KMF Kayne Anderson NextGen Energy and Infrastructure Inc

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-22467

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KAYNE ANDERSON NEXTGEN ENERGY &
INFRASTRUCTURE, INC.

(Exact name of registrant as specified in charter)

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Michael J. O’Neil
KA Fund Advisors, LLC, 811 Main Street, 14th Floor, Houston, Texas 77002
(Name and address of agent for service)

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

Date of fiscal year end: November 30, 2023

Date of reporting period: May 31, 2023

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1.       Reports to Stockholders.

The report of Kayne Anderson NextGen Energy & Infrastructure, Inc. (the “Registrant”) to stockholders for the semi-annual period ended May 31, 2023 is attached below.

CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:    This report of Kayne Anderson NextGen Energy & Infrastructure, Inc. (the “Fund”) 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 Fund’s historical experience and its present expectations or projections indicated in any forward-looking statement. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; energy industry risk; leverage risk; valuation risk; interest rate risk; tax risk; and other risks discussed in the Fund’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 Fund undertakes no obligation to publicly update or revise any forward-looking statements made herein. There is no assurance that the Fund’s investment objectives will be attained.

All investments in securities involve risks, including the possible loss of principal. The value of an investment in the Fund could be volatile, and you could suffer losses of some or a substantial portion of the amount invested. The Fund’s concentration of investments in energy infrastructure companies subjects it to the risks of the energy sector, including the risks of declines in energy and commodity prices, decreases in energy demand, adverse weather conditions, natural or other disasters, changes in government regulation, and changes in tax laws. Leverage creates risks that may adversely affect return, including the likelihood of greater volatility of net asset value and market price of common shares and fluctuations in distribution rates, which increases a stockholder’s risk of loss.

Performance data quoted in this report represent past performance and are for the stated time period only. Past performance is not a guarantee of future results. Current performance may be lower or higher than that shown based on market fluctuations from the end of the reported period.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
LETTER TO STOCKHOLDERS

June 30, 2023

Dear Fellow Stockholders:

It has been a very eventful start to fiscal 2023 in the financial markets. Much like the first quarter, there was no shortage of market moving events during fiscal Q2. For example — the second quarter began with the collapse of several large regional banks and ended with concerns about the potential for the United States to default on its debt obligations. Notwithstanding these events, the broader equity markets have performed well thus far in fiscal 2023.

The energy sector (including energy infrastructure) has reported strong operating and financial results during the year, but equity performance for these companies has lagged the broader markets. Importantly, nothing has changed in the energy infrastructure sector’s fundamentals to alter our constructive outlook. Further, the parallel trends of energy security and energy transition — both of which are beneficial for energy infrastructure companies — have only grown in importance during the year.

Focusing on where things stand today: inflation, interest rates and the state of the global economy are three topics front and center in investors’ minds. Central banks across the globe (including the Federal Reserve) remain focused on addressing higher-than-desired levels of inflation, and market participants continue to weigh the impact this will have on economic activity. Our outlook for the remainder of fiscal 2023 is cautious, but we do not believe a meaningful (or prolonged) downturn in the economy is likely.

In this quarterly update, we discuss the energy infrastructure markets, KMF’s portfolio positioning, and the Fund’s year-to-date performance. We believe the Fund’s portfolio investments are attractively valued and positioned to generate compelling risk-adjusted returns for investors. Equally important, KMF’s balance sheet is well positioned to deal with higher levels of market volatility. In our opinion, the biggest news during the quarter was our announcement of an agreement to combine KMF and Kayne Anderson Energy Infrastructure Fund, Inc. (NYSE: KYN) (the “Merger”). As discussed later in this letter, we believe the Merger is beneficial for both funds’ stockholders and enhances the combined fund’s ability to capitalize on the long-term tailwinds in the energy infrastructure sector. As it relates to fiscal Q2:

•   KMF’s Net Asset Return for fiscal Q2 was negative 5.6%;(1)

•   KMF’s portfolio investments announced solid Q1 2023 earnings and 2023 outlooks during the quarter; and

•   KMF maintained conservative leverage levels with ample downside cushion(2)

Market Conditions

Fiscal Q2 was a very strong quarter for broad equity indices, with contributions from large cap technology stocks more than offsetting weak performance from other industries (including the energy sector).

