of mandatory redeemable preferred stock		(2,600	)
Cash distributions paid to common stockholders, net		(107,382	)

Net Cash Provided by Financing Activities		486,540

NET DECREASE IN CASH		(12,033	)
CASH — BEGINNING OF PERIOD		53,830

CASH — END OF PERIOD	$	41,797

Supplemental disclosure of cash flow information:

Non-cash financing activities not included herein consist of reinvestment of distributions of $17,634 pursuant to the Company’s dividend reinvestment plan.

During the nine months ended August 31, 2012, interest paid was $33,719 and income tax paid was $1,028.

The Company received $22,500 paid-in-kind dividends during the nine months ended August 31, 2012. See Note 2 — Significant Accounting Policies.

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

FINANCIAL HIGHLIGHTS

(amounts in 000’s, except share and per share amounts)


	For the Nine Months Ended August 31, 2012 (Unaudited)			For the Fiscal Year Ended November 30,																					For the Period September 28, 2004⁽¹⁾ through November 30, 2004
	For the Nine Months Ended August 31, 2012 (Unaudited)			2011			2010			2009			2008			2007			2006			2005

Per Share of Common Stock⁽²⁾
Net asset value, beginning of period	$	27.01		$	26.67		$	20.13		$	14.74		$	30.08		$	28.99		$	25.07		$	23.91		$	23.70	⁽³⁾
Net investment income/(loss)⁽⁴⁾		(0.53	)		(0.69	)		(0.44	)		(0.33	)		(0.73	)		(0.73	)		(0.62	)		(0.17	)		0.02
Net realized and unrealized gain/(loss)		3.71			2.91			8.72			7.50			(12.56	)		3.58			6.39			2.80			0.19

Total income/(loss) from operations		3.18			2.22			8.28			7.17			(13.29	)		2.85			5.77			2.63			0.21

Auction rate preferred dividends⁽⁴⁾⁽⁵⁾		—			—			—			—			—			(0.10	)		—			(0.05	)		—
Auction rate preferred distributions — return of capital⁽⁵⁾		—			—			—			(0.01	)		(0.10	)		—			(0.10	)		—			—

Total dividends and distributions — auction rate preferred		—			—			—			(0.01	)		(0.10	)		(0.10	)		(0.10	)		(0.05	)		—

Common dividends⁽⁵⁾		(0.57	)		(1.26	)		(0.84	)		—			—			(0.09	)		—			(0.13	)		—
Common distributions — return of capital⁽⁵⁾		(0.99	)		(0.72	)		(1.08	)		(1.94	)		(1.99	)		(1.84	)		(1.75	)		(1.37	)		—

Total dividends and distributions — common		(1.56	)		(1.98	)		(1.92	)		(1.94	)		(1.99	)		(1.93	)		(1.75	)		(1.50	)		—

Underwriting discounts and offering costs on the issuance of auction rate preferred stock		—			—			—			—			—			—			—			(0.03	)		—
Effect of issuance of common stock		0.02			0.09			0.16			0.12			—			0.26			—			0.11			—
Effect of shares issued in reinvestment of dividends and distributions		0.01			0.01			0.02			0.05			0.04			0.01			—			—			—

Total capital stock transactions		0.03			0.10			0.18			0.17			0.04			0.27			—			0.08			—

Net asset value, end of period	$	28.66		$	27.01		$	26.67		$	20.13		$	14.74		$	30.08		$	28.99		$	25.07		$	23.91

Market value per share of common stock, end of period	$	30.50		$	28.03		$	28.49		$	24.43		$	13.37		$	28.27		$	31.39		$	24.33		$	24.90

Total investment return based on common stock market value⁽⁶⁾		14.8	%⁽⁷⁾		5.6	%		26.0	%		103.0	%		(48.8	)%		(4.4	)%		37.9	%		3.7	%		(0.4	)%⁽⁷⁾

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

FINANCIAL HIGHLIGHTS

(amounts in 000’s, except share and per share amounts)


	For the Nine Months Ended August 31, 2012 (Unaudited)			For the Fiscal Year Ended November 30,																					For the Period September 28, 2004⁽¹⁾ through November 30, 2004
				2011			2010			2009			2008			2007			2006			2005

Supplemental Data and Ratios⁽⁸⁾
Net assets applicable to common stockholders, end of period	$	2,529,181		$	2,029,603		$	1,825,891		$	1,038,277		$	651,156		$	1,300,030		$	1,103,392		$	932,090		$	792,836
Ratio of expenses to average net assets
Management fees		2.5	%		2.4	%		2.1	%		2.1	%		2.2	%		2.3	%		3.2	%		1.2	%		0.8	%
Other expenses		0.1			0.2			0.2			0.4			0.3			0.2			0.2			0.3			0.4

Subtotal		2.6			2.6			2.3			2.5			2.5			2.5			3.4			1.5			1.2
Interest expense and distributions on mandatory redeemable preferred stock⁽⁴⁾		2.5			2.3			1.9			2.5			3.4			2.3			1.7			0.8			0.0
Income tax expense		8.6			4.8			20.5			25.4			—	⁽⁹⁾		3.5			13.8			6.4			3.5

Total expenses		13.7	%		9.7	%		24.7	%		30.4	%		5.9	%		8.3	%		18.9	%		8.7	%		4.7	%

Ratio of net investment income/(loss) to average net assets⁽⁴⁾		(2.6	)%		(2.5	)%		(1.8	)%		(2.0	)%		(2.8	)%		(2.3	)%		(2.4	)%		(0.7	)%		0.5	%
Net increase/(decrease) in net assets to common stockholders resulting from operations to average net assets		10.5	%⁽⁷⁾		7.7	%		34.6	%		43.2	%		(51.2	)%		7.3	%		21.7	%		10.0	%		0.9	%⁽⁷⁾
Portfolio turnover rate		15.9	%⁽⁷⁾		22.3	%		18.7	%		28.9	%		6.7	%		10.6	%		10.0	%		25.6	%		11.8	%⁽⁷⁾
Average net assets	$	2,275,030		$	1,971,469		$	1,432,266		$	774,999		$	1,143,192		$	1,302,425		$	986,908		$	870,672		$	729,280
Senior unsecured notes outstanding, end of period		890,000			775,000			620,000			370,000			304,000			505,000			320,000			260,000			—
Credit facility outstanding, end of period		—			—			—			—			—			97,000			17,000			—			—
Auction rate preferred stock, end of period		—			—			—			75,000			75,000			75,000			75,000			75,000			—
Mandatory redeemable preferred stock, end of period		374,000			260,000			160,000			—			—			—			—			—			—
Average shares of common stock outstanding		80,978,508			72,661,162			60,762,952			46,894,632			43,671,666			41,134,949			37,638,314			34,077,731			33,165,900
Asset coverage of total debt⁽¹⁰⁾		426.2	%		395.4	%		420.3	%		400.9	%		338.9	%		328.4	%		449.7	%		487.3	%		—
Asset coverage of total leverage (debt and preferred stock)⁽¹¹⁾		300.1	%		296.1	%		334.1	%		333.3	%		271.8	%		292.0	%		367.8	%		378.2	%		—
Average amount of borrowings per share of common stock during the period⁽²⁾	$	10.31		$	10.09		$	7.70		$	6.79		$	11.52		$	12.14		$	8.53		$	5.57			—

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

FINANCIAL HIGHLIGHTS

(amounts in 000’s, except share and per share amounts)

(1)	Commencement of operations.

(2)	Based on average shares of common stock outstanding.

(3)	Initial public offering price of $25.00 per share less underwriting discounts of $1.25 per share and offering costs of $0.05 per share.

(4)	Distributions on the Company’s mandatory redeemable preferred stock are treated as an operating expense under GAAP and are included in the calculation of net investment loss. See Note 2 — Significant Accounting Policies.

(5)

The information presented for the nine months ended August 31, 2012 is an estimate of the characterization of the distribution paid and is based on the Company’s operating results during the period. The information presented for each of the other periods is a characterization of the total distributions paid to preferred stockholders and common stockholders as either a dividend (eligible to be treated as qualified dividend) or a distribution (return of capital) and is based on the Company’s earnings and profits.

