cushing-royalty_nq.htm
 
As filed with the Securities and Exchange Commission on April 29, 2013

 

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  811-22593



Cushing Royalty & Income 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, 2013
 
 
 
 

 

 
Item 1. Schedule of Investments.
 
The Cushing Royalty & Income Fund
           
SCHEDULE OF INVESTMENTS (Unaudited)
           
       
     
February 28, 2013
 
               
Common Stock  - 12.0% (1)
 
Shares
   
Fair Value
 
Upstream - 3.8% (1)
           
United States - 3.8% (1)
           
Linn Co, LLC (3)
    178,800     $ 6,967,836  
                6,967,836  
                   
Upstream - 8.2% (1)
               
Canada - 8.2% (1)
               
Arc Resources LTD
    139,500       3,517,091  
Crescent Point Energy Corporation
    224,400       8,540,800  
Enerplus Corporation
    243,100       3,296,436  
                15,354,327  
                   
Total Common Stock (Cost $23,577,767)
          $ 22,322,163  
                   
Master Limited Partnerships and Related Companies  - 78.7% (1)
               
Upstream - 78.7% (1)
               
United States - 78.7% (1)
               
Breitburn Energy Partners, L.P. (3)
    915,200     $ 17,800,640  
Dorchester Minerals, L.P. (3)
    226,900       5,348,033  
EV Energy Partners, L.P. (3)
    221,200       12,389,412  
Legacy Reserves, L.P. (3)
    654,600       17,268,348  
Linn Energy, LLC (3)
    481,200       18,290,412  
LRR Energy, L.P. (3)
    310,900       5,450,077  
Memorial Production Partners, L.P
    579,202       10,877,413  
MID-CON Energy Partners, L.P.
    548,800       12,068,112  
Pioneer Southwest Energy Partners, L.P.
    473,300       11,132,016  
QR Energy, L.P. (3)
    1,050,292       18,285,584  
Vanguard Natural Resources, LLC (3)
    644,300       17,917,983  
Total Master Limited Partnerships and Related Companies (Cost $144,295,814)
          $ 146,828,030  
                   
Royalty Trusts - 13.6% (1)
               
Upstream - 13.6% (1)
               
United States - 13.6% (1)
               
Hugoton Royalty Trust
    254,800     $ 2,028,208  
Pacific Coast Oil Trust
    540,000       10,243,800  
Sandridge Mississippian Trust II
    409,335       5,526,022  
Sandridge Permian Trust I
    482,938       7,582,127  
Total US Royalty Trusts (Cost $31,064,932)
          $ 25,380,157  
                   
                 
 
 
 

 
 
Senior Notes - 1.7% (1)
 
Principal
Amount
         
Upstream - 1.7% (1)
               
United States - 1.7% (1)
               
Breitburn Energy Partners, L.P., 7.875%, due 04/15/2022
    1,000,000     $ 1,067,500  
EV Energy Partners, L.P., 8.000%, due 04/15/2019
    2,000,000       2,105,000  
Total Senior Notes (Cost $3,095,000)
          $ 3,172,500  
                   
Short-Term Investments - Investment Companies - 3.5% (1)
 
Shares
         
United States - 3.5% (1)
               
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.02% (2)
    1,311,195     $ 1,311,195  
Fidelity Government Portfolio Fund - Institutional Class, 0.01% (2)
    1,311,194       1,311,194  
Fidelity Money Market Portfolio - Institutional Class, 0.12% (2)
    1,311,194       1,311,194  
First American Government Obligations Fund - Class Z, 0.02% (2)
    1,311,194       1,311,194  
Invesco STIC Prime Portfolio, 0.09% (2)
    1,311,194       1,311,194  
Total Short-Term Investments (Cost $6,555,971)
          $ 6,555,971  
                   
Total Investments - 109.5% (1) (Cost $208,589,484)
          $ 204,258,821  
Liabilities in Excess of Other Assets - (9.5)% (1)
            (17,779,905 )
Net Assets Applicable to Common Stockholders - 100.0% (1)
          $ 186,478,916  
                   
(1)
Calculated as a percentage of net assets applicable to common stockholders.
               
(2)
Rate reported is the current yield as of February 28, 2013.
               
(3)
All or a portion of these securities are held as collateral pursuant to the loan agreements.
               

 
Tax Basis

The cost basis of investments for federal income tax purposes at February 28, 2013 was as follows*:
 
Cost of investments               $ 206,424,541  
Gross unrealized appreciation            4,314,153  
Gross unrealized depreciation        ­­­­        (6,479,873 )
Net unrealized depreciation                 $ (2,165,720 )
 
* The above table only reflects tax adjustments through November 30, 2012.  For the previous fiscal year's federal income tax information, please refer to the Notes to Financial Statements section in the Fund's most recent semi-annual or annual report.

 
Fair Value Measurements
 
Various inputs that are used in determining the fair value of the Cushing Royalty & Income Fund’s (the “Fund”) 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, 2013
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
Assets
Equity Securities
                       
Common Stock (a)
  $ 22,322,163     $ 22,322,163     $ -     $ -  
Master Limited
  Partnerships and
  Related
  Companies (a)
    146,828,030       146,828,030       -       -  
US Royalty Trusts (a)
    25,380,157       25,380,157       -       -  
Total Equity Securities
    194,530,350       194,530,350       -       -  
Notes
        Senior Notes(a)
    3,172,500       -       3,172,500          
Total Notes
    3,172,500       -       3,172,500          
Other
                               
Short-Term
  Investments
    6,555,971       6,555,971       -       -  
Total Other
    6,555,971       6,555,971       -       -  
Total
  $ 204,258,821     $ 201,086,321     $ 3,172,500     $ -  


(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 February 28, 2013.

There were no transfers between any levels during the period ended February 28, 2013.

Derivative Financial Instruments

The Fund did not hold any derivative financial instruments during the period ended February 28, 2013.
 
 
 
 

 
 
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)  Cushing Royalty & Income Fund                                   

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

Date          April 26, 2013                                                                           



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/ Daniel L. Spears                         
Daniel L. Spears, President

Date          April 26, 2013                                                                          

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

Date          April 26, 2013