cushing-tr_nq.htm
 
As filed with the Securities and Exchange Commission on October 25, 2011

 

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, 2011
 
 
 
 
 

 
Item 1. Schedule of Investments.
 

 
The Cushing MLP Total Return Fund
          
 
SCHEDULE OF INVESTMENTS (Unaudited)
          
       
       
August 31, 2011
               
       
Shares
    
Fair Value
 
Master Limited Partnerships and Related Companies  - 115.4% (1)
          
 
Coal - 7.8% (1)
          
 
United States - 7.8% (1)
          
 
Oxford Resource Partners, L.P.
  
           400,000
   $
                 7,736,000
 
Penn Virginia Resources Partners, L.P.
  
           465,000
    
                    12,034,200
             
                    19,770,200
 
Crude/Natural Gas Production - 24.4% (1)
          
 
United States - 24.4% (1)
          
 
Breitburn Energy Partners, L.P.
  
           489,000
    
                      9,041,610
 
EV Energy Partners, L.P.
  
           300,000
    
                    20,664,000
 
Legacy Reserves, L.P.
  
           285,000
    
                      7,854,600
 
Linn Energy, LLC
  
           208,000
    
                      7,872,800
 
Sandridge Mississippian Trust
  
           218,000
    
                      5,681,080
 
Sandridge Permian Trust
  
           350,000
    
                      6,597,500
 
VOC Energy Trust
  
           165,000
    
                      3,686,100
           
                    61,397,690
 
Crude/Refined Products Pipelines and Storage - 23.5% (1)
          
 
United States - 23.5% (1)
          
 
Buckeye Partners, L.P.
  
           125,000
    
                      7,872,500
 
Enbridge Energy Partners, L.P.
  
           396,000
    
                    11,286,000
 
Genesis Energy, L.P.
  
           300,000
    
                      7,425,000
 
Kinder Morgan Energy Partners, L.P.
  
           100,000
    
                      7,016,000
 
Magellan Midstream Partners, L.P.
  
           200,000
    
                    11,994,000
 
Plains All American Pipeline, L.P.
  
           225,000
    
                    13,641,750
 
 
        
                    59,235,250
 
Fertilizers - 2.9% (1)
          
 
United States - 2.9% (1)
          
 
CVR Partners, L.P.
  
           300,000
    
                      7,299,000
               
 
 
 
 
 
 
Natural Gas/Natural Gas Liquid Pipelines and Storage - 29.1% (1)
          
 
United States - 29.1% (1)
          
 
Boardwalk Pipeline Partners, L.P.
  
           550,000
    
                    13,805,000
 
El Paso Corporation
  
           284,000
    
                      5,435,760
 
Energy Transfer Equity, L.P.
  
           132,000
    
                      5,047,680
 
Energy Transfer Partners, L.P.
  
           362,000
    
                    16,311,720
 
Enterprise Products Partners, L.P.
  
           300,000
    
                    12,645,000
 
ONEOK, Inc.
  
             81,000
    
                      5,742,900
 
Spectra Energy Partners, L.P.
  
           120,000
    
                      3,486,000
 
TC Pipelines, L.P.
  
           125,000
    
                      5,450,000
 
The Williams Companies, Inc.
  
           193,000
    
                      5,209,070
           
                    73,133,130
 
Natural Gas Gathering/Processing - 24.4% (1)
          
 
United States - 24.4% (1)
          
 
Copano Energy L.L.C.
  
           274,000
    
                      8,883,080
 
Crosstex Energy, L.P.
  
           950,000
    
                    15,570,500
 
DCP Midstream Partners, L.P.
  
           125,000
    
                      4,846,250
 
MarkWest Energy Partners, L.P.
  
           205,000
    
                      9,850,250
 
Regency Energy Partners, L.P.
  
           475,000
    
                    11,343,000
 
Targa Resources Partners, L.P.
  
           315,000
    
                    10,804,500
           
                    61,297,580
 
Propane - 1.5% (1)
          
 
United States - 1.5% (1)
          
 
NGL Energy Partners, L.P.
  
           175,000
    
                      3,752,000
               
 
Shipping - 1.8% (1)
          
 
Republic of the Marshall Islands - 1.8% (1)
          
 
Teekay Offshore Partners, L.P.
  