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Endnotes can be found on page 5.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
LETTER TO STOCKHOLDERS

The yield curve remains stubbornly inverted, and elevated short-term interest rates have made money market funds a comparably attractive place to invest capital. Notwithstanding the inverted yield curve’s “signal” of a pending recession, domestic economic growth continues to exceed expectations and the job market remains robust. Taking the Fed’s comments at face value — and their stated desire to bring inflation back in line with its stated 2% target — reductions to the Fed Funds rate are unlikely to happen any time soon.

Crude oil prices were rangebound during fiscal Q2, mostly trading between $70 and $80 per barrel and ending the quarter below the bottom of this range ($68 per barrel). Oil prices have declined meaningfully on a year-over-year basis (down 40%) and are approximately $56 per barrel less than peak 2022 levels. Oil markets continue to be driven by three primary factors: (1) Russian supply, (2) Chinese demand, and (3) OPEC+. Russian exports continue to be more resilient than expected, while Chinese demand is rebounding more slowly than expected. With both of these factors weighing on oil prices, OPEC+ has continued to take actions to support prices, including another surprise production cut of 1 MMbbl/d in early June and an extension of voluntary cuts through December 2024. More recently, events in Russia highlight the importance of energy security and the potential for meaningful disruptions in global exports of crude oil. We expect global inventories to draw in the second half of 2023 and our outlook for crude prices over the next few years remains constructive.

Natural gas prices continued to languish on mild weather, as Henry Hub spot gas prices traded down to ~$2.00/MMBtu and stayed at that level for most of the quarter. The forward curve, however, remains much higher at ~$3.50/MMBtu in 2024 and ~$4.00/MMBtu in 2025. European and Asian gas prices fell to 2-year lows during the quarter as mild winter weather and steady supplies of LNG from the U.S. enabled European inventories to remain at comfortable levels. That said, the global gas market remains delicately balanced. LNG continues to flow from domestic export facilities at full rates, and there is little margin for error in the supply/demand balance. Any supply disruption or spike in demand would cause international prices to meaningfully increase.

Portfolio and Performance

Returns across KMF’s three energy infrastructure sectors — midstream, U.S. utilities, and renewable infrastructure — were down or flat during the second quarter of fiscal 2023. U.S. utilities were on track to outperform the S&P 500 as investors sought safety amid regional banking concerns, but a sharp May downturn (-6%) on expectations for more hawkish actions by the Fed erased this outperformance.

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Endnotes can be found on page 5.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
LETTER TO STOCKHOLDERS

KMF generated a total Net Asset Return of negative 5.6% in fiscal Q2. KMF’s Market Return, which is based on stock price performance rather than Net Asset Value, was negative 6.4% for fiscal Q2.(10) This trailed our Net Asset Return as our stock price traded at a 17.7% discount to NAV as of May 31st compared to a 16.9% discount at the beginning of the fiscal quarter.

The fundamentals driving our long-term return expectations for KMF’s portfolio investments are not overly influenced by near term economic headwinds or challenging capital markets. Most of the energy infrastructure companies in KMF’s portfolio generate significant free cash flow and, consequently, are able to self-fund capital expenditures and dividends. Further, their cash flows are resilient and predictable. No sector (or company) can be completely insulated from volatility in the financial markets or an economic downturn, but the attributes of our core investment universe — midstream, renewable infrastructure, and U.S. utilities — give us confidence that these businesses are better positioned than other sectors to “weather the storm.” Thus far in fiscal 2023, we have increased KMF’s exposure to the midstream sector (70% of the portfolio) and decreased the Fund’s exposure to renewable infrastructure and utilities. Within the North American energy infrastructure sector, we are most bullish on the outlook for midstream companies.

