As filed with the Securities and Exchange Commission on July 9, 2009

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

Investment Company Act file number 811-22072

The Cushing MLP Total Return Fund
(Exact name of registrant as specified in charter)

3300 Oak Lawn Avenue, Suite 650, Dallas, TX 75219
(Address of principal executive offices) (Zip code)

Jerry V. Swank
3300 Oak Lawn Avenue, Suite 650, Dallas, TX 75219
(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: May 31, 2009

 

 

Item 1.  Report to Stockholders.

The Cushing MLP Total Return Fund

 

 

 

Semi-Annual Report
May 31, 2009

 

 

Table of Contents

 

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The Cushing MLP Total Return Fund

Shareholder Letter

 

 

Dear Shareholders:

 

We are pleased to report 2009 year to date performance of The Cushing MLP Total Return Fund (NYSE: SRV). The net asset value (“NAV”) of The Cushing MLP Total Return Fund was up 32.0% between January 1 and May 31, 2009. During this same period, the S&P 500 posted a total return of just under 3%. We believe the strong absolute and relative performance of MLPs is attributable to several key developments, including: 1) the abatement of technical selling, 2) a renewed focus on the positive MLP fundamentals, and 3) the thawing of previously frozen capital markets.

 

Much of the selling pressure on MLPs in 2008 came from the unwinding of leverage in the financial system. This has largely subsided. In the absence of technical selling, investors have focused more on the solid operating businesses of MLPs. In general, MLPs have continued to generate stable cash flows despite the recession. Nonetheless, we believe many investors late last year projected distribution cuts for the MLP space in 2009, and this has simply not materialized for the vast majority of partnerships. Of the 77 MLPs, all but nine and their related GP entities maintained or increased their distribution in 2009. The majority of the distribution cuts were from MLPs in the commodity sensitive upstream subsector, a group that we have generally avoided and represents less than 6% of the total MLP market capitalization.

 

In the fall of 2008, access to growth capital was extremely limited as credit markets in general had frozen. In 2009, investors have returned to the credit markets and spreads have tightened dramatically. Access to capital is critical to MLPs, and the chart below illustrates the strong correlation between MLP equity performance and the improvement in the credit markets.

Historical Credit Spreads vs. MLP Yields

 

 

Source: Richard Gross; Barclays Capital.

 

Year to date, MLPs have issued approximately $4.2 billion of debt. Importantly, non-investment grade MLPs have accessed the debt market as well. Equity issuance has recently increased significantly. $3.0 billion of equity has been raised year to date and over $1 billion in June.

 

MLP Capital Raised By Month

 

 

Source: Stephen Maresca, CFA; Morgan Stanley Research.

Note: Excludes general partner placements.

 

In 2009, our portfolio exposure in MLPs has generally been in the 80% – 135% range. The low end of the exposure range reflects our concern about the

overall stock market, not our MLP specific outlook. Despite periods of being less than 100% invested, our performance has been in line with the Alerian MLP Index (32% vs. 35%, respectively) this year¹. We continue to be overweight the large cap, investment grade names with strong balance sheets and general partner sponsors. These MLPs have predominantly fee-based revenues, have proven access to both the debt and equity capital markets, and, in our view, will be at the forefront of the opportunity to acquire distressed MLP assets. As processing economics have improved since late 2008, we still own select natural gas gathering and processing MLPs with high yields and secure distributions. Below is the breakout of MLP price performance year to date through May 2009.

 

2009 Year-To-Date Price Performance (Through May 31, 2009)

 

 

Source: Swank Energy Income Advisors, LP, Alerian Capital Management, LLC and FactSet Research Systems, Inc.

 

While MLPs have had a great run so far in 2009, MLPs still appear historically cheap using several key metrics, including price to cash flow, enterprise value to EBITDA, and yield spread to the 10 year treasury.

 

 

¹   The Alerian MLP Index is market weighted, float adjusted and includes general partners. Performance over the period January 1 – May 31, 2009.

Historical EBITDA and Cash Flow Multiples

 

Source: Stephen Maresca, CFA; Morgan Stanley Research.

 

Historical Yield Spread Through May 31, 2009

 

Source: FactSet Research Systems, Inc. and Alerian Capital Management, LLC.