(6)

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 distributions at actual prices pursuant to the Company’s dividend reinvestment plan.

(7)	Not annualized.

(8)	Unless otherwise noted, ratios are annualized.

(9)

For the fiscal year ended November 30, 2008, the Company accrued deferred income tax benefits of $339,991 (29.7% of average net assets) primarily related to unrealized losses on investments. Realization of a deferred tax benefit is dependent on whether there will be sufficient taxable income of the appropriate character within the carryforward periods to realize a portion or all of the deferred tax benefit. Because it could not have been predicted whether the Company would incur a benefit in the future, a deferred income tax expense of 0% was assumed.

(10)

Calculated pursuant to section 18(a)(1)(A) of the 1940 Act. Represents the value of total assets less all liabilities not represented by Senior Notes or any other senior securities representing indebtedness and mandatory redeemable preferred stock divided by the aggregate amount of Senior Notes and any other senior securities representing indebtedness. Under the 1940 Act, the Company may not declare or make any distribution on its common stock nor can it incur additional indebtedness if, at the time of such declaration or incurrence, its asset coverage with respect to senior securities representing indebtedness would be less than 300%. For purposes of this test, the credit facility is considered a senior security representing indebtedness.

(11)

Calculated pursuant to section 18(a)(2)(A) of the 1940 Act. Represents the value of total assets less all liabilities not represented by Senior Notes, any other senior securities representing indebtedness and preferred stock divided by the aggregate amount of Senior Notes, any other senior securities representing indebtedness and preferred stock. Under the 1940 Act, the Company may not declare or make any distribution on its common stock nor can it issue additional preferred stock if at the time of such declaration or issuance, its asset coverage with respect to all senior securities would be less than 200%. In addition to the limitations under the 1940 Act, the Company, under the terms of its mandatory redeemable preferred stock, would not be able to declare or pay any distributions on its common stock if such declaration would cause its asset coverage with respect to all senior securities to be less than 225%. For purposes of these tests, the credit facility is considered a senior security representing indebtedness.

See accompanying notes to financial statements.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

1. Organization

Kayne Anderson MLP Investment Company (the “Company”) was organized as a Maryland corporation on June 4, 2004, and is a non-diversified closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to obtain a high after-tax total return by investing at least 85% of its net assets plus any borrowings (“total assets”) in energy-related master limited partnerships and their affiliates (collectively, “MLPs”), and in other companies that, as their principal business, operate assets used in the gathering, transporting, processing, storing, refining, distributing, mining or marketing of natural gas, natural gas liquids (including propane), crude oil, refined petroleum products or coal (collectively with MLPs, “Midstream Energy Companies”). The Company commenced operations on September 28, 2004. The Company’s shares of common stock are listed on the New York Stock Exchange, Inc. (“NYSE”) under the symbol “KYN.”

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 as of 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. Cash and Cash Equivalents — Cash and cash equivalents include short-term, liquid investments with an original maturity of three months or less and include money market fund accounts.

C. Calculation of Net Asset Value — The Company determines its net asset value no less frequently than as of the last day of each month based on the most recent close of regular session trading on the NYSE, and makes its net asset value available for publication monthly. Currently, the Company calculates its net asset value on a weekly basis. Net asset value is computed by dividing the value of the Company’s assets (including accrued interest and distributions and current and deferred income tax assets), less all of its liabilities (including accrued expenses, distributions payable, current and deferred accrued income taxes, and any borrowings) and the liquidation value of any outstanding preferred stock, by the total number of common shares outstanding.

D. 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 ask prices on such day. 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. Debt securities that are considered bonds are valued by using the mean of the bid and ask prices provided by an independent pricing service. For debt securities that are considered bank loans, the fair market value is determined by the mean of the bid and ask prices provided by the agent or syndicate bank or principal market maker. When price quotes are not available, fair market value will be based on prices of comparable securities. In certain cases, the Company may not be able to purchase or sell debt securities at the quoted prices due to the lack of liquidity for these securities.

Exchange-traded options and futures contracts are valued at the last sales price at the close of trading in the market where such contracts are principally traded or, if there was no sale on the applicable exchange on such day, at the mean between the quoted bid and ask price as of the close of such exchange.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

The Company 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 Company for which reliable market quotations are not readily available, valuations are determined in a manner that most accurately 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 valued by senior professionals of KA Fund Advisors, LLC (“KAFA” or the “Adviser”) who are responsible for the portfolio investments. The investments will be valued monthly with new investments valued at the end of the month in which the investment was made.

•

Investment Team Valuation Documentation. Preliminary valuation conclusions will be determined by senior management of KAFA. Such valuations are submitted to the Valuation Committee (a committee of the Company’s Board of Directors) or the Board of Directors on a monthly or quarterly basis, as appropriate.

•

Valuation Committee. The Valuation Committee meets to consider the valuations submitted by KAFA (1) at the end of each month for new investments, if any, and (2) at the end of each quarter for existing investments. Between meetings of the Valuation Committee, a senior officer of KAFA is authorized to make valuation determinations. All valuation determinations of the Valuation Committee are subject to ratification by the Board of Directors 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.

At August 31, 2012, the Company held 5.6% of its net assets applicable to common stockholders (3.2% of total assets) in securities valued at fair value, as determined pursuant to procedures adopted by the Board of Directors, with fair value of $140,847. See Note 3 — Fair Value and Note 7 — Restricted Securities.

E. Repurchase Agreements — From time to time, the Company has agreed to purchase securities from financial institutions, subject to the seller’s agreement to repurchase them at an agreed-upon time and price (“repurchase agreements”). The financial institutions with whom the Company 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 Company to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. As of August 31, 2012, the Company did not have any repurchase agreements.

F. Short Sales — A short sale is a transaction in which the Company 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 Company may arrange through a broker to borrow the securities to be delivered to the buyer. The proceeds received by the Company for the short sale are retained by the broker until the Company replaces the borrowed securities. In borrowing the securities to be delivered to the buyer, the Company becomes obligated to replace the securities borrowed at their market price at the time of replacement, whatever the price may be.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

The Company’s short sales, if any, are fully collateralized. The Company is required to maintain 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 Company is liable for any dividends or distributions paid on securities sold short.

The Company may also sell short “against the box” (i.e., the Company enters into a short sale as described above while holding an offsetting long position in the security which it sold short). If the Company enters into a short sale “against the box,” the Company would segregate an equivalent amount of securities owned as collateral while the short sale is outstanding. During the nine months ended August 31, 2012, the Company did not engage in any short sales.

G. Security Transactions — 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.

H. Return of Capital Estimates — Distributions received from the Company’s investments in MLPs and other securities generally are comprised of income and return of capital. The Company 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 other industry sources. These estimates may subsequently be revised based on information received from MLPs after their tax reporting periods are concluded.

The following table sets forth the Company’s estimated total return of capital portion of the distributions received from its investments. The return of capital portion of the distributions is a reduction to investment income, results in an equivalent reduction in the cost basis of the associated investments and increases net realized gains (losses) and net change in unrealized gains (losses). In the Company’s financial statements (presented in accordance with GAAP), the return of capital cost basis reductions for the Company’s MLP investments are limited to the total amount of the cash distributions received from such investments. For income tax purposes, the cost basis reductions for the Company’s MLP investments typically exceed cash distributions received from such investments due to allocated losses from these investments. See Note 6 — Income Taxes.


	Three Months Ended August 31, 2012			Nine Months Ended August 31, 2012
Return of capital portion of distributions received		91	%		88	%
Return of capital — attributable to net realized gains (losses)	$	11,183		$	24,584
Return of capital — attributable to net change in unrealized gains (losses)		42,911			124,048

Total return of capital	$	54,094		$	148,632

For the three and nine months ended August 31, 2012, the Company estimated the return of capital portion of distributions received to be $50,772 (85%) and $145,310 (86%), respectively. These amounts were increased by $3,322 attributable to 2011 tax reporting information received by the Company in fiscal 2012. As a result, the return of capital percentage for the three and nine months ended August 31, 2012 was 91% and 88%, respectively.

