Page | ||||
1 | ||||
7 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
13 |
No. of |
||||||||||||||
Description
|
Shares/Units | Value | ||||||||||||
Long-Term Investments 131.9%
|
||||||||||||||
Equity Investments(a) 115.9%
|
||||||||||||||
United States 89.5%
|
||||||||||||||
MLP(b)(c) 34.7%
|
||||||||||||||
Alliance Resource Partners, L.P.
|
92 | $ | 4,275 | |||||||||||
Atlas Energy Resources, LLC
|
380 | 13,318 | ||||||||||||
Atlas Pipeline Partners, L.P.
|
566 | 19,328 | ||||||||||||
BreitBurn Energy Partners L.P.
|
306 | 5,086 | ||||||||||||
Calumet Specialty Products Partners, L.P.
|
267 | 3,815 | ||||||||||||
Capital Product Partners L.P.(d)
|
454 | 7,062 | ||||||||||||
Constellation Energy Partners LLC
|
51 | 702 | ||||||||||||
Copano Energy, L.L.C.
|
50 | 1,570 | ||||||||||||
Copano Energy, L.L.C. Unregistered, Class D
Units(e)(f)
|
114 | 2,829 | ||||||||||||
Crosstex Energy, L.P.
|
526 | 13,399 | ||||||||||||
DCP Midstream Partners, LP
|
241 | 5,895 | ||||||||||||
Duncan Energy Partners L.P.
|
83 | 1,497 | ||||||||||||
Eagle Rock Energy Partners, L.P.
|
127 | 1,800 | ||||||||||||
Energy Transfer Equity, L.P.
|
169 | 4,881 | ||||||||||||
Energy Transfer Partners, L.P.
|
151 | 6,737 | ||||||||||||
Enterprise Products Partners L.P.
|
1,591 | 46,845 | ||||||||||||
Exterran Partners, L.P.
|
249 | 5,518 | ||||||||||||
Global Partners LP
|
227 | 2,823 | ||||||||||||
Hiland Holdings GP, LP
|
66 | 1,465 | ||||||||||||
Hiland Partners, LP
|
59 | 2,697 | ||||||||||||
Holly Energy Partners, L.P.
|
77 | 2,579 | ||||||||||||
Inergy Holdings, L.P.
|
81 | 2,647 | ||||||||||||
Inergy, L.P.
|
241 | 6,348 | ||||||||||||
Magellan Midstream Partners, L.P.
|
226 | 8,403 | ||||||||||||
MarkWest Energy Partners, L.P.
|
270 | 9,306 | ||||||||||||
Martin Midstream Partners L.P.
|
310 | 9,707 | ||||||||||||
Natural Resource Partners L.P.
|
86 | 2,993 | ||||||||||||
ONEOK Partners, L.P.
|
190 | 11,389 | ||||||||||||
OSG America L.P.
|
179 | 2,144 | ||||||||||||
Penn Virginia Resource Partners, L.P.
|
309 | 7,708 | ||||||||||||
Pioneer Southwest Energy Partners L.P.
|
104 | 1,951 | ||||||||||||
Plains All American Pipeline, L.P.(g)
|
1,387 | 66,068 | ||||||||||||
Regency Energy Partners LP
|
301 | 7,494 | ||||||||||||
Regency Energy Partners LP(e)
|
114 | 2,705 | ||||||||||||
Targa Resources Partners LP
|
325 | 7,760 | ||||||||||||
TC PipeLines, LP
|
285 | 9,729 | ||||||||||||
Teekay LNG Partners L.P.
|
75 | 1,713 | ||||||||||||
Teekay Offshore Partners L.P.(d)
|
568 | 9,139 | ||||||||||||
TEPPCO Partners, L.P.
|
88 | 2,837 |
1
No. of |
||||||||||||||
Description
|
Shares/Units | Value | ||||||||||||
MLP(b)(c) (Continued)
|
||||||||||||||
Western Gas Partners, LP
|
223 | $ | 3,404 | |||||||||||
Williams Partners L.P.
|
269 | 8,162 | ||||||||||||
335,728 | ||||||||||||||
MLP Affiliates 25.2%
|
||||||||||||||
Atlas America, Inc.
|
472 | 17,695 | ||||||||||||
Crosstex Energy, Inc.
|
159 | 5,168 | ||||||||||||
Enbridge Energy Management, L.L.C.(h)
|
857 | 43,335 | ||||||||||||
Kinder Morgan Management, LLC(h)
|
2,899 | 160,885 | ||||||||||||
Penn Virginia Corporation(i)
|
245 | 16,234 | ||||||||||||
243,317 | ||||||||||||||
Marine Transportation 17.4%
|
||||||||||||||
Aries Maritime Transport Limited
|
1,125 | 4,456 | ||||||||||||
Arlington Tankers Ltd.
|
573 | 10,558 | ||||||||||||
DHT Maritime, Inc.
|
1,072 | 9,552 | ||||||||||||
Diana Shipping Inc.
|
425 | 12,065 | ||||||||||||
Eagle Bulk Shipping Inc.
|
516 | 13,669 | ||||||||||||
Euroseas Ltd.
|
53 | 711 | ||||||||||||
Frontline Ltd.
|
100 | 6,041 | ||||||||||||
Genco Shipping & Trading Limited
|
170 | 10,634 | ||||||||||||
General Maritime Corporation
|
50 | 1,241 | ||||||||||||
Navios Maritime Partners L.P.
|
571 | 7,140 | ||||||||||||
Nordic American Tanker Shipping Limited
|
620 | 21,827 | ||||||||||||
OceanFreight, Inc.
|
654 | 12,467 | ||||||||||||
Omega Navigation Enterprises, Inc.
|
949 | 14,960 | ||||||||||||
Paragon Shipping Inc.
|
619 | 9,377 | ||||||||||||
Safe Bulkers, Inc.
