nvcsrs
As filed
with the Securities and Exchange Commission on August 5, 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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
Registrants telephone number, including area code
Date of fiscal year end: November 30
Date of reporting period: May 31, 2011
Item 1. Report
to Stockholders.
The
Cushing®
MLP Total Return Fund
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Semi-Annual Report
May 31,
2011
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Investment Adviser
Cushing®
MLP Asset Management, LP
8117 Preston Road
Suite 440
Dallas, TX 75225
(214)
692-6334
www.srvfund.com
www.swankcapital.com
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Table of
Contents
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1
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3
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4
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5
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8
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9
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10
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11
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12
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14
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25
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(This page intentionally left blank)
The
Cushing®
MLP Total Return Fund
Dear Shareholder:
The
Cushing®
MLP Total Return Fund (NYSE: SRV) posted positive performance
for the six month period ending May 31, 2011. In the first
six months of fiscal 2011, SRV was +14.3% on a total return
basis and +6.8% on a NAV basis, versus 12.6% for the S&P
500 Index Total Return (S&P 500) and a 7.6%
return for the
Cushing®
30 MLP Index Total Return (MLPXTR).
Although the Fund benefited from a favorable economic
environment during the early part of the period, macro fears
returned to the forefront during the last couple of months of
the period. With the ongoing unrest in the Middle East/North
Africa, the Japan earthquakes/tsunami, continued European
sovereign debt concerns, uncomfortably high crude oil and
gasoline prices, inflation fears percolating, and a discouraging
lack of leadership by our elected officials to handle a looming
debt crisis, resilience is a word that first comes
to mind when thinking about equity and credit performance this
past quarter. While significant macro fears understandably drove
MLP sector correlations to the broader market (S&P
500) higher relative to the fourth quarter of 2010, we
believe MLP characteristics still provide good diversification
opportunities.
Continuing with the topic of risk, there is obviously no
shortage of global macro concerns. Of course, given the events
in the Middle East, North Africa, and Japan, there is certainly
a stronger case to be made for the continued development of safe
and reliable domestic fuel and related infrastructure. Of
particular relevance to higher yielding securities, we continue
to watch interest rates carefully. We take particular notice
when the dollar continues to trade lower and lower as gold moves
higher and higher, when the CEO of Wal-mart says inflation is
right around the corner, when PIMCO shorts Treasuries, and when
Standard and Poors revises its outlook on US sovereign
credit to negative. Further, the end of QE2 is
nearing, and at the very least, we believe this means additional
market volatility for bonds and stocks. Bottom line: ultimately,
we do not know what the future will bring (though we have a
feeling), and we continue to analyze and evaluate the impact of
rising interest rates on the Funds portfolio and leverage
funding costs.
1
Turning to the business aspect of the space, fundamentals for
the MLP group remain very strong, save for pockets of softness
such as natural gas storage and propane distribution and
headwinds related to long haul natural gas pipelines. New shale
plays importantly, no longer just dry gas, but crude
oil and liquids rich areas are driving
infrastructure opportunities. The dramatic shift in industry
focus to oil shale development is driven by horizontal drilling
technology and the extremely wide crude oil to natural gas price
ratio. We believe the opportunity set for growth for MLPs is as
abundant as we can remember, and MLPs are taking advantage of
their low costs of capital.
We look forward to continuing to pursue the Funds
investment objective to obtain a high after-tax total return
from a combination of capital appreciation and current income
from investments in MLPs. We invite you to visit our website at
www.srvfund.com for the latest updates on the Fund and its
adviser.
Jerry V. Swank
Chief Executive Officer
2
Key Financial Data
(Supplemental Unaudited
Information)
The Information presented below
regarding Distributable Cash Flow is supplemental non-GAAP
financial information, which we believe is meaningful to
understanding our operating performance. Supplemental non-GAAP
measures are not, and should not be construed as, a substitute
for amounts computed in accordance with GAAP and should be read
in conjunction with our full financial statements, including the
notes thereto.
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Period from
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December 1, 2010
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Fiscal
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Fiscal
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Fiscal
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through
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Year Ended
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Year Ended
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Year Ended
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May 31, 2011
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11/30/10
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11/30/09
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11/30/08
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FINANCIAL DATA
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Total income from investments
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Distributions received from MLPs
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$
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12,346,279
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$
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16,566,758
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$
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8,889,886
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$
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12,277,393
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Dividends from common stock
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4,503,795
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4,483,307
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1,779,867
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178,095
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Interest income & other
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625,626
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1,320,531
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518,446
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316,870
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Total income from investments
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$
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17,475,700
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$
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22,370,596
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$
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11,188,199
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$
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12,772,358
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Advisory fee and operating expenses
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Advisory fees, less reimbursement by Adviser
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$
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2,288,047
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$
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2,467,110
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$
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557,839
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$
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1,615,353
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Operating
expenses(a)
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779,735
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948,767
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1,072,460
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750,292
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Leverage costs
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358,968
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465,469
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176,619
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924,418
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Other
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89,854
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257,274
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100,347
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108,279
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Total advisory fees and operating expenses
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$
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3,516,604
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$
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4,138,620
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$
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1,907,265
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$
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3,398,342
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Distributable Cash Flow
(DCF)(b)
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$
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13,959,096
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$
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18,231,976
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$
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9,280,934
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$
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9,374,016
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Distributions paid on common stock
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$
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13,251,562
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$
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18,332,242
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$
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9,505,720
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$
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9,505,720
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Distributions paid on common stock per share
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$
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0.45
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$
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0.90
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$
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1.01
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$
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1.26
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Distribution Coverage Ratio
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Before advisory fee and operating expenses
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1.3
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x
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1.2
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x
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1.2
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x
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1.3
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x
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After advisory fee and operating expenses
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1.1
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x
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1.0
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x
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1.0
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x
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1.0
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x
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OTHER FUND DATA (end of period)
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Total Assets, end of period
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416,707,466
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293,125,989
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98,339,592
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61,974,946
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Unrealized appreciation (depreciation), net of income taxes
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56,638,706
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67,183,214
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20,880,742
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(58,032,746
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)
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Short-term borrowings
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105,800,000
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69,800,000
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29,900,000
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14,500,000
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Short-term borrowings as a percent of total assets
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25
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%
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24
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%
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30
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%
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23
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%
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Net Assets, end of period
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282,471,907
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208,002,375
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64,511,402
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37,779,243
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Net Asset Value per common share
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$
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8.58
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$
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8.03
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$
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5.74
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$
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3.98
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Market Value per share
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$
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10.54
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$
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9.42
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$
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7.37
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$
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10.36
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Market Capitalization
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$
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347,041,178
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$
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244,113,742
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$
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82,894,797
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$
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98,247,516
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Shares Outstanding
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32,926,108
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25,914,410
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11,247,598
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9,483,351
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(a) |
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Excludes expenses related to
capital raising.
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(b) |
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Net Investment Income
on the Statement of Operations is adjusted as follows to
reconcile to Distributable Cash Flow: increased by the return of
capital on MLP distributions and offering expenses.
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3
The
Cushing®
MLP Total Return Fund
May 31, 2011
(Unaudited)
(Expressed as a Percentage of Total Investments)
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(1)
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Master Limited Partnerships and
Related Companies
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(2)
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Senior Notes
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(3)
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Common Stock
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4
The
Cushing®
MLP Total Return Fund
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COMMON STOCK
7.7%(1)
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Shares
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Fair Value
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Shipping
2.9%(1)
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Republic of the Marshall Islands
2.9%(1)
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Seaspan Corp.
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300,000
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$
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8,286,000
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Utilities
4.8%(1)
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United States
4.8%(1)
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Dominion Resources, Inc.
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200,000
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9,544,000
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Integrys Energy Group, Inc.
