cushing_n-q.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: 811-22499



The Cushing Renaissance 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, 2014

 
 
 
 
 
Item 1. Schedule of Investments.
 
The Cushing® Renaissance Fund
            
SCHEDULE OF INVESTMENTS (Unaudited)
            
       
     
August 31, 2014
  
               
Common Stock  - 60.2% (1)
  
Shares
    
Fair Value
  
Chemicals - 11.8% (1)
            
Netherlands - 5.3% (1)
            
LyondellBasell Industries NV
     92,538     $ 10,581,720  
United States - 6.5% (1)
                
The Dow Chemical Company
     81,000       4,337,550  
E.I. du Pont de Nemours and Company
     40,000       2,644,400  
Westlake Chemical Corporation (2)
     60,000       5,827,800  
                23,391,470  
Engineering & Construction - 1.4% (1)
                
United States - 1.4% (1)
                
Jacobs Energy Group Inc. (3)
     15,000       808,650  
Quanta Services, Inc. (3)
     55,000       1,998,700  
                2,807,350  
Exploration & Production - 3.1% (1)
                
United States - 3.1% (1)
                
Devon Energy Corporation
     20,000       1,508,400  
EOG Resources, Inc.
     9,400       1,032,872  
Occidental Petroleum Corporation
     20,000       2,074,600  
RSP Permian, Inc. (3)
     50,000       1,430,000  
                6,045,872  
Industrials - 8.6% (1)
                
United States - 8.6% (1)
                
Flowserve Corporation
     15,000       1,138,350  
Fluor Corporation (2)
     35,100       2,593,539  
MRC Global Inc. (3)
     65,000       1,613,300  
Trinity Industrials, Inc. (2)
     89,200       4,315,496  
United Rentals, Inc. (2)(3)
     63,500       7,470,775  
                17,131,460  
Integrated Oil - 1.6% (1)
                
Netherlands - 1.6% (1)
                
Royal Dutch Shell PLC (2)
     39,500       3,198,315  
                   
Machinery - 0.8% (1)
                
United States - 0.8% (1)
                
Wabtec Corporation
     20,000       1,667,200  
                   
Manufacturing - 1.8% (1)
                
United States - 1.8% (1)
                
Dresser-Rand Group Inc. (3)
     25,000       1,732,500  
Greenbrier Companies, Inc.
     25,000       1,788,000  
                3,520,500  
 
 
 
 
 
 
 
Oil and Gas Services - 6.2% (1)
                
Bermuda - 3.0% (1)
                
Seadrill Limited (2)
     160,000       5,960,000  
Switzerland - 2.9% (1)
                
Transocean Ltd. (2)
     150,000       5,797,500  
United States - 0.3% (1)
                
Patterson-UTI Energy Inc.
     15,000       518,100  
                12,275,600  
Refining - 8.7% (1)
                
United States - 8.7% (1)
                
HollyFrontier Corporation
     30,000       1,500,900  
Marathon Petroleum Corporation
     25,100       2,284,351  
Phillips 66 (2)
     80,000       6,961,600  
Tesoro Corporation
     50,000       3,237,000  
Western Refining Inc. (2)
     70,000       3,257,100  
                17,240,951  
Transportation - 11.6% (1)
                
Bermuda - 3.3% (1)
                
GasLog Ltd. (2)
     175,677       4,446,385  
Golar LNG Limited
     33,486       2,109,618  
Canada - 0.7% (1)
                
Canadian Pacific Railway Limited
     7,200       1,444,320  
Republic of the Marshall Islands - 3.8% (1)
                
Ardmore Shipping Corporation
     170,854       2,236,479  
Dorian LPG Ltd. (3)
     65,005       1,276,048  
Navigator Holdings Ltd. (2)(3)
     91,000       2,683,590  
Teekay Corporation
     20,000       1,226,400  
United States - 3.8% (1)
                
Genesee & Wyoming Inc. (3)
     19,500       1,917,435  
Kirby Corporation (2)(3)
     34,000       4,055,860  
Quality Distribution Inc. (3)
     20,000       280,800  
Swift Trasportation Company (3)
     60,000       1,270,800  
                22,947,735  
Utilities - 4.6% (1)
                
United States - 4.6% (1)
                
Duke Energy Corporation
     22,000       1,627,780  
PG&E Corporation
     30,000       1,394,400  
PPL Corporation
     100,000       3,463,000  
The Southern Company (2)
     60,500       2,686,200  
                9,171,380  
                   
