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: August 31, 2015

 
 
 
 
Item 1. Schedule of Investments.

The Cushing MLP Total Return Fund
  
SCHEDULE OF INVESTMENTS (Unaudited)
  
             
   
August 31, 2015
  
             
         
Fair
  
Common Stock - 17.9%
  
Shares
    
Value
  
General Partnerships - 3.0%
            
United States - 3.0%
            
Enlink Midstream, LLC
     42,500     $ 1,014,050  
Targa Resources Corp. (1)
     24,535       1,620,782  
TerraForm Power, Inc. (1)
     57,600       1,296,000  
              3,930,832  
Large Cap Diversified - 4.0%
                
United States - 4.0%
                
ONEOK, Inc.(1)
     47,750       1,719,478  
Williams Companies, Inc.(1)
     72,350       3,487,270  
              5,206,748  
Natural Gas Transportation & Storage - 2.3%
                
United States - 2.3%
                
Columbia Pipeline Group, Inc.
     117,450       2,978,532  
                 
Oil & Gas Storage & Transportation - 5.0%
                
United States - 5.0%
                
Kinder Morgan, Inc. (1)
     159,948       5,183,915  
Semgroup Corp.
     25,750       1,416,250  
              6,600,165  
Shipping - 3.6%
                
Bermuda - 1.8%
                
Golar LNG Ltd. (1)
     61,350       2,388,969  
Republic of the Marshall Islands - 1.8%
                
Teekay Corp. (1)
     62,100       2,282,796  
              4,671,765  
                 
Total Common Stocks (Cost $25,225,075)
           $ 23,388,042  
                 
                 
Master Limited Partnerships and Related Companies - 115.4%
                
Crude Oil & Refined Products - 22.1%
                
United States - 22.1%
                
Blueknight Energy Partners, L.P. (1)
     242,433     $ 1,503,085  
Buckeye Partners, L.P. (1)
     79,200       5,577,264  
Delek Logistics Partners, L.P. (1)
     65,550       2,610,201  
Genesis Energy, L.P.
     96,650       4,219,739  
MPLX, L.P.
     19,200       952,704  
NuStar Energy, L.P. (1)
     75,100       3,918,718  
Phillips 66 Partners, L.P.
     19,450       1,213,680  
Rose Rock Midstream, L.P. (1)
     89,250       2,772,997  
Sunoco Logistics Partners, L.P.
     136,850       4,629,635  
Tesoro Logistics, L.P.
     28,550       1,507,725  
              28,905,748  
 
 
 
 
 
General Partnerships - 12.4%
                
United States - 12.4%
                
Energy Transfer Equity, L.P. (1)(2)
     160,900       4,513,245  
EQT GP Holdings, L.P.
     50,993       1,820,892  
NuStar GP Holdings, LLC (1)
     121,850       4,045,420  
Plains GP Holdings, L.P. (1)
     120,950       2,369,410  
Tallgrass Energy GP, L.P.
     71,200       2,036,320  
Western Gas Equity Partners, L.P.
     27,750       1,473,525  
              16,258,812  
Large Cap Diversified - 35.1%
                
United States - 35.1%
                
Enbridge Energy Management, LLC(1)(3)(4)
     173,945       4,896,552  
Energy Transfer Partners, L.P. (1)
     259,489       12,751,289  
Enterprise Products Partners, L.P. (1)
     259,050       7,281,896  
Magellan Midstream Partners, L.P. (1)
     71,000       5,010,470  
ONEOK Partners, L.P. (1)
     113,200       3,662,020  
Plains All American Pipeline, L.P.
     162,900       5,874,174  
Williams Partners, L.P. (1)(2)
     164,693       6,563,016  
              46,039,417  
Natural Gas Gatherers & Processors - 20.0%
                
United States - 20.0%
                
DCP Midstream Partners, L.P. (1)
     63,850       1,800,570  
Enable Midstream Partners, L.P. (1)
     522,000       8,101,440  
EnLink Midstream Partners, L.P. (1)
     206,400       3,638,832  
MarkWest Energy Partners, L.P. (1)
     87,600       4,938,012  
Targa Resources Partners, L.P. (1)
     168,445       5,085,355  
Western Gas Partners, L.P. (1)
     45,400       2,670,882  
              26,235,091  
Natural Gas Transportation & Storage - 13.6%
                
United States - 13.6%
                
Columbia Pipeline Partners, L.P.(1)
     212,696       4,217,762  
EQT Midstream Partners, L.P.
     50,000       3,890,000  
Spectra Energy Partners, L.P.
     60,950       3,104,793  
Tallgrass Energy Partners, L.P. (1)
     77,950       3,685,476  
TC Pipelines, L.P. (1)
     54,800       2,958,104  
              17,856,135  
Oil & Gas Storage & Transportation - 6.1%
                