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75,000
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3,925,500
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13,469,500
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Total Common Stock (Cost $21,722,670)
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$
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21,755,500
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MASTER LIMITED PARTNERSHIPS AND RELATED
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COMPANIES
121.7%(1)
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Coal
7.2%(1)
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United States
7.2%(1)
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Oxford Resource Partners, L.P.
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275,000
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6,811,750
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Penn Virginia Resources Partners, L.P.
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525,000
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13,581,750
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20,393,500
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Crude/Natural Gas Production
19.6%(1)
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United States
19.6%(1)
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Breitburn Energy Partners, L.P.
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475,000
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9,827,750
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EV Energy Partners, L.P.
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335,000
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18,542,250
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Legacy Reserves, L.P.
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275,000
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8,767,000
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Linn Energy, LLC
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300,000
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11,658,000
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Vanguard Natural Resources, LLC
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75,000
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2,223,750
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VOC Energy Trust
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200,000
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4,328,000
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55,346,750
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Crude/Refined Products Pipelines and Storage
28.9%(1)
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United States
28.9%(1)
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Buckeye Partners, L.P.
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100,000
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6,345,000
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Enbridge Energy Partners, L.P.
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650,000
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19,961,500
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Genesis Energy, L.P.
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500,000
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13,715,000
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Magellan Midstream Partners, L.P.
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200,000
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11,812,000
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Plains All American Pipeline, L.P.
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400,000
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24,896,000
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TransMontaigne Partners, L.P.
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140,000
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4,859,400
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81,588,900
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Fertilizers
1.8%(1)
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United States
1.8%(1)
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CVR Partners, L.P.
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250,000
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4,990,000
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Natural Gas/Natural Gas Liquid Pipelines and
Storage
30.3%(1)
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United States
30.3%(1)
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Boardwalk Pipeline Partners, LP
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600,000
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17,460,000
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See Accompanying Notes to the
Financial Statements.
5
The
Cushing®
MLP Total Return Fund
|
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Schedule of
Investments (Unaudited) |
May 31, 2011 (Continued) |
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MASTER LIMITED PARTNERSHIPS AND RELATED
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COMPANIES (Continued)
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Shares
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Fair Value
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Natural Gas/Natural Gas Liquid
Pipelines and Storage (Continued)
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United States (Continued)
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Cheniere Energy Partners, L.P.
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275,000
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$
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4,958,250
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El Paso Pipeline Partners, L.P.
|
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100,000
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|
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3,437,000
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Energy Transfer Partners, L.P.
|
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400,000
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|
|
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19,004,000
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Enterprise Products Partners, L.P.
|
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250,000
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|
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10,410,000
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Niska Gas Storage Partners, L.P.
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150,000
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2,911,500
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ONEOK Partners, L.P.
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155,700
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|
|
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12,976,038
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Spectra Energy Partners, L.P.
|
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120,000
|
|
|
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3,840,000
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Williams Partners, L.P.
|
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200,000
|
|
|
|
10,584,000
|
|
|
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|
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|
|
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|
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85,580,788
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|
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Natural Gas Gathering/Processing
21.2%(1)
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United States
21.2%(1)
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Crosstex Energy, L.P.
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900,000
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|
|
|
16,497,000
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DCP Midstream Partners, L.P.
|
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250,000
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|
|
|
10,132,500
|
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MarkWest Energy Partners, L.P.
|
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|
200,000
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|
|
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9,504,000
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Regency Energy Partners, L.P.
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400,000
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|
|
|
10,076,000
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Targa Resources Partners, L.P.
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400,000
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|
|
|
13,824,000
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|
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60,033,500
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Propane
5.6%(1)
|
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United States
5.6%(1)
|
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Inergy, L.P.
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325,000
|
|
|
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12,054,250
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NGL Energy Partners, L.P.
|
|
|
175,000
|
|
|
|
3,664,500
|
|
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|
|
|
|
|
|
|
|
15,718,750
|
|
|
|
|
|
|
|
|
|
|
Shipping
7.1%(1)
|
|
|
|
|
|
|
|
|
Republic of the Marshall Islands
7.1%(1)
|
|
|
|
|
|
|
|
|
Capital Product Partners, L.P.
|
|
|
250,000
|
|
|
|
2,322,500
|
|
Navios Maritime Partners, L.P.
|
|
|
625,000
|
|
|
|
11,937,500
|
|
Teekay Offshore Partners, L.P.
|
|
|
200,000
|
|
|
|
5,810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,070,000
|
|
|
|
|
|
|
|
|
|
|
Total Master Limited Partnerships and Related Companies
(Cost $288,074,016)
|
|
|
|
|
|
$
|
343,722,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
SENIOR NOTES
3.7%(1)
|
|
Amount
|
|
|
|
|
|
Crude/Natural Gas Production
1.7%(1)
|
|
|
|
|
|
|
|
|
United States
1.7%(1)
|
|
|
|
|
|
|
|
|
Breitburn Energy Partners, L.P., 8.625%, 10/15/2020
|
|
$
|
2,500,000
|
|
|
|
2,690,625
|
|
Linn Energy, LLC, 7.750%,
02/01/2021(2)
|
|
|
2,000,000
|
|
|
|
2,120,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,810,625
|
|
|
|
|
|
|
|
|
|
|
Crude/Refined Products Pipelines and Storage
0.3%(1)
|
|
|
|
|
|
|
|
|
United States
0.3%(1)
|
|
|
|
|
|
|
|
|
Genesis Energy, L.P., 7.875%,
12/15/2018(2)
|
|
|
1,000,000
|
|
|
|
1,002,500
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to the
Financial Statements.
6
The
Cushing®
MLP Total Return Fund
|
|
Schedule of
Investments (Unaudited) |
May 31, 2011 (Continued) |
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
SENIOR NOTES (Continued)
|
|
Amount
|
|
|
Fair Value
|
|
|
|
|
Natural Gas/Natural Gas Liquids Pipelines and
Storage 0.5%(1)
|
|
|
|
|
|
|
|
|
United States
0.5%(1)
|
|
|
|
|
|
|
|
|
Eagle Rock Energy Partners, L.P., 8.375%, due
06/01/2019(2)
|
|
$
|
1,000,000
|
|
|
$
|
1,003,750
|
|
El Paso Corp., 7.420%, due 02/15/2037
|
|
|
375,000
|
|
|
|
434,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,438,680
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Gathering/Processing
1.2%(1)
|
|
|
|
|
|
|
|
|
United States
1.2%(1)
|
|
|
|
|
|
|
|
|
Regency Energy Partners, L.P., 9.375%, due 06/01/2016
|
|
|
2,000,000
|
|
|
|
2,270,000
|
|
Targa Resources Partners, L.P., 8.250%, due 07/01/2016
|
|
|
200,000
|
|
|
|
214,000
|
|
Targa Resources Partners, L.P., 7.875%, due
10/15/2018(2)
|
|
|
250,000
|
|
|
|
266,875
|
|
Targa Resources Partners, L.P., 6.875%, due
02/01/2021(2)
|
|
|
600,000
|
|
|
|
599,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,350,125
|
|
|
|
|
|
|
|
|
|
|
Total Senior Notes (Cost $9,531,414)
|
|
|
|
|
|
|
10,601,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHORT-TERM INVESTMENTS INVESTMENT
COMPANIES
1.1%(1)
|
|
Shares
|
|
|
|
|
|
United States
1.1%(1)
|
|
|
|
|
|
|
|
|
AIM Short-Term Treasury Portfolio Fund Institutional
Class, 0.02%(3)
|
|
|
604,640
|
|
|
|
604,640
|
|
Fidelity Government Portfolio Fund Institutional
Class, 0.01%(3)
|
|
|
604,640
|
|
|
|
604,640
|
|
First American Treasury Obligations Fund
Class A,
0.00%(3)
|
|
|
604,640
|
|
|
|
604,640
|
|
First American Treasury Obligations Fund
Class Y,
0.00%(3)
|
|
|
604,640
|
|
|
|
604,640
|
|
First American Treasury Obligations Fund
Class Z,
0.00%(3)
|
|
|
604,640
|
|
|
|
604,640
|
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investments (Cost $3,023,200)
|
|
|
|
|
|
|
3,023,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS
134.2%(1)
(COST $322,351,301)
|
|
|
|
|
|
|
379,102,818
|
|
Liabilities in Excess of Other Assets
(34.2)%(1)
|
|
|
|
|
|
|
(96,630,911
|
)
|
|
|
|
|
|
|
|
|
|
NET ASSETS APPLICABLE TO COMMON
STOCKHOLDERS 100.0%(1)
|
|
|
|
|
|
$
|
282,471,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES SOLD SHORT (Unaudited)
|
|
|
|
|
|
|
|
|
Exchange Traded Note
(6.5)%(1)
|
|
|
|
|
|
|
|
|
J.P. Morgan Alerian MLP Index ETN
|
|
|
500,000
|
|
|
$
|
18,370,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL SECURITIES SOLD SHORT
(6.5)%(1)
(PROCEEDS $18,257,189)
|
|
|
|
|
|
$
|
18,370,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Calculated as a percentage of net
assets applicable to common stockholders.