Total Common Stock (Cost $85,936,877)
           $ 119,397,833  
                   
Master Limited Partnerships and Related Companies  - 31.2% (1)
                
Crude Oil & Refined Products Products - 9.1% (1)
                
United States - 9.1% (1)
                
Delek Logistics Partners, L.P.
     179,000     $ 7,428,500  
Phillips 66 Partners, L.P. (2)
     89,870       6,650,380  
Tesoro Logistics, L.P. (2)
     30,100       2,115,428  
World Point Terminals, L.P.
     101,000       1,929,100  
                18,123,408  
 
 
 
 
 
 
 
Natural Gas Gatherers & Processors - 1.4% (1)
                
United States - 1.4% (1)
                
QEP Midstream Partners, L.P. (2)
     103,700       2,696,200  
                   
Other - 3.4% (1)
                
Republic of the Marshall Islands - 1.4% (1)
                
Seadrill Partners LLC (2)
     79,800       2,755,494  
United States - 2.0% (1)
                
Calumet Specialty Products Partners, L.P.
     85,100       2,584,487  
OCI Partners, L.P.
     65,000       1,342,250  
                6,682,231  
Shipping - 13.1% (1)
                
Marshall Islands - 9.3% (1)
                
Capital Product Partners, L.P.
     426,000       4,660,440  
GasLog Partners, L.P. (2)
     89,706       2,989,901  
Knot Offshore Partners, L.P.
     85,970       2,411,458  
Navios Maritime Partners, L.P. (2)
     150,000       2,955,000  
Teekay LNG Partners, L.P. (2)
     60,000       2,604,000  
Teekay Offshore Partners, L.P.
     80,000       2,819,200  
United States - 3.8% (1)
                
Cheniere Energy Partners, L.P.
     230,000       7,613,000  
                26,052,999  
Upstream - 4.2% (1)
                
United States - 4.2% (1)
                
Legacy Reserves, L.P. (2)
     93,000       2,859,750  
Memorial Production Partners, L.P.
     50,000       1,170,000  
QR Energy, L.P. (2)
     195,000       4,217,850  
                8,247,600  
                   
Total Master Limited Partnerships and Related Companies (Cost $41,220,813)
           $ 61,802,438  
                   
                   
   
Principal
          
Senior Notes - 21.8% (1)
  
Amount
          
Engineering & Construction - 2.7% (1)
                
United States - 2.7% (1)
                
Zachry Holdings, Inc., 7.500%, due 02/01/2020 (4)
     5,000,000     $ 5,287,500  
                   
Exploration and Production - 12.9% (1)
                
Canada - 2.0% (1)
                
MEG Energy Corp., 6.375%, due 01/30/2023 (4)
     3,725,000       3,967,125  
United States - 10.9% (1)
                
Barrett Bill Corp., 7.000%, due 10/15/2022
     4,750,000       4,916,250  
Comstock Resources, Inc., 7.750%, due 04/01/2019
     5,000,000       5,362,500  
Denbury Resources, Inc., 4.625%, due 07/15/2023
     4,000,000       3,880,000  
Penn Virginia Corporation, 8.500%, due 05/01/2020
     3,000,000       3,315,000  
Resolute Energy Corp., 8.500%, due 05/01/2020
     2,000,000       2,070,000  
Sanchez Energy Corp., 6.125%, due 01/15/2023 (4)
     2,000,000       2,075,000  
              25,585,875  
Metals & Mining - 0.4% (1)
                
United States - 0.4% (1)
                
Cliffs Natural Resources Inc., 6.250%, due 10/01/2040
     1,000,000       870,667  
                   
Oil & Gas Services - 3.3% (1)
                
United States - 3.3% (1)
                
Key Energy Services, 6.750%, due 03/01/2021
     4,000,000       4,080,000  
Northern Oil & Gas, Inc., 8.000%, due 06/01/2020
     2,250,000       2,373,750  
                6,453,750  
Pipeline - 0.5% (1)
                
United States - 0.5% (1)
                
Sabine Pass Liquefaction, LLC, 5.750%, due 05/15/2024 (4)
     1,000,000       1,041,250  
 
 
 
 
 
 
 
                   
Refining - 2.0% (1)
                
United States - 2.0% (1)
                