|
178 | 3,383 | ||||||||||||
Seaspan Corporation
|
441 | 10,974 | ||||||||||||
Ship Finance International Limited
|
183 | 5,098 | ||||||||||||
Star Bulk Carriers Corp.
|
163 | 1,704 | ||||||||||||
Teekay Tankers Ltd.
|
588 | 11,849 | ||||||||||||
167,706 | ||||||||||||||
Coal 8.3%
|
||||||||||||||
Alpha Natural Resources, Inc.(i)(j)
|
194 | 19,219 | ||||||||||||
Arch Coal, Inc.(i)
|
166 | 9,004 | ||||||||||||
CONSOL Energy Inc.(i)
|
192 | 12,980 | ||||||||||||
Foundation Coal Holdings, Inc.
|
53 | 3,111 | ||||||||||||
Massey Energy Company(i)
|
202 | 13,331 |
2
No. of |
||||||||||||||
Description
|
Shares/Units | Value | ||||||||||||
Coal (Continued)
|
||||||||||||||
Patriot Coal Corporation(i)(j)
|
122 | $ | 7,333 | |||||||||||
Peabody Energy Corporation(i)
|
248 | 15,602 | ||||||||||||
80,580 | ||||||||||||||
Royalty Trust 3.9%
|
||||||||||||||
Hugoton Royalty Trust
|
240 | 7,441 | ||||||||||||
MV Oil Trust
|
652 | 12,007 | ||||||||||||
Permian Basin Royalty Trust
|
488 | 11,940 | ||||||||||||
San Juan Basin Royalty Trust
|
148 | 6,044 | ||||||||||||
37,432 | ||||||||||||||
Total United States (Cost $730,054)
|
864,763 | |||||||||||||
Canada 26.4%
|
||||||||||||||
Royalty Trust 26.3%
|
||||||||||||||
ARC Energy Trust
|
1,009 | 28,699 | ||||||||||||
Baytex Energy Trust
|
746 | 22,833 | ||||||||||||
Bonavista Energy Trust
|
597 | 18,461 | ||||||||||||
Bonterra Energy Income Trust
|
34 | 1,148 | ||||||||||||
Canadian Oil Sands Trust
|
41 | 1,982 | ||||||||||||
Crescent Point Energy Trust
|
1,167 | 43,105 | ||||||||||||
Enerplus Resources Fund
|
796 | 34,494 | ||||||||||||
Fording Canadian Coal Trust(i)
|
297 | 26,602 | ||||||||||||
NAL Oil & Gas Trust
|
945 | 13,736 | ||||||||||||
Penn West Energy Trust
|
792 | 23,247 | ||||||||||||
Progress Energy Trust
|
511 | 7,644 | ||||||||||||
Vermilion Energy Trust
|
569 | 23,041 | ||||||||||||
Westshore Terminals Income Fund
|
81 | 1,348 | ||||||||||||
Zargon Energy Trust
|
355 | 7,497 | ||||||||||||
253,837 | ||||||||||||||
Coal 0.1%
|
||||||||||||||
Western Canadian Coal Corp.(k)
|
87 | 521 | ||||||||||||
Total Canada (Cost $188,857)
|
254,358 | |||||||||||||
Total Equity Investments (Cost $918,911)
|
1,119,121 | |||||||||||||
3
Interest |
Maturity |
Principal |
||||||||||||
Description
|
Rate | Date | Amount | Value | ||||||||||
Energy Debt Investments 16.0%
|
||||||||||||||
United States 13.5%
|
||||||||||||||
Coal 0.5%
|
||||||||||||||
Peabody Energy Corporation(l)
|
4.750% | 12/15/66 | $ | 4,000 | $ | 5,110 | ||||||||
Marine Transportation 3.7%
|
||||||||||||||
Navios Maritime Holdings, Inc.
|
9.500 | 12/15/14 | 25,250 | 24,114 | ||||||||||
Overseas Shipholding Group, Inc.
|
7.500 | 2/15/24 | 5,000 | 4,563 | ||||||||||
Ship Finance International Limited
|
8.500 | 12/15/13 | 7,000 | 6,930 | ||||||||||
35,607 | ||||||||||||||
Midstream 1.5%
|
||||||||||||||
Targa Resources, Inc.
|
8.500 | 11/01/13 | 9,500 | 9,025 | ||||||||||
Targa Resources Investments, Inc.
|
(m) | 2/09/15 | 7,133 | 5,171 | ||||||||||
14,196 | ||||||||||||||
Oilfield Services 1.3%
|
||||||||||||||
Dresser, Inc.
|
(n) | 5/04/15 | 13,000 | 12,561 | ||||||||||
Upstream 5.4%
|
||||||||||||||
CDX Funding, LLC
|
(o) | 3/31/13 | 8,750 | 7,000 | ||||||||||
Hilcorp Energy Company
|
7.750 | 11/01/15 | 13,589 | 12,298 | ||||||||||
Mariner Energy, Inc.
|
8.000 | 5/15/17 | 6,000 | 5,490 | ||||||||||
Mariner Energy, Inc.
|
7.500 | 4/15/13 | 4,000 | 3,740 | ||||||||||
Parallel Petroleum Corporation
|
10.250 | 8/01/14 | 6,500 | 6,337 | ||||||||||
Petrohawk Energy Corporation
|
9.125 | 7/15/13 | 12,000 | 11,940 | ||||||||||
Quicksilver Resources Inc.
|
(p) | 8/06/13 | 5,000 | 4,963 | ||||||||||
51,768 | ||||||||||||||
Other Energy 1.1%
|
||||||||||||||
Energy Future Holdings Corp.
|
(q) | 10/10/14 | 7,444 | 6,960 | ||||||||||
Energy Future Holdings Corp.