Given the historically cheap valuations and our favorable long term outlook for the group, we believe the conditions exist for continued positive performance for MLPs.

 

The Cushing MLP Total Return Fund

 

 

Jerry V. Swank

Chief Executive Officer

The Cushing MLP Total Return Fund

Allocation of Portfolio Assets

May 31, 2009 (Unaudited)
(Expressed as a Percentage of Total Investments)

 

 

 

The Cushing MLP Total Return Fund

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

 

 

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

Statement of Assets & Liabilities (Unaudited)

May 31, 2009

 

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

Statement of Operations (Unaudited)

May 31, 2009

 

 

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

Statements of Changes in Net Assets

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

Statement of Cash Flows (Unaudited)

Period from December 1, 2008 through May 31, 2009

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

Financial Highlights

 

 

 

 

See Accompanying Notes to the Financial Statements.

The Cushing MLP Total Return Fund

Notes to Financial Statements

May 31, 2009 (Unaudited)

 

 

The Cushing MLP Total Return Fund (the “Fund”) was formed as a Delaware statutory trust on May 23, 2007, and is a non-diversified, closed-end management investment Company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s investment objective is to obtain a high after-tax total return from a combination of capital appreciation and current income. The Fund seeks to provide its stockholders with an efficient vehicle to invest in the energy infrastructure sector. The Fund commenced operations on August 27, 2007. The Fund’s shares are listed on the New York Stock Exchange under the symbol “SRV.”

 

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, recognition of distribution income and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

 

The Fund will use the following valuation methods to determine either current market value for investments for which market quotations are available, or if not available, the fair value, as determined in good faith pursuant to such policies and procedures may be approved by the Fund’s Board of Trustees (“Board of Trustees”) from time to time. The valuation of the portfolio securities of the Fund currently includes the following processes:

 

(i) The market value of each security listed or traded on any recognized securities exchange or automated quotation system will be the last reported sale price at the relevant valuation date on the composite tape or on the principal exchange on which such security is traded. If no sale is reported on that date, Swank Energy Income Advisors, LP (the “Advisor”) utilizes, when available, pricing quotations from principal market markers. Such quotations may be obtained from third-party pricing services or directly from investment brokers and dealers in the

secondary market. Generally, the Fund’s loan and bond positions are not traded on exchanges and consequently are valued based on market prices received from third-party services or broker-dealer sources.

 

(ii) Listed options on debt securities are valued at the average of bid price and ask price. Unlisted options on debt or equity securities are valued based upon their composite bid prices if held long, or their composite ask prices if held short. Futures are valued at the last sale price on the commodities exchange on which they trade.

 

(iii) The Fund’s non-marketable investments will generally be valued in such manner as the Investment Advisor determines in good faith to reflect their fair values under procedures established by, and under the general supervision and responsibility of, the Board of Trustees. The pricing of all assets that are fair valued in this manner will be subsequently reported to and ratified by the Board of Trustees.

 

The Fund may engage in short sale transactions. For financial statement purposes, an amount equal to the settlement amount is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short positions. Subsequent fluctuations in market prices of securities sold short may require purchasing the securities at prices which may differ from the market value reflected on the Statement of Assets and Liabilities. The Fund is liable for any dividends paid on securities sold short. The Fund’s obligation to replace the borrowed security will be secured by collateral deposited with the broker-dealer. The Fund also will be required to segregate similar collateral to the extent, if any, necessary so that the value of both collateral amounts in the aggregate is at all times equal to at least 100 percent of the current market value of the securities sold short.

 

Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Interest income is recognized on the accrual basis, including amortization of premiums and accretion of discounts. Distributions are recorded on the ex-dividend date. Distributions received from the Fund’s investments in master limited partnerships (“MLPs”) generally are comprised of ordinary income, capital gains and return of capital from the MLP. The Fund records investment income on the ex-date of the distributions. For financial statement purposes, the Fund uses return of capital and income estimates to allocate the dividend income received. Such estimates are based on historical information available from each MLP and other industry

sources. These estimates may subsequently be revised based on information received from MLPs after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year-end of the Fund.

 

For the period from December 1, 2008 through May 31, 2009, the Fund estimated the allocation of investment income and return of capital for the distributions received from MLPs within the Statement of Operations. For this period, the Fund had estimated approximately 10 percent as investment income and approximately 90 percent as return of capital.