|
|
(2) |
|
Restricted securities represent a
total fair value of $4,992,375, which represents 1.8% of net
assets.
|
|
(3) |
|
Rate reported is the current yield
as of May 31, 2011.
|
See Accompanying Notes to the
Financial Statements.
7
The
Cushing®
MLP Total Return Fund
May 31, 2011
|
|
|
|
|
Assets
|
|
|
|
|
Investments, at fair value (cost $322,351,301)
|
|
$
|
379,102,818
|
|
Receivable for investments sold
|
|
|
35,238,277
|
|
Cash and cash equivalents
|
|
|
1,838,234
|
|
Distributions and dividends receivable
|
|
|
271,125
|
|
Interest receivable
|
|
|
228,454
|
|
Prepaid expenses and other assets
|
|
|
28,558
|
|
|
|
|
|
|
Total assets
|
|
|
416,707,466
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Securities sold short, at fair value (proceeds $18,257,189)
|
|
|
18,370,000
|
|
Payable to Adviser
|
|
|
455,808
|
|
Payable for investments purchased
|
|
|
1,914,336
|
|
Distributions payable to common stockholders
|
|
|
7,408,374
|
|
Short-term borrowings
|
|
|
105,800,000
|
|
Accrued interest expense
|
|
|
13,821
|
|
Accrued offering expense
|
|
|
76,680
|
|
Accrued expenses and other liabilities
|
|
|
196,540
|
|
|
|
|
|
|
Total liabilities
|
|
|
134,235,559
|
|
|
|
|
|
|
Net assets applicable to common stockholders
|
|
$
|
282,471,907
|
|
|
|
|
|
|
Net Assets Applicable to Common Stockholders Consist of
|
|
|
|
|
Capital stock, $0.001 par value; 32,926,108 shares
issued and outstanding (unlimited shares authorized)
|
|
$
|
32,926
|
|
Additional paid-in capital
|
|
|
312,098,660
|
|
Undistributed net investment income, net of income taxes
|
|
|
3,421,224
|
|
Accumulated realized loss, net of income taxes
|
|
|
(89,719,609
|
)
|
Net unrealized gain on investments, net of income taxes
|
|
|
56,638,706
|
|
|
|
|
|
|
Net assets applicable to common stockholders
|
|
$
|
282,471,907
|
|
|
|
|
|
|
Net Asset Value per common share outstanding (net assets
applicable to common shares divided by common shares outstanding)
|
|
$
|
8.58
|
|
|
|
|
|
|
See Accompanying Notes to the
Financial Statements.
8
The
Cushing®
MLP Total Return Fund
Period From December 1, 2010
Through May 31, 2011
|
|
|
|
|
Investment Income
|
|
|
|
|
Distributions received from master limited partnerships
|
|
$
|
12,346,279
|
|
Less: return of capital on distributions
|
|
|
(11,166,507
|
)
|
|
|
|
|
|
Distribution income from master limited partnerships
|
|
|
1,179,772
|
|
Dividends from common stock
(net of foreign taxes withheld of $36,325)
|
|
|
4,503,795
|
|
Interest income
|
|
|
625,626
|
|
|
|
|
|
|
Total Investment Income
|
|
|
6,309,193
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
Advisory fees
|
|
|
2,288,047
|
|
Stock loan fees
|
|
|
365,628
|
|
Professional fees
|
|
|
111,956
|
|
Administrator fees
|
|
|
84,352
|
|
Trustees fees
|
|
|
54,740
|
|
Reports to stockholders
|
|
|
53,999
|
|
Registration fees
|
|
|
48,954
|
|
Fund accounting fees
|
|
|
28,766
|
|
Custodian fees and expenses
|
|
|
17,508
|
|
Transfer agent fees
|
|
|
13,832
|
|
Other expenses
|
|
|
89,854
|
|
|
|
|
|
|
Total Expenses before Interest Expense
|
|
|
3,157,636
|
|
|
|
|
|
|
Interest expense
|
|
|
358,968
|
|
|
|
|
|
|
Net Expenses
|
|
|
3,516,604
|
|
|
|
|
|
|
Net Investment Income
|
|
|
2,792,589
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) on Investments
|
|
|
|
|
Net realized gain on investments
|
|
|
28,149,450
|
|
|
|
|
|
|
Net change in unrealized depreciation of investments
|
|
|
(10,544,508
|
)
|
|
|
|
|
|
Net Realized and Unrealized Gain on Investments
|
|
|
17,604,942
|
|
|
|
|
|
|
Increase in Net Assets Applicable to Common Stockholders
Resulting from Operations
|
|
$
|
20,397,531
|
|
|
|
|
|
|
See Accompanying Notes to the
Financial Statements.
9
The
Cushing®
MLP Total Return Fund
|
|
|
|
|
|
|
|
|
|
|
Period From
|
|
|
Fiscal
|
|
|
|
December 1, 2010
|
|
|
Year Ended
|
|
|
|
Through
|
|
|
November 30,
|
|
|
|
May 31, 2011
|
|
|
2010
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
2,792,589
|
|
|
$
|
2,296,691
|
|
Net realized gain on investments
|
|
|
28,149,450
|
|
|
|
1,539,215
|
|
Net change in unrealized appreciation (depreciation) of
investments
|
|
|
(10,544,508
|
)
|
|
|
46,302,472
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets applicable to common stockholders
resulting from operations
|
|
|
20,397,531
|
|
|
|
50,138,378
|
|
|
|
|
|
|
|
|
|
|
Dividends and Distributions to Common Stockholders
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
(13,251,562
|
)
|
|
|
(18,332,242
|
)
|
|
|
|
|
|
|
|
|
|
Total dividends and distributions to common stockholders
|
|
|
(13,251,562
|
)
|
|
|
(18,332,242
|
)
|
|
|
|
|
|
|
|
|
|
Capital Share Transactions
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of 6,900,000 and 14,475,000 common shares from
offerings, net of offering
costs(1)
of $0 and $615,000, respectively
|
|
|
66,240,000
|
|
|
|
110,189,000
|
|
Issuance of 111,698 and 191,812 common shares from reinvestment
of distributions to stockholders, respectively
|
|
|
1,083,563
|
|
|
|
1,495,837
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets applicable to common stockholders
from capital share transactions
|
|
|
67,323,563
|
|
|
|
111,684,837
|
|
|
|
|
|
|
|
|
|
|
Total increase in net assets applicable to common stockholders
|
|
|
74,469,532
|
|
|
|
143,490,973
|
|
Net Assets
|
|
|
|
|
|
|
|
|
Beginning of fiscal year
|
|
|
208,002,375
|
|
|
|
64,511,402
|
|
|
|
|
|
|
|
|
|
|
End of fiscal year
|
|
$
|
282,471,907
|
|
|
$
|
208,002,375
|
|
|
|
|
|
|
|
|
|
|
Undistributed net investment income at the end of the fiscal year
|
|
$
|
3,421,224
|
|
|
$
|
628,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 2C in the Notes to
Financial Statements.
|
See Accompanying Notes to the
Financial Statements.
