UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT
INVESTMENT COMPANIES
Investment
Company Act File Number:
811-02328
SRH
Total Return Fund, Inc.
(Exact
Name of Registrant as Specified in Charter)
1700
Broadway, Suite 1850
Denver,
CO 80290
(Address
of Principal Executive Offices) (Zip Code)
Chris
Moore
SRH
Total Return Fund, Inc.
1700
Broadway, Suite 1850
Denver,
CO 80290
(Name
and Address of Agent for Service)
Registrant’s
Telephone Number, including Area Code:
(866)
228-4853
Date
of Fiscal Year End: November 30
Date
of Reporting Period: December 1, 2022 - May 31, 2023
Item
1. Reports to Stockholders.
(a)
The Report to Stockholders is attached herewith.
Distribution
Policy
May
31, 2023 (Unaudited)
SRH
Total Return Fund, Inc. (the “Fund”), acting pursuant to a Securities and Exchange Commission exemptive order and
with the approval of the Fund’s Board of Directors (the “Board”), has adopted a plan, consistent with its investment
objectives and policies to support a level distribution of income, capital gains and/or return of capital (the “Plan”).
In accordance with the Plan, the Fund distributed $0.125 per share on a quarterly basis during the six- month period ended May
31, 2023. The fixed amount distributed per share is subject to change at the discretion of the Fund’s Board. Under the Plan,
the Fund will typically distribute most or all of its available investment income to its stockholders, consistent with its primary
investment objectives and as required by the Internal Revenue Code of 1986, as amended (the “Code”). The Fund may
also distribute long-term capital gains and short-term capital gains and return of capital to stockholders in order to maintain
a level distribution. Each quarterly distribution to stockholders is expected to be at the fixed amount established by the Board,
except for extraordinary distributions and potential distribution rate increases or decreases to enable the Fund to comply with
the distribution requirements imposed by the Code. Stockholders should not draw any conclusions about the Fund’s investment
performance from the amount of these distributions or from the terms of the Plan. The Fund’s total return performance on
net asset value is presented in its financial highlights table. The Board may amend, suspend or terminate the Fund’s Plan
without prior notice if it deems such action to be in the best interest of the Fund or its stockholders. The suspension or termination
of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or above net asset value)
or widening an existing trading discount. The Fund is subject to risks that could have an adverse impact on its ability to maintain
level distributions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, investments
in foreign securities, foreign currency fluctuations and changes in the Code. Please refer to the Fund’s annual report for
a more complete description of its risks.
| SRH Total Return Fund, Inc. |
Table of Contents |
| Performance Overview |
2 |
| Statement of Investments |
7 |
| Statement of Assets and Liabilities |
10 |
| Statement of Operations |
11 |
| Statements of Changes in Net Assets |
12 |
| Statement of Cash Flows |
13 |
| Financial Highlights |
14 |
| Notes to Financial Statements |
17 |
| Additional Information |
26 |
| Summary of Dividend Reinvestment Plan |
29 |
| Semi-Annual
Report | May 31, 2023 |
1 |
| SRH
Total Return Fund, Inc. |
Performance
Overview |
May
31, 2023 (Unaudited)
Semi-Annual
Update:
The
SRH Total Return Fund, Inc. (the “Fund”) generated a return of -1.77% on net assets in the six-month period ended
May 31, 2023 (the “period”). Within the same period, the S&P 500 Index returned 3.33%, the Dow Jones Industrial
Average (“DJIA”) returned -3.86%, and the Morningstar US Large Value Index returned -4.25%.
The
Fund has outperformed the Morningstar U.S. Large Value Index on an annualized net assets basis since affiliates of Rocky Mountain
Advisers, LLC (“RMA”) became investment advisers to the Fund in January of 2002. However, the Fund has underperformed
the S&P 500 Index and the DJIA on an annualized net assets basis during this same timeframe.
On
a market price basis, the Fund lost -4.87% for the period, underperforming the Fund’s return performance on a NAV basis
of -1.77%. At the beginning of the period the discount was -16.2% and at the end of the period the discount was -18.8%.
More
detail on various holding period returns can be found in the table below:
| |
3
months |
6
months |
One
Year |
Three
Years* |
Five
Years* |
Ten
Years* |
Since
January 2002** |
| STEW
(NAV) |
1.57% |
-1.77% |
-1.19% |
13.49% |
7.96% |
8.84% |
8.36% |
| STEW
(Market) |
0.40% |
-4.87% |
-4.05% |
12.53% |
6.88% |
9.37% |
7.13% |
| S&P
500 Index† |
5.75% |
3.33% |
2.92% |
12.92% |
11.01% |
11.99% |
8.43% |
| DJIA†† |
1.39% |
-3.86% |
1.96% |
11.27% |
8.49% |
10.61% |
8.38% |
| Morningstar
US Large Value Index††† |
-0.98% |
-4.25% |
-0.71% |
12.18% |
7.85% |
8.82% |
6.97% |
| ** | Annualized
since January 2002, when affiliates of RMA became investment advisers to the Fund. Does
not include the effect of dilution on non-participating stockholders from the December
2002 rights offering. |
| † | The
S&P 500 Index is widely regarded as the best single gauge of large-cap U.S. equities.
There is over USD 9.9 trillion indexed or benchmarked to the index, with indexed assets
comprising approximately USD 3.4 trillion of this total. The index includes 500 leading
companies and captures approximately 80% coverage of available market capitalization.
|
| †† | The
Dow Jones Industrial Average (DJIA), is a price-weighted measure of 30 U.S. blue-chip
companies. The index covers all industries except transportation and utilities. |
| ††† | The
Morningstar US Large Value Index measures the performance of U.S. large-cap stocks with
relatively low prices given anticipated per-share earnings, book value, cash flow, sales
and dividends. This Index does not incorporate Environment, Social, or Governance (ESG)
criteria. |
The
performance data quoted represents past performance. Past performance is no guarantee of future results. Fund returns include
reinvested dividends and distributions, but do not reflect the reduction of taxes a stockholder would pay on Fund distributions
or the sale of Fund shares and do not reflect brokerage commissions, if any. Returns of the S&P 500 Index, the DJIA and Morningstar
US Large Value Index include reinvested dividends and distributions, but do not reflect the effect of commissions, expenses or
taxes, as applicable. You cannot invest directly in any of these indices. The investment return and the principal value of an
investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be
lower or higher than the performance data quoted.
| www.srhtotalreturnfund.com | 2 |
| SRH
Total Return Fund, Inc. |
Performance
Overview |
May
31, 2023 (Unaudited)
The
largest contributors to performance during the period were Microsoft Corporation (MSFT) contributing 0.73% and Enterprise Products
Partners L.P. (EPD) contributing 0.21% to the total return on net assets. The largest detractors to performance during the period
were NRG Energy, Inc. (NRG) retracting -0.47% and Pfizer Inc. (PFE) retracting -0.91% to the total return on net assets.
In
the initial 6 months of the fiscal year, the S&P 500 had a strong return due to the significant outperformance of the largest
companies in the index. While the Fund owns Microsoft (MSFT), it does not own the other growth-oriented mega-cap stocks included
in the index. For this reason, the Fund underperformed the index during the period. The portfolio management team’s opinion
is that, for the most part, those mega cap companies are overvalued given the growth potential in the medium and long term. Microsoft
was purchased in the Fund at an opportune time while it briefly traded at, what we believe was, an attractive valuation. In our
opinion, Microsoft should continue to be a good business for a long time.
During
the period, a few large banks failed and were taken over by the FDIC. Based on available information, it seems the failures were
almost exclusively due to the banks’ liquidity issues resulting from buying treasury securities that fell in value as interest
rates rose over the past two years. There was a lot of speculation at the time that these failures would influence the Federal
Reserve to cut interest rates. We believe this speculation is what may have led to the initial rises in these growth-oriented
mega-cap stocks. In our opinion, momentum and a somewhat out of the blue Artificial Intelligence hype continued the increases,
while the Federal Reserve defied expectation by continuing to raise interest rates. We do not know what the future will bring,
but we remain very cautious about the sustainability of the valuations of these mega cap stocks.
In
the meantime, the portfolio management team is continuing to look for opportunities to buy good long-term businesses at attractive
valuations. We believe the two new positions acquired during the period fit nicely in the portfolio; Stanley Black and Decker
(SWK) and Charles Schwab (SCHW). We believe both are good businesses that experienced declining stock prices related to temporary
issues allowing the Fund to purchase at attractive valuations.
During
the period, the position in Berkshire Hathaway (BRK/B) was reduced. The entire position in Intel Corp (INTC) was sold.
The
Fund follows a managed distribution program that seeks to deliver the Fund’s long-term total return potential through regular
quarterly distributions at a fixed rate per share. Distributions under the managed distribution program may consist of net investment
income, realized capital gains and by returning capital, or any combination thereof. During the period, the Fund made quarterly
distributions to shareholders in aggregate totaling $0.25 per share, estimated to be comprised of net investment income of $0.05
per share, net realized capital gains of $0.04 per share and $0.16 of return of capital. The period covers half of the fiscal
year and the composition of the distributions could change meaningfully by the end of the fiscal year. The managed distribution
program did not have a material effect on the Fund’s investment strategy over the period.