 

Subsequent to November 30, 2008, the Company revised the amount of investment income and return of capital it recognized based on the 2008 tax reporting information received from the individual MLPs. This revision amounted to a decrease in pre-tax net investment income of approximately $867,000 or $0.084 per share; an increase of approximately $467,000 or $0.045 per share in unrealized appreciation of investments; and an increase in realized gains of approximately $400,000 or $0.039 per share for the period ended May 31, 2009.

 

Dividends and distributions to common stockholders are recorded on the ex-dividend date. The character of dividends and distributions to common stockholders made during the year may differ from their ultimate characterization for federal income tax purposes. For the period ended May 31, 2009, the Fund’s dividends and distributions for book purposes were expected to be comprised of 100 percent return of capital. The tax character of distributions paid for the period ended May 31, 2009 will be determined in early 2010.

 

The Fund, as a corporation, is obligated to pay federal and state income tax on its taxable income. Currently, the maximum marginal regular federal income tax rate for a corporation is 35 percent. The Fund may be subject to a 20 percent federal alternative minimum tax on its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.

 

The Fund invests its assets primarily in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Fund reports its allocable share of the MLP’s taxable income in computing its own taxable income. The Fund’s tax expense or benefit is included in the Statement of Operations based on the component of income or

gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

 

In July 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. FIN 48 was effective as of the beginning of the first fiscal year beginning after December 15, 2006. The Fund has evaluated the application of FIN 48 and determined that it does not have a material impact on the financial statements.

 

The Fund considers all highly liquid investments purchased with initial maturity equal to or less than three months to be cash equivalents.

 

The Fund makes distributions from investments, which include the amount received as cash distributions from MLPs and dividend and interest payments. These activities are reported in the accompanying Statement of Changes in Net Assets, and additional information on cash receipts and payments is presented in the accompanying Statement of Cash Flows.

 

Under the Fund’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts that provide general indemnification to other parties. As of May 31, 2009, the Fund has accrued approximately $63,000 in expenses relating to the indemnification of its officers and directors relating to the legal proceedings described in Note J. The Fund’s maximum exposure under such indemnification arrangements, however, is unknown, as this would involve expenses relating to existing claims that have not yet been accrued or future claims that may be made against the Fund that have not yet occurred and may not occur.

In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”) was issued and is effective for fiscal years beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position.

 

The Fund occasionally engages in equity option trading as a source of protection against a broad market decline. During the period ended May 31, 2009, the Fund purchased 18,500 SPDR (S&P Depositary Receipts) Unit Trust, Series 1 equity option put contracts with various exercise prices and sold 14,800 of these option contracts for a total loss of $1,416,353. Of this loss, $1,102,291 was realized and included in the net realized loss on investments in the Statement of Operations.

 

On May 31, 2009 the Fund held 3,700 SPDR Unit Trust, Series 1 equity option put contracts at fair market value of $565,600. Of the 3,700 contracts held, 2,500 contracts had an exercise price of $90.00 and 1,200 contracts had an exercise price of $86.00. These equity option contracts are included in investments at value in the Statement of Assets and Liabilities. The unrealized loss of $314,062 on these equity option put contracts is included in the net change in unrealized appreciation in the Statement of Operations.

 

On February 10, 2009, a class action lawsuit was filed in the United States District Court, Northern District of Texas, on behalf of all persons who purchased shares of the Fund between September 1, 2008 and December 19, 2008, against the Investment Adviser, Swank Capital, LLC, Jerry V. Swank, Mark W. Fordyce, Brian R. Bruce, Ronald P. Trout and Edward N. McMillan, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Section 36(b) of the Investment Company Act of 1940. The plaintiffs’ claims relate to the treatment and valuation of a deferred tax asset carried by the Fund under FASB Statement of Financial Accounting Standards No. 109 (Accounting for Income Taxes).

 

 

The Fund’s investment objective is to obtain a high after-tax total return from a combination of capital appreciation and current income. The Fund will seek to achieve its investment objective by investing, under normal market

conditions, at least 80% of its net assets, plus any borrowings for investment purposes, in MLP investments; up to 50% of its managed assets in securities of MLPs and other natural resource companies that are not publicly traded, or that are otherwise restricted securities; up to 20% of its managed assets in securities of companies that are not MLPs, including other natural resource companies, and U.S. and non-U.S. issuers that may not constitute other natural resource companies; and up to 20% of its managed assets in debt securities of MLPs, other natural resource companies and other issuers.