10
The
Cushing®
MLP Total Return Fund
Period From December 1, 2010
through May 31, 2011
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
Increase in Net Assets Applicable to Common Stockholders
|
|
|
|
|
Resulting from Operations
|
|
$
|
20,397,531
|
|
Adjustments to reconcile increase in the net assets applicable
to common stockholders to net cash used in operating activities
|
|
|
|
|
Net change in unrealized depreciation of investments
|
|
|
10,544,508
|
|
Purchases of investments
|
|
|
(484,146,003
|
)
|
Proceeds from sales of investments
|
|
|
401,476,906
|
|
Proceeds from investments sold short
|
|
|
106,813,290
|
|
Purchases to cover investments sold short
|
|
|
(89,980,449
|
)
|
Return of capital on distributions
|
|
|
11,166,507
|
|
Net realized gains on sales of investments
|
|
|
(28,149,450
|
)
|
Net purchases of short-term investments
|
|
|
(2,839,570
|
)
|
Net accretion/amortization of senior notes
premiums/discounts
|
|
|
(42,943
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
Receivable for investments sold
|
|
|
(29,966,081
|
)
|
Interest receivable
|
|
|
174,253
|
|
Distributions and dividends receivable
|
|
|
726,770
|
|
Prepaid and other assets
|
|
|
24,360
|
|
Payable to Adviser
|
|
|
145,500
|
|
Payable for investments purchased
|
|
|
(6,471,394
|
)
|
Accrued interest expense
|
|
|
(426,752
|
)
|
Accrued offering expense
|
|
|
(70,925
|
)
|
Accrued expenses and other liabilities
|
|
|
(12,116
|
)
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(90,636,058
|
)
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
Proceeds from borrowing facility
|
|
|
149,000,000
|
|
Repayment of borrowing facility
|
|
|
(113,000,000
|
)
|
Common Stock Issuance, net of underwriting and other direct costs
|
|
|
6,900
|
|
Additional paid-in capital from Common Stock Issuance
|
|
|
66,233,100
|
|
Dividends paid to common stockholders
|
|
|
(10,590,367
|
)
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
91,649,633
|
|
|
|
|
|
|
Increase in Cash and Cash Equivalents
|
|
|
1,013,575
|
|
Cash and Cash Equivalents:
|
|
|
|
|
Beginning of fiscal year
|
|
|
824,659
|
|
|
|
|
|
|
End of fiscal year
|
|
$
|
1,838,234
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow and Non-Cash Information
|
|
|
|
|
Interest Paid
|
|
$
|
743,336
|
|
Taxes Paid
|
|
$
|
47,219
|
|
Additional paid-in capital from Dividend Reinvestment
|
|
$
|
1,083,563
|
|
See Accompanying Notes to the
Financial Statements.
11
The
Cushing®
MLP Total Return Fund
|
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Period From
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Period from
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December 1, 2010
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Fiscal
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Fiscal
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Fiscal
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August 27,
2007(1)
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through
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Year Ended
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Year Ended
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Year Ended
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through
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May 31,
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November 30,
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November 30,
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November 30,
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November 30,
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2011
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2010
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2009
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2008
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2007
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(Unaudited)
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Per Common Share
Data(2)
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Net Asset Value, beginning of period
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$
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8.03
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$
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5.74
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$
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3.98
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$
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18.17
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$
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Public offering price
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20.00
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Underwriting discounts and offering costs on issuance of common
shares
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(0.05
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)
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(0.01
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)
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(0.94
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)
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Income from Investment Operations:
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Net investment income
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0.53
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1.07
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1.09
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1.15
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0.30
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Net realized and unrealized gain (loss) on investments
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0.47
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2.17
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1.69
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(14.05
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)
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(0.89
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)
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Total increase (decrease) from investment operations
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1.00
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3.24
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2.78
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(12.90
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)
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(0.59
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Less Distributions to Common Stockholders:
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Net investment income
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Return of capital
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(0.45
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)
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(0.90
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)
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(1.01
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)
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(1.29
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)
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(0.30
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)
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Total distributions to common stockholders
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(0.45
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)
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(0.90
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)
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(1.01
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)
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(1.29
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)
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(0.30
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)
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Net Asset Value, end of period
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$
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8.58
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$
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8.03
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$
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5.74
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$
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3.98
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$
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18.17
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Per common share market value, end of period
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$
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10.54
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$
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9.42
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$
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7.37
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$
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10.36
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$
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16.71
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Total Investment Return Based on Market Value
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17.10
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%
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42.26
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%
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(16.89
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)%
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(31.18
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)%
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(14.84
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)%(3)
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See Accompanying Notes to the
Financial Statements.
12
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Period From
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Period from
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December 1, 2010
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Fiscal
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Fiscal
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Fiscal
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August 27,
2007(1)
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through
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Year Ended
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Year Ended
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Year Ended
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through
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May 31,
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November 30,
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November 30,
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November 30,
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November 30,
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2011
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2010
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2009
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2008
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2007
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(Unaudited)
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Supplemental Data and Ratios
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Net assets applicable to common stockholders, end of period
(000s)
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$
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282,472
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$
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208,002
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$
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64,511
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$
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37,779
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$
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159,103
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Ratio of expenses (including current and deferred income tax
benefit/expense) to average net assets before waiver
(4)(5)
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2.75
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%
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3.08
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%
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4.32
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%
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5.18
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%
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(4.53
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)%
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Ratio of expenses (including current and deferred income tax
benefit/expense) to average net assets after waiver
(4)(5)
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2.75
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%
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3.05
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%
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3.74
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%
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4.75
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%
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(5.18
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)%
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Ratio of expenses (excluding current and deferred income tax
benefit/expense) to average net assets before waiver
(4)(5)(6)
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2.75
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%
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3.08
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%
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4.32
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%
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2.99
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%
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2.69
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%
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Ratio of expenses (excluding current and deferred income tax
benefit/expense) to average net assets after
waiver(4)(5)(6)
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2.75
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%
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3.05
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%
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3.74
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%
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2.56
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%
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2.04
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%
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Ratio of net investment income (loss) to average net assets
before
waiver(4)(5)(6)
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2.19
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%
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1.66
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%
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0.22
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%
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(1.93
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)%
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(0.48
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)%
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Ratio of net investment income (loss) to average net assets
after
waiver(4)(5)(6)
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2.19
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%
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1.69
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%
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0.80
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%
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(1.49
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)%
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0.17
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%
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Ratio of net investment income (loss) to average net assets
after current and deferred income tax benefit/expense, before
waiver(4)(5)
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2.19
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%
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1.66
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%
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0.22
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%
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(4.12
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)%
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6.74
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%
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Ratio of net investment income (loss) to average net assets
after current and deferred income tax benefit/expense, after
waiver(4)(5)
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2.19
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%
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1.69
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%
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0.80
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%
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(3.69
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)%
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7.39
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%
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Portfolio turnover rate
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115.38
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%
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300.70
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%
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526.39
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%
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95.78
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%
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15.15
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%
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(1) |
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Commencement of Operations
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(2) |
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Information presented relates to a
share of common stock outstanding for the entire period.
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(3) |
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Not Annualized. Total investment
return is calculated assuming a purchase of common stock at the
initial public offering price and a sale at the closing 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. Total investment
return does not reflect brokerage commissions.
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(4) |
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Annualized for periods less than
one full year.