|
(r) | 10/10/14 | 4,500 | 4,196 | ||||||||||
11,156 | ||||||||||||||
Total United States (Cost $135,259)
|
130,398 | |||||||||||||
Canada 2.5%
|
||||||||||||||
Royalty Trust 0.6%
|
||||||||||||||
Harvest Operations Corp.
|
7.875 | 10/15/11 | 6,500 | 5,769 | ||||||||||
Upstream 1.9%
|
||||||||||||||
Athabasca Oil Sands Corp.
|
13.000 | 7/30/11 | 19,500 | 18,684 | ||||||||||
Total Canada (Cost $25,524)
|
24,453 | |||||||||||||
Total Fixed Income Investments (Cost $160,783)
|
154,851 | |||||||||||||
Total Long-Term Investments (Cost $1,079,694)
|
1,273,972 | |||||||||||||
4
Interest |
Maturity |
Principal |
||||||||||||
Description
|
Rate | Date | Amount | Value | ||||||||||
Short-Term Investment 0.3%
|
||||||||||||||
Repurchase Agreement 0.3%
|
||||||||||||||
Bear, Stearns & Co. Inc. (Agreement dated 8/31/2008 to be
repurchased at $3,266), collateralized by $3,360 in U.S.
Treasury Notes (Cost $3,265)
|
1.980% | 9/02/08 | $ | 3,265 | ||||||||||
Total Investments 132.2% (Cost $1,082,959)
|
1,277,237 | |||||||||||||
No. of |
||||||||||||||
Contracts | ||||||||||||||
Liabilities
|
||||||||||||||
Call Option Contracts Written(j)
|
||||||||||||||
United States
|
||||||||||||||
Coal
|
||||||||||||||
Alpha Natural Resources, Inc., call option expiring 9/20/2008 @
$100.00
|
500 | (250 | ) | |||||||||||
Arch Coal Inc., call option expiring 9/20/2008 @ $55.00
|
500 | (143 | ) | |||||||||||
CONSOL Energy Inc., call option expiring 9/20/2008 @ $65.00
|
1,000 | (580 | ) | |||||||||||
Massey Energy Inc., call option expiring 9/20/2008 @ $65.00
|
500 | (235 | ) | |||||||||||
Patriot Coal Corporation, call option expiring 9/20/2008 @ $57.50
|
500 | (285 | ) | |||||||||||
Peabody Energy Corporation, call option expiring 9/20/2008 @
$70.00
|
500 | (65 | ) | |||||||||||
(1,558 | ) | |||||||||||||
MLP Affiliates
|
||||||||||||||
Penn Virginia Corporation, call option expiring 9/20/2008 @
$70.00
|
500 | (115 | ) | |||||||||||
Canada
|
||||||||||||||
Royalty Trust
|
||||||||||||||
Fording Canadian Coal Trust, call option expiring 9/20/2008 @
$85.00
|
2,972 | (1,367 | ) | |||||||||||
Total Call Option Contracts Written (Premiums received
$2,763)
|
(3,040 | ) | ||||||||||||
Senior Unsecured Notes
|
(225,000 | ) | ||||||||||||
Revolving Credit Facility
|
(66,000 | ) | ||||||||||||
Other Liabilities
|
(40,303 | ) | ||||||||||||
Total Liabilities
|
(334,343 | ) | ||||||||||||
Other Assets
|
23,158 | |||||||||||||
Total Liabilities in Excess of Other Assets
|
(311,185 | ) | ||||||||||||
Net Assets Applicable To Stockholders
|
$ | 966,052 | ||||||||||||
(a) | Unless otherwise noted, equity investments are common units/common shares. |
5
(b) | Unless otherwise noted, securities are treated as a publicly traded partnership for regulated investment company (RIC) qualification purposes. To qualify as a RIC for tax purposes, the Fund may directly invest up to 25% of its total assets in equity and debt securities of entities treated as publicly traded partnerships. Although the Fund had 33.1% of its net assets invested in securities treated as publicly traded partnerships at August 31, 2008, the Fund had less than 25% of its total assets invested in these securities. It is the Funds intention to be treated as a RIC for tax purposes. | |
(c) | Includes Limited Liability Companies. | |
(d) | Security is not treated as a publicly-traded partnership for RIC qualification purposes. | |
(e) | Fair valued and restricted security. (See Notes 2, 3 and 6). | |
(f) | Security is currently not paying cash distributions but is expected to pay cash distributions or convert to securities which pay cash distributions within the next 24 months. | |
(g) | The Fund believes that it is an affiliate of Plains All American, L.P. (See Note 5). | |
(h) | Distributions are paid-in-kind. | |
(i) | Security or a portion thereof is segregated as collateral on option contracts written. | |
(j) | Security is non-income producing. | |
(k) | Security is currently not paying cash distributions but is expected to pay cash distributions or convert to securities which pay cash distributions within the next 12 months. | |
(l) | Convertible security. | |
(m) | Floating rate senior secured term loan facility. Security pays paid in-kind interest at a rate of LIBOR + 500 basis points (7.89% as of August 31, 2008). | |
(n) | Floating rate senior secured second lien term loan. Security pays interest at a rate of LIBOR + 575 basis points (8.56% as of August 31, 2008). | |
(o) | Floating rate senior secured second lien term loan. Security pays interest at a prime rate of 5.00% + 525 basis points and 200 basis points default penalty (12.25% as of August 31, 2008). As of August 31, 2008, CDX Funding, LLC was in payment default under the floating rate senior secured second lien term loan. | |
(p) | Floating rate senior secured second lien term loan. Security pays interest at a rate of LIBOR + 350 basis points (6.75% as of August 31, 2008). | |
(q) | Floating rate senior secured first lien B-2 term loan. Security pays interest at a rate of LIBOR + 350 basis points (6.21% as of August 31, 2008). | |
(r) | Floating rate senior secured first lien B-1 term loan. Security pays interest at a rate of LIBOR + 350 basis points (6.23% as of August 31, 2008). |
6
ASSETS
|
||||