 

 

The Fund has entered into an Investment Management Agreement with the Advisor. Under the terms of the agreement, the Fund will pay the Advisor a fee, payable at the end of each calendar month, at an annual rate equal to 1.25% of the average weekly value of the Fund’s managed assets during such month for the services and facilities provided by the Investment Advisor to the Fund. The Investment Advisor announced on December 19, 2008 that it will temporarily reduce the management fee charged to the Fund from an annual rate of 1.25% to 1.00%. The Investment Advisor is reimbursing the Fund’s expenses to the extent that total annual Fund operating expenses, not including interest payments or other expenses on borrowed funds, exceed 1.50% of average weekly managed assets. The Investment Advisor is not obligated to do so, however, and reimbursement may be discontinued at any time. The Investment Advisor announced on December 19, 2008 that it will discontinue this reimbursement. The Advisor earned $279,872 in management fees for the period ended May 31, 2009, of which $137,338 was waived by the Advisor. The waived amount includes $59,396 relating to certain offering expenses incurred after December 19, 2008.

 

The Fund has engaged U.S. Bancorp Fund Services, LLC to serve as the Fund’s administrator. The Fund pays the administrator a monthly fee computed at an annual rate of 0.08 percent of the first $100,000,000 of the Fund’s managed assets, 0.05 percent on the next $200,000,000 of managed assets and 0.04 percent on the balance of the Fund’s managed assets, with a minimum annual fee of $40,000.

 

Computershare Trust Fund, N.A. serves as the Fund’s transfer agent, dividend paying agent, and agent for the automatic dividend reinvestment plan.

 

U.S. Bank, N.A. serves as the Fund’s custodian. The Fund pays the custodian a monthly fee computed at an annual rate of 0.004 percent of the Fund’s daily market value, with a minimum annual fee of $4,800.

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Fund’s deferred tax assets and liabilities as of May 31, 2009, are as follows:

 

 

For the period from December 1, 2008 to May 31, 2009, before the application of valuation allowance, the components of income tax expense include $4,556,859 and $629,980 for deferred federal and state income tax expense, respectively. For the period ended May 31, 2009, the Fund had a net operating loss of approximately $15,432,000 and a capital loss of approximately $35,687,000 for federal income tax purposes. For the year ended November 30, 2008, the Fund had a net operating loss of approximately $6,449,000 and a capital loss of approximately $63,774,000 for federal income tax purposes. For the period ended November 30, 2007, the Fund had a net operating loss of approximately $440,000 and a capital loss of approximately $699,000 for federal income tax purposes. For corporations, capital losses can only be used to offset capital gains and cannot be used to offset ordinary income. As such, none of the capital loss was used to offset investment income. This capital loss may be carried forward for 5 years and, accordingly, would begin to expire as of November 30, 2012. The net operating loss can be carried forward for 20 years and, accordingly, would begin to expire as of November 30, 2027.

 

The Fund has recorded a valuation allowance for the full amount of the deferred tax asset as the Fund believes it is more likely than not that the asset will not be utilized.

 

Total income tax expense (current and deferred) differs from the amount computed by applying the federal statutory income tax rate of 35 percent to

net investment income and realized and unrealized gains (losses) on investments before taxes for the period ended May 31, 2009, as follows:

 

 

At May 31, 2009, the cost basis of investments and the proceeds from securities sold short for federal income tax purposes was $58,684,537 and $210,690 respectively, and gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

 

 

The Fund files a U.S. tax return. No income tax returns are currently under examination. The statute of limitations of the Fund’s tax return remains open for the years ended November 30, 2007 and November 30, 2008. Due to the nature of the Fund’s investments, the Fund may be required to file income tax returns in several states.

 

 

The Fund adopted the provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS 157), effective with the beginning of the Fund’s fiscal year. SFAS 157 establishes a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements) when market prices are not readily available or reliable.

 

 

For the period ended May 31, 2009, the Fund purchased (at cost) and sold securities (proceeds) in the amount of $155,842,181 and $143,372,864 (excluding short-term debt securities), respectively.