           170,000
    
                      4,569,600
               
               
 
Total Master Limited Partnerships and Related Companies (Cost $268,864,336)
       $
              290,454,450
               
 
Preferred Stock - 3.2% (1)
          
 
Shipping - 3.2% (1)
          
 
Republic of the Marshall Islands - 3.2% (1)
          
 
Seaspan Corp.
  
           300,000
   $
                 7,998,000
               
 
Total Preferred Stock (Cost $8,145,000)
       $
                 7,998,000
 
 
 
 
 
       
Principal
      
     
Amount
      
 
Senior Notes - 5.4% (1)
          
 
Crude/Natural Gas Production - 3.7% (1)
          
 
United States - 3.7% (1)
          
 
Breitburn Energy Partners, L.P., 8.625%, due 10/15/2020
 $
      2,500,000
   $
                  2,512,500
 
Eagle Rock Energy Partners, L.P., 8.375%, due 06/01/2019 (2)
  
        5,000,000
    
                      4,918,750
 
Linn Energy, LLC, 7.750%, due 02/01/2021 (2)
  
        2,000,000
    
                      2,050,000
             
                      9,481,250
 
Crude/Refined Products Pipelines and Storage - 0.4% (1)
          
 
United States - 0.4% (1)
          
 
Genesis Energy, L.P., 7.875%, due 12/15/2018 (2)
  
        1,000,000
    
                         967,500
               
 
Natural Gas Gathering/Processing - 1.3% (1)
          
 
United States - 1.3% (1)
          
 
Regency Energy Partners, L.P., 9.375%, due 06/01/2016
  
        2,000,000
    
                      2,200,000
 
Targa Resources Partners, L.P., 8.250%, due 07/01/2016
  
           200,000
    
                         210,000
 
Targa Resources Partners, L.P., 7.875%, due 10/15/2018
  
           250,000
    
                         263,750
 
Targa Resources Partners, L.P., 6.875%, due 02/01/2021 (2)
  
           600,000
    
                         595,500
             
                      3,269,250
               
 
Total Senior Notes (Cost $13,269,812)
       $
               13,718,000
               
 
Options - 1.1% (1)
          
 
United States - 1.1% (1)
  
Contracts
      
 
SPDR S&P 500 ETF Trust Put Option
          
   
 Expiration: October 2011, Exercise Price: $116.00
  
               8,600
   $
                 2,726,200
               
 
Total Options (Cost $4,661,393)
       $
                  2,726,200
               
 
Short-Term Investments - Investment Companies - 10.9% (1)
  
Shares
      
 
United States - 10.9% (1)
          
 
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.00% (3)
  
        5,495,939
   $
                 5,495,939
 
Fidelity Government Portfolio Fund - Institutional Class, 0.01% (3)
  
        5,495,939
    
                      5,495,939
 
First American Treasury Obligations Fund - Class A, 0.00% (3)
  
        5,495,939
    
                      5,495,939
 
First American Treasury Obligations Fund - Class Y, 0.00% (3)
  
        5,495,939
    
                      5,495,939
 
First American Treasury Obligations Fund - Class Z, 0.00% (3)
  
        5,495,939
    
                      5,495,939
 
Total Short-Term Investments (Cost $27,479,695)
       $
               27,479,695
               
               
 
Total Investments - 136.0% (1) (Cost $322,420,236)
       $
      342,376,345
 
Liabilities in Excess of Other Assets - (36.0)% (1)
        
                   (90,711,250)
 
Net Assets Applicable to Common Stockholders - 100.0% (1)
       $
       251,665,095
               
 
 
 
 
 
 
SCHEDULE OF SECURITIES SOLD SHORT (Unaudited)
          
 
Exchange Traded Note - (9.2)%(1)
          
 
United States - (9.2)% (1)
  
Shares
      
 
J.P. Morgan Alerian MLP Index ETN
  
           650,000
   $
               23,068,500
               
 
Total Exchange Traded Notes (Proceeds $22,917,024)
        $
              23,068,500
               
 
Options - (0.6)%(1)
          
 
United States - (0.6)% (1)
  
