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:  February 28, 2018

 
Item 1. Schedule of Investments.
 
The Cushing Renaissance Fund
            
SCHEDULE OF INVESTMENTS (Unaudited)
            
             
   
 
February 28, 2018    
             
         
Fair
  
Common Stock - 61.1%
  
Shares
    
Value
  
Chemicals - 8.7%
            
Netherlands - 2.0%
            
LyondellBasell Industries NV(1)
    
21,000
    
$
2,272,620
  
United States - 6.7%
                
Albemarle Corporation
    
12,500
      
1,255,375
  
DowDuPont, Inc.(1)
    
65,000
      
4,569,500
  
Huntsman Corporation
    
60,000
      
1,936,200
  
             
10,033,695
  
Diversified General Partnerships - 2.5%
                
United States - 2.5%
                
HollyFrontier Corporation(1)
    
67,500
      
2,891,025
  
                 
Exploration & Production - 13.5%
                
Canada - 1.7%
                
Suncor Energy, Inc.
    
60,000
      
1,975,200
  
Netherlands - 6.1%
                
Royal Dutch Shell Plc
    
110,000
      
6,959,700
  
United Kingdom - 4.7%
                
BP Plc
    
140,000
      
5,440,400
  
United States - 1.0%
                
QEP Resources, Inc.(2)
    
130,000
      
1,120,600
  
             
15,495,900
  
General Partners - 4.5%
                
United States - 4.5%
                
Targa Resources Corporation(1)
    
115,125
      
5,140,331
  
                 
Industrials - 7.6%
                
United States - 7.6%
                
Dover Corporation
    
32,000
      
3,203,200
  
Emerson Electric Company(1)
    
77,000
      
5,471,620
  
             
8,674,820
  
Oil Services - 1.7%
                
Netherlands Antilles - 1.7%
                
Schlumberger Ltd.
    
30,000
      
1,969,200
  
                 
Refiners - 11.4%
                
United States - 11.4%
                
CVR Energy, Inc.(1)
    
75,000
      
2,221,500
  
PBF Energy, Inc.(1)
    
100,000
      
2,931,000
  
Phillips 66(1)
    
44,000
      
3,976,280
  
Valero Energy Corporation(1)
    
44,000
      
3,978,480
  
             
13,107,260
  
Utilities - 11.2%
                
United States - 11.2%
                
Exelon Corporation(1)
    
99,000
      
3,666,960
  
FirstEnergy Corporation(1)
    
140,000
      
4,526,200
  
NRG Yield, Inc.(1)
    
300,000
      
4,695,000
  
             
12,888,160
  
Total Common Stocks (Cost $67,109,587)
          
$
70,200,391
  
                 
 
 
Master Limited Partnerships and Related Companies - 32.3%
                
Crude Oil & Refined Products - 7.0%
                
United States - 7.0%
                
MPLX, L.P.(1)
    
115,000
    
$
3,970,950
  
Sunoco, L.P.(1)
    
140,000
      
4,048,800
  
             
8,019,750
  
Large Cap Diversified - 4.4%
                
United States - 4.4%
                
Energy Transfer Partners, L.P.(1)
    
275,000
      
5,007,750
  
                 
Natural Gas Gatherers & Processors - 3.2%
                
United States - 3.2%
                
DCP Midstream, L.P.
    
50,000
      
1,792,000
  
Western Gas Partners, L.P.
    
40,000
      
1,862,000
  
             
3,654,000
  
Shipping - 11.9%
                
Republic of the Marshall Islands - 8.1%
                
GasLog Partners, L.P.
    
220,000
      
5,170,000
  
Golar LNG Partners, L.P.
    
225,000
      
4,160,250
  
United States - 3.8%
                
Cheniere Energy Partners, L.P.(1)
    
150,000
      
4,398,000
  
             
13,728,250
  
Upstream - 0.7%
                
United States - 0.7%
                
Mid-Con Energy Partners, L.P.(3)
    
465,116
      
776,744
  
                 
Yield - 5.1%
                
United States - 5.1%
                
NextEra Energy Partners, L.P.(1)
    
150,000
      
5,886,000
  
Total Master Limited Partnerships and Related Companies (Cost $31,292,514)
          
$
37,072,494
  
                 
                 
Fixed Income - 30.0%
                
Engineering & Construction - 5.5%
                
United States - 5.5%
                
Zachry Holdings, Inc., 7.500%, due 02/01/2020(1)(4)
    
6,250,000
    
$
6,343,750
  
                 
Exploration & Production - 14.4%
                
Canada - 2.0%
                
MEG Energy Corporation, 6.375%, due 01/30/2023(4)
    
2,725,000
      
2,350,312
  
United States - 12.4%
                
Barrett Bill Corporation, 7.000%, due 10/15/2022(1)
    
2,750,000
      
2,763,750
  
Denbury Resources, Inc., 4.625%, due 07/15/2023
    
4,000,000
      
2,980,000
  
Murphy Oil Corporation, 5.875%, due 12/01/2042
    
5,000,000
      
4,700,000
  
Sanchez Energy Corporation, 6.125%, due 01/15/2023(1)
    
5,000,000
      
3,775,000
  
             
16,569,062
  
Industrials - 3.2%
                
United States - 3.2%
                
Cleaver-Brooks, Inc., 7.875%, due 03/01/2023(4)
    
