Company: SRV
Filing Date: 2025-02-10
Form Type: N-CSR
Source: 0001398344-25-002262
Chunk: 3

Company: NXG Cushing Midstream Energy Fund
Filing Date: 2025-02-10
Form: N-CSR
Chunk 3
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 due to effective stock selection and overweight positioning versus the benchmark.

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The Fund also realized an approximate 2% positive return from implementing a covered call strategy. This strategy involves selling near-dated, out-of-the-money call options on securities held by the Fund to generate option premium income. It is applied to a portion of the Fund’s holdings, limited to no more than 10% of its total assets, and executed routinely.

Conversely, underweights in Large Cap Diversified C-corps and Canadian Midstream detracted from relative performance, despite their strong absolute returns. An overweight in the Renewables subsector further weighed on both absolute and relative performance, as the subsector continued to face negative momentum due to elevated interest rates and reduced growth expectations.

On an absolute basis, the top individual contributors to performance were Targa Resources Corp., Energy Transfer LP, and DT Midstream, Inc. Targa and Energy Transfer were the Fund’s two largest holdings during the period, with DT Midstream also ranking among the top positions. Both DT Midstream and Energy Transfer benefited from rising expectations of increased power demand driven by AI data centers, which rely on their extensive natural gas transmission networks. All three companies remained top holdings in the Fund at the end of the period, though the Fund reduced its exposure to Targa following its recent strength.

The valuation for Targa Resources, a Natural Gas Gatherer & Processor, significantly re-rated during the period, driven by its accretive Permian Basin growth strategy and improving financial outlook. Notably, it was the Fund’s largest holding and ranked as the seventh-best-performing stock in the S&P 500.

Energy Transfer, a Large Cap Diversified MLP, maintained its successful track record of integrating acquisitions, facilitating steady business growth alongside four distribution increases and robust positive FCF generation. As noted earlier, the company also benefited from expectations of increased AI and data center power demand, with numerous potential projects to serve new demand centers across its pipeline network.

DT Midstream, a Natural Gas Transportation & Storage company, owns, operates, and develops interstate pipelines as well as storage and gathering systems. The company benefits from its focused exposure to natural gas and a strong growth outlook. During the period, DT Midstream disclosed ongoing discussions with partners to supply natural gas to AI-driven data center projects, leveraging its extensive transmission network.

On an absolute basis, the biggest detractors from performance were First Solar Inc., EQT Corp., and Nextracker Inc. All three companies were