cushing-royalty_nq.htm
As filed with the Securities and Exchange Commission on October 30, 2012
 



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



The 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, 2012

 
 
 
 
 
Item 1. Schedule of Investments.
 
The Cushing Royalty & Income Fund
            
SCHEDULE OF INVESTMENTS (Unaudited)
            
       
     
August 31, 2012
  
               
Common Stock - 6.6% (1)
  
Shares
    
Fair Value
  
Crude Oil/ Natural Gas Production - 1.4%(1)
            
United States - 1.4%(1)
            
Pengrowth Energy Corporation
     414,000     $ 2,802,780  
                   
Exploration and Production - 5.2%(1)
                
Canada - 5.2%(1)
                
Baytex Energy Corporation
     63,000       2,868,390  
Crescent Point Energy Corporation
     180,800       7,518,125  
                10,386,515  
                   
Total Common Stock (Cost $14,206,182)
           $ 13,189,295  
                   
Master Limited Partnerships and Related Companies  - 62.7% (1)
                
Crude Oil/Natural Gas Production - 62.7%(1)
                
United States - 62.7% (1)
                
Breitburn Energy Partners, L.P.
     932,900     $ 18,256,853  
Dorchester Minerals, L.P.
     216,000       4,749,840  
EV Energy Partners, L.P.
     152,000       9,541,040  
Legacy Reserves, L.P.
     500,100       13,947,789  
Linn Energy, LLC
     462,500       18,389,000  
LRR Energy, L.P.
     222,700       4,017,508  
Memorial Production Partners, L.P
     515,602       9,162,248  
MID-CON Energy Partners, L.P.
     450,500       10,077,685  
Pioneer Southwest Energy Partners, L.P.
     414,500       10,611,200  
QR Energy, L.P.
     671,192       11,994,201  
Vanguard Natural Resources, LLC
     524,600       15,014,052  
Total Master Limited Partnerships and Related Companies (Cost $123,550,986)
           $ 125,761,416  
                   
Royalty Trusts - 36.3% (1)
                
Crude Oil/Natural Gas Production - 36.3% (1)
                
United States - 36.3% (1)
                
BP Prudhoe Bay Royalty Trust
     81,900     $ 7,234,227  
Enduro Royalty Trust
     344,700       6,290,775  
MV Oil Trust
     182,100       6,140,412  
Pacific Coast Oil Trust
     540,000       10,233,000  
Permian Basin Royalty Trust
     476,200       7,414,434  
San Juan Basin Royalty Trust
     97,000       1,321,140  
Sandridge Mississippian Trust II
     626,000       13,027,060  
Sandridge Permian Trust I
     639,800       12,783,204  
VOC Energy Trust
     147,300       2,644,035  
Whiting USA Trust II
     298,300       5,727,360  
 
 
 
 
 
                 
Total US Royalty Trusts (Cost $83,830,239)
           $ 72,815,647  
     
Principal
          
   
Amount
          
Senior Notes - 1.0% (1)
                
Crude Oil/Natural Gas Production - 1.0% (1)
                
United States - 1.0% (1)
                
EV Energy Partners, L.P., 8.000%, due 04/15/2019
     2,000,000     $ 2,075,000  
Total Senior Notes (Cost $2,060,000)
           $ 2,075,000  
                   
Short-Term Investments - Investment Companies - 1.4% (1)
  
Shares
          
United States - 1.4% (1)
                
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.02% (2)
     585,913     $ 585,913  
Fidelity Government Portfolio Fund - Institutional Class, 0.01% (2)
     585,914       585,914  
Fidelity Money Market Protfolio - Institutional Class, 0.16% (2)
     585,914       585,914  
First American Government Obligations Fund - Class Z, 0.02% (2)
     585,913       585,913  
First American Treasury Obligations Fund - Class Z, 0.00% (2)
     585,913       585,913  
Total Short-Term Investments (Cost $2,929,567)
           $ 2,929,567  
                   
                   
Total Investments - 108.0% (1) (Cost $226,576,974)
           $ 216,770,925  
Liabilities in Excess of Other Assets - (8.0)% (1)
             (16,135,749 )
Net Assets Applicable to Common Stockholders - 100.0% (1)
           $ 200,635,176  
                   
(1)
Calculated as a percentage of net assets applicable to common stockholders.
                
(2)
Rate reported is the current yield as of August 31, 2012.
                
 
Tax Basis

The cost basis of investments for federal income tax purposes at August 31, 2012 was as follows:
 
Cost of investments
   $ 226,576,974  
Gross unrealized appreciation
     6,662,650  
Gross unrealized depreciation
     (16,468,699 )
Net unrealized appreciation
   $ (9,806,049 )

Fair Value Measurements
 
Various inputs that are used in determining the fair value of the 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, 2012
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets
Equity Securities
                        
Common Stock (a)
   $ 13,189,295     $ 13,189,295     $ -     $ -  
Master Limited
  Partnerships and
  Related
  Companies (a)
     125,761,416       125,761,416       -       -  
US Royalty Trusts (a)
     72,815,647       72,815,647       -       -  
Total Equity Securities
     211,766,358       211,766,358       -       -  
Notes
        Senior Notes(a)
     2,075,000       -       2,075,000          
Total Notes
     2,075,000       -       2,075,000          
Other
                                
Short-Term Investments
     2,929,567       2,929,567       -       -  
Total Other
     2,929,567       2,929,567       -       -  
Total
   $ 216,770,925     $ 214,695,925     $ 2,075,000     $ -  
 
(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, 2012.

There were no transfers between any levels during the period ended August 31, 2012.

Derivative Financial Instruments

The Fund did not hold any derivative financial instruments during the period ended August 31, 2012.

 
 
 
 
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 Royalty & Income Fund                                           

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

Date          October 29, 2012                                                                                    



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          October 29, 2012                                                                                    

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

Date          October 29, 2012