 

 

The Fund has 92,500,000 shares of capital stock authorized and 10,276,607 shares outstanding at May 31, 2009. Transactions in common stock for the year ended November 30, 2008, and the period ended May 31, 2009 were as follows:

 

 

 

The Fund maintains a margin account arrangement with Credit Suisse. The interest rate charged on margin borrowing is tied to the cost of funds for Credit Suisse (which approximates LIBOR) plus 0.30 percent. Proceeds from the margin account arrangement are used to execute the Fund’s investment objective.

 

The average principal balance and interest rate for the period during which the credit facilities were utilized during the period ended May 31, 2009 was approximately $7,200,000 and 1.65 percent, respectively. At May 31, 2009, the principal balance outstanding was $10,000,000 and accrued interest expense was $37,185.

 

On June 30, 2009, the Fund sold 936,090 common shares in a registered public offering at a price of $5.85 per common share. The offering price represented a 21.4% premium to the Fund’s net asset value determined immediately prior to the pricing of the offering. The common shares were sold at a discount to the market price. The Fund received approximately $5.416 million in net proceeds from the offering which will be invested in accordance with its investment objective and policies. As a result of the transaction, the Fund’s total shares outstanding increased to 11,228,235.

The Cushing MLP Total Return Fund

Additional Information (Unaudited)

May 31, 2009

 

Director and Officer Compensation

 

The Fund does not compensate any of its directors who are interested persons nor any of its officers. For the period ended May 31, 2009, the aggregate compensation paid by the Fund to the independent directors was $49,500. The Fund did not pay any special compensation to any of its directors or officers.

 

Cautionary Note Regarding Forward-Looking Statements

 

This report contains “forward-looking statements” as defined under the U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Fund’s historical experience and its present expectations or projections indicated in any forward-looking statements. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; MLP industry risk; leverage risk; valuation risk; interest rate risk; tax risk; and other risks discussed in the Fund’s filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Fund undertakes no obligation to update or revise any forward-looking statements made herein. There is no assurance that the Fund’s investment objectives will be attained.

 

Form N-Q

 

The Fund files its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the SEC on Form N-Q. The Fund’s Form N-Q and statement of additional information are available without charge by visiting the SEC’s Web site at www.sec.gov. In addition, you may review and copy the Fund’s Form N-Q at the SEC’s Public Reference Room in Washington D.C. You may obtain information on the operation of the Public Reference Room by calling (800) SEC-0330.

Certifications

 

The Fund’s Chief Executive Officer has submitted to the New York Stock Exchange the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Fund Manual.

 

The Fund has filed with the SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.

 

Privacy Policy

 

In order to conduct its business, the Fund collects and maintains certain nonpublic personal information about its stockholders of record with respect to their transactions in shares of the Fund’s securities. This information includes the stockholder’s address, tax identification or Social Security number, share balances, and dividend elections. We do not collect or maintain personal information about stockholders whose share balances of our securities are held in “street name” by a financial institution such as a bank or broker.

 

We do not disclose any nonpublic personal information about you, the Fund’s other stockholders or the Fund’s former stockholders to third parties unless necessary to process a transaction, service an account, or as otherwise permitted by law.

 

To protect your personal information internally, we restrict access to nonpublic personal information about the Fund’s stockholders to those employees who need to know that information to provide services to our stockholders. We also maintain certain other safeguards to protect your nonpublic personal information.

 

Stockholder Proxy Voting Results

 

The annual meeting of stockholders was held on May 14, 2009. The matters considered at the meeting, together with the actual vote tabulations relating to such matters are as follows:

 

 

 

Ronald P. Trout continued as Trustee and his terms expire on the date of the Fund’s 2010 annual meeting of shareholders, and Brian R. Bruce continued as Trustee and his terms expire on the date of the Fund’s 2011 annual meeting of stockholders.

 

Based upon votes required for approval, each of these matters passed.

