717 Texas Avenue, Suite 3100 • Houston, Texas 77002 • Tel 713.493.20001800 Avenue of the Stars, Second Floor • Los Angeles, California 90067 • Tel 800.231.7414

www.kayneenergy.com

Kayne Anderson Energy Funds

August 7, 2008

IPAACapital Markets Breakfast

2

Firm Background

With offices in Los Angeles and Houston, Kayne Anderson Capital Advisors manages approximately $9 billion in assets and employs over 100 people. Distinct teams of investment professionals are dedicated to the various investment strategies managed by the firm.

Approximately $6.6 billion (75%) dedicated to the energy industry

Kayne Anderson Capital Advisors, L.P.

Private Equity Energy Group

$1.85 Billion raised in 4 funds

Investments in 50+ oil and gas companies

since 1992

12 investment professionals

(10 in Houston, 2 in Los Angeles)

2 new hires in Houston in August

Closed End FundGroup

(NYSE: KYN, KYE and KED)

$3.8 Billion in Assets

Hedge Fund Group

(Marketable Securities)

$2.4 Billion in Assets

Private Equity Group

(Non-Control Investments)

$600 Million raised

Energy

Energy Investments

(Public Companies)

$900 Million in Assets

Non-Energy

3

Private Equity Environment: 1998 vs. 2007

Data Point 1998 2007

Average WTI Crude Oil Price ($/bbl) $14.39 $72.36

Average Henry Hub Natural Gas Price ($/Mcf) $2.09 $6.98

E&P Capital Spent in U.S. ($MM) $24,000 $77,000

Total U.S. Wells Drilled 22,911 52,731

Average Cost per Well in U.S. ($M) $769 >$1,700

Total U.S. Drilling Rig Count 827 1,768

Average U.S. EUR per Well (Mboe) 200 160

Largest U.S. Independent E&P / Market Cap ($MM) Burlington Resources / ~$8,000 Devon Energy / $39,000

Largest U.S. Major / Market Cap ($MM) Exxon / $253,000 Exxon Mobil / $467,000

Total U.S. Crude Oil Consumption (MMbopd) 18.9 20.7

Total U.S. Crude Oil Production (MMbopd) 6.3 5.1

Total Net U.S. Crude Oil Imports (MMbopd) 8.7 9.9

Total U.S. Natural Gas Consumption (Bcfpd) 60.9 62.5

Total U.S. Natural Gas Production (Bcfpd) 52.1 51.1

Total Net U.S. Natural Gas Imports (Bcfpd) 8.2 10.1

Production from Unconventional Resources (Bcfpd) ~13.7 23.9

Average U.S. Natural Gas Production Decline Rate 23% >32%

Acreage Plays ?? En Vogue

Private Capital Available ($MM) <$2,000 ±$24,000

4Source: International Energy Agency (World Energy Outlook 2006 published in November 2006).

Cumulative Additions to Global Oil Demand and Net Oil Production

-2

0

2

4

6

8

10

2006 2007 2008 2009 2010

Mill

ion

Ba

rre

ls P

er

Da

y

Incremental Demand 2.50% decline 2.75% decline 3.00% decline 5.00% decline

Global Crude Oil Production Decline

5

Barnett Shale Production Profile

Source: Petro Data Source and Simmons & Company International.

Cotton Valley Production Profile

Woodford Shale Production Profile Pinedale Anticline Production Profile

Avg. Decline Rate:First 12 Months: 65%First 36 Months: 43%

Avg. Decline Rate:First 12 Months: 68%First 36 Months: 43%

Avg. Decline Rate:First 12 Months: 63%First 36 Months: 39%

Avg. Decline Rate:First 12 Months: 70%First 36 Months: 43%

U.S. Natural Gas Decline Treadmill

6

Energy Private Equity Capital Markets

$950

$1,400

$2,500

$3,000

$4,000

$1,300$1,320$1,500

$750$850$1,000

$1,600

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Kayne Anderson Yorktown Lime Rock EnCap Quantum NGP

'05-'06 Vintage Fund '07-'08 Vintage Fund (closed or estimated)

Source: Oil and Gas Investor.

($ in millions)

7

Competition

From Mafiosi to Mr. Rogers

Greater Access

Creative and Flexible Strategies – Solution Oriented

Timing

Quantity vs. Quality

Pros Cons

Energy Private Equity Capital Markets

8

Capital Raising Pre-Requisites

Track record

Keep a running tally of deals, value added to projects and returns

Strategy

Put simply, “How do you plan to make money?”

Save the Mission Statement for Jerry Maguire

Do your homework

You won’t know my favorite band (Yaz), but at least know that I don’t do gas storage projects in Kurdistan