Contracts
      
 
SPDR S&P 500 ETF Trust Call Option
          
   
 Expiration: October 2011, Exercise Price: $109.00
  
               8,600
   $
                  1,513,600
 
Enterprise Products Partners, L.P. Call Option
          
   
 Expiration: September 2011, Exercise Price: $45.00
  
               1,000
    
                             5,000
 
Kinder Morgan Energy Partners, L.P. Call Option
          
   
 Expiration: September 2011, Exercise Price: $72.50
  
                  500
    
                           23,000
 
Magellan Midstream Partners, L.P. Call Option
          
   
 Expiration: September 2011, Exercise Price: $60.00
  
                  500
    
                           40,000
               
 
Total Options (Proceeds $2,993,464)
       $
                 1,581,600
               
 
Total Securities Sold Short - (9.8)%(1) (Proceeds $25,910,488)
       $
         24,650,100
               
 
(1)
Calculated as a percentage of net assets applicable to common stockholders.
          
 
(2)
Restricted securities represent a total fair value of $8,531,750, which represents 3.4% of net assets.
 
(3)
Rate reported is the current yield as of August 31, 2011.
          
               

Tax Basis

The cost basis of investments for federal income tax purposes at August 31, 2011 was as follows:
 
 Cost of investments      $ 319,769,845  
 Gross unrealized appreciation    $ 36,197,791  
 Gross unrealized depreciation          (13,591,292)  
 Net unrealized appreciation    $ 22,606,499  
 
Fair Value Measurements

Various inputs that are used in determining the fair value of the Fund’s investments are summarized in the three broad levels listed below:

·  
Level 1 — quoted prices in active markets for identical securities
·  
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
·  
Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
 
 
 
 
 
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

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, 2011
    
(Level 1)
    
(Level 2)
    
(Level 3)
Assets
Equity Securities
                      
Master Limited
Partnerships and
Related Companies (a)
   $
290,454,450
   $
   290,454,450
   $
                      -
   $
                                 -
Preferred Stock (a)
  
 7,998,000
    
 7,998,000
    
                       -
    
                   -
Total Equity Securities
  
    298,452,450
    
    298,452,450
    
                      -
    
                   -
Notes
                      
Senior Notes (a)
  
      13,718,000
    
                       -
    
     13,718,000
    
                   -
Total Notes
  
      13,718,000
    
                       -
    
     13,718,000
    
                   -
Derivatives
                      
Options
  
           2,726,200
    
           2,726,200
    
                       -
    
                   -
Total Derivatives
  
           2,726,200
    
           2,726,200
    
                       -
    
                   -
Other
                      
Short-Term
  Investments
  
         27,479,695
    
         27,479,695
    
                      -
    
                   -
Total Other
  
         27,479,695
    
         27,479,695
    
                      -
    
                   -
Total Assets
 $
  342,376,345
   $
  328,658,345
   $
      13,718,000
   $
                             -
 
Liabilities
Note
                      
        Exchange Traded
              Note
 $
    23,068,500
   $
    23,068,500
   $
                       -
   $
                             -
Total Note
  
    23,068,500
    
   23,068,500
    
                      -
    
                              -
Derivatives
                      
        Options
  
      1,581,600
    
      1,581,600
    
                       -
    
                               -
Total Derivatives
  
      1,581,600
    
      1,581,600
    
                       -
    
                               -
Total Liabilities
 $
    24,650,100
   $
    24,650,100
   $
                       -
   $
                              -
Total
 $
  317,726,245
   $
 304,008,245
   $
     13,718,000
   $
                               -

(a)  
All other industry classifications are identified in the Schedule of Investments.  The Fund did not hold Level 3 investments at any time during the fiscal quarter ended August 31, 2011.
 
 
There were no transfers between Levels during the period.
 
 
 
 
 

Derivative Financial Instruments

The Fund provides disclosure regarding derivatives and hedging activity to allow investors to understand how and why the Fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect the Fund’s results of operations and financial position.

The Fund occasionally purchases and sells (“writes”) put and call equity options as a source of potential protection against a broad market decline. A purchaser of a put option has the right, but not the obligation, to sell the underlying instrument at an agreed upon price (“strike price”) to the option seller. A purchaser of a call option has the right, but not the obligation, to purchase the underlying instrument at the strike price from the option seller. Options are settled for cash.