Distribution & Outlook

KMF recently announced a $0.16 per share distribution payable July 5th. Given our outlook for the next 12 to 18 months at KYN (the surviving fund), in March we announced a 5% increase in KYN’s quarterly distribution (to $0.21 per share). Once the combination with KMF is completed, we intend to recommend an additional one cent per share increase in KYN’s quarterly distribution rate (to $0.22 per share, representing a cumulative 10% increase). KMF stockholders’ distribution is estimated to increase by approximately 20% once the combination is completed (on a pro forma basis).(11)

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Endnotes can be found on page 5.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
LETTER TO STOCKHOLDERS

KYN & KMF Proposed Merger

KMF and KYN announced plans to combine the two funds earlier this year, with KYN as the surviving entity. The Merger is subject to stockholder approval, and KYN and KMF expect to mail a definitive joint proxy statement/prospectus to stockholders that will contain information about the Merger, including the date of the special meeting, following a review period with the SEC.(12) Please refer to kaynefunds.com/insights for information on the Merger.

We continue to work towards the completion of this proposed combination of KYN and KMF and firmly believe this transaction enhances the combined fund’s ability to capitalize on the long-term tailwinds in the energy infrastructure sector. Stockholders in the combined entity will continue to have exposure to the largest macro trends in the energy industry, and the fund will be managed by the same dedicated team of professionals committed to providing attractive risk-adjusted returns and best-in-class financial disclosure.

We encourage investors to visit our website at kaynefunds.com for more information about the Fund, including the commentary posted on the “Insights” page that discuss performance, key industry trends, and the Merger. We appreciate your investment in KMF and look forward to providing future updates.

KA Fund Advisors, LLC

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Endnotes can be found on page 5.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
LETTER TO STOCKHOLDERS

​(1)          Net Asset Return is defined as the change in net asset value per share plus cash distributions paid during the period (assuming reinvestment through our dividend reinvestment plan).

​(2)          Downside cushion reflects the decrease in total asset value that could be sustained while maintaining compliance with 1940 Act leverage levels and KMF’s financial covenants.

​(3)          Fiscal year-to-date 2023 (11/30/22 – 5/31/23).

​(4)          The benchmark for the broad U.S. energy sector is the Energy Select Sector SPDR Fund (XLE), which is an exchange-traded fund (“ETF”) linked to the Energy Select Sector Index (IXE), a subset of the S&P 500.

​(5)          The benchmark for the midstream sector is the Alerian Midstream Energy Index (AMNA).

​(6)          The benchmark for the renewable infrastructure sector is the Kayne Anderson Renewable Infrastructure Index (KRII), a market-cap weighted index of 35 domestic and international renewable infrastructure companies with individual constituents capped at a 5% weighting.

​(7)          The benchmark for the U.S. utility sector is the Utilities Select Sector SPDR Fund (XLU), which is an exchange-traded fund (“ETF”) linked to the Utilities Select Sector Index (IXU), a subset of the S&P 500.

​(8)          KMF’s Benchmark is a composite of energy infrastructure companies. For fiscal 2023, this composite is comprised of a 50% weighting to the midstream sector, a 30% weighting to the renewable infrastructure sector, and a 20% weighting to the U.S. utility sector. The subsector allocations for this composite were established by Kayne Anderson at the beginning of fiscal 2023 based on the estimated target subsector allocations of the Fund’s assets over the intermediate term. KMF’s portfolio holdings and/or subsector allocations may change at any time.

​(9)          Whenever we reference “midstream companies”, the “midstream sector” or the “midstream industry” it includes both traditional midstream companies and natural gas & LNG infrastructure companies. Traditional midstream companies are defined as midstream companies that own and/or operate midstream assets related to crude oil, refined products, natural gas liquids or water. Natural gas & LNG infrastructure companies are defined as midstream companies that primarily own and/or operate midstream assets related to natural gas or liquefied natural gas.

​(10)        Market Return is defined as the change in share price plus cash distributions paid during the period (assuming reinvestment through our dividend reinvestment program).

​(11)        Estimate based on (i) the implied exchange ratio of 0.870 shares of KYN for each share of KMF (based on per share NAVs as of May 31, 2023) and (ii) a 22 cent per share quarterly distribution rate for KYN once the Merger closes. The exchange ratio will be based on the relative per share NAVs of each fund the business day prior to the Merger’s closing date.

