cushing-tr_nq.htm

 

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


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



Investment Company Act file number  811-22072



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



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



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



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



Date of fiscal year end: November 30


Date of reporting period:  February 28, 2011


 
 
 
 
Item 1. Schedule of Investments.
 
The Cushing MLP Total Return Fund
        
SCHEDULE OF INVESTMENTS (Unaudited)
        
   
   
February 28, 2011
           
   
Shares
    
 Fair Value
Common Stock - 4.0% (1)
        
Shipping - 0.3% (1)
        
United States - 0.3% (1)
        
Teekay Tankers, Ltd.
             50,000
   $
              534,500
           
Utilities - 3.7% (1)
        
United States - 3.7% (1)
        
Dominion Resources, Inc.
           150,000
    
                      6,844,500
Great Plains Energy, Inc.
             50,000
    
                         960,000
UIL Holdings Corp.
             25,000
    
                         768,500
         
                      8,573,000
           
Total Common Stock (Cost $9,119,925)
     $
            9,107,500
           
Master Limited Partnerships and Related Companies  - 131.3% (1)
        
Coal - 13.0% (1)
        
United States - 13.0% (1)
        
Oxford Resource Partners, L.P.
           450,000
   $
          11,430,000
Penn Virginia GP Holdings, L.P.
           700,000
    
                    18,620,000
         
                    30,050,000
Crude/Natural Gas Production - 15.5% (1)
        
United States - 15.5% (1)
        
Breitburn Energy Partners, L.P.
           500,000
    
                    11,120,000
Legacy Reserves, L.P.
           325,000
    
                    10,091,250
Linn Energy, LLC
           250,000
    
                      9,707,500
Vanguard Natural Resources, LLC
           150,000
    
                      4,911,000
       
                    35,829,750
Crude/Refined Products Pipelines and Storage - 31.1% (1)
        
United States - 31.1% (1)
        
Enbridge Energy Partners, L.P.
           350,000
    
                    23,464,000
Genesis Energy, L.P.
           600,000
    
                    17,508,000
Magellan Midstream Partners, L.P.
           250,000
    
                    15,110,000
Plains All American Pipeline, L.P.
           150,000
    
                      9,820,500
 
 
 
 
 
 
TransMontaigne Partners, L.P.
 
150,000
    
                5,967,000
 
      
                    71,869,500
Natural Gas/Natural Gas Liquid Pipelines and Storage - 27.9% (1)
        
United States - 27.9% (1)
        
Boardwalk Pipeline Partners, LP
           250,000
    
                      8,302,500
El Paso Pipeline Partners, L.P.
           100,000
    
                      3,770,000
Energy Transfer Partners, L.P.
           250,000
    
                    13,707,500
Enterprise Products Partners, L.P.
           300,000
    
                    13,080,000
ONEOK Partners, L.P.
           150,000
    
                    12,472,500
Spectra Energy Partners, L.P.
           120,000
    
                      3,944,400
Williams Partners, L.P.
           175,000
    
                      9,075,500
       
                    64,352,400
Natural Gas Gathering/Processing - 31.1% (1)
        
United States - 31.1% (1)
        
Crosstex Energy, L.P.
        1,000,000
    
                    17,000,000
DCP Midstream Partners, L.P.
           200,000
    
                      8,452,000
MarkWest Energy Partners, L.P.
           425,000
    
                    19,082,500
Regency Energy Partners, L.P.
           400,000
    
                    11,108,000
Targa Resources Partners, L.P.
           475,000
    
                    16,268,750
       
                    71,911,250
Propane - 4.2% (1)
        
United States - 4.2% (1)
        
Inergy, L.P.
           231,000
    
                      9,581,880
           
Shipping - 8.5% (1)
        
Republic of the Marshall Islands - 8.5% (1)
        
