cushing-ren_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: 811-22499


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, 2015

 
 
 
 
Item 1. Schedule of Investments.
 

The Cushing Renaissance Fund
  
SCHEDULE OF INVESTMENTS (Unaudited)
  
             
   
August 31, 2015
  
             
         
Fair
  
Common Stock - 64.0%
  
Shares
    
Value
  
Chemicals - 15.7%
            
Netherlands - 4.6%
            
LyondellBasell Industries NV
     67,538     $ 5,766,395  
United States - 11.1%
                
E.I. du Pont de Nemours and Company
     60,000       3,090,000  
Polyone Corporation
     90,000       2,922,300  
The Dow Chemical Company(1)
     120,000       5,251,200  
Westlake Chemical Corporation(1)
     45,000       2,485,350  
              19,515,245  
Commercial Service Supplies & Distributors - 0.8%
                
United States - 0.8%
                
United Rentals, Inc.(2)
     14,000       970,620  
                 
General Partnerships - 5.5%
                
United States - 5.5%
                
Kinder Morgan, Inc.(1)
     120,000       3,889,200  
Targa Resources Corporation(1)
     45,000       2,972,700  
              6,861,900  
Integrated Oil & Gas - 6.1%
                
France - 3.1%
                
Total SA
     82,000       3,804,800  
Norway - 3.0%
                
Statoil ASA
     242,000       3,748,580  
              7,553,380  
Machinery - 3.0%
                
United States - 3.0%
                
Greenbrier Companies, Inc.
     25,000       1,042,500  
Wabtec Corporation(1)
     28,000       2,681,280  
              3,723,780  
Materials - 0.8%
                
United States - 0.8%
                
Sealed Air Corporation
     20,000       1,029,000  
                 
Oil & Gas Refining & Marketing - 13.9%
                
United States - 13.9%
                
HollyFrontier Corporation
     75,000       3,514,500  
Marathon Petroleum Corporation(1)
     50,200       2,374,962  
Phillips 66(1)
     80,000       6,325,600  
Tesoro Corporation(1)
     55,000       5,060,550  
              17,275,612  
Oil & Gas Storage & Transportation - 7.6%
                
Bermuda - 3.1%
                
GasLog Ltd.(1)
     135,677       1,884,553  
Golar LNG Ltd.
     51,722       2,014,055  
Republic of the Marshall Islands - 4.5%
                
Ardmore Shipping Corporation
     33,854       379,842  
Teekay Corporation
     140,000       5,146,400  
              9,424,850  
Shipping - 1.0%
                
United States - 1.0%
                
Cheniere Energy, Inc.(2)
     20,000       1,243,000  
                 

 
 
 

Transportation - 0.5%
                
United States - 0.5%
                
XPO Logistics, Inc.(2)
     20,000       702,000  
                 
Utilities - 9.1%
                
United States - 9.1%
                
Calpine Corporation(2)
     75,000       1,195,500  
Centerpoint Energy, Inc.(1)
     145,000       2,699,900  
Dominion Resources, Inc.(1)
     30,000       2,092,500  
PPL Corporation(1)
     110,000       3,408,900  
Sempra Energy(1)
     20,000       1,897,000  
              11,293,800  
                 
Total Common Stocks (Cost $75,041,942)
           $ 79,593,187  
                 
Master Limited Partnerships and Related Companies - 24.7%
                
Oil & Gas Storage & Transportation - 20.4%
                
Republic of the Marshall Islands - 9.8%
                
Capital Product Partners, L.P.
     726,969     $ 5,146,940  
GasLog Partners, L.P.
     131,694       2,531,159  
Golar LNG Partners, L.P.
     229,686       4,540,892  
United States - 10.6%
                
Cheniere Energy Partners, L.P.(1)
     230,000       6,840,200  
Delek Logistics Partners, L.P.(1)
     124,000       4,937,680  
World Point Terminals, L.P.(1)
     101,000       1,425,110  
              25,421,981  
Other - 3.5%
                
United States - 3.5%
                
Calumet Specialty Products Partners, L.P.
     168,000       4,352,880  
                 
Transportation - 0.8%
                
Republic of the Marshall Islands - 0.8%
                
Navios Maritime Partners, L.P.
     115,000       1,016,600  
                 
Total Master Limited Partnerships and Related Companies (Cost $28,815,156)
           $ 30,791,461  
                 
                 
Fixed Income - 24.6%
                
Commercial Service Supplies & Distributors - 3.2%
                
United States - 3.2%
                
United Rentals North American, Inc., 5.750%, due 11/15/2024(1)
     4,000,000     $ 3,960,000  
                 

 
 
 

Construction & Engineering - 4.0%
                
United States - 4.0%
                
Zachry Holdings, Inc., 7.500%, due 02/01/2020(3)
     5,000,000       5,000,000  
                 
Oil & Gas Equipment & Services - 1.4%
                
United States - 1.4%
                
Key Energy Services, 6.750%, due 03/01/2021
     4,000,000       1,700,000  
                 
Oil & Gas Exploration & Production - 9.8%
                
Canada - 2.4%
                
MEG Energy Corporation, 6.375%, due 01/30/2023(3)
     3,725,000       3,017,250  
United States - 7.4%
                