Purchased Options — Premiums paid by the Fund for purchased options would be included in the Statement of Assets and Liabilities as an investment. The option is adjusted daily to reflect the current market value of the option and any change in fair value is recorded as unrealized appreciation or depreciation of investments. If the option is allowed to expire, the Fund will lose the entire premium paid and record a realized loss for the premium amount. Premiums paid for purchased options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain/loss or cost basis of the security.

Written Options — Premiums received by the Fund for written options would be included in the Statement of Assets and Liabilities. The amount of the liability is adjusted daily to reflect the current market value of the written option and any change in fair value is recorded as unrealized appreciation or depreciation of investments. Premiums received from written options that expire are treated as realized gains. The Fund records a realized gain or loss on written options based on whether the cost of the closing transaction exceeds the premium received. If a call option is exercised by the option buyer, the premium received by the Fund is added to the proceeds from the sale of the underlying security to the option buyer and compared to the cost of the closing transaction to determine whether there has been a realized gain or loss. If a put option is exercised by an option buyer, the premium received by the option seller reduces the cost basis of the purchased security.

Written uncovered call options subject the Fund to unlimited risk of loss. Written covered call options limit the upside potential of a security above the strike price. Put options written subject the Fund to risk of loss if the value of the security declines below the exercise price minus the put premium.

The Fund is not subject to credit risk on written options as the counterparty has already performed its obligation by paying the premium at the inception of the contract.

During the period ended August 31, 2011, the Fund purchased 4,300 J.P. Morgan Alerian MLP Index ETN equity option put contracts with an exercise price of $37.00 and sold all of these option contracts for a total realized gain of $378,502.  The Fund also purchased 30,900 S&P Depository Receipts (“SPDR”) Trust Series 1 equity option put contracts with various exercise prices and sold 17,000 of these option contracts for a total realized loss of $1,033,965.  5,300 of these contracts expired for a total realized loss of $397,087.  The Fund also purchased 6,900 iPath S&P 500 option call contracts with an exercise price of $25.00 and sold all of these contracts for a total realized loss of $151,077.  The total realized loss of $1,203,627 would be included in net realized gain (loss) on investments in the Statement of Operations.
 
 
 
 
 

On August 31, 2011 the Fund held 8,600 SPDR Trust Series 1 equity option put contracts at fair value of $2,726,200 with an exercise price of $116.00.  These equity option put contracts would be included in investments at fair value in the Statement of Assets and Liabilities. The unrealized depreciation of $1,935,193 on these equity option put contracts would be included in the net change in unrealized depreciation of investments in the Statement of Operations.

During the period ended August 31, 2011, the Fund wrote 19,400 SPDR Trust Series 1 short option put contracts with various exercise prices and covered 8,500 of these option contracts for a total realized gain of $645,735.  2,300 of these contracts expired for a total realized gain of $25,266.  The Fund also wrote 2,500 Kinder Morgan Energy Partners, L.P. short option call contracts with an exercise price of $72.50 and covered 2,000 of these option contracts for a total realized loss of $55,154.  The Fund also wrote 2,500 Magellan Midstream Partners, L.P. short option call contracts with an exercise price of $60.00 and covered 2,000 of these option contracts for a total realized loss of $130,554.  The total realized gain of $485,293 would be included in the net realized gain (loss) on investments in the Statement of Operations.

On August 31, 2011 the Fund held 8,600 SPDR S&P 500 ETF Trust short option put contracts at fair value of $1,513,600 and exercise price of $109.00, 1,000 Enterprise Products Partners, L.P. short option call contracts at fair value of $5,000 and exercise price of $45.00, 500 Kinder Morgan Energy Partners, L.P. short option call contracts at fair value of $23,000 and exercise price of $72.50, and 500 Magellan Midstream Partners, L.P. short option call contracts at fair value of $40,000 and exercise price of $60.00.  These equity option contracts would be included in securities sold short at fair value in the Statement of Assets and Liabilities. The unrealized appreciation of $1,411,864 on these short equity option put contracts would be included in the net change in unrealized depreciation of 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  10/21/11                                                                                            



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  10/21/11                                                                                            

 
By (Signature and Title) /s/ John H. Alban                                          
 John H. Alban, Treasurer

Date  10/21/11