In
our opinion, the Fund’s managed distribution program continues to fit the low turnover buy-and-hold investment strategy
both in its rate of growth and overall yield. RMA supports a distribution rate that is moderate, not excessive, so that the per
share NAV of the Fund can continue to increase over the long term. For the second consecutive year, the Fund’s Board of
Directors (“Board”) announced an increase in the quarterly distribution under the managed distribution program to
$0.125 per share beginning with the January 2023 distribution. However, the Board may end, suspend or terminate the managed distribution
program at any time if it deems such action to be in the best interest of the Fund or its stockholders.
| Semi-Annual
Report | May 31, 2023 |
3 |
| SRH
Total Return Fund, Inc. |
Performance
Overview |
May
31, 2023 (Unaudited)
The
following table shows the top ten holdings in the Fund as of May 31, 2023:
| Holding |
Symbol(s) |
Percentage of Total Managed Assets |
| Berkshire
Hathaway, Inc. |
BRK/A
and BRK/B |
35.7% |
| JPMorgan
Chase & Co. |
JPM |
8.1% |
| Yum!
Brands, Inc. |
YUM |
6.4% |
| Enterprise
Products Partners LP |
EPD |
5.4% |
| Cash
and Short-Term Investments |
SALXX |
5.2% |
| Microsoft
Corp. |
MSFT |
3.8% |
| Cisco
Systems, Inc. |
CSCO |
3.6% |
| Cohen
& Steers Infrastructure Fund, Inc. |
UTF |
3.4% |
| Pfizer,
Inc. |
PFE |
3.1% |
| NRG Energy,
Inc. |
NRG |
3.0% |
As
always, we appreciate your continued support of the Fund.
Sincerely,
 |
 |
| Joel Looney |
Jacob Hemmer |
| Portfolio Manager |
Portfolio Manager |
The
views and opinions in the preceding commentary are as of the date of this letter and are subject to change at any time. This material
represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice
and is not intended to predict or depict performance of any investment.
Portfolio
weightings and other figures in the foregoing commentary are provided as of period-end, unless otherwise stated.
Note
to Stockholders on the Fund’s Discount. As most stockholders are aware, the Fund’s shares presently trade at a
significant discount to net asset value. The Board is aware of this, monitors the discount and periodically reviews the limited
options available to mitigate the discount. In addition, there are several factors affecting the Fund’s discount over which
the Board and management have little control. In the end, the market sets the Fund’s share price. For long-term stockholders
of a closed-end fund, we believe the Fund’s discount should only be one of many factors taken into consideration at the
time of your investment decision.
Note
to Stockholders on Concentration of Investments. The Board feels it is important that stockholders be aware of the Fund’s
high concentration in a small number of positions. Concentrating investments in fewer securities may involve a degree of risk
that is greater than a fund having less concentrated investments spread over a greater number of securities. In particular, the
Fund is highly concentrated in Berkshire Hathaway, Inc., which, in addition to other business risks, is largely dependent on Warren
Buffett for major investment and capital allocation decisions. When Mr. Buffett is no longer able to fulfill his responsibilities
with Berkshire Hathaway, Inc., the value of the Fund’s position in Berkshire Hathaway, Inc. could be materially impacted.
| www.srhtotalreturnfund.com | 4 |
| SRH
Total Return Fund, Inc. |
Performance
Overview |
May
31, 2023 (Unaudited)
Growth
of $10,000 (as of May 31, 2023)
Comparison
of change in value of a hypothetical $10,000 investment in the Fund and the Underlying Indexes
Past
performance does not guarantee future results. Performance will fluctuate with changes in market conditions. Current performance
may be lower or higher than the performance data shown. Performance information does not reflect the deduction of taxes that stockholders
would pay on Fund distributions or the sale of Fund shares. An investment in the Fund involves risk, including loss of principal.
| Semi-Annual
Report | May 31, 2023 |
5 |
| SRH
Total Return Fund, Inc. |
Performance
Overview |
May
31, 2023 (Unaudited)
The
table below is a summary of the distributions paid for the six months ended May 31, 2023.
| | |
Net Asset
Value | | |
Per Share of Common Stock
Market Price | | |
Distribution Paid* | |
| 1/31/2023 | |
$ | 15.59 | | |
$ | 12.90 | | |
$ | 0.125 | |
| 4/28/2023 | |
| 15.84 | | |
| 12.81 | | |
| 0.125 | |
| * | Please
refer to page 28 for classifications of distributions. |
INVESTMENTS
AS A % OF NET ASSETS
APPLICABLE
TO COMMON STOCKHOLDERS
Holdings
are subject to change
| www.srhtotalreturnfund.com | 6 |
| SRH
Total Return Fund, Inc. |
Statement
of Investments |
May
31, 2023 (Unaudited)
| Description | |
Shares/Principal
Amount | | |
Value (Note 2) | |
| LONG TERM INVESTMENTS 109.04% | |
| | | |
| | |
| DOMESTIC COMMON STOCK 98.93% | |
| | | |
| | |
| Capital Goods 2.59% | |
| | | |
| | |
| Stanley Black & Decker, Inc. | |
| 515,000 | | |
$ | 38,609,550 | |
| | |
| | | |
| | |
| Construction Machinery 1.38% | |
| | | |
| | |
| Caterpillar, Inc. | |
| 100,000 | | |
| 20,575,000 | |
| | |
| | | |
| | |
| Diversified 41.14% | |
| | | |
| | |
| Berkshire Hathaway, Inc., Class A(a)(b) | |
| 1,028 | | |
| 501,688,651 | |
| Berkshire Hathaway, Inc., Class B(a)(b) | |
| 345,000 | | |
| 110,772,600 | |
| | |
| | | |
| 612,461,251 | |
| Diversified Financial Services 15.32% | |
| | | |
| | |
| American Express Co.(c) | |
| 105,000 | | |
| 16,648,800 | |
| Charles Schwab Corp.(c) | |
| 750,000 | | |
| 39,517,500 | |
| Evercore, Inc., Class A | |
| 300,000 | | |
| 32,385,000 | |
| JPMorgan Chase & Co. | |
| 1,028,000 | | |
| 139,509,880 | |
| | |
| | | |
| 228,061,180 | |
| Electric 3.46% | |
| | | |
| | |
| NRG Energy, Inc. | |
| 1,525,000 | | |
| 51,529,750 | |
| | |
| | | |
| | |
| Food 1.28% | |
| | | |
| | |
| JM Smucker Co. | |
| 130,000 | | |
| 19,056,700 | |
| | |
| | | |
| | |
| Healthcare Products & Services 1.87% | |
| | | |
| | |
| Johnson & Johnson | |
| 179,100 | | |
| 27,771,246 | |
| | |
| | | |
| | |
| Insurance 2.50% | |
| | | |
| | |
| Travelers Cos., Inc. | |
| 220,000 | | |
| 37,232,800 | |
| | |
| | | |
| | |
| Pharmaceuticals 3.51% | |
| | | |
| | |
| Pfizer, Inc. | |
| 1,375,000 | | |
| 52,277,500 | |
| | |
| | | |
| | |
| Real Estate Investment Trusts (REITs) 4.75% | |
| | | |
| | |
| Broadstone Net Lease, Inc. | |
| 1,400,000 | | |
| 21,952,000 | |
| STAG Industrial, Inc. | |
| 1,400,000 | | |
| 48,720,000 | |
| | |
| | | |
| 70,672,000 | |
See
Accompanying Notes to Financial Statements.
| Semi-Annual Report | May
31, 2023 |
7 |
| SRH
Total Return Fund, Inc. |
Statement
of Investments |
May
31, 2023 (Unaudited)
| Description | |
Shares/Principal
Amount | | |
Value (Note 2) | |
| Retail 12.58% | |
| | | |
| | |
| eBay, Inc. | |
| 650,000 | | |
$ | 27,651,000 | |
| Walmart, Inc. | |
| 335,000 | | |
| 49,201,450 | |
| Yum! Brands, Inc. | |
| 858,000 | | |
| 110,416,020 | |
| | |
| | | |
| 187,268,470 | |
| Software & Tech Services 4.41% | |
| | | |
| | |
| Microsoft Corp. | |
| 200,000 | | |
| 65,678,000 | |
| | |
| | | |
| | |
| Technology, Hardware & Equipment 4.14% | |
| | | |
| | |
| Cisco Systems, Inc. | |
| 1,240,000 | | |
| 61,590,800 | |
| | |
| | | |
| | |
| TOTAL DOMESTIC COMMON STOCK | |
| | | |
| | |
| (Cost $582,108,586) | |
| | | |
| 1,472,784,247 | |
| | |
| | | |
| | |
| CLOSED-END FUNDS 3.90% | |
| | | |
| | |
| Cohen & Steers Infrastructure Fund, Inc. | |
| 2,750,000 | | |
| 58,162,500 | |
| | |
| | | |
| | |
| TOTAL CLOSED-END FUNDS | |
| | | |
| | |
| (Cost $35,605,881) | |
| | | |
| 58,162,500 | |
| | |
| | | |
| | |
| LIMITED PARTNERSHIPS 6.21% | |
| | | |
| | |
| Enterprise Products Partners LP | |
| 3,650,000 | | |
| 92,454,500 | |
| | |
| | | |
| | |
| TOTAL LIMITED PARTNERSHIPS | |
| | | |
| | |
| (Cost $71,009,752) | |
| | | |
| 92,454,500 | |
| | |
| | | |
| | |
| TOTAL LONG TERM INVESTMENTS | |
| | | |
| | |
| (Cost $688,724,219) | |
| | | |
| 1,623,401,247 | |
See
Accompanying Notes to Financial Statements.