Republic of the Marshall Islands - 3.4%
                
Capital Products Partners, L.P. (1)
     335,811       2,377,542  
Shell Midstream Partners, L.P.
     52,450       2,075,446  
United States - 2.7%
                
Dominion Midstream Partners, L.P. (1)
     95,550       3,500,952  
              7,953,940  
Propane - 3.8%
                
United States - 3.8%
                
Amerigas Partners, L.P. (1)
     82,050       3,679,122  
NGL Energy Partners, L.P. (1)
     55,000       1,325,500  
              5,004,622  
Shipping - 2.3%
                
Marshall Islands - 1.1%
                
Teekay Offshore Partners, L.P.
     79,050       1,399,185  
Republic of the Marshall Islands - 1.2%
                
Golar LNG Partners, L.P.
     82,900       1,638,933  
 
 
 
 
 
                 
              3,038,118  
                 
Total Master Limited Partnerships and Related Companies (Cost $176,055,430)
           $ 151,291,883  
                 
Preferred Stock - 4.4%
                
Crude Oil & Refined Products - 4.4%
                
United States - 4.4%
                
Blueknight Energy Partners, L.P. (1)
     757,519     $ 5,764,720  
Total Preferred Stock (Cost $5,032,847)
           $ 5,764,720  
                 
Fixed Income - 2.0%
                
Exploration & Production - 2.0%
                
United States - 2.0%
                
Midcontinent Express Pipeline, LLC, 6.700%, due 09/15/2019(1)(5)
     2,500,000     $ 2,606,250  
Total Fixed Income (Cost $2,686,855)
           $ 2,606,250  
                 
Short-Term Investments - Investment Companies - 2.8%
                
United States - 2.8%
                
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.02%(6)
     729,833     $ 729,833  
Fidelity Government Portfolio Fund - Institutional Class, 0.01%(6)
     729,832       729,832  
Fidelity Money Market Portfolio - Institutional Class, 0.13%(6)
     729,832       729,832  
First American Government Obligations Fund - Class Z, 0.05%(6)
     729,832       729,832  
Invesco STIC Prime Portfolio, 0.07%(6)
     729,832       729,832  
Total Short-Term Investments - Investment Companies (Cost $3,649,161)
           $ 3,649,161  
                 
Total Investments - 142.5% (Cost $212,649,368)
           $ 186,700,056  
Liabilities in Excess of Other Assets - (42.5)%
             (55,646,197 )
Net Assets Applicable to Common Stockholders - 100.0%
           $ 131,053,859  
   
                 
Schedule of Securities Sold Short - (6.4)%
                
Exchange Traded Funds - (6.4)%
  
Shares
          
United States - (6.4)%
                
JPMorgan Alerian MLP Index ETN
     (233,000 )   $ (8,343,730 )
Total Securities Sold Short (Proceeds $8,553,664)
           $ (8,343,730 )
   
SCHEDULE OF WRITTEN OPTIONS - (0.1)%
                
United States - (0.1)%
  
Contracts
          
Energy Transfer Equity, L.P., Call Option
                
Expiration: September 2015, Exercise Price $50.00
     (300 )   $ (36,000 )
Williams Partners, L.P., Call Option
                
Expiration: September 2015, Exercise Price $50.00
     (150 )     (37,650 )
Total Written Options (Proceeds $33,656)
           $ (73,650 )
 
Percentages are stated as a percent of net assets.
      
(1) 
All or a portion of these securities are held as collateral pursuant to the loan agreements.
      
(2) 
All of a portion of these securities represent cover for outstanding call options written.
      
(3) 
No distribution or dividend was made during the period ended Augsut 31, 2015.  As such, it is classified as a non-income producing security as of August 31, 2015.
      
(4) 
Security distributions are paid-in-kind.
      
(5) 
Restricted security under rule 144A under the Securities Act of 1933, as amended.
      
(6) 
Rate reported is the current yield as of August 31, 2015.
      
 
 
 
 
 
Tax Basis

The cost basis of investments for federal income tax purposes at August 31, 2015 was as follows*:
 
Cost of investments
   $ 159,919,421  
Gross unrealized appreciation  
     48,815,807  
Gross unrealized depreciation 
     (30,452,552 )
Net unrealized appreciation  
   $ 18,363,255  
 
*The above table only reflects tax adjustments through November 30, 2014.  For the previous fiscal year’s federal income tax information, please refer to the Notes to Financial Statements section in the most recent semi-annual or annual report for the Cushing MLP Total Return Fund (the “Fund”).