Barrett Bill Corporation, 7.000%, due 10/15/2022(1)
     2,750,000       1,938,750  
Comstock Resources, Inc., 7.750%, due 04/01/2019
     5,000,000       1,575,000  
Denbury Resources, Inc., 4.625%, due 07/15/2023
     4,000,000       2,700,000  
Sanchez Energy Corporation, 6.125%, due 01/15/2023(1)
     4,000,000       3,020,000  
              9,233,750  
Oil & Gas Refining & Marketing - 3.0%
                
United States - 3.0%
                
Western Refining Inc., 6.250%, due 04/01/2021(1)
     3,750,000       3,731,250  
                 
Oil & Gas Storage & Transportation - 1.6%
                
United States - 1.6%
                
Sabine Pass Liquefaction, LLC, 5.750%, due 05/15/2024(1)
     1,000,000       982,500  
Sabine Pass Liquefaction, LLC, 5.625%, due 02/01/2021(1)
     1,000,000       990,000  
              1,972,500  
Trading Companies & Distributors - 1.6%
                
United States - 1.6%
                
H & E Equipment Services, Inc., 7.000%, due 09/01/2022(1)
     2,000,000       2,000,000  
                 
Total Fixed Income (Cost $40,766,869)
           $ 30,614,750  
                 
Short-Term Investments - Investment Companies - 0.4%
                
United States - 0.4%
                
AIM Short-Term Treasury Portfolio Fund - Institutional Class, 0.02%(4)
     95,380     $ 95,380  
Fidelity Government Portfolio Fund, 0.01%(4)
     95,380       95,380  
Fidelity Money Market Portfolio, 0.13%(4)
     95,380       95,380  
First American Prime Obligations Fund - Class Z, 0.05%(4)
     95,380       95,380  
Invesco STIC Prime Portfolio, 0.07%(4)
     95,380       95,380  
Total Short-Term Investments - Investment Companies (Cost $476,900)
           $ 476,900  
                 
Total Investments - 113.7% (Cost $145,100,867)
           $ 141,476,298  
Liabilities in Excess of Other Assets - (13.7%)
             (17,033,629 )
Net Assets Applicable to Common Stockholders - 100.0%
           $ 124,442,669  
                 
                 
 
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) 
No distribution or dividend was made during the period ended August 31, 2015.  As such, it is classified as a non-income producing security as of August 31, 2015.
    
(3) 
Restricted security under rule 144A under the Securities Act of 1933, as amended.  At August 31, 2015, these securities amounted to  approximately $8,017,250, or 6.4% of net assets
(4) 
Rate reported is the current yield as of August 31, 2015.
    
The Global Industry Classification Standard ("GICS®") was developed by and/or is the exclusive property of MSCI, Inc. ("MSCI") and Standard & Poor's Financial Services LLC ("S&P"). GICS is a service mark of MSCI and S&P, and has been licensed for use by U.S. Bancorp Fund Services, LLC.


 
 
 

Tax Basis

The cost basis of investments for federal income tax purposes at August 31, 2015 was as follows*:
 
Cost of investments
 $ 145,405,749    
Gross unrealized appreciation
 15,379,434    
 Gross unrealized depreciation
    ­­­­ (19,308,885)
  
Net unrealized appreciation
 $     (3,929,451)  
 
* 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 Cushing Renaissance Fund's (the “Fund”) most recent semi-annual or annual report.

 
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)
   $ 79,593,187     $ 79,593,187     $ -     $ -  
Master Limited
     Partnerships and
     Related
     Companies (a)
     30,791,461       30,791,461       -       -  
Total Equity Securities
     110,384,648       110,384,648       -       -  
Notes
     30,614,750       -       30,614,750          
        Senior Notes(a)
                             -  

 
 
 
 
                                 
Total Notes
     30,614,750       -       30,614,750       -  
Other
                                
      Short Term
Investments (a)
     476,900       476,900       -       -  
Total Other
     476,900       476,900       -       -  
Total
   $ 141,476,298     $ 110,861,548     $ 30,614,750     $ -  
 

(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.

There were no transactions in purchased options during the period ended August 31, 2015.

Transactions in written options contracts for the period ended August 31, 2015, are as follows:
 
   
Contracts
    
Premiums
  
Outstanding at November 30, 2014
     -     $ -  
Options written
     400       39,585  
Options covered
     -       -  
Options expired
     (400 )     (39,585 )
Options exercised
     -       -  
Outstanding at August 31, 2015
     -     $ -  

The average monthly fair value of written options during the period ended August 31, 2015 was $3,733.

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
  
$                -
$         39,585
$           39,585
           
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
  
$               -
$                  -
$                    -
 
 
 
 
 
 
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 Renaissance 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