| www.srhtotalreturnfund.com |
8 |
| SRH
Total Return Fund, Inc. |
Statement
of Investments |
May
31, 2023 (Unaudited)
| Description | |
Shares/Principal
Amount | | |
Value (Note 2) | |
| SHORT TERM INVESTMENTS 6.03% | |
| | | |
| | |
| Money Market Funds 6.03% | |
| | | |
| | |
| State Street Institutional U.S. Government Money Market Fund, Administration Class, 7-Day Yield - 4.77% | |
| 89,723,991 | | |
$ | 89,723,991 | |
| | |
| | | |
| | |
| TOTAL MONEY MARKET FUNDS | |
| | | |
| | |
| (Cost $89,723,991) | |
| | | |
| 89,723,991 | |
| | |
| | | |
| | |
| TOTAL SHORT TERM INVESTMENTS | |
| | | |
| | |
| (Cost $89,723,991) | |
| | | |
| 89,723,991 | |
| | |
| | | |
| | |
| TOTAL INVESTMENTS 115.07% | |
| | | |
| 1,713,125,238 | |
| (Cost $778,448,210) | |
| | | |
| | |
| | |
| | | |
| | |
| SENIOR NOTES (NET OF DEFERRED OFFERING COST OF $1,736,385) (15.00%) | |
| | | |
| (223,263,615 | ) |
| | |
| | | |
| | |
| OTHER ASSETS AND LIABILITIES, NET (0.07%) | |
| | | |
| (1,146,121 | ) |
| | |
| | | |
| | |
| NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS 100.00% | |
| | | |
$ | 1,488,715,502 | |
| (a) | Non-income
producing security. |
| (b) | For
additional information on portfolio concentration, see Note 6. |
| (c) | A
portion of the security is held as collateral for the written call options in the amount
of $1,702,750. |
Percentages
are stated as a percent of Net Assets Applicable to Common Stockholders.
Written
Call Options:
| Description | |
Counterparty | | |
Exercise Price | | |
Premiums Received | | |
Expiration Date | |
Number of Contracts | | |
Notional Value | | |
Value
(Note 2) | |
| American Express Co. | |
| Pershing | | |
$ | 175 | | |
$ | 1,092,500 | | |
1/19/2024 | |
| (1,050 | ) | |
$ | (16,648,800 | ) | |
$ | (866,250 | ) |
| Charles Schwab Corp. | |
| Pershing | | |
| 75 | | |
| 2,230,395 | | |
6/21/2024 | |
| (3,500 | ) | |
| (18,441,500 | ) | |
| (836,500 | ) |
| | |
| | | |
| | | |
| | | |
| |
| | | |
$ | (35,090,300 | ) | |
$ | (1,702,750 | ) |
See
Accompanying Notes to Financial Statements.
| Semi-Annual Report | May
31, 2023 |
9 |
| SRH
Total Return Fund, Inc. |
Statement
of Assets and Liabilities |
May
31, 2023 (Unaudited)
| ASSETS: | |
| |
| Total Investments at Value | |
| | |
| Cost ($778,448,210) | |
$ | 1,713,125,238 | |
| Dividends and interest receivable | |
| 2,482,884 | |
| Prepaid expenses and other assets | |
| 102,981 | |
| Total Assets | |
| 1,715,711,103 | |
| | |
| | |
| LIABILITIES: | |
| | |
| Written options, at value | |
| | |
| (Premiums received $3,322,895) | |
| 1,702,750 | |
| Senior notes (net of deferred offering cost of $1,736,385) (Note 10) | |
| 223,263,615 | |
| Investment advisory fees payable (Note 4) | |
| 1,327,555 | |
| Interest payable on senior notes (Note 10) | |
| 448,838 | |
| Administration fees payable (Note 4) | |
| 130,984 | |
| Printing fees payable | |
| 49,190 | |
| Custody fees payable | |
| 12,899 | |
| Legal fees payable | |
| 14,041 | |
| Audit and tax fees payable | |
| 22,690 | |
| Directors' fees and expenses payable (Note 4) | |
| 9,529 | |
| Accrued expenses and other payables | |
| 13,510 | |
| Total Liabilities | |
| 226,995,601 | |
| NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS | |
$ | 1,488,715,502 | |
| | |
| | |
| NET ASSETS (APPLICABLE TO COMMON STOCKHOLDERS) CONSIST OF: | |
| | |
| Par value of common stock (authorized 249,990,000 shares at $0.01 par value) | |
$ | 973,331 | |
| Paid-in capital in excess of par value of common stock | |
| 526,914,994 | |
| Total distributable earnings | |
| 960,827,177 | |
| NET ASSETS (APPLICABLE TO COMMON STOCKHOLDERS) | |
$ | 1,488,715,502 | |
| | |
| | |
| Net Asset Value, $1,488,715,502/97,333,118 common stock outstanding | |
$ | 15.30 | |
See
Accompanying Notes to Financial Statements.
| www.srhtotalreturnfund.com |
10 |
| SRH
Total Return Fund, Inc. |
Statement
of Operations |
For
the Period Ended May 31, 2023 (Unaudited)
| INVESTMENT INCOME: | |
| |
| Dividends | |
$ | 18,411,457 | |
| Interest and other income | |
| 1,576,905 | |
| Total Investment Income | |
| 19,988,362 | |
| | |
| | |
| EXPENSES: | |
| | |
| Investment advisory fees (Note 4) | |
| 7,734,267 | |
| Interest on senior notes (Note 10) | |
| 3,068,210 | |
| Administration fees (Note 4) | |
| 774,614 | |
| Directors' fees and expenses (Note 4) | |
| 115,967 | |
| Printing fees | |
| 72,157 | |
| Legal fees | |
| 58,444 | |
| Custody fees | |
| 23,926 | |
| Insurance expense | |
| 26,557 | |
| Audit and tax fees | |
| 21,189 | |
| Transfer agency fees | |
| 19,049 | |
| Offering costs (Note 10) | |
| 94,913 | |
| Other | |
| 100,540 | |
| Total Expenses | |
| 12,109,833 | |
| Net Investment Income | |
| 7,878,529 | |
| | |
| | |
| REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain/(loss) on: | |
| | |
| Investments | |
| 17,102,634 | |
| Written options | |
| 2,255,389 | |
| Net realized gain | |
| 19,358,023 | |
| Net change in unrealized appreciation/depreciation on: | |
| | |
| Investments | |
| (59,208,035 | ) |
| Written options | |
| (509,244 | ) |
| Net change in unrealized depreciation | |
| (59,717,279 | ) |
| NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | |
| (40,359,256 | ) |
| NET DECREASE IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM OPERATIONS | |
$ | (32,480,727 | ) |
See
Accompanying Notes to Financial Statements.
| Semi-Annual Report | May
31, 2023 |
11 |
| SRH Total Return Fund, Inc. |
Statements
of Changes in Net Assets |
| | |
For the
Six Months Ended
May 31, 2023
(Unaudited) | | |
For the
Year Ended
November 30, 2022 | |
| OPERATIONS: | |
| | |
| |
| Net investment income | |
$ | 7,878,529 | | |
$ | 10,633,346 | |
| Net realized gain on investments, written options and foreign currency transactions | |
| 19,358,023 | | |
| 43,458,775 | |
| Long-term capital gain distributions from other investment companies | |
| – | | |
| 2,310,644 | |
| Net change in unrealized appreciation/depreciation on investments, written options and foreign currency translations | |
| (59,717,279 | ) | |
| 7,509,224 | |
| Net Increase/(Decrease) in Net Assets Applicable to Common Stockholders Resulting from Operations | |
| (32,480,727 | ) | |
| 63,911,989 | |
| | |
| | | |
| | |
| DISTRIBUTIONS TO COMMON STOCKHOLDERS (NOTE 9): | |
| | | |
| | |
| From distributable earnings | |
| (24,333,280 | ) | |
| (46,754,112 | ) |
| Total Distributions: Common Stockholders | |
| (24,333,280 | ) | |
| (46,754,112 | ) |
| | |
| | | |
| | |
| CAPITAL SHARE TRANSACTIONS (NOTE 8): | |
| | | |
| | |
| Repurchase of fund shares | |
| – | | |
| (6,259,136 | ) |
| Net Decrease in Net Assets from Capital Share Transactions | |
| – | | |
| (6,259,136 | ) |
| | |
| | | |
| | |
| Net Increase/(Decrease) in Net Assets Applicable to Common Stockholders | |
| (56,814,007 | ) | |
| 10,898,741 | |
| | |
| | | |
| | |
| NET ASSETS: | |
| | | |
| | |
| Beginning of period | |
| 1,545,529,509 | | |
| 1,534,630,768 | |
| End of period | |
$ | 1,488,715,502 | | |
$ | 1,545,529,509 | |
See
Accompanying Notes to Financial Statements.