3,500,000
      
3,701,250
  
                 
Natural Gas Gatherers & Processors - 2.7%
                
United States - 2.7%
                
DCP Midstream, L.P., 7.375%, due 06/15/2023
    
3,000,000
      
3,031,875
  
 
 
Refiners - 4.2%
                
United States - 4.2%
                
PBF Holding Company, LLC / PBF Finance Corporation, 7.000%, due 11/15/2023
    
4,655,000
      
4,864,475
  
Total Fixed Income (Cost $36,649,969)
          
$
34,510,412
  
                 
Short-Term Investments - Investment Companies - 0.6%
                
United States - 0.6%
                
Fidelity Government Portfolio Fund - Institutional Class, 1.26%(5)
    
169,565
    
$
169,565
  
First American Government Obligations Fund - Class Z, 1.25%(5)
    
169,564
      
169,564
  
Morgan Stanley Institutional Liquidity Funds - Government Portfolio, 1.26%(5)
    
169,564
      
169,564
  
Invesco Short-Term Government & Agency Portfolio - Institutional Class, 1.30%(5)
    
169,565
      
169,565
  
Total Short-Term Investments - Investment Companies (Cost $678,258)
          
$
678,258
  
                 
Total Investments - 124.0% (Cost $135,730,328)
          
$
142,461,555
  
Written Options(6) - 0.0% (Premiums paid $32,038)
            
(22,880)
 
Liabilities in Excess of Other Assets - (24.0%)
            
(27,507,155)
 
Net Assets Applicable to Common Stockholders - 100.0%
          
$
114,931,520
  
 
(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 February 28, 2018.  As such, it is classified as a non-income producing security as of February 28, 2018.
(3)
Restricted security.  Fair valued by the Adviser using the Fund's valuation prodecures and subsequently ratified by the Board of Trustees.  The position was acquired on October 7, 2016 at $1,000,000 and the fair value accounted for 0.68% of the Fund's net assets as of February 28, 2018.
(4)
Securities purchased pursuant to Rule 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "qualified institutional buyers."  These securities have been deemed to be liquid by the Fund's adviser under the supervision of the Board of Directors.  As of February 28, 2018, the value of these investments was $12,395,313 or 10.78% of total net assets.
(5)
Rate reported is the current yield as of February 28, 2018.
      
(6)
Description
Exercise
Price
Expiration
Date
Currency
Number of
Contracts
Premiums
Received
Fair
Value
Unrealized
Appreciation
(Depreciation)
 
Dover Corporation, Call Option
$105.00
3/1/2018
USD
160
$14,074
$13,280
$794
 
Emerson Electric Company,
Call Option
$75.00
3/1/2018
USD
400
$17,964
$9,600
$8,364
            $32,038 $22,880
$9,158
 
 

Tax Basis

The cost basis of investments for federal income tax purposes at February 28, 2018 was as follows*:
      
Cost of investments
  
$
135,698,290
  
Gross unrealized appreciation
    
13,261,227
  
Gross unrealized depreciation
    
(6,520,842
)
Net unrealized appreciation
  
$
6,740,385
  
 
* The above table only reflects tax adjustments through November 30, 2017.  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   
  
         
 
    
 
    
 
  
Description
  
Fair Value at
February 28, 2018
    
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
    
Significant Other
Observable Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
  
Assets
Equity Securities
                        
Common Stock (a)
  
$
70,200,391
    
$
70,200,391
    
$
-
    
$
-
  
Master Limited
Partnerships and
Related
   Companies (a)
    
37,072,494
      
36,295,750
      
776,744
      
-
  
Total Equity Securities
    
107,272,885
      
106,496,141
      
776,744
      
-
  
Notes
        Senior Notes(a)
    
34,510,412
      
-
      
34,510,412
      
-
  
Total Notes
    
34,510,412
      
-
      
34,510,412
      
-
  
Other
                                
      Short Term
Investments (a)
    
678,258
      
678,258
      
-
      
-
  
Total Other
    
678,258
      
678,258
      
-
      
-
  
Total Assets
  
$
142,161,555
    
$
107,174,399
    
$
35,287,156
    
$
-
  
Liabilities
      Written Options
  
$
22,880
    
$
22,880
    
$
-
    
$
-
  
Total Liabilities
  
$
22,880
    
$
22,880
    
$
-
    
$
-
  

(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, 2018.

Transfers into and out of each level are measured at fair value at the end of the period. There were no transfers between any levels during the period ended February 28, 2018.

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 February 28, 2018.

The average monthly fair value of written options during the period ended February 28, 2018 was $47,043.

The effect of derivative instruments on the Statement of Operations for the period ended February 28, 2018:
 
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
  
$
-
    
$
105,799
    
$
105,799
  
                         
 
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
  
$
-
    
$
9,158
    
$
9,158
  
 
Asset derivatives
  
Risk Exposure Category
  
Statement of Assets and
Liabilities location
    
Fair Value
  
Equity Contracts
  
Written options, at fair value
    
$
22,880
  

 
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/ Jerry V. Swank                                                                                                                          
 Jerry V. Swank, President & Chief Executive Officer

Date          4/11/18                                                                                                                                                                                 
 

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/ Jerry V. Swank                                                                                                                       
Jerry V. Swank, President & Chief Executive Officer
 
Date               4/11/18                                                                                                                                                                              
 

By (Signature and Title)    /s/ John H. Alban                                                                                                                        
John H. Alban, Treasurer & Chief Financial Officer
 
Date                   4/11/18