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(5) |
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For the period from
December 1, 2010 through May 31, 2011, the Fund
accrued $0 in net current and deferred tax expense. For the
fiscal year ended November 30, 2010, the Fund accrued $0 in
net current and deferred tax expense. For the fiscal year ended
November 30, 2009, the Fund accrued $0 in net current and
deferred tax expense. For the fiscal year ended
November 30, 2008, the Fund accrued $3,153,649 in net
current and deferred tax expense. For the period from
August 27, 2007 through November 30, 2007, the Fund
accrued $3,153,649 in net current and deferred income tax
benefit.
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(6) |
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This ratio excludes current and
deferred income tax benefit/expense on net investment income.
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See Accompanying Notes to the
Financial Statements.
13
The
Cushing®
MLP Total Return Fund
May 31, 2011 (Unaudited)
The
Cushing®
MLP Total Return Fund (the Fund) was formed as a
Delaware statutory trust on May 23, 2007, and is a
non-diversified, closed-end investment company under the
Investment Company Act of 1940, as amended (the 1940
Act). The Funds investment objective is to seek to
produce current income and capital appreciation. The Fund seeks
to provide its stockholders with an efficient vehicle to invest
in the energy infrastructure sector. The Fund commenced
operations on August 27, 2007. The Funds shares are
listed on the New York Stock Exchange under the symbol
SRV.
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2.
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Significant
Accounting Policies
|
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities,
recognition of distribution income and disclosure of contingent
assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
The Fund uses the following valuation methods to determine fair
value as either current market value for investments for which
market quotations are available, or if not available, the fair
value, as determined in good faith pursuant to such policies and
procedures as may be approved by the Funds Board of
Trustees (Board of Trustees) from time to time. The
valuation of the portfolio securities of the Fund currently
includes the following processes:
(i) The market value of each security listed or traded on
any recognized securities exchange or automated quotation system
will be the last reported sale price at the relevant valuation
date on the composite tape or on the principal exchange on which
such security is traded. If no sale is reported on that date,
Cushing®
MLP Asset Management, LP (the Adviser) (formerly
Swank Energy Income Advisors, LP) utilizes, when available,
pricing quotations from principal market markers. Such
14
quotations may be obtained from third-party pricing services or
directly from investment brokers and dealers in the secondary
market. Generally, the Funds loan and bond positions are
not traded on exchanges and consequently are valued based on
market prices received from third-party services or
broker-dealer sources.
(ii) Listed options on debt securities are valued at the
average of the bid price and the ask price. Unlisted options on
debt or equity securities are valued based upon their composite
bid prices if held long, or their composite ask prices if held
short. Futures are valued at the last sale price on the
commodities exchange on which they trade.
(iii) The Funds non-marketable investments will
generally be valued in such manner as the Adviser determines in
good faith to reflect their fair values under procedures
established by, and under the general supervision and
responsibility of, the Board of Trustees. The pricing of all
assets that are fair valued in this manner will be subsequently
reported to and ratified by the Board of Trustees.
The Fund may engage in short sale transactions. For financial
statement purposes, an amount equal to the settlement amount, if
any, is included in the Statement of Assets and Liabilities as a
liability. The amount of the liability is subsequently
marked-to-market
to reflect the current value of the short positions. Subsequent
fluctuations in market prices of securities sold short may
require purchasing the securities at prices which may differ
from the market value reflected on the Statement of Assets and
Liabilities. When the Fund sells a security short, it must
borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale. A gain,
limited to the price at which the Fund sold the security short,
or a loss, unlimited in size, will be recognized under the
termination of a short sale. The Fund is also subject to the
risk that it may be unable to reacquire a security to terminate
a short position except at a price substantially in excess of
the last quoted price. The Fund is liable for any dividends paid
on securities sold short and such amounts would be reflected as
dividend expense in the Statement of Operations. The Funds
obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer. The Fund also will
be required to segregate similar collateral to the extent, if
any, necessary so that the value of both collateral amounts in
the aggregate is at all times equal to at least 100% of the
current market value of the securities sold short. The fair
value of securities sold short is $18,370,000 at May 31,
2011.
15
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C.
|
Security
Transactions, Investment Income and Expenses
|
Security transactions are accounted for on the date the
securities are purchased or sold (trade date). Realized gains
and losses are reported on a specific identified cost basis.
Interest income is recognized on the accrual basis, including
amortization of premiums and accretion of discounts.
Distributions are recorded on the ex-dividend date.
Distributions received from the Funds investments in
master limited partnerships (MLPs) generally are
comprised of ordinary income, capital gains and return of
capital from the MLP. The Fund records investment income on the
ex-date of the distributions. For financial statement purposes,
the Fund uses return of capital and income estimates to allocate
the dividend income received. Such estimates are based on
historical information available from each MLP and other
industry sources. These estimates may subsequently be revised
based on information received from MLPs after their tax
reporting periods are concluded, as the actual character of
these distributions is not known until after the fiscal year end
of the Fund.
The Fund estimates the allocation of investment income and
return of capital for the distributions received from MLPs
within the Statement of Operations. The Fund has estimated
approximately 5% of the distributions to be from investment
income with the remaining balance to be return of capital.
Expenses are recorded on the accrual basis. During 2010, the
Fund over accrued offering costs by $147,605, of which $70,925
of offering payments were applied against the accrual during the
period ended May 31, 2011. As of May 31, 2011, the
balance of accrued offering costs was $76,680.
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|
D.
|
Dividends
and Distributions to Stockholders
|
Dividends and distributions to common stockholders are recorded
on the ex-dividend date. The character of dividends and
distributions to common stockholders made during the year may
differ from their ultimate characterization for federal income
tax purposes. For the period ended May 31, 2011, the
Funds dividends and distributions were expected to be
comprised of 100% return of capital. The tax character of
distributions paid for the period ended May 31, 2011 will
be determined in early 2012.
|
|
E.
|
Federal
Income Taxation
|
The Fund, taxed as a corporation, is obligated to pay federal
and state income tax on its taxable income. Currently, the
maximum marginal regular federal income tax rate for a
corporation is 35%. The Fund may be subject to a 20% federal
alternative minimum tax on its federal alternative minimum
taxable
16
income to the extent that its alternative minimum tax exceeds
its regular federal income tax.
The Fund invests its assets primarily in MLPs, which generally
are treated as partnerships for federal income tax purposes. As
a limited partner in the MLPs, the Fund reports its allocable
share of the MLPs taxable income in computing its own
taxable income. The Funds tax expense or benefit is
included in the Statement of Operations based on the component
of income or gains (losses) to which such expense or benefit
relates. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. A valuation allowance is
recognized if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred
income tax asset will not be realized.
The Fund has reviewed all open tax years and major jurisdictions
and concluded that there is no impact on the Funds net
assets and no tax liability resulting from unrecognized tax
benefits relating to uncertain income tax positions taken or
expected to be taken on a tax return. As of May 31, 2011,
the Funds federal tax returns since inception remain
subject to examination by the Internal Revenue Service.
|
|
F.
|
Cash and
Cash Equivalents
|
The Fund considers all highly liquid investments purchased with
initial maturity equal to or less than three months to be cash
equivalents.
The Fund makes distributions from investments, which include the
amount received as cash distributions from MLPs, common stock
dividends and interest payments. These activities are reported
in the Statement of Changes in Net Assets, and additional
information on cash receipts and payments is presented in the
Statement of Cash Flows.
Under the Funds organizational documents, its officers and
trustees are indemnified against certain liabilities arising out
of the performance of their duties to the Fund. In addition, in
the normal course of business, the Fund may enter into contracts
that provide general indemnification to other parties. The
Funds maximum exposure under such indemnification
arrangements is unknown, as this would involve future claims
that may be made against the Fund that have not yet occurred,
and may not occur.