Investments, at fair value:
|
||||
Non-affiliated (Cost $1,034,257)
|
$ | 1,207,904 | ||
Affiliated (Cost $45,437)
|
66,068 | |||
Repurchase agreement (Cost $3,265)
|
3,265 | |||
Total investments (Cost $1,082,959)
|
1,277,237 | |||
Cash denominated in foreign currency (Cost $489)
|
488 | |||
Deposits with brokers
|
7,779 | |||
Receivable for securities sold (Cost $7,811)
|
7,785 | |||
Interest, dividends and distributions receivable
(Cost $5,279)
|
5,260 | |||
Deferred debt issuance costs and other, net
|
1,846 | |||
Total Assets
|
1,300,395 | |||
LIABILITIES | ||||
Revolving credit facility
|
66,000 | |||
Payable for securities purchased (Cost $36,152)
|
36,152 | |||
Investment management fee payable
|
1,378 | |||
Call option contracts written, at fair value (Premiums
received $2,763)
|
3,040 | |||
Accrued directors fees and expenses
|
61 | |||
Accrued expenses and other liabilities
|
2,712 | |||
Senior Unsecured Notes
|
225,000 | |||
Total Liabilities
|
334,343 | |||
NET ASSETS
|
$ | 966,052 | ||
NET ASSETS CONSIST OF
|
||||
Common stock, $0.001 par value (32,443,513 shares
issued, 32,209,009 shares outstanding and
199,979,000 shares authorized)
|
$ | 32 | ||
Paid-in capital, less distributions in excess of taxable income
|
729,176 | |||
Accumulated net investment income less distributions not treated
as tax return of capital
|
(6,819 | ) | ||
Accumulated net realized gains less distributions not treated as
tax return of capital
|
49,705 | |||
Net unrealized gains on investments, foreign currency
translations, options and interest rate swap contracts
|
193,958 | |||
NET ASSETS
|
$ | 966,052 | ||
NET ASSET VALUE PER SHARE
|
$29.99 | |||
7
INVESTMENT INCOME
|
||||
Income
|
||||
Dividends and distributions:
|
||||
Non-affiliated investments
|
$ | 47,005 | ||
Affiliated investments
|
3,608 | |||
Total dividends and distributions (after foreign taxes withheld
of $2,807)
|
50,613 | |||
Return of capital
|
(22,227 | ) | ||
Net dividends and distributions
|
28,386 | |||
Interest (after foreign taxes withheld of $20)
|
11,402 | |||
Total Investment Income
|
39,788 | |||
Expenses
|
||||
Investment management fees
|
12,143 | |||
Administration fees
|
551 | |||
Professional fees
|
361 | |||
Reports to stockholders
|
179 | |||
Custodian fees
|
150 | |||
Directors fees
|
149 | |||
Insurance
|
128 | |||
Other expenses
|
286 | |||
Total Expenses Before Interest Expense and Auction
Agent Fees
|
13,947 | |||
Interest expense
|
2,466 | |||
Auction agent fees
|
178 | |||
Total Expenses
|
16,591 | |||
Net Investment Income
|
23,197 | |||
REALIZED AND UNREALIZED GAINS/(LOSSES)
|
||||
Net Realized Gains/(Losses)
|
||||
Investments
|
65,434 | |||
Foreign currency transactions
|
(547 | ) | ||
Options written
|
2,821 | |||
Interest rate swap contracts
|
(10,610 | ) | ||
Net Realized Gains
|
57,098 | |||
Net Change in Unrealized Gains/(Losses)
|
||||
Investments
|
3,886 | |||
Foreign currency translations
|
(15 | ) | ||
Options written
|
726 | |||
Interest rate swap contracts
|
5,312 | |||
Net Change in Unrealized Gains
|
9,909 | |||
Net Realized and Unrealized Gains
|
67,007 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
90,204 | |||
DIVIDENDS TO PREFERRED STOCKHOLDERS
|
(10,751 | ) | ||
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS
RESULTING FROM OPERATIONS
|
$ | 79,453 | ||
8
For the Nine |
||||||||
Months Ended |
For the Fiscal |
|||||||
August 31, 2008 |
Year Ended |
|||||||
(Unaudited) | November 30, 2007 | |||||||
OPERATIONS
|
||||||||
Net investment income
|
$ | 23,197 | $ | 34,782 | ||||
Net realized gains
|
57,098 | 38,505 | ||||||
Net change in unrealized gains
|
9,909 | 115,785 | ||||||
Net Increase in Net Assets Resulting from Operations
|
90,204 | 189,072 | ||||||
DIVIDENDS/DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
|
||||||||
Dividends from net investment income
|
(10,751 | )(1) | (7,254 | )(2) | ||||
Dividends from net realized short-term capital gains
|
| (1) | (4,653 | )(2) | ||||
Distributions from net realized long-term capital gains
|
| (1) | (4,194 | )(2) | ||||
Dividends/Distributions to Preferred Stockholders
|
(10,751 | ) | (16,101 | ) | ||||
DIVIDENDS/DISTRIBUTIONS TO COMMON STOCKHOLDERS
|
||||||||
Dividends from net investment income
|
(12,446 | )(1) | (26,509 | )(2) | ||||
Dividends from net realized short-term capital gains
|
| (1) | (17,004 | )(2) | ||||
Distributions from net realized long-term capital gains
|
| (1) | (15,329 | )(2) | ||||
Distributions return of capital
|
(36,348 | )(1) | | (2) | ||||
Dividends/Distributions to Common Stockholders
|
(48,794 | ) | (58,842 | ) | ||||
CAPITAL STOCK TRANSACTIONS
|
||||||||
Underwriting costs and offering expenses
|
(89 | ) | | |||||
Underwriting discounts and offering expenses associated with the
issuance of preferred stock
|
| 131 | ||||||
Gain on 765 shares of Series B Preferred Stock
redeemed at a discount to liquidation value
|
956 | | ||||||
Issuance of 3,142 and 526,629 from treasury shares of common
stock from reinvestment of distributions
|
92 | 14,111 | ||||||
Net Increase in Net Assets Applicable to Common Stockholders
from Capital Stock Transactions
|
959 | 14,242 | ||||||
Total Increase in Net Assets Applicable to Common
Stockholders
|
31,618 | 128,371 | ||||||