 

The Cushing MLP Total Return Fund

 

TRUSTEES

Brian R. Bruce

Ronald P. Trout

Edward N. McMillan

Jerry V. Swank

 

OFFICERS

Jerry V. Swank

Chief Executive Officer and President

 

Mark W. Fordyce

Chief Financial Officer, Principal Accounting Officer, Treasurer, and Secretary

 

Michael S. Minces

Chief Compliance Officer

 

INVESTMENT ADVISOR

Swank Energy Income Advisors, LP

3300 Oak Lawn Avenue, Suite 650

Dallas, TX 75219

 

ADMINISTRATOR

U.S. Bancorp Fund Services, LLC

615 East Michigan Street, 3rd Floor

Milwaukee, WI 53202

 

CUSTODIAN

U.S. Bank, N.A.

1555 N. River Center Drive, Suite 302

Milwaukee, WI 53212

 

TRANSFER AGENT

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

 

LEGAL COUNSEL

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP

JP Morgan Chase Tower

2200 Ross Avenue, Suite 1600

Dallas, TX 75201

 

STOCK SYMBOL

Listed NYSE Symbol: SRV

 

 

The Cushing MLP Total Return Fund

 

Item 2. Code of Ethics.

Not applicable for semi-annual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semi-annual reports.

Item 4. Principal Accountant Fees and Services.

Not applicable for semi-annual reports.

Item 5. Audit Committee of Listed Registrants.

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)), and is comprised of Mr. Brian Bruce, Mr. Ronald Trout and Mr. Edward McMillan.

Item 6. Investments.

(a)		Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
(b)		Not Applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable for semi-annual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

     Management of the registrant’s portfolio is the responsibility of Jerry V. Swank who is a manager of the Adviser.

(a)(1) The following table provides biographical information about the manager as of the date of this filing:

		Positions(s) Held
		With Registrant and Length of		Principal Occupation
Name		Time Served		During Past Five Years
Jerry V. Swank		Trustee, Chairman of the Board, Chief Executive Officer and President since 2007.		Managing Partner of the Investment Adviser.

(a)(2) The following table provides information about the other accounts managed on a day-to-day basis by the portfolio manager as of May 31, 2009:

										Number of Accounts				Total Assets of Accounts
Name of		Number of				Total Assets of				Paying a Performance				Paying a Performance
Manager		Accounts				Accounts				Fee				Fee
Jerry V. Swank
Registered investment companies			0			$	0				0			$	0
Other pooled investment vehicles			3			$	479,000,000				3			$	479,000,000
Other accounts			1			$	55,000,000				1			$	55,000,000

(iv) Conflicts of Interest with the Investment Adviser

     Conflicts of interest may arise because the Investment Adviser and its affiliates generally will be carrying on substantial investment activities for other Clients, including, but not limited to, the affiliated funds, in which the Fund will have no interest. The Investment Adviser or its affiliates may have financial incentives to favor certain of such accounts over the Fund. Any of their proprietary accounts and other customer accounts may compete with the Fund for specific trades. The Investment Adviser or its affiliates may buy or sell securities for the Fund which differ from securities bought or sold for other accounts and customers, even though their investment objectives and policies may be similar to the Fund’s. Situations may occur when the Fund could be disadvantaged because of the investment activities conducted by the Investment Adviser and its affiliates for their other accounts. Such situations may be based on, among other things, legal or internal restrictions on the combined size of positions that may be taken for the Fund and the other accounts, limiting the size of the Fund’s position, or the difficulty of liquidating an investment for the Fund and the other accounts where the market cannot absorb the sale of the combined position. Notwithstanding these potential conflicts of interest, the Investment Adviser, Fund’s Board of Trustees and officers have a fiduciary obligation to act in the Fund’s best interest.

     The Fund’s investment opportunities may be limited by affiliations of the Investment Adviser or its affiliates with MLPs and other natural resource companies. Additionally, to the extent that the Investment Adviser sources and structures private investments in MLPs and other natural resource companies, certain employees of the Investment Adviser may become aware of actions planned by MLPs and other natural resource companies, such as acquisitions that may not be announced to the public. It is possible that the Fund could be precluded from investing in an MLP or other natural resource company.

     The Investment Adviser manages several private managed accounts (“Affiliated Funds”). Some of the Affiliated Funds have investment objectives that are similar to or overlap with the Fund. Further, the Investment Adviser may at some time in the future manage other investment funds with the same investment objective as the Fund.

     The Investment Adviser and its affiliates generally will be carrying on substantial investment activities for other Clients, including, but not limited to, the Affiliated Funds, in which the Fund will have no interest. Investment decisions for the Fund are made independently from those of such other Clients; however, from time to time, the same investment decision may be made for more than one fund or account.