| www.srhtotalreturnfund.com |
12 |
| SRH
Total Return Fund, Inc. |
Statement
of Cash Flows |
For
the Period Ended May 31, 2023 (Unaudited)
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| |
| Net decrease in net assets applicable to Common Stockholders resulting from operations | |
$ | (32,480,727 | ) |
| Adjustments to reconcile change in net assets applicable to Common Stockholders resulting from operations to net cash provided by operating activities: | |
| | |
| Purchase of investment securities | |
| (84,765,463 | ) |
| Net sales of short-term investment securities | |
| 17,784,293 | |
| Proceeds from disposition of investment securities | |
| 80,513,223 | |
| Amortization of premium and accretion of discount on investments | |
| (654,447 | ) |
| Premiums received from written options transactions | |
| 3,322,895 | |
| Net realized (gain)/loss on: | |
| | |
| Investments | |
| (17,102,634 | ) |
| Written options | |
| (2,255,389 | ) |
| Net change in unrealized appreciation/depreciation on: | |
| | |
| Investments | |
| 59,208,035 | |
| Written options | |
| 509,244 | |
| Amortization of offering costs | |
| 94,913 | |
| (Increase)/Decrease in assets: | |
| | |
| Dividends and interest receivable | |
| 125,034 | |
| Prepaid expenses and other assets | |
| (32,254 | ) |
| Increase/(Decrease) in liabilities: | |
| | |
| Interest payable on senior loans | |
| 9,460 | |
| Investment advisory fees payable | |
| 62,675 | |
| Administration fees payable | |
| 1,186 | |
| Directors' fees and expenses payable | |
| (6,004 | ) |
| Legal fees payable | |
| 7,555 | |
| Audit and tax fees payable | |
| (22,310 | ) |
| Custody fees payable | |
| (21,273 | ) |
| Printing fees payable | |
| 31,266 | |
| Accrued expenses and other payables | |
| 4,002 | |
| Net Cash Provided by Operating Activities | |
| 24,333,280 | |
| | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | |
| Cash distributions paid to Common Stockholders | |
| (24,333,280 | ) |
| Net Cash Used in Financing Activities | |
| (24,333,280 | ) |
| Effect of exchange rates on cash | |
| – | |
| | |
| | |
| Net increase in cash | |
| – | |
| Cash, beginning balance | |
| – | |
| Cash, ending balance | |
$ | – | |
| | |
| | |
| Cash paid for interest on senior notes during the period was: | |
$ | 3,058,750 | |
See
Accompanying Notes to Financial Statements.
| Semi-Annual Report | May
31, 2023 |
13 |
| SRH Total
Return Fund, Inc. |
Financial
Highlights |
Contained
below is selected data for a share of common stock outstanding, total investment return, ratios to average net assets and other
supplemental data for the periods indicated. This information has been determined based upon information provided in the financial
statements and market price data for the Fund’s shares.
| OPERATING
PERFORMANCE: |
| Net asset value —
Beginning of Period |
| INCOME FROM INVESTMENT
OPERATIONS: |
| Net investment income(a) |
| Net realized and unrealized
gain/(loss) on investments |
| Net Increase/(Decrease) from
Operations Applicable to Common Stockholders |
| DISTRIBUTIONS TO
COMMON STOCKHOLDERS |
| Distributions from net
investment income |
| Distributions from net
realized capital gains |
| Distributions from tax
return of capital |
| Total Distributions Paid to
Common Stockholders |
| CAPITAL SHARE TRANSACTIONS: |
| Impact of Capital Share
Transactions(a) |
| Total Capital Share
Transactions |
| Net Increase/(Decrease)
in Net Asset Value |
| Common Share Net Asset
Value — End of Period |
| Common Share Market
Price— End of Period |
| Total Return, Common
Share Net Asset Value(b) |
| Total Return, Common
Share Market Price(b) |
| RATIOS TO AVERAGE
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:(c) |
| Ratio of operating expenses
to average net assets including waiver |
| Ratio of operating expenses
to average net assets excluding waiver |
| Ratio of operating expenses
to average net assets excluding interest on borrowings |
| Ratio of net investment
income to average net assets including waiver |
| Ratio of net investment
income to average net assets excluding waiver |
| SUPPLEMENTAL DATA: |
| Portfolio turnover rate |
| Net Assets Applicable
to Common Stockholders, End of Period (000s) |
| Number of Common Shares
Outstanding, End of Period (000s) |
| BORROWINGS AT END
OF PERIOD |
| Aggregate Amount of
Senior Notes Outstanding (000s) |
| Asset Coverage Per $1,000(g) |
See
Accompanying Notes to Financial Statements.
| www.srhtotalreturnfund.com |
14 |
| SRH Total
Return Fund, Inc. |
Financial
Highlights |
For the Six
Months
Ended
May 31, 2023
(Unaudited) | | |
For the Year
Ended
November 30,
2022 | | |
For the Year
Ended
November 30,
2021 | | |
For the Year
Ended
November 30,
2020 | | |
For the Year
Ended
November 30,
2019 | | |
For the Year
Ended
November 30,
2018 | |
| | | | |
| | | |
| | | |
| | | |
| | | |
| | |
| $ | 15.88 | | |
$ | 15.69 | | |
$ | 13.29 | | |
$ | 13.56 | | |
$ | 13.32 | | |
$ | 12.79 | |
| | | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | 0.08 | | |
| 0.11 | | |
| 0.01 | | |
| 0.06 | | |
| 0.07 | | |
| 0.09 | |
| | (0.41 | ) | |
| 0.55 | | |
| 2.79 | | |
| (0.01 | ) | |
| 0.52 | | |
| 0.80 | |
| | (0.33 | ) | |
| 0.66 | | |
| 2.80 | | |
| 0.05 | | |
| 0.59 | | |
| 0.89 | |
| | | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | (0.25 | ) | |
| (0.01 | ) | |
| – | | |
| (0.05 | ) | |
| (0.08 | ) | |
| (0.06 | ) |
| | – | | |
| (0.47 | ) | |
| (0.41 | ) | |
| (0.34 | ) | |
| (0.30 | ) | |
| (0.21 | ) |
| | – | | |
| – | | |
| – | | |
| (0.02 | ) | |
| (0.03 | ) | |
| (0.10 | ) |
| | (0.25 | ) | |
| (0.48 | ) | |
| (0.41 | ) | |
| (0.41 | ) | |
| (0.41 | ) | |
| (0.37 | ) |
| | | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | – | | |
| 0.01 | | |
| 0.01 | | |
| 0.09 | | |
| 0.06 | | |
| 0.01 | |
| | – | | |
| 0.01 | | |
| 0.01 | | |
| 0.09 | | |
| 0.06 | | |
| 0.01 | |
| | (0.58 | ) | |
| 0.19 | | |
| 2.40 | | |
| (0.27 | ) | |
| 0.24 | | |
| 0.53 | |
| $ | 15.30 | | |
$ | 15.88 | | |
$ | 15.69 | | |
$ | 13.29 | | |
$ | 13.56 | | |
$ | 13.32 | |
| $ | 12.42 | | |
$ | 13.31 | | |
$ | 13.02 | | |
$ | 10.91 | | |
$ | 11.41 | | |
$ | 11.09 | |
| | (1.77 | %) | |
| 4.96 | % | |
| 21.86 | % | |
| 2.04 | % | |
| 5.60 | % | |
| 7.78 | % |
| | (4.87 | %) | |
| 6.01 | % | |
| 23.18 | % | |
| (0.45 | %) | |
| 6.72 | % | |
| 6.57 | % |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | 1.62 | %(d) |
| 1.61 | % | |
| 1.65 | % | |
| 1.16 | % | |
| 1.11 | % | |
| 1.22 | % |
| | 1.62 | %(d) |
| 1.61 | % | |
| 1.68 | % | |
| 1.17 | % | |
| 1.11 | % | |
| 1.22 | % |
| | 1.21 | %(d) |
| 1.20 | % | |
| 1.24 | % | |
| 1.12 | % | |
| N/A | | |
| 1.21 | % |
| | 1.05 | %(d) |
| 0.70 | % | |
| 0.07 | % | |
| 0.52 | % | |
| 0.54 | % | |
| 0.71 | % |
| | 1.05 | %(d) |
| 0.70 | % | |
| 0.04 | % | |
| 0.51 | % | |
| 0.54 | % | |
| 0.71 | % |
| | | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | 5 | % | |
| 10 | % | |
| 6 | % | |
| 6 | % | |
| 2 | % | |
| 1 | % |
| $ | 1,488,716 | | |
$ | 1,545,530 | | |
$ | 1,534,631 | | |
$ | 1,305,895 | | |
$ | 1,392,553 | | |
$ | 1,407,553 | |
| | 97,333 | | |
| 97,333 | | |
| 97,802 | | |
| 98,271 | | |
| 102,676 | | |
| 105,657 | |
| | | | |
| | | |
| | | |
| | | |
| | | |
| | |
| $ | 225,000 | (e)(f) | |
$ | 223,169 | (e) | |
$ | 222,978 | (e) | |
$ | 222,749 | (e) | |
| N/A | | |
| N/A | |
| | 7,617 | | |
| 7,925 | | |
| 7,882 | | |
| 6,863 | | |
| N/A | | |
| N/A | |
See
Accompanying Notes to Financial Statements.
