cushing_nq.htm

 

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


 
FORM N-Q
 
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
 


Investment Company Act file number  811-22072



The Cushing MLP Total Return Fund
(Exact name of registrant as specified in charter)



8117 Preston Road Suite 440
Dallas, TX 75225
(Address of principal executive offices) (Zip code)



Jerry V. Swank
8117 Preston Road Suite 440
Dallas, TX 75225
(Name and address of agent for service)



214-692-6334
Registrant's telephone number, including area code



Date of fiscal year end: November 30
 

Date of reporting period:  August 31, 2010

 
 
 
 
Item 1. Schedule of Investments.
 

 
The Cushing MLP Total Return Fund
        
 
SCHEDULE OF INVESTMENTS (Unaudited)
        
     
     
August 31, 2010
             
     
Shares
    
 Fair Value
 
Master Limited Partnerships and Related Companies - United States - 131.6% (1)
        
 
Coal - 14.9% (1)
        
 
Alliance Holdings GP, L.P.
           100,000
   $
         3,809,000
 
Natural Resource Partners, L.P.
           275,000
    
                      7,040,000
 
Oxford Resource Partners, L.P.
           300,000
    
                      5,724,000
 
Penn Virginia GP Holdings, L.P.
           300,000
    
                      5,874,000
 
Penn Virginia Resource Partners, L.P.
           200,000
    
                      4,482,000
           
                    26,929,000
 
Crude/Natural Gas Production - 13.8% (1)
        
 
Breitburn Energy Partners, L.P.
             50,000
    
                         852,500
 
ECA Marcellus Trust I
  100,000       1,997,000
 
Encore Energy Partners, L.P.
           150,000
    
                      2,791,500
 
EV Energy Partners, L.P.
           175,000
    
                      5,883,500
 
Legacy Reserves, L.P.
           174,900
    
                      4,006,959
 
Linn Energy, LLC
           200,000
    
                      5,704,000
 
Vanguard Natural Resources, LLC
           150,000
    
                      3,630,000
         
                    24,865,459
 
Crude/Refined Products Pipelines and Storage - 37.2% (1)
        
 
Buckeye Partners, L.P.
             75,000
    
                      4,579,500
 
Enbridge Energy Partners, L.P.
           350,000
    
                    18,812,500
 
Genesis Energy, L.P.
           600,000
    
                    12,690,000
 
Magellan Midstream Partners, L.P.
           250,000
    
                    12,115,000
 
Plains All American Pipeline, L.P.
           150,000
    
                      9,006,000
 
Sunoco Logistics Partners, L.P.
             75,000
    
                      5,553,750
 
TransMontaigne Partners, L.P.
           125,000
    
                      4,355,000
 
 
      
                    67,111,750
 
Natural Gas/Natural Gas Liquid Pipelines and Storage - 34.0% (1)
        
 
Boardwalk Pipeline Partners, LP
           200,000
    
                      6,112,000
 
 
 
 
 
 
 
 
El Paso Pipeline Partners, L.P.
           100,000
    
                      3,131,000
 
Energy Transfer Partners, L.P.
           125,000
    
                      5,711,250
 
Enterprise GP Holdings, L.P.
           115,000
    
                      5,561,400
 
Enterprise Products Partners, L.P.
           400,000
    
                    14,788,000
 
Niska Gas Storage Partners LLC
           100,000
    
                      1,888,000
 
ONEOK Partners, L.P.
           150,000
    
                    10,320,000
 
TC Pipelines, L.P.
           150,000
    
                      6,517,500
 
Williams Partners, L.P.
  175,000        7,369,250
         
                  61,398,400
 
Natural Gas Gathering/Processing - 17.3% (1)
        
 
Chesapeake Midstream Partners, L.P.
             75,000
    
                      1,766,250
 
MarkWest Energy Partners, L.P.
           425,000
    
                    14,161,000
 
Regency Energy Partners, L.P.
           300,000
    
                      7,134,000
 
Targa Resources Partners, L.P.
           325,000
    
                      8,219,250
         
                   31,280,500
 
Propane - 9.2% (1)
        
 
Inergy, L.P.
           300,000
    
                    11,172,000
 
Inergy Holdings, L.P.
           200,000
    
                      5,476,000
           
                    16,648,000
 
Shipping - 5.2% (1)
        