​(12)        More information on the Merger is available in the preliminary joint proxy statement/prospectus (Form N-14) filed with the Securities and Exchange Commission (SEC). KYN and KMF expect to mail a definitive joint proxy statement/prospectus to stockholders that will contain information about the Merger following a review period with the SEC. The definitive joint proxy statement, along with other relevant documents, will be available at no charge on the SEC website at www.sec.gov. Please refer to kaynefunds.com/insights for additional information on the combination.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
PORTFOLIO SUMMARY
(UNAUDITED)

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
MANAGEMENT DISCUSSION
(UNAUDITED)

Fund Overview

Kayne Anderson NextGen Energy & Infrastructure, Inc. (the “Fund” or “KMF”) is a non-diversified, closed-end fund that commenced operations in November 2010. Our investment objective is to provide a high level of total return with an emphasis on making cash distributions to our stockholders. We seek to achieve that investment objective by investing at least 80% of our total assets in the securities of Energy Companies and Infrastructure Companies. We expect to invest the majority of our assets in securities of “NextGen” companies which we define as Energy Companies and Infrastructure Companies that are meaningfully participating in, or benefitting from, the Energy Transition. Please see the Glossary of Key Terms for a description of these investment categories and for the meaning of capitalized terms not otherwise defined herein.

As of May 31, 2023, we had total assets of $512 million, net assets applicable to our common stockholders of $389 million (net asset value of $8.24 per share), and 47.2 million shares of common stock outstanding.

Results of Operations — For the Three Months Ended May 31, 2023

Investment Income.    Investment income totaled $3.9 million for the quarter. We received $7.8 million of dividends and distributions, of which $3.9 million was treated as return of capital. Interest income was less than $0.1 million.

Operating Expenses.    Operating expenses totaled $3.7 million, including $1.7 million of investment management fees, $1.0 million of interest expense, $0.5 million of preferred stock distributions and $0.5 million of other operating expenses.

Net Investment Income.    Our net investment income totaled $0.2 million.

Net Realized Loss.    We had a net realized loss of $0.3 million.

Net Change in Unrealized Gains.    We had a net decrease in unrealized gains of $23.9 million.

Net Decrease in Net Assets Resulting from Operations.    As a result of the above, we had a net decrease in net assets resulting from operations of $24.0 million.

Distributions to Common Stockholders

On June 14, 2023, KMF declared a quarterly distribution of $0.16 per common share for the second quarter, which was paid on July 5, 2023. Payment of future distributions is subject to Board of Directors approval, as well as meeting the covenants on our debt agreements and terms of our preferred stock.

The Board of Directors considers several items in setting our distributions to common stockholders including net distributable income as defined below, realized and unrealized gains and expected returns for portfolio investments.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
MANAGEMENT DISCUSSION
(UNAUDITED)

Net distributable income (“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.

For the purposes of calculating NDI, 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 (d) net premiums received from the sale of covered calls.

For the purposes of calculating NDI, operating expenses include (a) investment management fees paid to our investment adviser, (b) other expenses (mostly comprised of fees paid to other service providers), (c) accrual for estimated excise taxes (if any) and (d) interest expense and preferred stock distributions.

Net Distributable Income (NDI)

(amounts in millions, except for per share amounts)

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(1)    Adjusted NDI excludes distributions received from Atlantica Sustainable Infrastructure plc and Aris Water Solutions, Inc. attributable to the first quarter of fiscal 2023 with ex-dividend dates in March 2023 ($0.4 million).

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
MANAGEMENT DISCUSSION
(UNAUDITED)

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:

•   A significant portion of the cash distributions received from our investments is characterized as return of capital. For GAAP purposes, return of capital distributions are excluded from investment income, whereas the NDI calculation includes the return of capital portion of such distributions.

•   GAAP recognizes distributions received from our investments that exceed the cost basis of our securities to be realized gains and are therefore excluded from investment income, whereas the NDI calculation includes these distributions.

•   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 call premium that we received, thereby generating a profit. The premium we receive from selling call options, less (i) the amount that we pay to repurchase such call option contracts and (ii) the amount by which the market price of an underlying security is above the strike price at the time a new call option is written (if any), is included in NDI. For GAAP purposes, premiums received from call option contracts sold are not included in investment income. See Note 2 — Significant Accounting Policies for a full discussion of the GAAP treatment of option contracts.