| Semi-Annual Report | May
31, 2023 |
15 |
| SRH Total Return Fund, Inc. |
Financial
Highlights |
| (a) | Calculated
based on the average number of common shares outstanding during each fiscal period. |
| (b) | Total
return based on per share net asset value reflects the effects of changes in net asset
value on the performance of the Fund during each fiscal period. Total return based on
common share market value assumes the purchase of common shares at the market price on
the first day and sale of common shares at the market price on the last day of the period
indicated. Dividends and distributions, if any, are assumed to be reinvested at prices
obtained under the Fund's distribution reinvestment plan. |
| (c) | Ratios
do not reflect the proportionate share of income and expenses of the underlying investee
funds (i.e. those listed under Money Market Funds or Closed-End Funds on the Statement
of Investments). |
| (e) | The
amount shown is due to the issuance of senior notes (See Note 10). |
| (f) | Principal
amount. Excludes the costs incurred in connection with the issuance of the senior notes.
|
| (g) | Calculated
by subtracting the Fund’s total liabilities (excluding the principal amount of
the senior notes) from the Fund's total assets and dividing by the principal amount of
the senior notes, then multiplying by $1,000. |
See
Accompanying Notes to Financial Statements.
| www.srhtotalreturnfund.com |
16 |
| SRH
Total Return Fund, Inc. |
Notes
to Financial Statements |
May 31, 2023
(Unaudited)
NOTE
1. FUND ORGANIZATION
SRH
Total Return Fund, Inc. (the “Fund” or “STEW”), is a non-diversified, closed-end management company
organized as a Maryland corporation and is registered with the Securities and Exchange Commission (“SEC”) under
the Investment Company Act of 1940, as amended (the “1940 Act”).
The
Fund is considered an investment company for financial reporting purposes under generally accepted accounting principles in the
United States of America (“GAAP”) and accordingly follows the investment company accounting and reporting guidance
in the Financial Accounting Standards Board Accounting Standards Codification Topic 946 Financial Services – Investment
Companies.
NOTE
2. SIGNIFICANT ACCOUNTING POLICIES
The
following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
The preparation of financial statements is in accordance with GAAP, which requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
Portfolio
Valuation: Equity securities including closed-end funds and limited partnerships for which market quotations are readily available
(including securities listed on national securities exchanges and those traded over-the-counter) are valued based on the last
sales price at the close of the applicable exchange. If such equity securities were not traded on the valuation date, but market
quotations are readily available, they are valued at the bid price provided by an independent pricing service or by principal
market makers. Equity securities traded on NASDAQ are valued at the NASDAQ Official Closing Price. Debt securities are valued
at the mean between the closing bid and asked prices, or based on a matrix system which utilizes information (such as credit ratings,
yields and maturities) from independent pricing services, principal market makers, or other independent sources. Money market
mutual funds are valued at their net asset value per share. Short-term fixed income securities such as Commercial Paper, Bankers
Acceptances and U.S. Treasury Bills, having a maturity of less than 60 days are valued using market quotations or a matrix method
provided by a pricing service. If prices are not available from the pricing service, then the securities will be priced at fair
value under procedures approved by the Board of Directors (the “Board”). Pursuant to Rule 2a-5 under the 1940 Act,
the Board has designated the Fund's investment adviser, Paralel Advisors LLC ("Paralel" or the “Adviser”),
as the valuation designee (the "Valuation Designee") with respect to the fair valuation of the Fund's portfolio securities,
subject to oversight by and periodic reporting to the Board. Fair valued securities are those for which market quotations are
not readily available or where the pricing agent or market maker does not provide a valuation or methodology, or provides a valuation
or methodology that, in the judgment of the Adviser, does not represent fair value.
For
valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under certain circumstances described
below. If the Valuation Designee determines that developments between the close of a foreign market and the close of the New York
Stock Exchange (“NYSE”) will, in its judgment, materially affect the value of some or all of the Fund’s portfolio
securities, the Valuation Designee may adjust the previous closing prices to reflect what it believes to be the fair value of
the securities as of the close of the NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value,
the Valuation Designee reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities
markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities.
The Valuation Designee may also fair value securities in other situations, such as when a particular foreign market is closed
but the U.S. market is open. The Valuation Designee may use outside pricing services to provide it with closing prices. The Valuation
Designee may consider whether it is appropriate, in light of relevant circumstances, to adjust such valuation in accordance with
the Fund’s valuation procedures. The Valuation Designee cannot predict how often it will use closing prices and how often
it will determine it necessary to adjust those prices to reflect fair value. If the Valuation Designee adjusts prices, the Valuation
Designee will periodically compare closing prices, the next day’s opening prices in the same markets and those adjusted
prices as a means of evaluating its security valuation process.
| Semi-Annual Report | May 31,
2023 |
17 |
| SRH
Total Return Fund, Inc. |
Notes
to Financial Statements |
| |
May 31, 2023 (Unaudited) |
Options
are valued at the mean of the highest bid and lowest ask prices on the principal exchange on which the option trades. If no quotations
are available, fair value procedures will be used. Fair value procedures will also be used for any options traded over-the-counter.
Various
inputs are used to determine the value of the Fund's investments. Observable inputs are inputs that reflect the assumptions market
participants would use based on market data obtained from sources independent of the reporting entity. Unobservable inputs are
inputs that reflect the reporting entity’s own assumptions based on the best information available in the circumstances.
These
inputs are summarized in the three broad levels listed below.
Level
1 — Unadjusted quoted prices in active markets for identical investments that the Fund has the ability to access
Level
2 — Significant observable inputs (including quoted prices for similar investments, 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)
| www.srhtotalreturnfund.com |
18 |
SRH
Total Return Fund, Inc. |
Notes
to Financial Statements |
| |
May
31, 2023 (Unaudited) |
The
following is a summary of the Fund’s investments by inputs used to value those investments and other financial instruments
as of May 31, 2023:
Investments
in Securities at Value* | |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
| Domestic
Common Stock | |
$ | 1,472,784,247 | | |
$ | – | | |
$ | – | | |
$ | 1,472,784,247 | |
| Closed-End Funds | |
| 58,162,500 | | |
| – | | |
| – | | |
| 58,162,500 | |
| Limited Partnerships | |
| 92,454,500 | | |
| – | | |
| – | | |
| 92,454,500 | |
| Money
Market Funds | |
| 89,723,991 | | |
| – | | |
| – | | |
| 89,723,991 | |
| TOTAL | |
$ | 1,713,125,238 | | |
$ | – | | |
$ | – | | |
$ | 1,713,125,238 | |
Other
Financial Instruments** | |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
| Written
Call Options | |
$ | (1,702,750 | ) | |
$ | – | | |
$ | – | | |
$ | (1,702,750 | ) |
| TOTAL | |
$ | (1,702,750 | ) | |
$ | – | | |
$ | – | | |
$ | (1,702,750 | ) |
| * | For
detailed descriptions and other security classifications, see the accompanying Statement
of Investments. |
| ** | Other
financial instruments are derivative instruments reflected in the Statement of Investments. |
Securities
Transactions and Investment Income: Securities transactions are recorded as of the trade date. Realized gains and losses from
securities sold are recorded on the identified cost basis. Dividend income is recorded as of the ex-dividend date or for certain
foreign securities, when the information becomes available to the Fund. Certain dividend income from foreign securities will be
recorded, in the exercise of reasonable diligence, as soon as the Fund is informed of the dividend if such information is obtained
subsequent to the ex-dividend date and may be subject to withholding taxes in these jurisdictions. Withholding taxes on foreign
dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates.
Non-cash dividends included in dividend income, if any, are recorded at the fair value of the securities received. Interest income,
including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis
using the effective yield method.