 
Navios Maritime Partners, L.P.
           300,000
    
                      5,193,000
 
Teekay Offshore Partners, L.P.
           200,000
    
                      4,250,000
           
                      9,443,000
             
 
Total Master Limited Partnerships and Related Companies (Cost $198,069,690)
      
                  237,676,109
     
Principal
      
   
Amount
      
 
Senior Notes - United States - 6.8% (1)
        
 
Natural Gas/Natural Gas Liquids Pipelines and Storage - 0.2% (1)
        
 
El Paso Corp., 7.420%, due 02/15/2037
           375,000
    
                         344,127
             
 
Natural Gas Gathering/Processing - 6.6% (1)
        
 
Atlas Pipeline Partners, L.P., 8.750% due 06/15/2018
        3,500,000
    
                      3,473,750
 
Copano Energy, LLC, 8.125%, due 03/01/2016
        2,000,000
    
                      2,030,000
 
MarkWest Energy Partners, L.P., 6.875%, due 11/01/2014
        2,000,000
    
                      2,030,000
 
MarkWest Energy Partners, L.P., 8.750%, due 04/15/2018
        1,000,000
    
                      1,075,000
 
Regency Energy Partners, L.P., 9.375%, due 06/01/2016 (2)
        2,000,000
    
                      2,180,000
 
 
 
 
 
 
 
Targa Resources Partners, L.P., 8.250%, due 07/01/2016
           200,000
    
                         209,000
 
Targa Resources Partners, L.P., 11.250%, due 07/15/2017 (2)
           600,000
    
                         693,000
 
Targa Resources Partners, L.P., 7.875%, due 10/15/2018
           250,000
    
                         258,125
           
                    11,948,875
             
 
Total Senior Notes (Cost $11,032,581)
      
                    12,293,002
             
 
Options - United States - 0.4% (1)
Contracts
      
 
SPDR Trust Series 1
        
   
Expiration: October 2010, Exercise Price: $104.00 (Cost $761,456)
               3,000
    
                         763,500
           
 
Short-Term Investments - United States - Investment Companies - 3.0% (1)
Shares
      
 
AIM Short-Term Treasury Portfolio Fund - Institutional Class
        1,065,545
    
                      1,065,545
 
Fidelity Government Portfolio Fund - Institutional Class
        1,065,545
    
                      1,065,545
 
First American Treasury Obligations Fund - Class A
        1,065,545
    
                      1,065,545
 
First American Treasury Obligations Fund - Class Y
        1,065,544
    
                      1,065,544
 
First American Treasury Obligations Fund - Class Z
        1,065,544
    
                      1,065,544
 
Total Short-Term Investments (Cost $5,327,723)
      
                      5,327,723
             
 
Total Investments - 141.8% (1) (Cost $215,191,450)
      
                  256,060,334
 
Liabilities in Excess of Other Assets - (41.8)% (1)
      
                   (75,473,045)
 
Total Net Assets Applicable to Common Stockholders - 100.0% (1)
     $
      180,587,289
             
 
SECURITIES SOLD SHORT (Unaudited)
        
 
Exchange Traded Note - United States - (5.3)%(1)
Shares
      
 
J.P. Morgan Alerian MLP Index
           300,000
   $
         9,552,000
 
Total Securities Sold Short - (5.3)%(1) (Proceeds $9,549,648)
     $
         9,552,000
             
 
(1)
Calculated as a percentage of net assets applicable to common stockholders.
        
 
(2)
Restricted securities represent a total fair value of $2,873,000 which represents 1.6% of net assets.
        


Restricted Securities

Certain of the Fund’s investments are 144A securities and are valued as determined in accordance with procedures established by the Board of Trustees.  The table below shows the principal amount, acquisition date, acquisition cost, fair value and percent of net assets which the restricted securities comprise at August 31, 2010.
 