I. Investment Income — The Company records dividends and distributions on the ex-dividend date. Interest income is recognized on the accrual basis, including amortization of premiums and accretion of discounts. When investing in securities with payment in-kind interest, the Company will accrue interest income during the life of the security even though it will not be receiving cash as the interest is accrued. To the extent that interest income to be received is not expected to be realized, a reserve against income is established. During the nine months ended August 31, 2012, the Company did not have a reserve against interest income, since all interest income accrued is expected to be received.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

Many of the debt securities that the Company holds were purchased at a discount or premium to the par value of the security. The non-cash accretion of a discount to par value increases interest income while the non- cash amortization of a premium to par value decreases interest income. The accretion of a discount and amortization of premiums are based on the effective interest method. The amount of these non-cash adjustments can be found in the Company’s Statement of Cash Flows. The non-cash accretion of a discount increases the cost basis of the debt security, which results in an offsetting unrealized loss. The non-cash amortization of a premium decreases the cost basis of the debt security which results in an offsetting unrealized gain. To the extent that par value is not expected to be realized, the Company discontinues accruing the non-cash accretion of the discount to par value of the debt security.

The Company receives paid-in-kind dividends in the form of additional units from its investment in Buckeye Partners, L.P. (Class B Units), Crestwood Midstream Partners LP (Class C Units), Enbridge Energy Management, L.L.C. and Kinder Morgan Management, LLC. In connection with the purchase of units directly from PVR Partners, L.P. (“PVR”) in a private investment in public equity (“PIPE investment”) transaction, the Company was entitled to the distribution paid to unitholders of record on May 8, 2012, even though such investment had not closed at such date. Pursuant to the purchase agreement, the purchase price for the PVR units was reduced by the amount of such dividend, which had the effect of paying such distribution in additional units. The additional units are not reflected in investment income during the period received but are recorded as unrealized gains. During the three and nine months ended August 31, 2012, the Company received the following paid-in-kind dividends.


	Three Months Ended August 31, 2012		Nine Months Ended August 31, 2012
Buckeye Partners, L.P. (Class B Units)	$	917	$	2,694
Crestwood Midstream Partners LP (Class C Units)		577		1,691
Enbridge Energy Management, L.L.C.		949		3,283
Kinder Morgan Management, LLC		4,981		14,103
PVR Partners, L.P.		—		729

Total paid-in-kind dividends	$	7,424	$	22,500

J. Distributions to Stockholders — Distributions to common stockholders are recorded on the ex-dividend date. Distributions to mandatory redeemable preferred stockholders are accrued on a daily basis as described in Note 12 — Preferred Stock. As required by the Distinguishing Liabilities from Equity topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, the Company includes the accrued distributions on its mandatory redeemable preferred stock as an operating expense due to the fixed term of this obligation. For tax purposes the payments made to the holders of the Company’s mandatory redeemable preferred stock are treated as dividends or distributions.

The estimated characterization of the distributions paid to preferred and common stockholders will be either a dividend (ordinary income) or distribution (return of capital). This estimate is based on the Company’s operating results during the period. The actual characterization of the preferred and common stock distributions made during the current year will not be determinable until after the end of the fiscal year when the Company can determine earnings and profits and, therefore, the characterization may differ from the preliminary estimates.

K. Partnership Accounting Policy — The Company records its pro rata share of the income (loss) and capital gains (losses), to the extent of distributions it has received, allocated from the underlying partnerships and adjusts the cost basis of the underlying partnerships accordingly. These amounts are included in the Company’s Statement of Operations.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

L. Federal and State Income Taxation — The Company, as a corporation, is obligated to pay federal and state income tax on its taxable income. The Company invests its assets primarily in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Company includes its allocable share of the MLP’s taxable income in computing its own taxable income. Deferred income taxes reflect (i) taxes on unrealized gains/(losses), which are attributable to the temporary difference between fair value and tax basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (iii) the net tax benefit of accumulated net operating and capital losses. To the extent the Company has a deferred tax asset, consideration is given as to whether or not a valuation allowance is required. The need to establish a valuation allowance for deferred tax assets is assessed periodically by the Company based on the Income Tax Topic of the FASB Accounting Standards Codification that it is more likely than not that some portion or all of the deferred tax asset will not be realized. In the assessment for a valuation allowance, consideration is given to all positive and negative evidence related to the realization of the deferred tax asset. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability (which are highly dependent on future cash distributions from the Company’s MLP holdings), the duration of statutory carryforward periods and the associated risk that operating and capital loss carryforwards may expire unused.

The Company may rely to some extent on information provided by the MLPs, which may not necessarily be timely, to estimate taxable income allocable to the MLP units held in the portfolio and to estimate the associated deferred tax liability. Such estimates are made in good faith. From time to time, as new information becomes available, the Company modifies its estimates or assumptions regarding the deferred tax liability.

The Company’s policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. For the three and nine months ended August 31, 2012, the Company did not have any interest or penalties associated with the underpayment of any income taxes. The tax years from 2008 through 2011 remain open and subject to examination by tax jurisdictions.

M. Derivative Financial Instruments — The Company may utilize derivative financial instruments in its operations.

Interest rate swap contracts. The Company may use hedging techniques such as interest rate swaps to mitigate potential interest rate risk on a portion of the Company’s leverage. Such interest rate swaps would principally be used to protect the Company against higher costs on its leverage resulting from increases in short term interest rates. The Company does not hedge any interest rate risk associated with portfolio holdings. Interest rate transactions the Company uses for hedging purposes expose it to certain risks that differ from the risks associated with its portfolio holdings. 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 Company. In addition, if the counterparty to an interest rate swap defaults, the Company would not be able to use the anticipated net receipts under the interest rate swap to offset its cost of financial leverage.

Interest rate swap contracts are recorded at fair value with changes in value during the reporting period, and amounts accrued under the agreements, included as unrealized gains or losses in the Statement of Operations. Monthly cash settlements under the terms of the interest rate swap agreements or termination payments are recorded as realized gains or losses in the Statement of Operations. The Company 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. At August 31, 2012, the Company had no interest rate swap contracts outstanding. See Note 8 — Derivative Financial Instruments.

Option contracts. The Company is also exposed to financial market risks including changes in the valuations of its investment portfolio. The Company may purchase or write (sell) call options. A call option on a security is a

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

contract that gives the holder of the option, in return for a premium, the right to buy from the writer of the option the security underlying the option at a specified exercise price at any time during the term of the option.

The Company would realize a gain on a purchased call option if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Company would realize either no gain or a loss on the purchased call option. The Company may also purchase put option contracts. If a purchased put option is exercised, the premium paid increases the cost basis of the securities sold by the Company.

The Company may also write (sell) call options with the purpose of generating realized gains or reducing its ownership of certain securities. If the Company writes a call option on a security, the Company has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price. The Company will only write call options on securities that the Company holds in its portfolio (i.e., covered calls).

When the Company writes a call option, an amount equal to the premium received by the Company 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 Company on the expiration date as realized gains from investments. If the Company repurchases a written call option prior to its exercise, the difference between the premium received and the amount paid to repurchase the option is treated as a realized gain or 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 Company has realized a gain or loss. The Company, 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 8 — Derivative Financial Instruments.

N. Indemnifications — Under the Company’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Company. In addition, in the normal course of business, the Company enters into contracts that provide general indemnification to other parties. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred, and may not occur. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

3. Fair

Value

The Fair Value Measurement Topic of the FASB Accounting Standards Codification (“ASC 820”) defines fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants under current market conditions at the measurement date. As required by ASC 820, the Company has performed an analysis of all assets and liabilities (other than deferred taxes) measured at fair value to determine the significance and character of all inputs to their fair value determination. Inputs are the assumptions, along with considerations of risk, that a market participant would use to value an asset or a liability. In general, observable inputs are based on market data that is readily available, regularly distributed and verifiable that the Company obtains from independent, third-party sources. Unobservable inputs are developed by the Company based on its own assumptions of how market participants would value an asset or a liability.