Dividend
income from investments in real estate investment trusts (“REITs”) is recorded at management’s estimate of income
included in distributions received. Distributions received in excess of this amount are recorded as a reduction of the cost of
investments. The actual amount of income and return of capital are determined by each REIT only after its fiscal year-end, and
may differ from the estimated amounts. Such differences, if any, are recorded by the Fund in the following annual financial reporting
period.
Foreign
Currency Translations: The Fund may invest a portion of its assets in foreign securities. In the event that the Fund executes
a foreign security transaction, the Fund will generally enter into a forward foreign currency contract to settle the foreign security
transaction. Foreign securities may carry more risk than U.S. securities, such as political, market and currency risks. See Foreign
Issuer Risk under Note 6.
The
Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values
of assets and liabilities, other than investments in securities at fiscal period-end, resulting from changes in exchange rates.
| Semi-Annual
Report | May 31, 2023 |
19 |
| SRH
Total Return Fund, Inc. |
Notes
to Financial Statements |
| |
May 31, 2023 (Unaudited) |
Distributions
to Common Stockholders: It is the Fund’s policy to distribute substantially all net investment income and net realized
gains to stockholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code
of 1986, as amended. Distributions to common stockholders are recorded on the ex-dividend date.
The
Fund intends to distribute its net realized capital gains, if any, at least annually. At times, to maintain a stable level of
distributions, the Fund may pay out less than all of its net investment income or pay out accumulated undistributed income, or
return capital, in addition to current net investment income. Any distribution that is treated as a return of capital generally
will reduce a stockholder's basis in his or her shares, which may increase the capital gain or reduce the capital loss realized
upon the sale of such shares. Any amounts received in excess of a stockholder's basis are generally treated as capital gain, assuming
the shares are held as capital assets.
Indemnifications:
Like many other companies, the Fund’s organizational documents provide that its officers and directors are indemnified
against certain liabilities arising out of the performance of their duties to the Fund. In addition, both in some of its principal
service contracts and in the normal course of its business, the Fund enters into contracts that provide indemnifications to other
parties for certain types of losses or liabilities. The Fund’s maximum exposure under these arrangements is unknown as this
could involve future claims against the Fund.
Federal
Income Tax: For federal income tax purposes, the Fund currently qualifies, and intends to remain qualified as a regulated
investment company under the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially
all of its earnings to its stockholders. Accordingly, no provision for federal income or excise taxes has been made.
Income
and capital gain distributions are determined and characterized in accordance with income tax regulations, which may differ from
GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by
the Fund, timing differences and differing characterization of distributions made by the Fund as a whole.
As
of and during the period ended May 31, 2023, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes
interest and penalties, if any, related to unrecognized tax benefits as income tax expenses, in the Statement of Operations. The
Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by
the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the
filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated
no uncertain tax positions that require a provision for income taxes.
NOTE
3. DERIVATIVE FINANCIAL INSTRUMENTS
As
a part of its investment strategy, the Fund may invest to a lesser extent in derivatives contracts. In doing so, the Fund will
employ strategies in differing combinations to permit them to increase, decrease, or change the level or types of exposure to
market factors. Central to those strategies are features inherent in derivatives that make them more attractive for this purpose
than equity or debt securities; they require little or no initial cash investment, they can focus exposure on only certain selected
risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract.
This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales
of securities capable of affecting a similar response to market factors.
| www.srhtotalreturnfund.com |
20 |
| SRH
Total Return Fund, Inc. |
Notes
to Financial Statements |
| |
May 31, 2023 (Unaudited) |
Risk
of Investing in Derivatives: The Fund’s use of derivatives can result in losses due to unanticipated changes in the
market risk factors and the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures
to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected,
resulting in losses for the combined or hedged positions.
Derivatives
may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains
or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative
to its net assets and can substantially increase the volatility of the Fund’s performance.
Associated
risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative
and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to,
per its investment objectives, but are the additional risks from investing in derivatives.
Examples
of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell or close out the derivative
in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the
Fund. In addition, use of derivatives may increase or decrease exposure to the following risk factors:
Equity
Risk: Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general
market. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that
follow.
Option
Contracts: The Fund may enter into options transactions for hedging purposes and for non-hedging purposes such as seeking
to enhance return. The Fund may write put and call options on any stocks or stock indices, currencies traded on domestic and foreign
securities exchanges, or futures contracts on stock indices, interest rates and currencies traded on domestic and, to the extent
permitted by the Commodity Futures Trading Commission, foreign exchanges. A call option on an asset written by the Fund obligates
the Fund to sell the specified asset to the holder (purchaser) at a stated price (the exercise price) if the option is exercised
before a specified date (the expiration date). A put option on an asset written by the Fund obligates the Fund to buy the specified
asset from the purchaser at the exercise price if the option is exercised before the expiration date. Premiums received when writing
options are recorded as liabilities and are subsequently adjusted to the current value of the options written. Premiums received
from writing options that expire are treated as realized gains. Premiums received from writing options, which are either exercised
or closed, are offset against the proceeds received or amount paid on the transaction to determine realized gains or losses.
| Semi-Annual
Report | May 31, 2023 |
21 |
| SRH Total Return Fund, Inc. |
Notes
to Financial Statements |
May 31, 2023
(Unaudited)
For
the period ended May 31, 2023, the effects of derivative instruments on the Statement of Assets and Liabilities were as follows:
| Risk Exposure | |
Asset
Derivatives Statement of Assets and Liabilities Location | |
Fair
Value | |
Liability
Derivatives Statement of Assets and Liabilities Location | |
Fair
Value |
Equity Contracts
(Written Options) | |
N/A | |
| - | | |
Written options,
at value | |
$ | 1,702,750 | |
| Total | |
| |
| - | | |
| |
$ | 1,702,750 | |
For
the period ended May 31, 2023, the effects of derivative instruments on the Statement of Operations were as follows:
Risk
Exposure | |
Statement
of Operations Location | |
Realized
Gain/ (Loss) on Derivatives | |
Change
in Unrealized Appreciation/ Depreciation on Derivatives |
| Equity Contracts (Written Options) | |
Net realized gain on written options/Net change in unrealized appreciation on written options | |
$ | 2,255,389 | | |
$ | (509,244 | ) |
| Total | |
| |
$ | 2,255,389 | | |
$ | (509,244 | ) |
The
average monthly notional value of written option contracts for the Fund was $26,353,017 during the period ended May 31, 2023.
NOTE
4. ADVISORY FEES, ADMINISTRATION FEES AND OTHER AGREEMENTS
Paralel
serves as the Fund's investment adviser pursuant to an advisory agreement with the Fund. The Fund pays Paralel an annual fee,
calculated and paid monthly, equal to 0.90% of the first $2 billion of the Fund’s average Managed Assets, plus 0.80% of
the Fund’s average Managed Assets over $2 billion. "Managed Assets" means the total assets of the Fund, including
assets attributable to leverage, minus liabilities (other than debt representing leverage and any preferred stock that may be
outstanding).
Rocky
Mountain Advisers, LLC (“RMA”) provides sub-advisory services to the Fund pursuant to a sub-advisory agreement between
RMA and Paralel. Paralel, not the Fund, pays RMA an annual sub-advisory fee, calculated and paid monthly, equal to 0.77% of the
first $2 billion of the Fund’s average Managed Assets, plus 0.68% of the Fund’s average Managed Assets over $2 billion.
Paralel
Technologies LLC (“PRT”), an affiliate of Paralel, serves as the Fund’s administrator and provides all administrative
and fund accounting services to the Fund. As compensation for its services, PRT receives an annual fee, calculated and paid monthly,
equal to 0.09% of the first $2 billion of the Fund’s average Managed Assets, plus 0.075% of the Fund’s average Managed
Assets over $2 billion.
Paralel
is a wholly owned subsidiary of PRT. RMA may be deemed an affiliate of PRT and Paralel under the 1940 Act due to an indirect,
non-controlling investment in PRT by SCLT Holdings, LLC, a fully owned subsidiary of the Susan L. Ciciora Trust, which is also
the sole member of RMA. The Susan L. Ciciora Trust may be deemed an affiliate of the Fund.
| www.srhtotalreturnfund.com |
22 |
| SRH Total Return Fund, Inc. |
Notes
to Financial Statements |
May 31, 2023
(Unaudited)
No
persons (other than the Independent Directors) receive compensation from the Fund for acting as a director or officer; however,
certain Directors and officers of the Fund are officers or employees of Paralel, RMA or PRT and may receive compensation in such
capacities. The Fund pays each member of the Board who is not a director, officer, employee, or affiliate of Paralel, RMA or PRT
or any of their affiliates (each an “Independent Director”) a fee of $40,000 per annum, plus $5,000 for each regular
quarterly meeting, $3,000 for each audit committee meeting, $1,000 for each nominating committee meeting and $1,000 for each telephonic
meeting of the Board. The Lead Independent Director of the Board receives an additional $3,125 for attending each regular quarterly
meeting of the Board. The chairman of the Audit Committee receives an additional $3,000 for attending each regular meeting of
the audit committee. The Fund will reimburse all Directors for travel and out-of-pocket expenses incurred in connection with
such meetings.