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS
|
||||||||
Beginning of period
|
934,434 | 806,063 | ||||||
End of period
|
$ | 966,052 | $ | 934,434 | ||||
(1) | The information presented in each of these items is a current estimate of the characterization of a portion of the total dividends and distributions paid to preferred stockholders and common stockholders for the nine months ended August 31, 2008 as either dividend (ordinary income) or distribution (long-term capital gains or return of capital). This estimate is based on the Funds operating results during the period. The actual characterization of the preferred stock and the common stock dividends and distributions made during the current year will not be determinable until after the end of the fiscal year when the Fund can determine earnings and profits and, therefore it may differ from the preliminary estimates. | |
(2) | The information presented in each of these items is a characterization of a portion of the total dividends and distributions paid to preferred stockholders and common stockholders for the fiscal year ended November 30, 2007 as either dividend (ordinary income) or distribution (long-term capital gains or return of capital). This characterization is based on the Funds earnings and profits. |
9
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||
Net increase in net assets resulting from operations
|
$ | 90,204 | ||
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
|
||||
Return of capital distributions
|
22,227 | |||
Realized gains on investments, options and interest rate swap
contracts
|
(57,645 | ) | ||
Unrealized gains (excluding impact on cash of $4 of foreign
currency translations)
|
(9,905 | ) | ||
Accretion of bond discount
|
(112 | ) | ||
Purchase of investments
|
(627,140 | ) | ||
Proceeds from sale of investments
|
675,923 | |||
Purchase of short-term investments, net
|
(2,350 | ) | ||
Increase in deposits with brokers
|
(3,529 | ) | ||
Increase in receivable for securities sold
|
(4,703 | ) | ||
Decrease in interest, dividend and distributions receivables
|
965 | |||
Increase in deferred debt issuance costs and other
|
(4 | ) | ||
Increase in payable for securities purchased
|
22,365 | |||
Increase in investment management fee payable
|
74 | |||
Increase in option contracts written, net
|
1,916 | |||
Increase in accrued directors fees and expenses
|
9 | |||
Increase in accrued expenses and other liabilities
|
1,912 | |||
Net Cash Provided by Operating Activities
|
110,207 | |||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||
Redemption of Auction Rate Preferred Stock (Series B
Preferred Stock at a $956 discount to liquidation value)
|
(299,044 | ) | ||
Proceeds from the issuance of Senior Unsecured Notes, net of
offering costs of $1,641
|
223,359 | |||
Proceeds from revolving credit facility
|
25,000 | |||
Underwriting costs and offering expenses
|
(89 | ) | ||
Cash dividends and distributions paid to preferred stockholders
|
(10,751 | ) | ||
Cash dividends and distributions paid to common stockholders
|
(48,702 | ) | ||
Net Cash Used in Financing Activities
|
(110,227 | ) | ||
NET DECREASE IN CASH
|
(20 | ) | ||
CASH BEGINNING OF PERIOD
|
508 | |||
CASH END OF PERIOD
|
$ | 488 | ||
10
For the Period |
||||||||||||||||
For the Nine |
June 28, |
|||||||||||||||
Months Ended |
For the Fiscal |
2005(1) |
||||||||||||||
August 31, |
Year Ended |
through |
||||||||||||||
2008 |
November 30, |
November 30, |
||||||||||||||
(Unaudited) | 2007 | 2006 | 2005 | |||||||||||||
Per Share of Common Stock
|
||||||||||||||||
Net asset value, beginning of period
|
$ | 29.01 | $ | 25.44 | $ | 24.13 | $ | 23.84 | (2) | |||||||
Income from Investment
Operations(3)
|
||||||||||||||||
Net investment income
|
0.72 | 1.09 | 1.17 | 0.23 | ||||||||||||
Net realized and unrealized gains
|
2.08 | 4.82 | 2.34 | 0.33 | ||||||||||||
Total income from investment operations
|
2.80 | 5.91 | 3.51 | 0.56 | ||||||||||||
Dividends/Distributions Preferred
Stockholders(3)
|
||||||||||||||||
Dividends from net investment income
|
(0.33 | ) | (0.23 | ) | (0.44 | ) | | |||||||||
Dividends from net realized short-term capital gains
|
| (0.14 | ) | | | |||||||||||
Distributions from net realized long-term capital gains
|
| (0.13 | ) | | | |||||||||||
Total dividends/distributions Preferred Stockholders
|
(0.33 | ) | (0.50 | ) | (0.44 | ) | | |||||||||
Dividends/Distributions Common Stockholders
|
||||||||||||||||
Dividends from net investment income
|
(0.39 | ) | (0.83 | ) | (0.86 | ) | (0.23 | ) | ||||||||
Dividends from net realized short-term capital gains
|
| (0.53 | ) | (0.81 | ) | (0.04 | ) | |||||||||
Distributions from net realized long-term capital gains
|
| (0.48 | ) | | | |||||||||||
Distributions return of capital
|
(1.13 | ) | | (0.03 | ) | | ||||||||||
Total dividends/distributions Common Stockholders
|
(1.52 | ) | (1.84 | ) | (1.70 | ) | (0.27 | ) | ||||||||
Capital Stock
Transactions(3)
|
||||||||||||||||
Effect of common stock repurchased
|
| | 0.05 | | ||||||||||||
Underwriting discounts and offering costs on the issuance of
common and preferred stock
|
| | (0.11 | ) | | |||||||||||
Gain on 765 shares of Series B Preferred Stock
redeemed at a discount to liquidation value
|
0.03 | | | | ||||||||||||
Total capital stock transactions