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” which amends ASC 820. The amended guidance clarifies the wording used to describe many requirements in accounting literature for fair value measurement and disclosure to establish consistency between U.S. GAAP and International Financial Reporting Standards (“IFRSs”). The Company adopted ASU No. 2011-04 in the fiscal second quarter of 2012.

The adoption of ASU 2011-04 did not have an impact on the measurement of fair value for the Company’s assets, but it does require the inclusion of additional disclosures on assumptions used by the Company to

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

determine fair value. Specifically, for assets measured at fair value using significant unobservable inputs (Level 3), ASU No. 2011-04 requires that the Company (i) describes the valuation process (ii) discloses quantitative information about unobservable inputs and (iii) provides a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and inter-relationships between the inputs.

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

•

Level 1 — Valuations based on 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 — Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

•

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.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at August 31, 2012 and the Company presents these assets by security type and description on its Schedule of Investments or on its Statement of Assets and Liabilities. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment.


	Total		Quoted Prices in Active Markets (Level 1)		Prices with Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets at Fair Value
Equity investments	$	4,375,785	$	4,234,938	$	—	$	140,847
Debt investments		35,611		—		35,611		—

Total assets at fair value	$	4,411,396	$	4,234,938	$	35,611	$	140,847

Liabilities at Fair Value
Call option contracts written	$	268	$	—	$	268	$	—

For the nine months ended August 31, 2012, there were no transfers between Level 1 and Level 2.

As of August 31, 2012, the Company had senior unsecured notes outstanding with aggregate principal amount of $890,000 and 14,960,000 shares of mandatory redeemable preferred stock outstanding with a total liquidation value of $374,000. See Note 11 — Senior Unsecured Notes and Note 12 — Preferred Stock.

Of the $374,000 of mandatory redeemable preferred stock, Series D ($100,000 liquidation value) and Series E ($120,000 liquidation value) are publicly traded on the New York Stock Exchange (NYSE). As a result, the Company categorizes these series of mandatory redeemable preferred stock as Level 1. The remaining three series of preferred stock — the Series A, B and C mandatory redeemable preferred stock ($154,000 liquidation value) — and all of the senior unsecured notes were issued in private placements to institutional investors and are not listed on any exchange or automated quotation system.

As such, the Company categorizes all of the senior unsecured notes ($890,000 principal amount) and Series A, B and C of the mandatory redeemable preferred stock ($154,000 liquidation value) as Level 3 and determines the fair value of these instruments based on estimated market yields and credit spreads for comparable instruments with similar maturity, terms and structure.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

The Fund records these instruments on its Statement of Assets and Liabilities at carrying value, and as of August 31, 2012, the estimated fair values of these leverage instruments are as follows.


Instrument	Principal Amount/ Liquidation Value		Fair Value
Senior unsecured notes	$	890,000	$	929,600
Mandatory redeemable preferred stock	$	374,000	$	388,804

The following tables present the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended August 31, 2012.


Three Months Ended August 31, 2012	Equity Investments
Balance — May 31, 2012	$	145,875
Purchases		12,000
Issuances		1,493
Transfers out		(28,729	)
Realized gains (losses)		—
Unrealized gains, net		10,208

Balance — August 31, 2012	$	140,847


Nine Months Ended August 31, 2012	Equity Investments
Balance — November 30, 2011	$	164,129
Purchases		40,000
Issuances		5,114
Transfers out		(69,440	)
Realized gains (losses)		—
Unrealized gains, net		1,044

Balance — August 31, 2012	$	140,847

The $10,208 and $1,044 of unrealized gains presented in the tables above for the three and nine months ended August 31, 2012 relate to investments that are still held at August 31, 2012, and the Company includes these unrealized gains on the Statement of Operations — Net Change in Unrealized Gains (Losses).

The purchases of $12,000 and $40,000 for the three and nine months ended August 31, 2012 relate to the Company’s investment in DCP Midstream Partners, L.P. and PVR Partners, L.P. The issuances of $1,493 and $5,114 for the three and nine months ended August 31, 2012 relate to additional units received from Buckeye Partners, L.P. (Class B Units), Crestwood Midstream Partners LP (Class C Units) and PVR Partners, L.P. The Company’s investments in the common units of PVR Partners, L.P. and Teekay Offshore Partners L.P., which are noted as transfers out of Level 3 in the tables above, became readily marketable during the nine months ended August 31, 2012.

Valuation Techniques and Unobservable Inputs

Unless otherwise determined by the Board of Directors, the Company values its private investments in public equity (“PIPE”) investments that are convertible into or otherwise will become publicly tradeable (e.g., through subsequent registration or expiration of a restriction on trading) based on the market value of the publicly-traded security less a discount. The discount is initially equal to the discount negotiated at the time the Company agrees to a purchase price. To the extent that such securities are convertible or otherwise become publicly traded within a time frame that may be reasonably determined, this discount will be amortized on a straight line basis over such estimated time frame.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

The Company’s investments in private companies are typically valued using one of or a combination of the following valuation techniques: (i) analysis of valuations for publicly traded companies in a similar line of business (“public company analysis”), (ii) analysis of valuations for comparable M&A transactions (“M&A analysis”) and (iii) discounted cash flow analysis. The table entitled “Quantitative Table for Valuation Techniques” outlines the valuation technique(s) used for each asset category.

The public company analysis utilizes valuation ratios (commonly referred to as trading multiples) for publicly traded companies in a similar line of business as the portfolio company to estimate the fair value of such portfolio company. Typically, the Company’s analysis focuses on the ratio of enterprise value (“EV”) to earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) which is commonly referred to as an EV/EBITDA multiple and the ratio of equity market value (“EMV”) to distributable cash flow (“DCF”) which is commonly referred to as a EMV/DCF multiple. For example if a portfolio company’s enterprise value was seven times its current or projected EBITDA, the company has an EV/EBITDA multiple of 7x. For these analyses, the Company utilizes projections provided by external sources (i.e., third party equity research estimates) as well as internally developed estimates, and focuses on EBITDA and DCF projections for the current calendar year and next calendar year. Based on this data, the Company selects a range of multiples for each metric given the trading multiples of similar publicly traded companies and applies such multiples to the portfolio company’s EBITDA and DCF to estimate the portfolio company’s enterprise value and equity value. When calculating these values, the Company applies a discount to the portfolio company’s estimated equity value for the lack of marketability in the portfolio company’s securities.

The M&A analysis utilizes valuation multiples for historical M&A transactions for companies or assets in a similar line of business as the portfolio company to estimate the fair value of such portfolio company. Typically, the Company’s analysis focuses on EV/EBITDA multiples. The Company selects a range of multiples based on EV/EBITDA multiples for similar M&A transactions and applies such ranges to the portfolio company’s EBITDA to estimate the portfolio company’s enterprise value. The Company utilizes projections provided by external sources as well as internally developed estimates to calculate the valuation multiples of the comparable M&A transactions.

The discounted cash flow analysis is used to estimate the equity value for the portfolio company based on estimated cash flows of such portfolio company. Such cash flows include a terminal value for the portfolio company, which is typically based on an EV/EBITDA multiple. A present value of these cash flows is determined by using estimated discount rates (based on the Company’s estimate for required equity rate of return for such portfolio company).

Under all of these valuation techniques, the Company estimates operating results of its portfolio companies (including EBITDA and DCF). These estimates utilize unobservable inputs such as historical operating results, which may be unaudited, and projected operating results, which will be based on operating assumptions for such portfolio company. These estimates will be sensitive to changes in assumptions specific to such portfolio company as well as general assumptions for the industry. Other unobservable inputs utilized in the valuation techniques outlined above include: discounts for lack of marketability, selection of publicly-traded companies, selection of similar M&A transactions, selected ranges for valuation multiples, selected range of yields and expected required rates of return.