17
|
|
I.
|
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 Funds 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 are 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 are 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
18
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 May 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 22,300 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. The
remaining 5,300 contracts expired for a total realized loss of
$397,087. The total realized loss of $1,052,550 is included in
net realized gain on investments in the Statement of Operations.
The Fund did not hold any option contracts as of May 31,
2011.
During the period ended May 31, 2011, the Fund wrote 10,800
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. The remaining
2,300 contracts expired for a total realized gain of $25,266.
The total realized gain of $671,001 is included in net realized
gain on investments in the Statement of Operations.
|
|
J.
|
Recent
Accounting Pronouncement
|
In May 2011, the FASB issued ASU
No. 2011-04
Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in GAAP and the International
Financial Reporting Standards (IFRSs). ASU
No. 2011-04
amends FASB ASC Topic 820, Fair Value Measurements and
Disclosures, to establish common requirements for measuring fair
value and for disclosing information about fair value
measurements in accordance with GAAP and IFRSs. ASU
No. 2011-04
is effective for fiscal years beginning after December 15,
2011 and for interim periods within those fiscal years.
Management is currently evaluating these amendments and does not
believe they will have a material impact on the Funds
financial statements.
|
|
3.
|
Concentrations
of Risk
|
The Funds investment objective is to seek to produce
current income and capitalization. The Fund will seek to achieve
its investment objective by investing, under normal market
conditions, at least 80% of its net assets, plus any borrowings
for investment purposes, in MLP investments; up to 50% of
19
its managed assets in securities of MLPs and other natural
resource companies that are not publicly traded, or that are
otherwise restricted securities; up to 20% of its managed assets
in securities of companies that are not MLPs, including other
natural resource companies, and U.S. and
non-U.S. issuers
that may not constitute other natural resource companies; and up
to 20% of its managed assets in debt securities of MLPs, other
natural resource companies and other issuers.
|
|
4.
|
Agreements
and Related Party Transactions
|
The Fund has entered into an Investment Management Agreement
with the Adviser (the Agreement). Under the terms of
the Agreement, the Fund will pay the Adviser a fee, payable at
the end of each calendar month, at an annual rate equal to 1.25%
of the average weekly value of the Funds managed assets
during such month for the services and facilities provided by
the Adviser to the Fund. The Adviser earned $2,288,047 in
advisory fees for the period ended May 31, 2011.
The Fund has engaged U.S. Bancorp Fund Services, LLC
to serve as the Funds administrator. The Fund pays the
administrator a monthly fee computed at an annual rate of 0.08%
of the first $100,000,000 of the Funds managed assets,
0.05% on the next $200,000,000 of managed assets and 0.04% on
the balance of the Funds managed assets, with a minimum
annual fee of $40,000.
Computershare Trust Fund, N.A. serves as the Funds
transfer agent, dividend paying agent, and agent for the
automatic dividend reinvestment plan.
U.S. Bank, N.A. serves as the Funds custodian. The
Fund pays the custodian a monthly fee computed at an annual rate
of 0.004% of the Funds average daily market value, with a
minimum annual fee of $4,800.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and
liabilities for financial reporting
20
and tax purposes. Components of the Funds deferred tax
assets and liabilities as of May 31, 2011, are as follows:
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
5,994,995
|
|
Capital loss carryforward
|
|
|
27,182,951
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
33,177,946
|
|
Less Deferred tax liabilities:
|
|
|
|
|
Unrealized gain on investment securities
|
|
|
21,508,843
|
|
|
|
|
|
|
Net deferred tax asset before valuation allowance
|
|
|
11,669,103
|
|
Valuation allowance
|
|
|
(11,669,103
|
)
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
|
|
|
|
|
|
|
The net operating loss carryforward and capital loss
carryforward are available to offset future taxable income. The
Fund has the following net operating loss and capital loss
amounts:
|
|
|
|
|
|
|
Fiscal Year Ended Net Operating Loss
|
|
Amount
|
|
|
Expiration
|
|
November 30, 2007
|
|
$
|
|
|
|
NA
|
November 30, 2008
|
|
|
5,736,436
|
|
|
November 30, 2028
|
November 30, 2009
|
|
|
2,225,868
|
|
|
November 30, 2029
|
November 30, 2010
|
|
|
|
|
|
NA
|
|
|
|
|
|
|
|
Total Fiscal Year Ended Net Operating Loss
|
|
$
|
7,962,304
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended Capital
Loss
|
|
|
|
|
|
|
November 30, 2007
|
|
$
|
|
|
|
NA
|
November 30, 2008
|
|
|
62,485,409
|
|
|
November 30, 2013
|
November 30, 2009
|
|
|
50,363,661
|
|
|
November 30, 2014
|
November 30, 2010
|
|
|
|
|
|
NA
|
|
|
|
|
|
|
|
Total Fiscal Year Ended Capital Loss
|
|
$
|
112,849,070
|
|
|
|
|
|
|
|
|
|
|
For corporations, capital losses can only be used to offset
capital gains and cannot be used to offset ordinary income. As
such, for the fiscal year ended November 30, 2010, the Fund
used capital loss carryforwards of $699,000 from the fiscal year
ended November 30, 2007 and $1,653,000 from the fiscal year
ended November 30, 2008 to offset its capital gains. The
capital loss may be carried forward for 5 years and,
accordingly, would begin to expire as of
21
November 30, 2013. The net operating loss can be carried
forward for 20 years and, accordingly, would begin to
expire as of November 30, 2027.
The Fund has recorded a valuation allowance for the full amount
of the deferred tax asset as the Fund believes it is more likely
than not that the asset will not be utilized.
Total income tax benefit (current and deferred) differs from the
amount computed by applying the federal statutory income tax
rate of 35% to net investment income and realized and unrealized
gains (losses) on investments before taxes for the period ended
May 31, 2011, as follows:
|
|
|
|
|
Application of statutory income tax rate
|
|
$
|
7,139,000
|
|
Change in state tax rate used to determine deferred tax
|
|
|
76,000
|
|
Change in valuation allowance
|
|
|
(7,215,000
|
)
|
|
|
|
|
|
Total tax expense
|
|
$
|
|
|
|
|
|
|
|
The decrease in the valuation allowance was due to a decrease in
the net deferred tax asset of $7,215,000 during the period ended
May 31, 2011. All federal and state tax amounts above are
deferred balances and there were no current balances for federal
or state taxes in the current year.
At May 31, 2011, the cost basis of investments was
$316,864,813 and gross unrealized appreciation and depreciation
of investments for federal income tax purposes were as follows:
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
70,331,098
|
|
Gross unrealized depreciation
|
|
|
(8,093,093
|
)
|
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
62,238,005
|
|
|
|
|
|
|
The Fund recognizes the tax benefits of uncertain tax positions
only where the position is more likely than not to
be sustained assuming examination by tax authorities. Management
has analyzed the Funds tax positions, and has concluded
that no liability for unrecognized tax benefits should be
recorded related to uncertain tax positions taken on
U.S. tax returns and state tax returns filed since
inception of the Fund. No income tax returns are currently under
examination. All tax years since commencement of operations
remain subject to examination by the tax authorities in the
United States. Due to the nature of the Funds investments,
the Fund may be required to file income tax returns in several
states. The Fund is not aware of any tax positions for which it
is reasonably possible that the total amounts of unrecognized
tax benefits will change materially in the next 12 months.