     When two or more Clients advised by the Investment Adviser or its affiliates seek to purchase or sell the same publicly traded securities, the securities actually purchased or sold will be allocated among the Clients on a good faith equitable basis by the Investment Adviser in its discretion in accordance with the Clients’ various investment objectives and procedures adopted by the Investment Adviser and approved by the Fund’s Board of Trustees. In some cases, this system may adversely affect the price or size of the position the Fund may obtain.

     The Fund’s investment opportunities may be limited by investment opportunities in the MLPs and other natural resource companies that the Investment Adviser is evaluating for the Affiliated Funds. To the extent a potential investment is appropriate for the Fund and one or more of the Affiliated Funds, the Investment Adviser will need to fairly allocate that investment to the Fund or an Affiliated Fund, or both, depending on its allocation procedures and applicable law related to combined or joint transactions. There may occur an attractive limited investment opportunity suitable for the Fund in which the Fund cannot invest under the particular allocation method being used for that investment.

     Under the 1940 Act, the Fund and its Affiliated Funds may be precluded from co-investing in private placements of securities. Except as permitted by law or positions of the staff of the SEC, the Investment Adviser will not co-invest its other Clients’ assets in private transactions in which the Fund invests. To the extent the Fund is precluded from co-investing, the Investment Adviser will allocate private investment opportunities among its Clients, including but not limited to the Fund and the Affiliated Funds, based on allocation policies that take into account several suitability factors, including the size of the investment opportunity, the amount each Client has available for investment and the Client’s investment objectives. These allocation policies may result in the allocation of investment opportunities to an Affiliated Fund rather than to the Fund.

(a)(3) As of May 31, 2009:

Compensation

     Mr. Swank is compensated by the Investment Adviser. Mr. Swank is a principal of the Investment Adviser and is compensated through partnership distributions that are based primarily on the profits and losses of the Investment Adviser. The partnership distributions are affected by the amount of assets the Investment Adviser manages and the appreciation of those assets, particularly over the long-term, but are not determined with specific reference to any particular performance benchmark or time period. Some of the other accounts managed by Mr. Swank, including the Affiliated Funds, have investment strategies that are similar to the

Fund’s investment strategy. However, the Investment Adviser manages potential material conflicts of interest by allocating investment opportunities in accordance with its allocation policies and procedures.

(a)(4) As of May 31, 2009:

Securities Beneficially Owned in the Registrant by Portfolio Managers

     The following table provides information about the dollar range of equity securities in the registrant beneficially owned by the portfolio manager:

		Aggregate Dollar Range of
		Beneficial Ownership
Portfolio Manager		in the Registrant
Jerry V. Swank		$	10,001 — 50,000

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

														(d)
														Maximum Number
										(c)				(or Approximate
										Total Number of				Dollar Value) of
										Shares (or Units)				Shares (or Units)
		(a)								Purchased as Part				that May Yet Be
		Total Number of				(b)				of Publicly				Purchased Under
		Shares (or Units)				Average Price Paid				Announced Plans				the Plans or
Period		Purchased				per Share (or Unit)				or Programs				Programs
Month #1 12/1/08-12/31/08			0				0				0				0
Month #2 1/1/09-1/31/09			0				0				0				0
Month #3 2/1/09-2/28/09			0				0				0				0
Month #4 3/1/09-3/31/09			0				0				0				0
Month #5 4/1/09-4/30/09			0				0				0				0
Month #6 5/1/09-5/31/09			0				0				0				0
Total			0				0				0				0

Item 10. Submission of Matters to a Vote of Security Holders.

Not Applicable.

Item 11. Controls and Procedures.

(a)

The Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.

(b)

There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)

(1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable.

(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.

(b)

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished 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 MLP Total Return Fund
By (Signature and Title)		/s/ Jerry V. Swank
		Jerry V. Swank, President & Chief Executive Officer
Date		July 1, 2009

     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 & Chief Executive Officer
Date		July 1, 2009
By (Signature and Title)		/s/ Mark Fordyce
		Mark Fordyce, Chief Financial Officer, Principal Accounting Officer, Treasurer & Secretary
Date		July 1, 2009