Changes in EBITDA multiples, DCF multiples, or discount rates, each in isolation, may change the fair value of the Company’s portfolio investments. Generally, a decrease in EBITDA multiples or DCF multiples, or an increase in discount rates may result in a decrease in the fair value of the Company’s portfolio investments.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ from the values that would have been used

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize.

The following table summarizes the significant unobservable inputs that the Company uses to value its portfolio investments categorized as Level 3 as of August 31, 2012:

Quantitative Table for Valuation Techniques

Range

Weighted

Assets at Fair Value

Fair Value

Valuation Technique

Unobservable Inputs

Low

High

Average

Equity securities of

83,445

- Discount to publicly traded

- Current discount

3.0%

6.6%

5.3%

public companies

securities

(PIPE)

- Remaining restricted period

30 days

505 days

328 days

Equity securities of

57,402

- Public company analysis

- Selected valuation multiples:

private companies⁽¹⁾ –

EV / 2013E EBITDA

17.0x

19.5x

18.3x

common units /

common equity

- Discount for marketability

15.0%

- M&A company analysis

- Selected EV / EBITDA

multiples

16.0x

18.0x

17.0x

- Discounted cash flow

- Equity rate of return

18.0%

25.0%

20.2%

Total

140,847

(1)	Includes the Company’s interest ($2,470 at August 31, 2012) in the Clearwater Trust consisting of a coal royalty interest.

4. Concentration

of Risk

The Company’s investment objective is to obtain a high after-tax total return by investing at least 85% of our total assets in public and private investments in MLPs and other Midstream Energy Companies. Under normal circumstances, the Company intends to invest at least 80% of its total assets in MLPs, which are subject to certain risks, including supply and demand risk, depletion and exploration risk, commodity pricing risk, acquisition risk, and the risk associated with the hazards inherent in midstream energy industry activities. A substantial portion of the cash flow received by the Company is derived from investment in equity securities of MLPs and other Midstream Energy Companies. The amount of cash that an MLP or other Midstream Energy Company has available for distributions and the tax character of such distributions are dependent upon the amount of cash generated by the portfolio company’s operations. The Company may invest up to 15% of its total assets in any single issuer and a decline in value of the securities of such an issuer could significantly impact the net asset value of the Company. The Company may invest up to 20% of its total assets in debt securities of MLP’s and other Midstream Energy Companies, which may include below investment grade debt securities. The Company 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 Company uses this strategy, it may not achieve its investment objectives.

5. Agreements

and Affiliations

A. Administration Agreement — The Company has entered into an administration agreement with Ultimus Fund Solutions, LLC (“Ultimus”), which may be amended from time to time. Pursuant to the administration agreement, Ultimus will provide certain administrative services for the Company. The administration agreement has automatic one-year renewals unless earlier terminated by either party as provided under the terms of the administration agreement.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

B. Investment Management Agreement — The Company has entered into an investment management agreement with KAFA under which KAFA, subject to the overall supervision of the Company’s Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, the Company. For providing these services, KAFA receives a management fee from the Company. On September 20, 2012, the Company renewed its agreement with KAFA for a period of one year, which expires on December 11, 2013. The agreement may be renewed annually upon approval of the Company’s Board of Directors (including a majority of the Company’s directors who are not “interested persons” of the Company, as such term is defined in the 1940 Act). In conjunction with this renewal, the Company entered into a one year agreement with KAFA to waive a portion of its management fee. Effective October 1, 2012, KAFA agreed to waive 0.125% of its management fee on total assets in excess of $4,500,000 (thereby reducing the management fee to 1.25% on total assets in excess of $4,500,000). For the nine months ended August 31, 2012, the Company paid management fees at an annual rate of 1.375% of the Company’s average quarterly total assets. See Note 14 — Subsequent Events.

For purposes of calculating the management fee the average total assets for each quarterly period are determined by averaging the total assets at the last day of that quarter with the total assets at the last day of the prior quarter. The Company’s total assets are equal to the Company’s gross asset value (which includes assets attributable to or proceeds from the Company’s use of preferred stock, commercial paper or notes and other borrowings and excludes any net deferred tax asset), minus the sum of the Company’s accrued and unpaid dividends and distributions on any outstanding common stock and accrued and unpaid dividends and distributions on any outstanding preferred stock and accrued liabilities (other than liabilities associated with borrowing or leverage by the Company and any accrued taxes, including, a deferred tax liability). Liabilities associated with borrowing or leverage by the Company include the principal amount of any borrowings, commercial paper or notes issued by the Company, 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 Company.

C. Portfolio Companies — From time to time, the Company may “control” or may be an “affiliate” of one or more of its portfolio companies, as each of these terms is defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if the Company and its affiliates owned 25% or more of its outstanding voting securities and would be an “affiliate” of a portfolio company if the Company and its affiliates 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 Company’s investment adviser), principal underwriters and affiliates of those affiliates or underwriters.

The Company believes that there are several factors that determine whether or not a security should be considered a “voting security” in complex structures such as limited partnerships of the kind in which the Company invests. The Company also notes that the SEC staff has issued guidance on the circumstances under which it would consider a limited partnership interest to constitute a voting security. Under most partnership agreements, the management of the partnership is vested in the general partner, and the limited partners, individually or collectively, have no rights to manage or influence management of the partnership through such activities as participating in the selection of the managers or the board of the limited partnership or the general partner. As a result, the Company believes that many of the limited partnership interests in which it invests should not be considered voting securities. However, it is possible that the SEC staff may consider the limited partner interests the Company holds in certain limited partnerships to be voting securities. If such a determination were made, the Company 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 making such a determination as to whether to treat any class of limited partnership interests the Company holds as a voting security, the Company considers, among other factors, whether or not the holders of such limited partnership interests have the right to elect the board of directors of the limited partnership or the general partner. If the holders of such limited partnership interests do not have the right to elect the board of directors, the

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

Company generally has not treated such security as a voting security. In other circumstances, based on the facts and circumstances of those partnership agreements, including the right to elect the directors of the general partner, the Company has treated those securities as voting securities and, therefore, as affiliates. If the Company does not consider the security to be a voting security, it will not consider such partnership to be an “affiliate” unless the Company and its affiliates own more than 25% of the outstanding securities of such partnership.

There is no assurance that the SEC staff will not consider that other limited partnership securities that the Company owns and does not treat as voting securities are, in fact, voting securities for the purposes of Section 17 of the 1940 Act. If such determination were made, the Company will be required to abide by the restrictions on “control” or “affiliate” transactions as proscribed in the 1940 Act. The Company or any portfolio company that it controls, and its affiliates, may from time to time engage in certain of such joint transactions, purchases, sales and loans in reliance upon and in compliance with the conditions of certain exemptive rules promulgated by the SEC. The Company cannot make assurances, however, that it would be able to satisfy the conditions of these rules with respect to any particular eligible transaction, or even if the Company were allowed to engage in such a transaction, that the terms would be more or as favorable to the Company or any company that it controls as those that could be obtained in arm’s length transaction. As a result of these prohibitions, restrictions may be imposed on the size of positions that may be taken for the Company or on the type of investments that it could make.

As of August 31, 2012, the Company believes that Buckeye Partners, L.P., MarkWest Energy Partners, L.P. and PVR Partners, L.P. meet the criteria described above and are therefore considered affiliates of the Company.

Clearwater Trust — At August 31, 2012, the Company held approximately 63% of the Clearwater Trust. The Company believes that it is an “affiliate” of the trust under the 1940 Act by virtue of its majority interest in the trust.

Plains All American GP LLC and Plains All American Pipeline, L.P. — Robert V. Sinnott is Chief Executive Officer of Kayne Anderson Capital Advisors, L.P. (“KACALP”), the managing member of KAFA. Mr. Sinnott also serves as a director on the board of Plains All American GP LLC (“Plains GP”), the general partner of Plains All American Pipeline, L.P. (“PAA”). Members of senior management of KACALP and KAFA and various affiliated funds managed by KACALP, including the Company, own units of Plains GP. The Company believes that it is an affiliate of Plains GP and PAA under the 1940 Act by virtue of (i) the Company’s and other affiliated Kayne Anderson funds’ ownership interests in Plains GP and (ii) Mr. Sinnott’s participation on the board of Plains GP.