22
|
|
6.
|
Fair
Value Measurements
|
Various inputs that are used in determining the fair value of
the Funds 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 Funds 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 Other
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Fair Value at
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
Description
|
|
May 31, 2011
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock(a)
|
|
$
|
21,755,500
|
|
|
$
|
21,755,500
|
|
|
$
|
|
|
|
$
|
|
|
Master Limited Partnerships and Related
Companies(a)
|
|
|
343,722,188
|
|
|
|
343,722,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity Securities
|
|
|
365,477,688
|
|
|
|
365,477,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Notes(a)
|
|
|
10,601,930
|
|
|
|
|
|
|
|
10,601,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Notes
|
|
|
10,601,930
|
|
|
|
|
|
|
|
10,601,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investments
|
|
|
3,023,200
|
|
|
|
3,023,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other
|
|
|
3,023,200
|
|
|
|
3,023,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
379,102,818
|
|
|
$
|
368,500,888
|
|
|
$
|
10,601,930
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Traded Note
|
|
$
|
18,370,000
|
|
|
$
|
18,370,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
360,732,818
|
|
|
$
|
350,130,888
|
|
|
$
|
10,601,930
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 period
ended May 31, 2011.
|
23
|
|
7.
|
Investment
Transactions
|
For the period ended May 31, 2011, the Fund purchased (at
cost) and sold securities (proceeds) in the amount of
$478,624,184 and $396,005,013 (excluding short-term securities),
respectively and made purchases to cover investments sold short
and received proceeds from investments sold short in the amount
of $89,980,449 and $106,813,290, respectively. The Fund
purchased (at cost) and sold options (proceeds) in the amount of
$5,521,819 and $4,469,269, respectively. The Fund sold written
options (proceeds) in the amount of $1,002,624.
The Fund has unlimited shares of capital stock authorized and
32,926,108 shares outstanding at May 31, 2011.
Transactions in common stock for the fiscal year ended
November 30, 2010 and the period ended May 31, 2011
were as follows:
|
|
|
|
|
Shares at November 30, 2009
|
|
|
11,247,598
|
|
Shares sold through additional offerings
|
|
|
14,475,000
|
|
Shares issued through reinvestment of distributions
|
|
|
191,812
|
|
|
|
|
|
|
Shares at November 30, 2010
|
|
|
25,914,410
|
|
Shares sold through additional offerings
|
|
|
6,900,000
|
|
Shares issued through reinvestment of distributions
|
|
|
111,698
|
|
|
|
|
|
|
Shares at May 31, 2011
|
|
|
32,926,108
|
|
|
|
|
|
|
The Fund maintains a margin account arrangement with Credit
Suisse. The interest rate charged on margin borrowing is tied to
the cost of funds for Credit Suisse (which approximates LIBOR
plus 0.30%). Proceeds from the margin account arrangement are
used to execute the Funds investment objective.
The average principal balance and interest rate for the period
during which the credit facilities were utilized during the
period ended May 31, 2011 was approximately $91,564,000 and
0.68%, respectively. At May 31, 2011, the principal balance
outstanding was $105,800,000 and accrued interest expense was
$13,821.
On June 13, 2011, the Fund issued 62,546 shares
through its dividend reinvestment plan. After these share
issuances, the Funds total common shares outstanding were
32,988,654.
24
The
Cushing®
MLP Total Return Fund
May 31, 2011
Trustee
and Officer Compensation
The Fund does not currently compensate any of its trustees who
are interested persons nor any of its officers. For the period
ended May 31, 2011, the aggregate compensation paid by the
Fund to the independent trustees was $54,000. The Fund did not
pay any special compensation to any of its trustees or officers.
The Fund continuously monitors standard industry practices and
this policy is subject to change. The Funds Statement of
Additional Information includes additional information about the
Trustees and is available on the SECs Web site at
www.sec.gov.
Cautionary
Note Regarding Forward-Looking Statements
This report 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
Funds historical experience and its present expectations
or projections indicated in any forward-looking statements.
These risks include, but are not limited to, changes in economic
and political conditions; regulatory and legal changes; MLP
industry risk; leverage risk; valuation risk; interest rate
risk; tax risk; and other risks discussed in the Funds
filings with the 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 update or revise
any forward-looking statements made herein. There is no
assurance that the Funds investment objectives will be
attained.
Proxy
Voting Policies
A description of the policies and procedures that the Fund uses
to determine how to vote proxies relating to portfolio
securities owned by the Fund and information regarding how the
Fund voted proxies relating to the portfolio of securities
during the
12-month
period ended June 30, 2010 is available to stockholders by
visiting the SECs Web site at www.sec.gov.
25
Form N-Q
The Fund files its complete schedule of portfolio holdings for
the first and third quarters of each fiscal year with the SEC on
Form N-Q.
The Funds
Form N-Q
and statement of additional information are available without
charge by visiting the SECs Web site at www.sec.gov. In
addition, you may review and copy the Funds
Form N-Q
at the SECs Public Reference Room in Washington D.C. You
may obtain information on the operation of the Public Reference
Room by calling (800) SEC-0330.
Certifications
The Funds Chief Executive Officer has submitted to the New
York Stock Exchange the annual CEO certification as required by
Section 303A.12(a) of the NYSE Listed Fund Manual.
The Fund has filed with the SEC the certification of its Chief
Executive Officer and Chief Financial Officer required by
Section 302 of the Sarbanes-Oxley Act.
Dividend
Reinvestment Plan
How the
Plan Works
Unless the registered owner of common shares elects to receive
cash by contacting the Plan Agent, all dividends declared for
your common shares of the Fund will be automatically reinvested
by Computershare Trust Company, N.A.
and/or
Computershare Inc. (together, the Plan Agent), agent
for shareholders in administering the Funds Dividend
Reinvestment Plan (the Plan), in additional common
shares of the Fund. The Plan Agent will open an account for each
common shareholder under the Plan in the same name in which such
common shareholders common shares are registered. Whenever
the Fund declares a dividend or other distribution (for purposes
of this section, together, a dividend) payable in
cash, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Agent for
the participants accounts, depending upon the
circumstances described below, either (i) through receipt
of additional unissued but authorized common shares from the
Fund (newly-issued common shares) or (ii) by
purchase of outstanding common shares on the open market
(open-market purchases) on the New York Stock
Exchange or elsewhere.
If, on the payment date for any dividend, the market price per
common share plus per share fees (which include any brokerage
commissions the Plan Agent
26
is required to pay) is greater than the net asset value per
common share, the Plan Agent will invest the dividend amount in
newly-issued common shares, including fractions, on behalf of
the participants. The number of newly-issued common shares to be
credited to each participants account will be determined
by dividing the dollar amount of the dividend by the net asset
value per common share on the payment date; provided that, if
the net asset value per common share is less than 95% of the
market price per common share on the payment date, the dollar
amount of the dividend will be divided by 95% of the market
price per common share on the payment date. If, on the payment
date for any dividend, the net asset value per common share is
greater than the market value per common share plus per share
fees, the Plan Agent will invest the dividend amount in common
shares acquired on behalf of the participants in open-market
purchases.
Participation
in the Plan
If a registered owner of common shares elects not to participate
in the Plan, you will receive all dividends in cash paid by
check mailed directly to you (or, if the shares are held in
street or other nominee name, then to such nominee) by the Plan
Agent, as dividend disbursing agent. You may elect not to
participate in the Plan and to receive all dividends in cash by
sending written or telephonic instructions to the Plan Agent, as
dividend paying agent, or by contacting the Plan Agent via their
website at the address set out below. Participation in the Plan
is completely voluntary and may be terminated or resumed at any
time without penalty by contacting the Plan Agent before the
dividend record date; otherwise such termination or resumption
will be effective with respect to any subsequently declared
dividend or other distribution.
Plan
Fees
There will be no per share fees with respect to common shares
issued directly by the Fund. However, each participant will pay
a per share fee (currently $0.03) incurred in connection with
open-market purchases. There is no direct transaction fee to
participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a transaction fee payable by the
participants. Participants who request a sale of shares through
the Plan Agent are subject to a $15.00 sales transaction fee and
pay a per share fee of $0.12 per share sold. All per share fees
include any brokerage commissions the Plan Agent is required to
pay.
27
Tax
Implications
The automatic reinvestment of dividends will not relieve
participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends.