 
 
 
 
 
Investment Security
  
Principal
Amount
Acquisition
Date
  
Acquisition
Cost Basis
  
Market
Value
  
Market Value
as Percent of
Net Assets
  
Market Value
as Percent of
Total Assets
Regency Energy Partners,
L.P., 9.375%, due 06/01/2016
Senior
Notes
 $ 2,000,000
5/15/2009
  
 $  1,893,888
 
 $ 2,180,000
 
1.2%
  
0.8%
                       
Targa Resources Partners,
L.P., 11.250%, due 07/15/2017
Senior
Notes
 $    600,000
6/30/2009
  
 $     570,410
 
 $    693,000
 
0.4%
  
0.2%
Totals
        
$  2,464,298
  
$ 2,873,000
  
1.6%
  
1.0%
 
 
Tax Basis

At August 31, 2010, the cost basis of investments for federal income tax purposes was $213,855,900 and gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
 
 Gross unrealized appreciation    $       47,091,894  
 Gross unrealized depreciation              (4,887,460)  
 Net unrealized appreciation   $ 42,204,434  
 
 
Fair Value Measurements
 
The Fund has adopted authoritative fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value.  These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period.  These inputs are summarized in the three broad levels listed below.

     
Fair Value Measurements at Reporting Date Using
     
Quoted Prices in
  
Significant
     
Active Markets for
Significant Other
Unobservable
 
Fair Value at
  
Identical Assets
Observable Inputs
Inputs
Description
August 31, 2010
  
(Level 1)
(Level 2)
(Level 3)
Assets
Equity Securities
          
Master Limited
Partnerships and
Related Companies (a)
$  237,676,109
  
$  237,676,109
$                    -
$                 -
Total Equity Securities
    237,676,109
  
    237,676,109
                      -
                   -
Notes
          
Senior Notes (a)
      12,293,002
  
                       -
     12,293,002
                   -
Total Notes
      12,293,002
  
                       -
     12,293,002
                   -
Derivatives
          
Options
           763,500
  
           763,500
                       -
                   -
Total Derivatives
           763,500
  
           763,500
                       -
                   -
Other
          
Short-Term
Investments
         5,327,723
  
         5,327,723
                      -
                   -
Total Other
         5,327,723
  
         5,327,723
                      -
                   -
Total Assets
$  256,060,334
  
$  243,767,332
$   12,293,002
$                 -
 
Liabilities
Securities Sold Short
          
        Exchange Traded Note
$      9,552,000
  
$      9,552,000
$                    -
$                 -
Total
$  246,508,334
  
$  234,215,332
$   12,293,002
$                 -

(a)  
All other industry classifications are identified in the Schedule of Investments.
 

 
 
 
 
Derivative Financial Instruments
The Fund has adopted enhanced disclosure regarding derivatives and hedging activity intending to improve financial reporting of derivative instruments by enabling investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position.

The Fund occasionally engages in equity option trading as a source of protection against a broad market decline. During the period ended August 31, 2010, the Fund purchased 71,500 S&P Depository Receipts (“SPDR”) Trust Series 1 equity option put contracts with various exercise prices.  The Fund sold 65,500 of these option contracts for a total realized loss of $2,437,561.  Of the remaining contracts, 3,000 contracts expired for a total realized loss of $364,182.  These realized losses would be included in net realized gain on investments in the Statement of Operations.

On August 31, 2010 the Fund held 3,000 SPDR Trust Series 1 equity option put contracts at fair value of $763,500. All of the contracts held had an exercise price of $104.00.  These equity option put contracts would be included in investments at fair value in the Statement of Assets and Liabilities. The unrealized appreciation of $2,044 on these equity option put contracts would be included in the net change in unrealized appreciation of investments in the Statement of Operations.

During the period ended August 31, 2010, the Fund wrote 53,600 SPDR Trust Series 1 short option put contracts with various exercise prices and covered 53,600 of these option contracts for a total realized gain of $946,710.  This realized loss would be included in net realized gain on investments in the Statement of Operations.

 
Item 2. Controls and Procedures.
 
(a)  
The Registrant’s President and Treasurer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) (17 CFR 270.30a-3(c)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rule 13a-15(b) or Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(d)).

(b)  
There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) (17 CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.


 
 
 
 
Item 3. Exhibits.
 
Separate certifications for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)).  Filed herewith.
 

 
 
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


(Registrant)  The Cushing MLP Total Return Fund                                                                                                                                                          

 
By (Signature and Title)    /s/ Jerry V. Swank                                     
Jerry V. Swank, President

Date       10/27/2010                                                                                 



Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)    /s/ Jerry V. Swank                                    
Jerry V. Swank, President

Date       10/27/2010                                                                                 
 
 
By (Signature and Title)    /s/ John H. Alban                                                                                                                                
John H. Alban, Treasurer

Date       10/27/2010