6. Income

Taxes

Deferred income taxes reflect (i) taxes on net unrealized gains, which are attributable to the difference between fair market value and tax basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (iii) the net tax benefit of accumulated net operating losses. Components of the Company’s deferred tax assets and liabilities as of August 31, 2012 are as follows:


Deferred tax assets:
Net operating loss carryforwards — Federal	$	58,440
Net operating loss carryforwards — State		4,992
AMT credit carryforwards		1,133
Deferred tax liabilities:
Net unrealized gains on investment securities, interest rate swap contracts and option contracts		(691,044	)
Basis reductions resulting from current year estimated return of capital		(6,206	)

Total deferred tax liability, net	$	(632,685	)

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

At August 31, 2012, the Company had federal net operating loss carryforwards of $172,277 (deferred tax asset of $58,440). Realization of the deferred tax assets and net operating loss carryforwards are dependent, in part, on generating sufficient taxable income prior to expiration of the loss carryforwards. If not utilized, $52,182, $26,118, $33,413, $19,217 and $41,347 of the net operating loss carryforward will expire in 2027, 2028, 2029, 2030 and 2032, respectively. In addition, the Company has state net operating loss carryforwards of $162,245 (deferred tax asset of $4,992). These state net operating loss carryforwards begin to expire in 2012 through 2032.

At August 31, 2012, the Company had alternative minimum tax (“AMT”) credit carryforwards of $1,133, of which $1,028 was paid in connection to the income tax return for the 2011 fiscal year. AMT credits can be used to reduce regular tax to the extent that regular tax exceeds the AMT in a future year. AMT credits do not expire.

The Company primarily invests its equity securities issued by MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner of MLPs, the Company includes its allocable share of such MLPs’ income or loss in computing its own taxable income or loss. Additionally, for income tax purposes, the Company reduces the cost basis of its MLP investments by the cash distributions received, and increases or decreases the cost basis of its MLP investments by its allocable share of the MLP’s income or loss. During the fiscal year ended November 30, 2011, the Company received $174,040 in aggregate cash distributions from its MLP investments and reduced its cost basis, for income tax purposes, by the same amount. During the same period, the Company had additional cost basis reductions of $113,567 due to net allocated losses from its MLP investments.

Although the Company currently has a net deferred tax liability, it periodically reviews the recoverability of its deferred tax assets based on the weight of available evidence. When assessing the recoverability of its deferred tax assets, significant weight is given to the effects of potential future realized and unrealized gains on investments and the period over which these deferred tax assets can be realized, as the expiration dates for the federal capital and operating loss carryforwards range from five to nineteen years.

Based on the Company’s assessment, it has determined that it is more likely than not that its deferred tax assets will be realized through future taxable income of the appropriate character. Accordingly, no valuation allowance has been established for the Company’s deferred tax assets. The Company will continue to assess the need for a valuation allowance in the future. Significant declines in the fair value of its portfolio of investments may change the Company’s assessment regarding the recoverability of its deferred tax assets and may result in a valuation allowance. If a valuation allowance is required to reduce any deferred tax asset in the future, it could have a material impact on the Company’s net asset value and results of operations in the period it is recorded.

Total income taxes were different from the amount computed by applying the federal statutory income tax rate of 35% to the net investment loss and realized and unrealized gains (losses) on investments before taxes for the three and nine months ended August 31, 2012 , as follows:


	Three Months Ended August 31, 2012		Nine Months Ended August 31, 2012
Computed federal income tax at 35%	$	131,348	$	134,946
State income tax, net of federal tax		7,626		7,979
Non-deductible distributions on mandatory redeemable preferred stock and other		2,096		4,682

Total income tax expense (benefit)	$	141,070	$	147,607

At August 31, 2012, the cost basis of investments for federal income tax purposes was $2,544,263. The cost basis for federal income tax purposes is $251,118 lower than the cost basis for GAAP reporting purposes primarily due to the additional basis adjustments attributable to the Company’s share of the allocated losses from

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

its MLP investments. At August 31, 2012, gross unrealized appreciation and depreciation of investments and options for federal income tax purposes were as follows:


Gross unrealized appreciation of investments (including options)	$	1,883,558
Gross unrealized depreciation of investments (including options)		(16,608	)

Net unrealized appreciation of investments	$	1,866,950

7. Restricted

Securities

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 August 31, 2012, the Company held the following restricted investments:


Investment	Acquisition Date	Type of Restriction	Number of Units, Principal ($) (in 000’s)		Cost Basis		Fair Value		Fair Value Per Unit		Percent of Net Assets			Percent of Total Assets
Level 3 Investments⁽¹⁾
Buckeye Partners, L.P.
Class B Units	⁽²⁾	⁽³⁾		903	$	45,006	$	41,715	$	46.18		1.6	%		1.0	%
Clearwater Trust
Trust Interest	⁽⁴⁾	⁽⁵⁾		1		3,266		2,470		n/a		0.1			0.1
Crestwood Midstream Partners LP
Class C Units	⁽²⁾	⁽³⁾		1,175		26,007		27,604		23.50		1.1			0.6
DCP Midstream Partners, LP
Common Units	7/2/12	⁽³⁾		338		11,796		14,126		41.83		0.6			0.3
Plains All American GP LLC⁽⁶⁾
Common Units	⁽²⁾	⁽⁵⁾		24		31,520		54,932		2,261		2.2			1.2

Total					$	117,595	$	140,847				5.6	%		3.2	%

Level 2 Investments⁽⁷⁾
Senior Notes
EP Energy LLC	4/10/12	⁽⁵⁾	$	4,250	$	4,250	$	4,627		n/a		0.2	%		0.1	%

Total of all restricted securities					$	121,845	$	145,474				5.8	%		3.3	%

(1)	Securities are valued using inputs reflecting the Company’s own assumptions as more fully described in Note 2 — Significant Accounting Policies and Note 3 — Fair Value.

(2)	Securities acquired at various dates during the nine months ended August 31, 2012 and/or in prior years.

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

(4)

On September 28, 2010, the Bankruptcy Court finalized the plan of reorganization of Clearwater Natural Resources, LP (“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. See Note 5 — Agreements and Affiliations.

(5)	Unregistered security of a private company or trust.

(6)

In determining the fair value for Plains All American GP, LLC (“PAA GP”), the Company’s valuation is based on publicly available information. Robert V. Sinnott, the CEO of KACALP, sits on PAA GP’s board of directors (see Note 5 — Agreements and Affiliations for more detail). Certain private investment funds managed by KACALP may value its investment in PAA GP based on non-public information, and, as a result, such valuation may be different than the Company’s valuation.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

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

8. Derivative

Financial Instruments

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 August 31, 2012 is indicative of the volume of this type of option activity during the period. See Note 2 — Significant Accounting Policies.

Option Contracts — Transactions in option contracts for the three and nine months ended August 31, 2012 were as follows:


Three Months Ended August 31, 2012	Number of Contracts			Premium
Call Options Written
Options outstanding at May 31, 2012		1,000		$	64
Options written		8,943			775
Options subsequently repurchased⁽¹⁾		(1,593	)		(90	)
Options exercised		(7,550	)		(664	)

Options outstanding at August 31, 2012⁽²⁾		800		$	85

(1)	The price at which the Company subsequently repurchased the options was $28 which resulted in

a net realized gains of $62.

(2)	The percentage of total investments subject to call options written was 0.1% at August 31, 2012.


Nine Months Ended August 31, 2012	Number of Contracts			Premium
Call Options Written
Options outstanding at November 30, 2011		1,119		$	121
Options written		28,793			2,799
Options subsequently repurchased⁽¹⁾		(14,904	)		(1,503	)
Options exercised		(13,208	)		(1,254	)
Options expired		(1,000	)		(78	)

Options outstanding at August 31, 2012		800		$	85

(1)	The price at which the Company subsequently repurchased the options was $514, which resulted in a realized gain of $989.