Fair Value Measurements

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

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

      Fair Value Measurements at Reporting Date Using        
         
Quoted Prices in
          
Significant
  
         
Active Markets for
    
Significant Other
    
Unobservable
  
   
Fair Value at
    
Identical Assets
    
Observable Inputs
    
Inputs
  
Description
  
August 31, 2015
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets
Equity Securities
                        
Common Stock (a)
   $ 23,388,042     $ 23,388,042     $ -     $ -  
Master Limited
  Partnerships and
  Related
  Companies (a)
     151,291,883       151,291,883       -       -  
Royalty Trusts(a)
     -       -       -       -  
Preferred Stock(a)
     5,764,720       5,764,720       -       -  
Total Equity Securities
     180,444,645       180,444,645       -       -  
Notes
        Senior Notes(a)
     2,606,250       -       2,606,250       -  
Total Notes
     2,606,250       -       2,606,250       -  
Other
      Short Term 
  Investments (a)
     3,649,161       3,649,161       -       -  
      Options
     -       -       -       -  
Total Other
     3,649,161       3,649,161       -       -  
Total Assets
   $ 186,700,056     $ 184,093,806     $ 2,606,250     $ -  
Liabilities
        Securities
   Sold Short(a)
   $ 8,343,730     $ 8,343,730     $ -     $ -  
   Written Options
     73,650       73,650                  
Total Liabilities
   $ 8,417,380     $ 8,417,380     $ -     $ -  

(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 August 31, 2015.

Transfers into and out of each level are measured at fair value at the end of the fiscal period.  There were no transfers between any levels during the period ended August 31, 2015.

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 are included in the Statement of Assets and Liabilities as an investment. The option is adjusted daily to reflect the fair 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 fair 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.

The Fund has adopted the disclosure provisions of FASB Accounting Standard Codification 815, Derivatives and Hedging (“ASC 815”).  ASC 815 requires enhanced disclosures about the Fund’s use of and accounting for derivative instruments and the effect of derivative instruments on the Fund’s results of operations and financial position.  Tabular disclosure regarding derivative fair value and gain/loss by contract type (e.g., interest rate contracts, foreign exchange contracts, credit contracts, etc.) is required and derivatives accounted for as hedging instruments under ASC 815 must be disclosed separately from those that do not qualify for hedge accounting.  Even though the Fund may use derivatives in an attempt to achieve an economic hedge, the Fund’s derivatives are not accounted for as hedging instruments under ASC 815 because investment companies account for their derivatives at fair value and record any changes in fair value in current period earnings.

Transactions in purchased options contracts for the period ended August 31, 2015, are as follows:

   
Contracts
    
Premiums
  
Outstanding at November 30, 2014
     2,738     $ 412,001  
Options purchased
     7,300       1,283,897  
Options covered
     (4,400 )     (784,990 )
Options expired
     (5,638 )     (910,908 )
Options exercised
     -       -  
Outstanding at August 31, 2015
     -     $ -  

The average monthly fair value of purchased options during the period ended August 31, 2015 was $22,556.

Transactions in written options contracts for the period ended August 31, 2015, are as follows:
 
 
   
Contracts
    
Premiums
  
Outstanding at November 30, 2014
     2,480     $ 96,975  
Options written
     14,180       572,177  
Options covered
     -       -  
Options expired
     (12,953 )     (511,914 )
Options exercised
     (3,257 )     (123,582 )
Outstanding at August 31, 2015
     450     $ 33,656  

The average monthly fair value of written options during the period ended August 31, 2015 was $36,121.

The effect of derivative instruments on the Statement of Operations for the period ended August 31, 2015:
 
Amount of Realized Gain (Loss) on Derivatives Recognized in Income
Derivatives not accounted for as
hedging instruments under ASC
815
  
Purchased
Options
Written
Options
Total
Equity Contracts
  
$(1,029,666)
$       511,914
$(517,752)
           
Amount of Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income
Derivatives not accounted for as
hedging instruments under ASC
815
  
Purchased
Options
Written
Options
Total
Equity Contracts
  
$               -
$      (31,709)
$      (31,709)


 
 
 
 
Item 2. Controls and Procedures.
 
(a)  
The Fund’s President and Treasurer have concluded that the Fund'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 Fund'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 Fund's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Fund's internal control over financial reporting.
 

Item 3. Exhibits.
 
Separate certifications for each principal executive officer and principal financial officer of the Fund 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 Fund 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/ Daniel L. Spears                                 
Daniel L. Spears, President
 
Date              10/28/15                                                                                          



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 Fund and in the capacities and on the dates indicated.

By (Signature and Title)                  /s/ Daniel L. Spears                                 
Daniel L. Spears, President

Date              10/28/15                                                                                           

 
By (Signature and Title)              /s/ John H. Alban                                        
John H. Alban, Treasurer
 
Date              10/28/15