Liquidity and Capital Resources

At May 31, 2023, we had total leverage outstanding of $122 million, which represented 24% of total assets. On April 4, 2023, our Board of Directors approved a change in our non-fundamental investment policy related to our use of leverage. Our revised policy is, under normal market conditions, to utilize leverage in an amount that represents approximately 20% to 25% of our total assets. We often refer to this as our “target leverage levels”. Under our prior policy, target leverage levels were approximately 25% to 30% of total assets. See Notice of Change to Non-Fundamental Investment Policy — Use of Leverage.

Total leverage was comprised of $80 million of senior unsecured notes (“Notes”), $42 million of mandatory redeemable preferred stock (“MRP Shares”). As of May 31, 2023, we did not have any borrowings outstanding under our unsecured revolving credit facility (the “Credit Facility”) or our unsecured revolving credit facility with Sumitomo Mitsui Banking Corporation (“Bank Facility”) and we had $14 million of cash and cash equivalents. As of July 21, 2023, we did not have any borrowings outstanding under our Credit Facility or Bank Facility and we had $3 million of cash.

Our Credit Facility has a total commitment of $45 million and matures on February 23, 2024. The interest rate on borrowings under the Credit Facility may vary between the secured overnight financing rate (“SOFR”) plus 1.40% and SOFR plus 2.25%, depending on our asset coverage ratios. We pay a fee of 0.20% per annum on any unused amounts of the Credit Facility.

Our Bank Facility has a total commitment of $20 million and a three-year term, maturing August 6, 2024. Borrowings under the Bank Facility will bear interest at a rate of 1-month SOFR plus 1.45%. The Fund will pay a commitment fee of 0.20% per annum on any unused amounts of the Bank Facility.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
MANAGEMENT DISCUSSION
(UNAUDITED)

At May 31, 2023, we had $80 million of Notes outstanding that mature between 2023 and 2033 and we had $42 million of MRP Shares outstanding that are subject to mandatory redemption in 2024 and 2026. We have $22 million of Notes that mature in the second half of fiscal 2023 and we expect to refinance these maturities with borrowings under our Credit Facility and/or Bank Facility, or with cash on hand.

At May 31, 2023, our asset coverage ratios under the Investment Company Act of 1940, as amended (“1940 Act”), were 637% for debt and 420% for total leverage (debt plus preferred stock). We target asset coverage ratios that give us the ability to withstand declines in the market value of the securities we hold before breaching the financial covenants in our leverage (we often refer to this as our “downside cushion”). At this time, we target asset coverage ratios that provide 40% to 50% of downside cushion relative to our financial covenants. Our leverage targets are dependent on market conditions as well as certain other factors and may vary from time to time.

As of May 31, 2023, our total leverage consisted of 84% of fixed rate obligations and 16% of floating rate obligations. At such date, the weighted average interest/dividend rate on our total leverage was 4.72%.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
SCHEDULE OF INVESTMENTS
MAY 31, 2023
(amounts in 000’s)
(UNAUDITED)

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
SCHEDULE OF INVESTMENTS
MAY 31, 2023
(amounts in 000’s)
(UNAUDITED)

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

(2)    Refer to the Glossary of Key Terms for definitions.

(3)    Foreign security.

(4)    Securities are treated as a qualified 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 qualified publicly-traded partnerships. It is the Fund’s intention to be treated as a RIC for tax purposes. As of May 31, 2023, the Fund had 23.7% of its total assets invested in qualified publicly-traded partnerships.

(5)    Energy Transfer LP (“ET”) Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“ET Series A Units”). ET Series A Units have a liquidation preference of $1,000 per unit and pay a quarterly distribution at a rate equal to the three-month LIBOR plus a spread of 4.028%. ET Series A Units are redeemable anytime at a redemption price of $1,000 per ET Series A Unit plus accumulated and unpaid distributions. As of May 31, 2023, the distribution rate was 9.370%.

(6)    The Fund’s ability to sell this security is subject to certain legal or contractual restrictions. As of May 31, 2023, the aggregate value of restricted securities held by the Fund was $33,693 (6.6% of total assets), which included $9,378 of Level 2 securities and $24,315 of Level 3 securities. See Note 7 — Restricted Securities.