Interest Rate Swap Contracts — The Company may enter 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 future 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 Company. In addition, if the counterparty to the interest rate swap contracts defaults, the Company would not be able to use the anticipated receipts under the swap contracts to offset the interest payments on the Company’s leverage. At the time the interest rate swap contracts reach their scheduled termination, there is a risk that the Company 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 Company is required to terminate any swap contract early, then the Company could be required to make a termination payment. As of August 31, 2012, the Company did not have any interest rate swap contracts outstanding.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

During the fiscal second quarter, the Company entered into interest rate swap contracts ($150,000 notional amount) in anticipation of the private placements of senior unsecured notes. On April 17, 2012, these interest rate swap contracts were terminated in conjunction with the pricing of the private placements, and resulted in a $2,606 realized loss.

The following table sets forth the fair value of the Company’s derivative instruments on the Statement of Assets and Liabilities.

Derivatives Not Accounted for as

Hedging Instruments

Statement of Assets and Liabilities Location

Fair Value as of

August 31, 2012

Call options

Call option contracts written

(268

)

The following tables set forth the effect of the Company’s derivative instruments on the Statement of Operations.


		For the Three Months Ended August 31, 2012
Derivatives Not Accounted for as Hedging Instruments	Location of Gains/(Losses) on Derivatives Recognized in Income	Net Realized Gains/(Losses) on Derivatives Recognized in Income			Change in Unrealized Gains/(Losses) on Derivatives Recognized in Income
Call options	Options	$	62		$	(242	)

Derivatives Not Accounted for as Hedging Instruments	Location of Gains/(Losses) on Derivatives Recognized in Income	For the Nine Months Ended August 31, 2012
		Net Realized Gains/(Losses) on Derivatives Recognized in Income			Change in Unrealized Gains/(Losses) on Derivatives Recognized in Income
Call options	Options	$	1,067		$	(276	)
Interest rate swap contracts	Interest rate swap contracts		(2,606	)		—

		$	(1,539	)	$	(276	)

9. Investment

Transactions

For the nine months ended August 31, 2012, the Company purchased and sold securities in the amounts of $1,230,012 and $642,986 (excluding short-term investments and options), respectively.

10.

Credit Facility

At August 31, 2012, the Company had a $200,000 unsecured revolving credit facility (the “Credit Facility”) with a syndicate of lenders. During the fiscal second quarter, the Company increased the size of its Credit Facility from $175,000 to $200,000 by adding a new lender to the syndicate. The Credit Facility matures on June 11, 2013. The interest rate may vary between LIBOR plus 1.75% to LIBOR plus 3.00%, depending on the Company’s asset coverage ratios. Outstanding loan balances will accrue interest daily at a rate equal to one-month LIBOR plus 1.75% based on current asset coverage ratios. The Company will pay a fee of 0.40% per annum on any unused amounts of the Credit Facility. See Financial Highlights for the Company’s asset coverage ratios under the 1940 Act.

For the nine months ended August 31, 2012, the average amount outstanding under the Credit Facility was $41,604 with a weighted average interest rate of 2.26%. As of August 31, 2012, the Company had no outstanding borrowings under the Credit Facility.

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

11. Senior

Unsecured Notes

At August 31, 2012, the Company had $890,000, aggregate principal amount of senior unsecured fixed and floating rate notes (the “Senior Notes”) outstanding. On May 3, 2012, the Company completed a private placement of $175,000 of Senior Notes. Net proceeds from such offerings were used to repay borrowings under the Company’s Credit Facility, to refinance the Series I Senior Notes, to make new portfolio investments and for general corporate purposes.

The table below sets forth the key terms of each series of the Senior Notes.


Series	Principal Outstanding, November 30, 2011		Principal Redeemed⁽¹⁾		Principal Issued		Principal Outstanding, August 31, 2012		Estimated Fair Value August 31, 2012		Fixed/Floating Interest Rate	Maturity
I	$	60,000	$	60,000	$	—	$	—	$	—	5.847%		6/19/12
K		125,000		—		—		125,000		130,200	5.991%		6/19/13
M		60,000		—		—		60,000		63,400	4.560%		11/4/14
N		50,000		—		—		50,000		50,100	3-month LIBOR + 185 bps		11/4/14
O		65,000		—		—		65,000		68,700	4.210%		5/7/15
P		45,000		—		—		45,000		44,800	3-month LIBOR + 160 bps		5/7/15
Q		15,000		—		—		15,000		15,500	3.230%		11/9/15
R		25,000		—		—		25,000		26,400	3.730%		11/9/17
S		60,000		—		—		60,000		65,100	4.400%		11/9/20
T		40,000		—		—		40,000		43,300	4.500%		11/9/22
U		60,000		—		—		60,000		59,100	3-month LIBOR + 145 bps		5/26/16
V		70,000		—		—		70,000		73,600	3.710%		5/26/16
W		100,000		—		—		100,000		109,000	4.380%		5/26/18
X		—		—		14,000		14,000		14,100	2.460%		5/3/15
Y		—		—		20,000		20,000		20,400	2.910%		5/3/17
Z		—		—		15,000		15,000		15,400	3.390%		5/3/19
AA		—		—		15,000		15,000		15,500	3.560%		5/3/20
BB		—		—		35,000		35,000		36,200	3.770%		5/3/21
CC		—		—		76,000		76,000		78,800	3.950%		5/3/22

	$	775,000	$	60,000	$	175,000	$	890,000	$	929,600

(1)	On May 3, 2012, the Series I Senior Notes ceased to be deemed outstanding following the Company’s irrevocable deposit of $60,000 (plus interest) with the Senior Notes paying agent.

Holders of the fixed rate Senior Notes are entitled to receive cash interest payments semi-annually (on June 19 and December 19) at the fixed rate. Holders of the floating rate Senior Notes are entitled to receive cash interest payments quarterly (on March 19, June 19, September 19 and December 19) at the floating rate. During the nine months ended August 31, 2012, the weighted average interest rate on the outstanding Senior Notes was 4.09%.

As of August 31, 2012, each series of Senior Notes were rated “AAA” by FitchRatings. In the event the credit rating on any series of Senior Notes falls below “A-”, the interest rate on such series will increase by 1% during the period of time such series is rated below “A-”. The Company is required to maintain a current rating from one rating agency with respect to each series of Senior Notes. Prior to the third fiscal quarter, Series K, M and N Senior Notes were rated by Moody’s. On July 2, 2012, the Company requested that Moody’s withdraw its ratings of the Company’s Series K, M and N Senior Notes. On July 7, 2012, Moody’s downgraded the Company’s Series K, M and N Senior Notes from “Aa1” to “A1” and on August 3, 2012, Moody’s withdrew its ratings.

The Senior Notes were issued in private placement offerings to institutional investors and are not listed on any exchange or automated quotation system. The Senior Notes contain various covenants related to other

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

indebtedness, liens and limits on the Company’s overall leverage. Under the 1940 Act and the terms of the Senior Notes, the Company may not declare dividends or make other distributions on shares of its common stock or make purchases of such shares if, at any time of the declaration, distribution or purchase, asset coverage with respect to the outstanding Senior Notes would be less than 300%.

The Senior Notes are redeemable in certain circumstances at the option of the Company. The Senior Notes are also subject to a mandatory redemption to the extent needed to satisfy certain requirements if the Company fails to meet an asset coverage ratio required by law and is not able to cure the coverage deficiency by the applicable deadline, or fails to cure a deficiency as stated in the Company’s rating agency guidelines in a timely manner.

The Senior Notes are unsecured obligations of the Company and, upon liquidation, dissolution or winding up of the Company, will rank: (1) senior to all the Company’s outstanding preferred shares; (2) senior to all of the Company’s outstanding common shares; (3) on a parity with any unsecured creditors of the Company and any unsecured senior securities representing indebtedness of the Company; and (4) junior to any secured creditors of the Company.