|
0.03 | | (0.06 | ) | | |||||||||||
Net asset value, end of period
|
$ | 29.99 | $ | 29.01 | $ | 25.44 | $ | 24.13 | ||||||||
Market value per share of common stock, end of period
|
$ | 28.07 | $ | 25.79 | $ | 25.00 | $ | 21.10 | ||||||||
Total investment return based on common stock market
value(4)
|
15.1 | % | 10.2 | % | 27.2 | % | (14.6 | )% | ||||||||
Supplemental Data and
Ratios(5)
|
||||||||||||||||
Net assets applicable to common stockholders, end of period
|
$ | 966,052 | $ | 934,434 | $ | 806,063 | $ | 776,963 | ||||||||
Ratio of expenses to average net
assets:(6)
|
||||||||||||||||
Excluding investment management fee waivers, interest expense
and auction agent fees
|
1.9 | % | 2.0 | % | 2.0 | % | 1.7 | % | ||||||||
Excluding investment management fee waivers
|
2.3 | % | 2.2 | % | 2.1 | % | 1.7 | % | ||||||||
Including investment management fee waivers
|
2.3 | % | 2.1 | % | 1.8 | % | 1.5 | % | ||||||||
Ratio of net investment income to average net assets
|
3.2 | % | 3.8 | % | 4.6 | % | 2.3 | % | ||||||||
Net increase in net assets applicable to common stockholders
resulting from operations to average net assets
|
8.2 | %(7) | 19.1 | % | 12.3 | % | 2.4 | %(7) | ||||||||
Portfolio turnover rate
|
48.9 | %(7) | 52.1 | % | 63.8 | % | 23.2 | %(7) | ||||||||
Senior Unsecured Notes outstanding, end of period
|
$ | 225,000 | | | | |||||||||||
Revolving credit facility, end of period
|
$ | 66,000 | $ | 41,000 | | $ | 40,000 | |||||||||
Auction Rate Preferred Stock, end of period
|
| $ | 300,000 | $ | 300,000 | | ||||||||||
Asset coverage of total debt Debt Incurrence and
Dividend Payment Test
|
432.0 | %(8) | | | | |||||||||||
Asset coverage of total leverage (Debt and Preferred Stock)
|
432.0 | %(9) | 374.0 | %(9) | 368.7 | %(9) | | |||||||||
Average amount of borrowings outstanding per share of common
stock during the period
|
$ | 1.62 | $ | 0.53 | $ | 0.08 | |
11
(1) | Commencement of operations. | |
(2) | Initial public offering price of $25.00 per share less underwriting discounts of $1.125 per share and offering costs of $0.04 per share. | |
(3) | Based on average shares of common stock outstanding of 32,207,341; 32,036,996; 31,809,344 and 32,204,000 for the nine months ended August 31, 2008; for the fiscal year ended November 30, 2007; for the fiscal year ended November 30, 2006 and for the period June 28, 2005 through November 30, 2005, respectively. | |
(4) | Not annualized for the nine months ended August 31, 2008 and for the period June 28, 2005 through November 30, 2005. Total investment return is calculated assuming a purchase of common stock at the market price on the first day and a sale at the current market price on the last day of the period reported. The calculation also assumes reinvestment of dividends at actual prices pursuant to the Funds dividend reinvestment plan. | |
(5) | Unless otherwise noted, ratios are annualized. | |
(6) | The following table sets forth the components of the ratio of expenses to average total assets and average net assets applicable to common stockholders for each period presented in our Financial Highlights. |
August 31, 2008 |
||||||||||||||||||||||||||||||||
(Unaudited) |
November 30, 2007 |
November 30, 2006 |
November 30, 2005 |
|||||||||||||||||||||||||||||
Ratio of Expenses to | Ratio of Expenses to | Ratio of Expenses to | Ratio of Expenses to | |||||||||||||||||||||||||||||
Average |
Average |
Average |
Average |
Average |
Average |
Average |
Average |
|||||||||||||||||||||||||
Total |
Net |
Total |
Net |
Total |
Net |
Total |
Net |
|||||||||||||||||||||||||
Assets | Assets | Assets | Assets | Assets | Assets | Assets | Assets | |||||||||||||||||||||||||
Management fees
|
1.2 | % | 1.7 | % | 1.2 | % | 1.7 | % | 1.2 | % | 1.7 | % | 1.2 | % | 1.3 | % | ||||||||||||||||
Other expenses
|
0.2 | 0.2 | 0.2 | 0.3 | 0.2 | 0.3 | 0.4 | 0.4 | ||||||||||||||||||||||||
Total expenses excluding management fee waivers,
interest expense and auction agent fees
|
1.4
|
% |
1.9
|
% |
1.4
|
% |
2.0
|
% |
1.4
|
% |
2.0
|
% |
1.6
|
% |
1.7
|
% | ||||||||||||||||
Interest expense and auction agent fees
|
0.3 | 0.4 | 0.2 | 0.2 | 0.1 | 0.1 | | | ||||||||||||||||||||||||
Total expenses excluding management fee waivers
|
1.7
|
% |
2.3
|
% |
1.6
|
% |
2.2
|
% |
1.5
|
% |
2.1
|
% |
1.6
|
% |
1.7
|
% | ||||||||||||||||
Management Fee Waivers
|
| | (0.1 | ) | (0.1 | ) | (0.2 | ) | (0.3 | ) | (0.2 | ) | (0.2 | ) | ||||||||||||||||||
Total expenses including management fee waivers,
interest expense and auction agent fees
|
1.7
|
% |
2.3
|
% |
1.5
|
% |
2.1
|
% |
1.3
|
% |
1.8
|
% |
1.4
|
% |
1.5
|
% | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Average total assets
|
$ | 1,312,625 | $ | 1,240,766 | $ | 1,100,467 | $ | 795,136 | ||||||||||||||||||||||||
Average net assets
|
$ | 968,574 | $ | 906,692 | $ | 802,434 | $ | 759,550 |
(7) | Not annualized. | |
(8) | 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 divided by the aggregate amount of senior notes and any other senior securities representing indebtedness. Under the 1940 Act, the Fund may neither declare or make any distribution on its common stock nor can it incur additional indebtedness if at the time of such incurrence asset coverage with respect to senior securities representing indebtedness would be less than 300%. For purposes of this test the revolving credit facility is considered a senior security representing indebtedness. | |