(7)    Fair valued on a recurring basis using significant unobservable inputs (Level 3). See Notes 2 and 3 in Notes to Financial Statements.

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
SCHEDULE OF INVESTMENTS
MAY 31, 2023
(amounts in 000’s)
(UNAUDITED)

(8)    Enterprise Products Partners L.P. (“EPD”) Series A Cumulative Convertible Preferred Units (“EPD Convertible Preferred Units”) are senior to the common units in terms of liquidation preference and priority of distributions, and pay a distribution of 7.25% per annum. The EPD Convertible Preferred Units are convertible into EPD common units at any time after September 29, 2025 at the liquidation preference amount divided by 92.5% of the 5-day volume weighted average price of EPD’s common units at such time.

(9)    On May 14, 2023, ONEOK, Inc. (“OKE”) and Magellan Midstream Partners, L.P. (“MMP”) announced a definitive merger agreement under which OKE will acquire all of the outstanding units of MMP in a cash-and-stock transaction. The merger is expected to close in the third quarter of 2023.

(10)  This company is structured like an MLP, but is not treated as a qualified publicly-traded partnership for RIC qualification purposes.

(11)  The Fund’s ownership of Plains AAP, L.P. (“PAGP-AAP”) is exchangeable on a one-for-one basis into either Plains GP Holdings, L.P. (“PAGP”) shares or Plains All American Pipeline, L.P. (“PAA”) units at the Fund’s option. The Fund values its PAGP-AAP investment on an “as exchanged” basis based on the higher public market value of either PAGP or PAA. As of May 31, 2023, the Fund’s PAGP-AAP investment is valued at PAGP’s closing price. See Note 7 — Restricted Securities.

(12)  For purposes of the Fund’s investment policies, it considers NextGen Companies to be Energy Companies and Infrastructure Companies that are meaningfully participating in, or benefitting from, the Energy Transition. For these purposes, the Fund includes Natural Gas & LNG Infrastructure Companies, Renewable Infrastructure Companies and certain Utility Companies as NextGen Companies.

(13)  The Fund believes that it is an affiliate of Streamline Innovations Holdings, Inc. (“Streamline”). See Note 5 — Agreements and Affiliations.

(14)  Streamline is a privately-held company. Streamline Series C Preferred Shares are convertible into common equity at any time at the Fund’s option and are senior to common equity and Series A and Series B preferred shares in terms of liquidation preference and priority of distributions. Streamline Series C Preferred Shares are entitled to receive a quarterly dividend beginning on March 31, 2025, at an annual rate of 12.0%, which rate shall increase 2.0% each year thereafter to a maximum rate of 18.0%. Streamline Series C Preferred Shares are redeemable by Streamline at any time after March 31, 2025, at a price sufficient for the Fund to achieve a 20.0% internal rate of return on its investment.

(15)  Security is non-income producing.

(16)  The rate indicated is the yield as of May 31, 2023.

At May 31, 2023, the Fund’s geographic allocation was as follows:

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2023
(amounts in 000’s, except share and per share amounts)
(UNAUDITED)

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
STATEMENT OF OPERATIONS
(amounts in 000’s)
(UNAUDITED)

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS
(amounts in 000’s)

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

(2)    Distributions paid to common stockholders for the six months ended May 31, 2023 are characterized as dividend income (a portion of which may be eligible to be treated as qualified dividend income) until after the end of the fiscal year when the Fund can determine its earnings and profits for the full fiscal year, which would include gains and losses on the sale of securities for the remainder of the fiscal year. The final tax character may differ substantially from this preliminary information.

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 2023
(amounts in 000’s)
(UNAUDITED)

____________

Supplemental disclosure of cash flow information:

During the six months ended May 31, 2023, interest paid related to debt obligations was $1,790.

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
FINANCIAL HIGHLIGHTS
(amounts in 000’s, except share and per share amounts)

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
FINANCIAL HIGHLIGHTS
(amounts in 000’s, except share and per share amounts)

See accompanying notes to financial statements.

KAYNE ANDERSON NEXTGEN ENERGY & INFRASTRUCTURE, INC.
FINANCIAL HIGHLIGHTS
(amounts in 000’s, except share and per share amounts)