State
Street Bank & Trust Company (“State Street”) serves as the Fund’s custodian. Computershare Shareowner Services
(“Computershare”) serves as the Fund’s common stock servicing agent, dividend-paying agent and registrar. As
compensation for State Street’s and Computershare’s services, the Fund pays each a monthly fee plus certain out-of-pocket
expenses.
NOTE
5. SECURITIES TRANSACTIONS
Purchases
and sales of securities, excluding short term securities, during the period ended May 31, 2023 were $84,765,463 and $80,512,462,
respectively.
NOTE
6. PORTFOLIO INVESTMENTS AND CONCENTRATION
Under
normal market conditions, the Fund intends to invest at least 80% of its net assets in common stocks. Common stocks include dividend-paying
closed-end funds, open-end funds and REITs. The portion of the Fund’s assets that are not invested in common stocks may
be invested in fixed income securities and cash equivalents. The term “fixed income securities” includes bonds, U.S.
Government securities, notes, bills, debentures, preferred stocks, convertible securities, bank debt obligations, repurchase agreements
and short-term money market obligations.
Concentration
Risk: The Fund operates as a “non-diversified” investment company, as defined in the 1940 Act. As a result of
being “non-diversified” with respect to 50% of the Fund’s portfolio, the Fund must limit the portion of its
assets invested in the securities of a single issuer to 5%, measured at the time of purchase. In addition, no single investment
can exceed 25% of the Fund’s total assets at the time of purchase. A more concentrated portfolio may cause the Fund’s
net asset value to be more volatile and thus may subject stockholders to more risk. Thus, the volatility of the Fund’s net
asset value and its performance in general, depends disproportionately more on the performance of a smaller number of holdings
than that of a more diversified fund. As a result, the Fund is subject to a greater risk of loss than a fund that diversifies
its investments more broadly.
As
of May 31, 2023, the Fund held more than 25% of its assets in Berkshire Hathaway, Inc. In addition to market appreciation of the
issuer since the time of purchase, the Fund acquired additional interest in Berkshire Hathaway, Inc. in the March 20, 2015 reorganization.
After the reorganization was completed, shares held of the issuer were liquidated to bring the concentration to 25%. Concentration
of the Berkshire Hathaway, Inc. position was a direct result of market appreciation and decreased leverage since the time the
Fund and the funds acquired in the reorganization purchased the security.
Foreign
Issuer Risk: Investment in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers.
These risks may include, but are not limited to: (i) less information about non-U.S. issuers or markets may be available due to
less rigorous disclosure, accounting standards or regulatory practices; (ii) many non-U.S. markets are smaller, less
liquid and more volatile thus, in a changing market, the Fund’s adviser may not be able to sell the Fund’s portfolio
securities at times, in amounts and at prices they consider reasonable; (iii) currency exchange rates or controls may adversely
affect the value of the Fund’s investments; (iv) the economies of non-U.S. countries may grow at slower rates than expected
or may experience downturns or recessions; and, (v) withholdings and other non-U.S. taxes may decrease the Fund’s return.
| Semi-Annual Report | May 31, 2023 |
23 |
| SRH Total Return Fund, Inc. |
Notes
to Financial Statements |
May 31, 2023
(Unaudited)
NOTE
7. SIGNIFICANT STOCKHOLDERS
On
May 31, 2023, trusts and other entities and individuals affiliated with Stewart R. Horejsi and the Horejsi family owned 45,384,254
shares of Common Stock of the Fund, representing approximately 46.63% of the total Common Stock outstanding.
NOTE
8. SHARE REPURCHASES AND REDEMPTIONS
In
accordance with Section 23(c) of the 1940 Act and the rules promulgated thereunder, the Fund may from time to time effect repurchases
and/or redemptions of its Common Stock.
For
the period ended May 31, 2023, the Fund did not repurchase shares. For the year ended November 30, 2022, the Fund repurchased
469,255 shares of Common Stock at a total purchase amount of $6,259,136 at an average discount of 17.13% of net asset value.
NOTE
9. TAX BASIS DISTRIBUTIONS AND TAX BASIS INFORMATION
The
amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized
at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2023.
The
character of distributions paid on a tax basis during the year ended November 30, 2022 was as follows:
| Distributions Paid From: | |
|
| Ordinary Income | |
$ | 1,927,320 | |
| Tax Return of Capital | |
| 44,826,792 | |
| | |
$ | 46,754,112 | |
The
amount of net unrealized appreciation/(depreciation) and the cost of investment securities for tax purposes at May 31, 2023 were
as follows:
| Cost of investments for income tax purposes | |
$ | 758,373,075 | |
| Gross appreciation on investments (excess of value over tax cost) | |
| 997,217,954 | |
| Gross depreciation on investments (excess of tax cost over value) | |
| (42,465,791 | ) |
| Net unrealized appreciation on investments | |
$ | 954,752,163 | |
NOTE
10. SENIOR NOTES
On
November 5, 2020, the Fund issued senior unsecured notes (“Notes”) in an aggregate amount of $225,000,000 in three
fixed-rate series. The Notes were issued in private placement offerings to institutional investors and are not listed on any exchange
or automated quotation system. The note purchase agreement (the “Agreement”) contains various covenants related to
other indebtedness and limits on the Fund’s overall leverage. Under the 1940 Act and the terms of the Notes,
the Fund may not declare dividends or make other distributions on shares of its common stock or make purchases of such shares
if, at any time of the declaration, distribution or purchase, asset coverage with respect to senior securities representing indebtedness
(including the Notes) would be less than 300%.
| www.srhtotalreturnfund.com |
24 |
| SRH Total Return Fund, Inc. |
Notes
to Financial Statements |
May 31, 2023
(Unaudited)
The
table below sets forth a summary of the key terms of each series of Notes outstanding at May 31, 2023.
| Series | |
Principal Outstanding
May 31, 2023 | |
Payment Frequency | |
Unamortized Offering Costs | |
Estimated
Fair Value May 31, 2023 | |
Fixed Interest Rate | |
Maturity Date |
| A | |
$ | 85,000,000 | | |
Semi-Annual | |
$ | 624,712 | | |
$ | 70,741,935 | | |
| 2.62 | % | |
November 5, 2030 |
| B | |
$ | 85,000,000 | | |
Semi-Annual | |
$ | 660,796 | | |
$ | 69,305,352 | | |
| 2.72 | % | |
November 5, 2032 |
| C | |
$ | 55,000,000 | | |
Semi-Annual | |
$ | 450,877 | | |
$ | 43,767,275 | | |
| 2.87 | % | |
November 5, 2035 |
The
Fund incurred costs in connection with the issuance of the Notes. These costs, totaling $2,226,190, were recorded as a deferred
charge and are being amortized over the respective life of each series of notes. Amortization of $94,913 is included as Offering
Costs on the Statement of Operations and the carrying amount on the Statement of Assets and Liabilities is equal to the principal
amount of the Notes less unamortized offering costs. The estimated fair value of the Notes was calculated, for disclosure purposes,
based on estimated market yields for comparable debt instruments with similar maturity and terms. The Fund categorizes the Notes
as Level 2 securities within the fair value hierarchy.
The
Fund shall at all times maintain a current rating given by a NRSRO (Nationally Recognized Statistical Rating Organization) of
at least Investment Grade with respect to the Notes and shall not at any time have any rating given by a NRSRO of less than Investment
Grade with respect to the Notes. The Notes have been assigned an ‘A’ long-term rating by Fitch Ratings.
At
May 31, 2023, the Fund was in compliance with all covenants under the Agreement.
| Semi-Annual Report | May 31, 2023 |
25 |
| SRH Total Return Fund, Inc. |
Additional Information |
May 31, 2023
(Unaudited)
PORTFOLIO
INFORMATION
The
Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an
exhibit to its report on Form N-PORT. The Fund’s N-PORT reports are available (i) on the Fund’s website at www.srhtotalreturnfund.com;
or (ii) on the SEC’s website at www.sec.gov.
PROXY
VOTING
The
policies and procedures used by the Fund to determine how to vote proxies relating to portfolio securities held by the Fund are
available, without charge, (i) on the Fund’s website at www.srhtotalreturnfund.com,
(ii) on the SEC’s website at www.sec.gov, or (iii) by calling toll-free (877) 561-7914.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended
June 30 is available at www.sec.gov.
SENIOR
OFFICER CODE OF ETHICS
The
Fund files a copy of its code of ethics that applies to its principal executive officer, principal financial officer or controller,
or persons performing similar functions (the “Senior Officer Code of Ethics”), with the SEC as an exhibit to its annual
report on Form N-CSR. The Fund’s Senior Officer Code of Ethics is available on the Fund’s website located at www.srhtotalreturnfund.com.
