cushing-royalty_nq.htm
 
As filed with the Securities and Exchange Commission on October 28, 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:  August 31, 2013


 
 
 
Item 1. Schedule of Investments.

The Cushing Royalty & Income Fund
            
SCHEDULE OF INVESTMENTS (Unaudited)
            
       
     
August 31, 2013
  
               
Common Stock  - 13.4% (1)
  
Shares
    
Fair Value
  
Crude Oil & Refined Products - 1.7% (1)
            
United States - 1.7% (1)
            
Berry Petroleum Company
     71,400     $ 2,938,110  
                   
Upstream - 11.7% (1)
                
Canada - 11.7% (1)
                
Arc Resources LTD(2)
     176,959       4,237,070  
Crescent Point Energy Corporation(2)
     217,062       7,917,518  
Enerplus Corporation(2)
     516,074       8,571,989  
                20,726,577  
                   
Total Common Stock (Cost $24,419,273)
           $ 23,664,687  
                   
Master Limited Partnerships and Related Companies  - 78.2% (1)
                
Coal - 0.8% (1)
                
United States - 0.8% (1)
                
Natural Resource Partners, L.P.
     74,584     $ 1,462,592  
                   
Crude Oil & Refined Products - 1.4% (1)
                
United States - 1.4% (1)
                
Delek Logistics Partners, L.P.
     82,200       2,433,120  
                   
Natural Gas Gatherers & Processors - 1.6% (1)
                
United States - 1.6% (1)
                
PVR Partners, L.P.
     121,900       2,829,299  
                   
Other - 0.3% (1)
                
United States - 0.3% (1)
                
Calumet Specialty Products Partners, L.P.
     17,446       533,324  
                   
Shipping - 1.5% (1)
                
Republic of the Marshall Islands - 1.5% (1)
                
Capital Product Partners, L.P.
     299,148       2,650,451  
                   
Upstream - 71.7% (1)
                
United States - 71.7% (1)
                
Atlas Resource Partners, L.P.
     187,187       3,884,130  
BreitBurn Energy Partners, L.P. (2)
     911,077       16,098,731  
Dorchester Minerals, L.P. (2)
     212,560       5,099,315  
EV Energy Partners, L.P.
     107,400       3,919,026  
Legacy Reserves, L.P. (2)
     661,679       17,852,100  
Linn Energy, LLC (2)
     547,911       13,210,134  
LRR Energy, L.P. (2)
     134,305       2,021,290  
Memorial Production Partners, L.P. (2)
     649,343       13,142,702  
MID-CON Energy Partners, L.P. (2)
     686,356       16,362,727  
QR Energy, L.P. (2)
     1,039,838       17,115,734  
Vanguard Natural Resources, LLC (2)
     656,336       18,016,423  
              126,722,312  
Variable Distribution - 0.9% (1)
                
United States - 0.9% (1)
                
Northern Tier Energy, L.P.
     74,088       1,543,253  
                   
                   
Total Master Limited Partnerships and Related Companies (Cost $136,168,142)
           $ 138,174,351  
                   
Royalty Trusts - 6.3% (1)
                
Upstream - 6.3% (1)
                
United States - 6.3% (1)
                
Hugoton Royalty Trust
     271,341     $ 2,170,728  
Pacific Coast Oil Trust
     494,490       8,984,883  
Total US Royalty Trusts (Cost $12,049,893)
           $ 11,155,611  
                   
   
Principal
          
Senior Notes - 1.7% (1)
  
Amount
          
Upstream - 1.7% (1)
                
United States - 1.7% (1)
                
BreitBurn Energy Partners, L.P., 7.875%, due 04/15/2022
     1,000,000     $ 995,000  
EV Energy Partners, L.P., 8.000%, due 04/15/2019
     2,000,000       2,010,000  
Total Senior Notes (Cost $3,095,000)
           $ 3,005,000  
 
 
 
 
 
Short-Term Investments - Investment Companies - 4.4% (1)
  
Shares
          
United States - 4.4% (1)
                
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.02% (3)
     1,541,059       1,541,059  
Fidelity Government Portfolio Fund - Institutional Class, 0.01% (3)
     1,541,059       1,541,059  
Fidelity Money Market Portfolio - Institutional Class, 0.05% (3)
     1,541,059       1,541,059  
First American Government Obligations Fund - Class Z, 0.02% (3)
     1,541,059       1,541,059  
Invesco STIC Prime Portfolio, 0.02% (3)
     1,541,060       1,541,060  
Total Short-Term Investments (Cost $7,705,296)
           $ 7,705,296  
                   
Total Investments - 104.0% (1) (Cost $183,437,604)
           $ 183,704,945  
Liabilities in Excess of Other Assets - (4.0)% (1)
             (7,106,693 )
Net Assets Applicable to Common Stockholders - 100.0% (1)
           $ 176,598,252  
 
(1)
Calculated as a percentage of net assets applicable to common stockholders.
                
(2)
All or a portion of these securities are held as collateral pursuant to the loan agreements.
                
(3)
Rate reported is the current yield as of August 31, 2013.
                

 
 
 
 
 

Tax Basis

The cost basis of investments for federal income tax purposes at August 31, 2013 was as follows*:
 
Cost of investments
 $ 181,272,661  
Gross unrealized appreciation   6,534,735  
Gross unrealized depreciation   (4,102,451 )
Net unrealized appreciation $ 2,432,284  

* 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
  
August 31, 2013
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets
Equity Securities
                        
Common Stock (a)
   $ 23,664,687     $ 23,664,687     $ -     $ -  
Master Limited Partnerships and Related Companies (a)
     138,174,351       138,174,351       -       -  
US Royalty Trusts (a)
     11,155,611       11,155,611       -       -  
Total Equity Securities
     172,994,649       172,994,649       -       -  
 
 
 
 
 
Notes
        Senior Notes(a)
     3,005,000       -       3,005,000       -  
Total Notes
     3,005,000       -       3,005,000       -  
Other
                                
Short-Term Investments
     7,705,296       7,705,296       -       -  
Total Other
     7,705,296       7,705,296       -       -  
Total
   $ 183,704,945     $ 180,699,945     $ 3,005,000     $ -  
 
(a)  
All other industry classifications are identified in the Schedule of Investments.  The Fund did not hold Level 3 investments at any time during the period ended August 31, 2013.

There were no transfers between any levels during the period ended August 31, 2013.

Derivative Financial Instruments

The Fund did not hold any derivative financial instruments during the period ended August 31, 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        October 28, 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        October 28, 2013                                                                          

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

Date        October 28, 2013