Western Refining Inc., 6.250%, due 04/01/2021
     3,750,000       3,918,750  
                   
                   
Total Senior Notes (Cost $42,173,461)
           $ 43,157,792  
                   
Short-Term Investments - Investment Companies - 0.3% (1)
  
Shares
          
United States - 0.3% (1)
                
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.01% (5)
     121,937     $ 121,937  
Fidelity Government Portfolio Fund - Institutional Class, 0.01% (5)
     121,937       121,937  
Fidelity Money Market Protfolio - Institutional Class, 0.05% (5)
     121,937       121,937  
First American Government Obligations Fund - Class Z, 0.01% (5)
     121,937       121,937  
Invesco STIC Prime Portfolio, 0.01% (5)
     121,937       121,937  
Total Short-Term Investments (Cost $609,685)
           $ 609,685  
                   
                   
Total Investments - 113.5% (1) (Cost $169,940,836)
           $ 224,967,748  
Liabilities in Excess of Other Assets - (13.5)% (1)
             (26,757,893 )
Net Assets Applicable to Common Stockholders - 100.0% (1)
           $ 198,209,855  
                   
SCHEDULE OF WRITTEN CALL OPTIONS
                
Options - (0.0)%(1)
                
United States - (0.0)% (1)
  
Contracts
          
Transocean Ltd. Call Option
                
 
 Expiration: September 2014, Exercise Price: $40.00
     (1,500 )   $ (43,500 )
                   
Total Written Call Options - (0.0)%(1) (Premiums $50,943)
           $ (43,500 )
                   
                   
(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)
No distribution or dividend was made during the period ended August 31, 2014.  As such, it is classified as a non-income producing security as of August 31, 2014.
                
(4)
Restricted security under Rule 144A under the Securities Act of 1933, as amended.
          
(5)
Rate reported is the current yield as of August 31, 2014.
                
 
 
 
 
 
 
 
Tax Basis

The cost basis of investments for federal income tax purposes at August 31, 2014 was as follows*:

Cost of investments                                                                              $ 170,022,543
Gross unrealized appreciation                                                                  58,147,490
Gross unrealized depreciation                                                                  (3,245,785) 
Net unrealized appreciation                                                                   $   54,901,705

* The above table only reflects tax adjustments through November 30, 2013.  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 Renaissance 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, 2014
  
(Level 1)
(Level 2)
(Level 3)
Assets
Equity Securities
          
Common Stock (a)
$        119,397,833
  
$            119,397,833
$                         -
   $                                 -
Master Limited Partnerships and Related Companies (a)
61,802,438
  
61,802,438
-
  -
Total Equity Securities
    181,200,271
  
    181,200,271
                      -
                   -
Notes
        Senior Notes(a)
43,157,792
  
-
43,157,792
 
-
Total Notes
43,157,792
  
-
43,157,792
-
 
 
 
 
 
 
 
Other
          
      Short Term Investment
609,685
  
                     609,685
                      -
                   -
Total Other
         609,685
  
609,685
                      -
                   -
Total Assets
$        224,967,748
  
$            181,809,956
$        43,157,792
$                                 -
Liabilities
       Written Call Options
$                 43,500
  
$                     43,500
$                         -
$                                 -
Total Liabilities
$                 43,500
  
$                     43,500
$                         -
$                                 -
Total
$        224,924,248
  
$            181,766,456
$        43,157,792
$                                 -


(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, 2014.

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, 2014.

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.

There were no transactions in purchased options during the period ended August 31, 2014.

Transactions in written options contracts for the period ended August 31, 2014, are as follows:
 
 
   
Contracts
    
Premiums
  
Outstanding at December 1, 2013
     -     $ -  
Options written
     10,020       439,772  
Options covered
     (490 )     (22,403 )
Options exercised
     (1,050 )     (66,107 )
Options expired
     (6,980 )     (300,319 )
Outstanding at August 31, 2014
     1,500     $ 50,943  

The average monthly fair value of written options during the period ended August 31, 2014 was $46,478.
 
The effect of derivative instruments on the Statement of Operations for the period ended August 31, 2014.
 
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
  
$               -
$      307,513
$         307,513
           
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
  
$           -
$         7,443
$           7,443

 
 
 
 
 
 
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 Renaissance Fund                                                                                                                                 

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

 
Date October 28, 2014                                                                                                                   



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, 2014                                                                                      

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

 
Date October 28, 2014