At August 31, 2012, the Company was in compliance with all covenants under the Senior Notes agreements.

12. Preferred

Stock

At August 31, 2012, the Company had 14,960,000 shares of mandatory redeemable preferred stock outstanding, with a liquidation value of $374,000 ($25.00 per share). On March 21, 2012, the Company completed a public offering of 4,800,000 shares of Series E mandatory redeemable preferred stock at a price of $25.00 per share. Net proceeds from the offering were approximately $117,400. The net proceeds of the preferred stock offering were used to repay borrowings under the Credit Facility and to redeem $6,000 of Series A mandatory redeemable preferred stock at 108% of par value ($480 of dividend premium paid). The Company recognized $64 of expense for the write-off of issuance costs associated with this redemption.

The table below sets forth the key terms of each series of the mandatory redeemable preferred stock.


Series	Liquidation Value November 30, 2011		Liquidation Value Shares Redeemed		Liquidation Value Shares Issued		Liquidation Value August 31, 2012		Estimated Fair Value August 31, 2012		Rate	Maturity Redemption Date
A	$	110,000	$	6,000	$	—	$	104,000	$	112,600	5.57%		5/7/17
B		8,000		—		—		8,000		8,300	4.53%		11/9/17
C		42,000		—		—		42,000		44,600	5.20%		11/9/20
D⁽¹⁾		100,000		—		—		100,000		101,480	4.95%		6/1/18
E⁽²⁾		—		—		120,000		120,000		121,824	4.25%		4/1/19

	$	260,000	$	6,000	$	120,000	$	374,000	$	388,804

(1)	Series D mandatory redeemable preferred shares are publicly traded on the New York Exchange (NYSE) under the symbol “KYNPRD”. The fair value is based on the price of $25.37 as of August 31, 2012.

(2)	Series E mandatory redeemable preferred shares are publicly traded on the New York Exchange (NYSE) under the symbol “KYNPRE”. The fair value is based on the price of $25.38 on August 31, 2012.

Holders of the series A, B and C mandatory redeemable preferred stock are entitled to receive cumulative cash dividend payments on the first business day following each quarterly period (February 28, May 31, August 31 and November 30). Holders of the series D and E mandatory redeemable preferred stock are entitled to receive cumulative cash dividend payments on the first business day of each month.

The table below outlines the terms of each series of mandatory redeemable preferred stock. The dividend rate on the Company’s mandatory redeemable preferred stock will increase if the credit rating is downgraded below “A” by FitchRatings. Further, the annual dividend rate for all series of mandatory redeemable preferred stock will

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

increase by 4.0% if no ratings are maintained, and the annual dividend rate will increase by 5.0% if the Company fails to make dividend or certain other payments. The Company is required to maintain a current rating from one rating agency with respect to each series of mandatory redeemable preferred stock.


	Series A, B and C	Series D and E
Rating as of August 31, 2012 (FitchRatings)	“AA”	“AA”
Ratings Threshold	“A”	“A”
Method of Determination	Lowest Credit Rating	Highest Credit Rating
Increase in Annual Dividend Rate	0.5% to 4.0%	0.75% to 4.0%

The mandatory redeemable preferred stock rank senior to all of the Company’s outstanding common shares and on parity with any other preferred stock. The mandatory redeemable preferred stock is redeemable in certain circumstances at the option of the Company and are also subject to a mandatory redemption if the Company fails to meet a total leverage (debt and preferred stock) asset coverage ratio of 225% or fails to maintain its basic maintenance amount as stated in the Company’s rating agency guidelines.

Under the terms of the mandatory redeemable preferred stock, the Company may not declare dividends or pay other distributions on shares of its common stock or make purchases of such shares if, at any time of the declaration, distribution or purchase, asset coverage with respect to total leverage would be less than 225%.

The holders of the mandatory redeemable preferred stock have one vote per share and will vote together with the holders of common stock as a single class except on matters affecting only the holders of mandatory redeemable preferred stock or the holders of common stock. The holders of the mandatory redeemable preferred stock, voting separately as a single class, have the right to elect at least two directors of the Company.

At August 31, 2012, the Company was in compliance with the asset coverage and basic maintenance requirements of its mandatory redeemable preferred stock.

13. Common

Stock

At August 31, 2012, the Company had 185,040,000 shares of common stock authorized and 88,240,873 shares outstanding. As of that date, KACALP owned 4,000 shares. Transactions in common shares for the nine months ended August 31, 2012 were as follows:


Shares outstanding at November 30, 2011			75,130,209
Shares issued through reinvestment of distributions			610,664
Shares issued in connection with offerings of common stock⁽¹⁾⁽²⁾			12,500,000

Shares outstanding at August 31, 2012			88,240,873

(1)

On February 29, 2012, the Company sold 7,500,000 shares of common stock at a price of $31.51 per share. The public offering was completed on March 5, 2012 and the net proceeds of $226,513 were used by the Company to make additional portfolio investments that are consistent with the Company’s investment objective, and for general corporate purposes.

(2)

On August 3, 2012, the Company sold 5,000,000 shares of common stock at a price of $29.75 per share. The public offering was completed on August 8, 2012 and the net proceeds of $142,750 were used by the Company to make additional portfolio investments that are consistent with the Company’s investment objective, and for general corporate purposes.

14. Subsequent

Events

On September 20, 2012, the Company declared its quarterly distribution of $0.5375 per common share for the fiscal third quarter for a total quarterly distribution payment of $47,429. The distribution was paid on

KAYNE ANDERSON MLP INVESTMENT COMPANY

NOTES TO FINANCIAL STATEMENTS

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

(UNAUDITED)

October 12, 2012 to common stockholders of record on October 5, 2012. Of this total, pursuant to the Company’s dividend reinvestment plan, $5,648 was reinvested into the Company through the issuance of 190,540 shares of common stock.

On September 20, 2012, the Company renewed its investment management agreement with KAFA for a period of one year, which expires on December 11, 2013. In conjunction with the renewal, the Company entered into a one year agreement with KAFA to waive a portion of its management fee. Effective October 1, 2012, KAFA agreed to waive 0.125% of its management fee on total assets in excess of $4,500,000 (thereby reducing the management fee to 1.25% on total assets in excess of $4,500,000).

KAYNE ANDERSON MLP INVESTMENT COMPANY

REPURCHASE DISCLOSURE

(UNAUDITED)

Notice is hereby given in accordance with Section 23(c) of the 1940 Act, that the Company may from time to time purchase shares of its common and preferred stock and its Senior Notes in the open market or in privately negotiated transactions.


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

William H. Shea, Jr.		Director

Terry A. Hart		Chief Financial Officer and Treasurer

David J. Shladovsky		Chief Compliance Officer and Secretary

J.C. Frey		Executive Vice President, Assistant Secretary and Assistant Treasurer

James C. Baker		Executive Vice President

Ron M. Logan, Jr.		Senior Vice President

Jody C. Meraz		Vice President

Investment Adviser KA Fund Advisors, LLC 717 Texas Avenue, Suite 3100 Houston, TX 77002		Administrator Ultimus Fund Solutions, LLC 350 Jericho Turnpike, Suite 206 Jericho, NY 11753

1800 Avenue of the Stars, Third Floor Los Angeles, CA 90067		Stock Transfer Agent and Registrar American Stock Transfer & Trust Company, LLC 6201 15^th Avenue Brooklyn, NY 11219

Custodian JPMorgan Chase Bank, N.A. 14201 North Dallas Parkway, Second Floor Dallas, TX 75254		Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP 350 South Grand Avenue Los Angeles, CA 90071

		Legal Counsel Paul Hastings LLP 55 Second Street, 24th Floor San Francisco, CA 94105

Please visit us on the web at http://www.kaynefunds.com or call us toll-free at 1-877-657-3863.

LOGO

This report, including the financial statements herein, is made available to stockholders of the Company for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Company or of any securities mentioned in this report.

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