Accordingly, any taxable dividend received by a participant that
is reinvested in additional common shares will be subject to
federal (and possibly state and local) income tax even though
such participant will not receive a corresponding amount of cash
with which to pay such taxes.
Contact
Information
For more information about the plan you may contact the Plan
Agent in writing at PO Box 43078, Providence, RI
02940-3078,
by calling the Plan Agent at
1-800-662-7232
or at the Plan Agents website, www.computershare.com
/investor.
Privacy
Policy
In order to conduct its business, the Fund collects and
maintains certain nonpublic personal information about its
stockholders of record with respect to their transactions in
shares of the Funds securities.
This information includes the stockholders address, tax
identification or Social Security number, share balances, and
dividend elections. We do not collect or maintain personal
information about stockholders whose share balances of our
securities are held in street name by a financial
institution such as a bank or broker.
We do not disclose any nonpublic personal information about you,
the Funds other stockholders or the Funds former
stockholders to third parties unless necessary to process a
transaction, service an account, or as otherwise permitted by
law.
To protect your personal information internally, we restrict
access to nonpublic personal information about the Funds
stockholders to those employees who need to know that
information to provide services to our stockholders. We also
maintain certain other safeguards to protect your nonpublic
personal information.
28
Stockholder
Proxy Voting Results
The annual meeting of stockholders was held on May 12,
2011. The matters considered at the meeting, together with the
actual vote tabulations relating to such matters were as follows:
|
|
1. |
To elect Brian R. Bruce as Trustee of the Fund to hold office
for a term of three years and until his successor is duly
elected and qualified.
|
|
|
|
|
|
|
|
No. of Shares
|
|
|
Brian R. Bruce
|
|
|
|
|
Affirmative
|
|
|
30,429,667
|
|
Withheld
|
|
|
353,331
|
|
|
|
|
|
|
TOTAL
|
|
|
30,782,998
|
|
Edward N. McMillan and Jerry V. Swank continue as Trustees and
their terms expire on the date of the 2012 annual meeting of
stockholders, each to serve until his successor is duly elected
and qualified. Ronald P. Trout continues as Trustee and his term
expires on the date of the 2013 annual meeting of stockholders,
to serve until his successor is duly elected and qualified.
|
|
2. |
An amendment to the Funds Amended and Restated Agreement
and Declaration of Trust that would restrict any person from
purchasing or acquiring, without the prior approval of the
Funds Board of Trustees, any direct or indirect interest
in the Funds common shares, if such acquisition would
either (a) cause a person to become a holder of more
than 4.99% of the common shares of the Fund, or
(b) increase the percentage of the Funds shares owned
by any such holder.
|
|
|
|
|
|
|
|
No. of Shares
|
|
|
Affirmative
|
|
|
25,101,115
|
|
Against
|
|
|
5,397,560
|
|
Withheld
|
|
|
284,323
|
|
|
|
|
|
|
TOTAL
|
|
|
30,782,998
|
|
Based upon votes required for approval, these matters passed.
29
(This page intentionally left blank)
The
Cushing®
MLP Total Return Fund
TRUSTEES
Brian R. Bruce
Ronald P. Trout
Edward N. McMillan
Jerry V. Swank
OFFICERS
Jerry V. Swank
Chief Executive Officer and
President
Daniel L. Spears
Executive Vice President and Secretary
John H. Alban
Chief Financial Officer
Barry Y. Greenberg
Chief Compliance
Officer
INVESTMENT
ADVISER
Cushing®
MLP Asset Management, LP
8117 Preston Road, Suite 440
Dallas, TX 75225
ADMINISTRATOR
U.S. Bancorp Fund Services,
LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
CUSTODIAN
U.S. Bank, N.A.
1555 N. River Center
Drive, Suite 302
Milwaukee, WI 53212
TRANSFER AGENT
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher
& Flom LLP
Four Times Square
New York, NY 10036
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
JP Morgan Chase Tower
2200 Ross Avenue, Suite 1600
Dallas, TX 75201
The
Cushing®
MLP Total Return Fund
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Investment Adviser
Cushing®
MLP Asset Management, LP
8117 Preston Road
Suite 440
Dallas, TX 75225
(214) 692-6334
www.srvfund.com
www.swankcapital.com
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Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Investments.
(a) |
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Schedule of Investments is included as part of the report to shareholders filed under Item 1
of this Form. |
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(b) |
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Not Applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment
Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and
Affiliated Purchasers.
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(d) |
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(c) |
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Maximum Number (or |
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Total Number of |
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Approximate Dollar |
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Shares (or Units) |
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Value) of Shares |
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(a) |
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Purchased as Part |
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(or Units) that May |
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Total Number of |
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(b) |
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of Publicly |
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Yet Be Purchased |
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Shares (or Units) |
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Average Price Paid |
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Announced Plans or |
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Under the Plans or |
Period |
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Purchased |
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per Share (or Unit) |
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Programs |
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Programs |
Month #1
12/01/2010-12/31/2010 |
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0 |
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0 |
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0 |
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0 |
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Month #2
01/01/2011-01/31/2011 |
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0 |
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0 |
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0 |
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0 |
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Month #3
02/01/2011-02/28/2011 |
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0 |
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0 |
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0 |
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0 |
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(d) |
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(c) |
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Maximum Number (or |
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Total Number of |
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Approximate Dollar |
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Shares (or Units) |
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Value) of Shares |
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(a) |
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Purchased as Part |
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(or Units) that May |
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Total Number of |
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(b) |
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of Publicly |
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Yet Be Purchased |
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Shares (or Units) |
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Average Price Paid |
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Announced Plans or |
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Under the Plans or |
Period |
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Purchased |
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per Share (or Unit) |
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Programs |
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Programs |
Month #4
03/01/2011-03/31/2011 |
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0 |
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0 |
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0 |
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0 |
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Month #5
04/01/2011-04/30/2011 |
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0 |
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0 |
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0 |
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0 |
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Month #6
05/01/2011-05/31/2011 |
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0 |
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0 |
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0 |
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0 |
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Total |
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0 |
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0 |
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0 |
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0 |
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* |
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Footnote the date each plan or program was announced, the dollar amount (or share or unit
amount) approved, the expiration date (if any) of each plan or program, each plan or program that
expired during the covered period, each plan or program registrant plans to terminate or let
expire. |
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. Controls and Procedures.
(a) |
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The Registrants President/Chief Executive Officer and Chief Financial Officer have reviewed
the Registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the Act)) as of a date within 90 days of the filing of this
report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934. Based on their review, such officers have concluded that the
disclosure controls and procedures are effective in ensuring that information required to be
disclosed in this report is appropriately recorded, processed, summarized and reported and
made known to them by others within the Registrant and by the Registrants service provider. |
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(b) |
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There were no changes in the Registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the
period covered by this report that has materially affected, or is reasonably likely to
materially affect, the Registrants internal control over financial reporting. |
Item 12. Exhibits.
(a) |
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(1) Any code of ethics or amendment thereto, that is the subject of the disclosure required
by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through
filing an exhibit. Not Applicable. |
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(2) A separate certification for each principal executive and principal financial officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
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(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given
during the period covered by the report by or on behalf of the registrant to 10 or more persons. |
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(b) |
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Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished
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.
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(Registrant) |
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The Cushing MLP Total Return Fund |
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By (Signature and Title) |
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/s/ Jerry V. Swank |
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Jerry V. Swank, President & Chief Executive Officer |
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Date |
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August 5, 2011 |
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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.
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By (Signature and Title) |
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/s/ Jerry V. Swank |
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Jerry V. Swank, President & Chief Executive Officer |
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Date |
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August 5, 2011 |
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By (Signature and Title) |
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/s/ John H. Alban |
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John H. Alban, Chief Financial Officer |
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Date |
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August 5, 2011 |
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