(9) | Calculated pursuant to section 18(a)(2)(A) and section 18(a)(2)(B) of the 1940 Act. Represents the value of total assets less all liabilities not represented by preferred stock and senior securities representing indebtedness divided by the aggregate amount of preferred stock and senior securities representing indebtedness. Under the 1940 Act, the Fund may not declare or make any distribution on its common stock nor can it incur additional preferred stock if at the time of such declaration or incurrence its asset coverage with respect to all senior securities would be less than 200%. For purposes of this test, the revolving credit facility is considered a senior security representing indebtedness. |
12
1. | Organization |
2. | Significant Accounting Policies |
13
| Investment Team Valuation. The applicable investments are initially valued by KA Fund Advisors, LLC (KAFA or the Adviser) investment professionals responsible for the portfolio investments. | |
| Investment Team Valuation Documentation. Preliminary valuation conclusions are documented and discussed with senior management of KAFA. Such valuations generally are submitted to the Valuation Committee (a committee of the Funds Board of Directors) or the Board of Directors on a monthly basis, and stand for intervening periods of time. | |
| Valuation Committee. The Valuation Committee meets on or about the end of each month to consider new valuations presented by KAFA, if any, which were made in accordance with the Valuation Procedures in such month. Between meetings of the Valuation Committee, a senior officer of KAFA is authorized to make valuation determinations. The Valuation Committees valuations stand for intervening periods of time unless the Valuation Committee meets again at the request of KAFA, the Board of Directors, or the Committee itself. All valuation determinations of the Valuation Committee are subject to ratification by the Board at its next regular meeting. | |
| Valuation Firm. No less than quarterly, a third-party valuation firm engaged by the Board of Directors reviews the valuation methodologies and calculations employed for these securities. | |
| Board of Directors Determination. The Board of Directors meets quarterly to consider the valuations provided by KAFA and the Valuation Committee, if applicable, and ratify valuations for the applicable securities. The Board of Directors considers the report provided by the third-party valuation firm in reviewing and determining in good faith the fair value of the applicable portfolio securities. |
14
15
16
Gross unrealized appreciation of investments (including options)
|
$ | 232,029 | ||
Gross unrealized depreciation of investments (including options)
|
(46,049 | ) | ||
Net unrealized appreciation before foreign currency related
translations
|
185,980 | |||
Unrealized depreciation on foreign currency related translations
|
(45 | ) | ||
Net unrealized appreciation
|
$ | 185,935 | ||
17
3. | Fair Value |
| Level 1 Quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement. | |
| Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers. | |
| Level 3 Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Funds own assumptions that market participants would use to price the asset or liability based on the best available information. |
Prices with |
||||||||||||||||
Quoted Prices |
Other |
|||||||||||||||
in Active |
Observable |
Unobservable |
||||||||||||||
Markets |
Inputs |
Inputs |
||||||||||||||
Assets at Fair Value
|
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Long-Term Investments
|
$ | 1,273,972 | $ | 1,113,587 | $ | 154,851 | $ | 5,534 |
18
Long-Term |
||||
Assets at Fair Value Using
Unobservable Inputs (Level 3)
|
Investments | |||
Balance November 30, 2007
|
$ | 31,584 | ||
Transfers out of Level 3
|
(31,584 | ) | ||
Realized gain (losses)
|
| |||
Unrealized gains, net
|
34 | |||
Purchases, issuances or settlements
|
5,500 | |||
Balance August 31, 2008
|
$ | 5,534 | ||
4. | Concentration of Risk |
5. | Agreements and Affiliations |
19
6. | Restricted Securities |
20
Number of |
||||||||||||||||||||||||||||||
Units or |
Percent |
Percent |
||||||||||||||||||||||||||||
Type of |
Principal ($) |
Acquisition |
Cost |
Fair |
Fair Value |
of Net |
of Total |
|||||||||||||||||||||||
Investment | Security | Restriction | (in 000s) | Date | Basis | Value | per Unit | Assets | Assets | |||||||||||||||||||||
Copano Energy, L.L.C.
|
Class D Units | (1) | 114 | 3/14/2008 | $ | 3,000 | $ | 2,829 | $ | 27.46 | 0.3 | % | 0.2 | % | ||||||||||||||||
Regency Energy Partners LP
|
Common Units | (2) | 114 | 8/01/2008 | 2,454 | 2,705 | 23.80 | 0.3 | 0.2 | |||||||||||||||||||||
Total of securities valued in accordance with procedures
established by the board of directors(3)
|
$ | 5,454 | $ | 5,534 | 0.6 | % | 0.4 | % | ||||||||||||||||||||||
Athabasca Oil Sands Corp.
|
Corporate Bonds | (4) | $ | 19,500 | (5) | $ | 19,047 | $ | 18,684 | n/a | 1.9 | % | 1.4 | % | ||||||||||||||||
CDX Funding, LLC
|
Term Loan | (4) | $ | 8,750 | (5) | 8,877 | 7,000 | n/a | 0.7 | 0.5 | ||||||||||||||||||||
Dresser, Inc.