Capital Product Partners, L.P.
           200,000
    
                      1,944,000
Navios Maritime Partners, L.P.
           600,000
    
                    11,916,000
Teekay Offshore Partners, L.P.
           200,000
    
                      5,754,000
         
                    19,614,000
           
Total Master Limited Partnerships and Related Companies (Cost $207,854,140)
     $
        303,208,780
   
Principal
      
 
Amount
      
Senior Notes - 7.1% (1)
        
Crude/Natural Gas Production - 2.1% (1)
        
United States - 2.1% (1)
        
Breitburn Energy Partners, L.P., 8.625%, 10/15/2020 (2)
 $     2,500,000
   $
           2,640,625
Linn Energy, LLC, 7.750%, 02/01/2021 (2)
        2,000,000
    
                      2,135,000
         
               4,775,625
 
 
 
 
 
Crude/Refined Products Pipelines and Storage - 0.4% (1)
        
United States - 0.4% (1)
        
Genesis Energy, L.P., 7.875%, 12/15/2018 (2)
        1,000,000
    
                      1,027,500
           
Natural Gas/Natural Gas Liquids Pipelines and Storage - 0.2% (1)
        
United States - 0.2% (1)
        
El Paso Corp., 7.420%, due 02/15/2037
           375,000
    
                         373,444
           
Natural Gas Gathering/Processing - 4.4% (1)
        
United States - 4.4% (1)
        
Atlas Pipeline Partners, L.P., 8.750% due 06/15/2018
        3,500,000
    
                      3,762,500
Copano Energy, LLC, 8.125%, due 03/01/2016
        2,000,000
    
                      2,092,500
MarkWest Energy Partners, L.P., 8.750%, due 04/15/2018
        1,000,000
    
                      1,100,000
Regency Energy Partners, L.P., 9.375%, due 06/01/2016
        2,000,000
    
                      2,247,500
Targa Resources Partners, L.P., 8.250%, due 07/01/2016
           200,000
    
                         213,000
Targa Resources Partners, L.P., 7.875%, due 10/15/2018 (2)
           250,000
    
                         265,000
Targa Resources Partners, L.P., 6.875%, due 02/01/2021 (2)
           600,000
    
                         595,500
         
                    10,276,000
           
Total Senior Notes (Cost $14,644,440)
     $
          16,452,569
           
Options - 0.6% (1)
Contracts
      
J.P. Morgan Alerian MLP Index Put Option
        
 
Expiration: April 2011, Exercise Price: $37.00
               4,300
   $
               182,750
SPDR Trust Series 1 Put Option
        
 
Expiration: March 2011, Exercise Price: $130.00
               8,500
    
                         1,300,500
Total Options (Cost $2,970,574)
     $
            1,483,250
           
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)
           508,893
   $
              508,893
Fidelity Government Portfolio Fund - Institutional Class, 0.01% (3)
           508,893
    
                         508,893
First American Treasury Obligations Fund - Class A, 0.00% (3)
           508,893
    
                         508,893
First American Treasury Obligations Fund - Class Y, 0.00% (3)
           508,893
    
                         508,893
First American Treasury Obligations Fund - Class Z, 0.00% (3)
           508,893
    
                         508,893
Total Short-Term Investments (Cost $2,544,465)
       $
           2,544,465
           
           
Total Investments - 144.1% (1) (Cost $240,133,544)
     $
  332,796,564
Liabilities in Excess of Other Assets - (44.1)% (1)
      
                 (101,853,275)
Net Assets Applicable to Common Stockholders - 100.0% (1)
     $
   230,943,289
           
SECURITIES SOLD SHORT
        
Options - (0.2)%(1)
Contracts
      
SPDR Trust Series 1 Put Option
        
 
 Expiration: March 2011, Exercise Price: $122.00
               8,500
   $
               357,000
Total Securities Sold Short - (0.2)%(1) (Proceeds $977,358)
     $
         357,000
           
(1)
Calculated as a percentage of net assets applicable to common stockholders.
        
(2)
Restricted securities represent a total fair value of $6,663,625, which represents 2.9% of net assets.
        