|
Term Loan | (4) | $ | 13,000 | (5) | 12,299 | 12,561 | n/a | 1.3 | 1.0 | ||||||||||||||||||||
Energy Future Holdings Corp.
|
Term Loan | (4) | $ | 7,444 | (5) | 7,469 | 6,960 | n/a | 0.7 | 0.6 | ||||||||||||||||||||
Energy Future Holdings Corp.
|
Term Loan | (4) | $ | 4,500 | (5) | 4,278 | 4,196 | n/a | 0.4 | 0.3 | ||||||||||||||||||||
Hilcorp Energy Company
|
Corporate Bonds | (4) | $ | 13,589 | (5) | 13,223 | 12,298 | n/a | 1.3 | 1.0 | ||||||||||||||||||||
Quicksilver Resources Inc.
|
Term Loan | (1) | $ | 5,000 | (5) | 4,901 | 4,963 | n/a | 0.5 | 0.4 | ||||||||||||||||||||
Targa Resources Investments, Inc.
|
Term Loan | (4) | $ | 7,133 | (5) | 5,080 | 5,171 | n/a | 0.6 | 0.4 | ||||||||||||||||||||
Total of securities valued by prices provided by market maker or
independent pricing service(6)(7)
|
$ | 75,174 | $ | 71,833 | 7.4 | % | 5.6 | % | ||||||||||||||||||||||
Total of all restricted securities
|
$ | 80,628 | $ | 77,367 | 8.0 | % | 6.0 | % | ||||||||||||||||||||||
(1) | Unregistered security of a publicly-traded company. | |
(2) | Security subject to lock-up agreement. | |
(3) | Restricted securities that represent Level 3 categorization under SFAS No. 157 where reliable market quotes are not readily available. Securities are valued in accordance with the procedures established by the board of directors as more fully described in Note 2 Significant Accounting Policies. | |
(4) | Unregistered security of a private company. | |
(5) | Acquired at various times throughout the current fiscal period and/or prior fiscal year. | |
(6) | Securities with a fair market value determined by the mean of the bid and ask prices provided by a syndicate bank or principal market maker. These securities have limited trading volume and are not listed on a national exchange. The syndicate bank or principal market maker is the active exchange for such securities. | |
(7) | Restricted securities that represent Level 2 categorization under SFAS No. 157. Securities are valued using prices provided by a principal market maker, syndicate bank or an independent pricing service as more fully described in Note 2 Significant Accounting Policies. |
21
7. | Option Contracts |
Number of |
||||||||
Contracts | Premium | |||||||
Put Options Purchased
|
||||||||
Options outstanding at beginning of period
|
| | ||||||
Options purchased
|
8,503 | $ | 1,263 | |||||
Options exercised
|
(750 | ) | (52 | ) | ||||
Options expired
|
(7,753 | ) | (1,211 | ) | ||||
Options outstanding at end of period
|
| | ||||||
Call Options Written
|
||||||||
Options outstanding at beginning of period
|
4,000 | $ | 847 | |||||
Options written
|
39,215 | 12,182 | ||||||
Options written terminated in closing purchase transactions
|
(6,420 | ) | (1,875 | ) | ||||
Options exercised
|
(19,573 | ) | (5,392 | ) | ||||
Options expired
|
(10,250 | ) | (2,999 | ) | ||||
Options outstanding at end of period
|
6,972 | $ | 2,763 | |||||
8. | Investment Transactions |
9. | Revolving Credit Facility |
22
10. | Senior Unsecured Notes and Preferred Stock |
Series
|
Principal | Fixed Interest Rate | Maturity | |||||||||
A
|
$ | 53,000 | 5.65 | % | 8/13/2011 | |||||||
B
|
35,000 | 5.90 | % | 8/13/2012 | ||||||||
C
|
137,000 | 6.06 | % | 8/13/2013 | ||||||||
Total
|
$ | 225,000 | ||||||||||
11. | Interest Rate Swap Contracts |
23
12. | Common Stock |
Shares outstanding at November 30, 2007
|
32,205,867 | |||
Shares issued through reinvestment of dividends and distributions
|
3,142 | |||
Shares outstanding at August 31, 2008
|
32,209,009 | |||
13. | Subsequent Events |
24
Directors and Corporate Officers
|
||
Kevin S. McCarthy
|
Chairman of the Board of Directors, President and Chief Executive Officer |
|
Anne K. Costin
|
Director | |
Steven C. Good
|
Director | |
Gerald I. Isenberg
|
Director | |
William H. Shea Jr.
|
Director | |
Terry A. Hart
|
Chief Financial Officer and Treasurer | |
David J. Shladovsky
|
Secretary and Chief Compliance Officer | |
J.C. Frey
|
Executive Vice President, Assistant Secretary and Assistant Treasurer | |
James C. Baker
|
Executive Vice President | |
Investment Adviser
|
Administrator | |
KA Fund Advisors, LLC
|
Bear Stearns Funds Management Inc. | |
717 Texas Avenue, Suite 3100
|
a J.P. Morgan Company | |
Houston, TX 77002
|
237 Park Avenue | |
New York, NY 10017 | ||
1800 Avenue of the Stars, Second Floor
|
||
Los Angeles, CA 90067
|
Stock Transfer Agent and Registrar | |
American Stock Transfer & Trust Company | ||
59 Maiden Lane | ||
New York, NY 10038 | ||
Custodian | Independent Registered Public Accounting Firm | |
Custodial Trust Company
|
PricewaterhouseCoopers LLP | |
a J.P. Morgan Company
|
350 South Grand Avenue | |
101 Carnegie Center
|
Los Angeles, CA 90071 | |
Princeton, NJ 08540
|
||
Legal Counsel | ||
Paul, Hastings, Janofsky & Walker LLP 55 Second Street, 24th Floor San Francisco, CA 94105 |