(3)
Rate reported is the current yield as of February 28, 2011.
        
 
 
 
 
 

Tax Basis

The cost basis of investments for federal income tax purposes at February 28, 2011 was as follows:

Cost of investments                                                                       $236,091,256
Gross unrealized appreciation                                                          98,390,996
Gross unrealized depreciation                                                          ( 1,685,688)
Net unrealized appreciation                                                             $96,705,308
 
 
Fair Value Measurements

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

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

These inputs are summarized in the three broad levels listed below.

     
Fair Value Measurements at Reporting Date Using
     
Quoted Prices in
  
Significant
     
Active Markets for
Significant Other
Unobservable
 
Fair Value at
  
Identical Assets
Observable Inputs
Inputs
Description
February 28, 2011
  
(Level 1)
(Level 2)
(Level 3)
Assets
Equity Securities
          
Common Stock (a)
$     9,107,500
  
$    9,107,500
$                      -
   $                               -
Master Limited
   Partnerships and
   Related
   Companies (a)
303,208,780
  
    303,208,780
                      -
                   -
Total Equity Securities
    312,316,280
  
    312,316,280
                      -
                   -
Notes
          
Senior Notes (a)
      16,452,569
  
                       -
     16,452,569
                   -
Total Notes
      16,452,569
  
                       -
     16,452,569
                   -
Derivatives
          
Options
           1,483,250
  
           1,483,250
                       -
                   -
Total Derivatives
           1,483,250
  
           1,483,250
                       -
                   -
Other
          
Short-Term
   Investments
         2,544,465
  
         2,544,465
                      -
                   -
Total Other
         2,544,465
  
         2,544,465
                      -
                   -
Total Assets
$  332,796,564
  
$  316,343,995
$      16,452,569
$                               -
 
Liabilities
Derivatives
          
        Options
$         357,000
  
$         357,000
$                       -
$                               -
Total
$  332,439,564
  
$  315,986,995
$      16,452,569
$                               -

(a)  
All other industry classifications are identified in the Schedule of Investments.  The Fund did not hold Level 3 investments at any time during the fiscal quarter ended February 28, 2011.
 

 
 
 
 
Derivative Financial Instruments

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

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

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

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

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

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

During the period ended February 28, 2011, the Fund purchased 4,300 J.P. Morgan Alerian MLP Index equity option put contracts with an exercise price of $37.00 and 8,500 S&P Depository Receipts (“SPDR”) Trust Series 1 equity option put contracts with an exercise price of $130.00.

On February 28, 2011 the Fund held 4,300 J.P. Morgan Alerian MLP Index equity option put contracts at fair value of $182,750 and 8,500 SPDR Trust Series 1 equity option put contracts at fair value of $1,300,500.  These equity option put contracts would be included in investments at fair value in the Statement of Assets and Liabilities. The unrealized depreciation of $1,487,324 on these equity option put contracts would be included in the net change in unrealized depreciation of investments in the Statement of Operations.

During the period ended February 28, 2011, the Fund wrote 8,500 SPDR Trust Series 1 short option put contracts with an exercise price of $122.00.
 
 
On February 28, 2011 the Fund held 8,500 SPDR Trust Series 1 short option put contracts at fair value of $(357,000). All contracts had an exercise price of $122.00.  These equity option contracts would be included in securities sold short at fair value in the Statement of Assets and Liabilities. The unrealized appreciation of $620,358 on these equity option put contracts would be included in the net change in unrealized appreciation of investments in the Statement of Operations.


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

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

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

 
 
 
 
 
SIGNATURES

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


(Registrant)  The Cushing MLP Total Return Fund                           
 
 
By (Signature and Title)              /s/ Jerry V. Swank                            
Jerry V. Swank, President

Date           April 27, 2011                                                                                                           



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

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

Date           April 27, 2011                                                                                                        
 
 
By (Signature and Title)              /s/ John H. Alban                                                         
John H. Alban, Treasurer

Date           April 27, 2011