PRIVACY
STATEMENT
Pursuant
to SEC Regulation S-P (Privacy of Consumer Financial Information) the Board established the following policy regarding information
about the Fund’s stockholders. We consider all stockholder data to be private and confidential, and we hold ourselves to
the highest standards in its safekeeping and use.
General
Statement. The Fund may collect nonpublic information (e.g., your name, address, email address, Social Security Number, Fund
holdings (collectively, “Personal Information”)) about stockholders from transactions in Fund shares. The Fund will
not release Personal Information about current or former stockholders (except as permitted by law) unless one of the following
conditions is met: (i) we receive your prior written consent; (ii) we believe the recipient to be you or your authorized representative;
(iii) to service or support the business functions of the Fund (as explained in more detail below), or (iv) we are required by
law to release Personal Information to the recipient. The Fund has not and will not in the future give or sell Personal Information
about its current or former stockholders to any company, individual, or group (except as permitted by law) and as otherwise provided
in this policy.
In
the future, the Fund may make certain electronic services available to its stockholders and may solicit your email address and
contact you by email, telephone or U.S. mail regarding the availability of such services. The Fund may also contact stockholders
by email, telephone or U.S. mail in connection with these services, such as to confirm enrollment in electronic stockholder communications
or to update your Personal Information. In no event will the Fund transmit your Personal Information via email without your consent.
Use
of Personal Information. The Fund will only use Personal Information (i) as necessary to service or maintain stockholder accounts
in the ordinary course of business and (ii) to support business functions of the Fund and its affiliated businesses. This means
that the Fund may share certain Personal Information, only as permitted by law, with affiliated businesses of the Fund, and that
such information may be used for non-Fund-related solicitation. When Personal Information is shared with the Fund’s
business affiliates, the Fund may do so without providing you the option of preventing these types of disclosures as permitted
by law.
| www.srhtotalreturnfund.com |
26 |
| SRH Total Return Fund, Inc. |
Additional Information |
May 31, 2023
(Unaudited)
Safeguards
Regarding Personal Information. Internally, we also restrict access to Personal Information to those who have a specific need
for the records. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard Personal
Information. Any doubts about the confidentiality of Personal Information, as required by law, are resolved in favor of confidentiality.
SECTION
19(A) NOTICES
The
following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company
Act of 1940, as amended, and the related rules adopted thereunder. The Fund estimates the following percentages, of the total
distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage
of the total distribution amount. These percentages are disclosed for the fiscal year-to-date cumulative distribution amount per
share for the Fund.
The
amounts and sources of distributions reported in these 19(a) notices are only estimates and not for tax reporting purposes. The
actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during
the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV
for the calendar year that will tell stockholders how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the six months ended May 31, 2023 | |
% Breakdown of the Total Cumulative Distributions for the six months ended May 31, 2023 |
| Net Investment | |
Net Realized Capital Gains | | |
Return of Capital | | |
Total Per Common Share | | |
Net Investment Income | |
Net Realized Capital Gains | | |
Return of Capital | | |
Total Per Common Share | |
| $0.04848 | |
$ | 0.04003 | | |
$ | 0.16149 | | |
$ | 0.25000 | | |
19.39% | |
| 16.02 | % | |
| 64.59 | % | |
| 100.00 | % |
The
Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of the distribution
may be a return of capital. A return of capital may occur for example, when some or all of the money that you invested in the
Fund is paid back to stockholders. A return of capital distribution does not necessarily reflect the Fund's investment performance
and should not be confused with `yield' or `income.’
Stockholders
should not draw any conclusions about the Fund's investment performance from the amount of the distribution or from the terms
of the Fund's Plan.
DISCLAIMER
The
Fund is not sponsored, endorsed, sold or promoted by Morningstar, Inc. or any of its affiliates (all such entities, collectively,
“Morningstar Entities”). The Morningstar Entities make no representation or warranty, express or implied, to the owners
of the Fund or any member of the public regarding the advisability of investing in mutual funds generally or in the Fund in particular
or the ability of the Morningstar Index Data to track general mutual fund market performance.
| Semi-Annual Report | May 31, 2023 |
27 |
| SRH Total Return Fund, Inc. |
Additional Information |
May 31, 2023
(Unaudited)
THE
MORNINGSTAR ENTITIES DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE MORNINGSTAR INDEX DATA OR ANY DATA INCLUDED
THEREIN AND MORNINGSTAR ENTITIES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
| www.srhtotalreturnfund.com |
28 |
| SRH Total Return Fund, Inc. |
Summary
of Dividend Reinvestment Plan |
May 31, 2023
(Unaudited)
Registered
holders (“Common Stockholders”) of common shares (the “Common Shares”) are automatically enrolled (the
“Participants”) in the Fund’s Dividend Reinvestment Plan (the “Plan”) whereupon all distributions
of income, capital gains or managed distributions (“Distributions”) are automatically reinvested in additional Common
Shares. Common Stockholders who elect to not participate in the Plan will receive all distributions in cash paid by check in U.S.
dollars mailed directly to the stockholders of record (or if the shares are held in street name or other nominee name, then the
nominee) by the custodian, as dividend disbursing agent.
Computershare
Shareowner Services (the “Agent”) serves as Agent for each Participant in administering the Plan. After the Fund declares
a Distribution, if (1) the net asset value per Common Share is equal to or less than the market price per Common Share plus estimated
brokerage commissions on the payment date for a Distribution, Participants will be issued Common Shares at the higher of net asset
value per Common Share or 95% of the market price per Common Share on the payment date; or if (2) the net asset value per Common
Share exceeds the market price plus estimated brokerage commissions on the payment date for a Distribution, the Agent shall apply
the amount of such Distribution to purchase Common Shares on the open market and Participants will receive the equivalent in Common
Shares valued at the weighted average market price (including brokerage commissions) determined as of the time of the purchase
(generally, following the payment date of the Distribution). If, before the Agent has completed its purchases, the market price
plus estimated brokerage commissions exceeds the net asset value of the Common Shares as of the payment date, the purchase price
paid by the Agent may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than
if such Distribution had been paid in Common Shares issued by the Fund. If the Agent is unable to invest the full Distribution
amount in purchases in the open market or if the market discount shifts to a market premium during the purchase period then the
Agent may cease making purchases in the open market the instant the Agent is notified of a market premium and may invest the uninvested
portion of the Distribution in newly issued Common Shares at the net asset value per Common Share at the close of business provided
that, if the net asset value is less than or equal to 95% of the then current market price per Common Share, the dollar amount
of the Distribution will be divided by 95% of the market price on the payment date. The Fund will not issue Common Shares under
the Plan below net asset value.
There
is no charge to Participants for reinvesting Distributions, except for certain brokerage commissions, as described below. The
Agent’s fees for the handling of the reinvestment of Distributions will be paid by the Fund. There will be no brokerage
commissions charged with respect to shares issued directly by the Fund. However, each Participant will pay a pro rata share of
brokerage commissions incurred with respect to the Agent’s open market purchase in connection with the reinvestment of Distributions.
The automatic reinvestment of Distributions will not relieve Participants of any federal income tax that may be payable on such
Distributions.
The
Fund reserves the right to amend or terminate the Plan upon 90 days’ written notice to Common Stockholders of the Fund.
Participants
in the Plan may (i) request a certificate, (ii) request to sell their shares, or (iii) withdraw from the Plan upon written notice
to the Agent or by telephone in accordance with the specific procedures and will receive certificates for whole Common Shares
and cash for fractional Common Shares.
All
correspondence concerning the Plan should be directed to the Agent, Computershare Shareowner Services, P.O. Box 43078, Providence
RI 02940-3078. To receive a full copy of the Fund’s Dividend Reinvestment Plan, please contact the Agent at 1-866-228-4853.
| Semi-Annual Report | May 31, 2023 |
29 |
| DIRECTORS |
|
Richard
I. Barr
Thomas J. Moore
Joel W. Looney
Nicole L. Murphey
Steven K. Norgaard |
| |
|
|
INVESTMENT
ADVISER
|
|
Paralel
Advisors LLC
1700
Broadway, Suite 1850
Denver,
CO 80290
|
| |
|
|
SUB-INVESTMENT
ADVISER
|
|
Rocky
Mountain Advisers, LLC
2121 E. Crawford Place
Salina, KS 67401 |
| |
|
|
| ADMINISTRATOR |
|
Paralel
Technologies LLC
1700 Broadway, Suite 1850
Denver,
CO 80290
|
| |
|
|
| CUSTODIAN |
|
State
Street Bank and Trust
One Congress Street , Suite 1
Boston, MA 02114-2016 |
| |
|
|
STOCK
TRANSFER
AGENT
|
|
Computershare
Inc.
150 Royall St., Suite 101
Canton,
MA 02021
|
| |
|
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM |
|
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
OH 44115
|
| |
|
|
| LEGAL
COUNSEL |
|
Paul
Hastings, LLP
515
South Flower Street
Twenty-Fifth Floor
Los
Angeles, CA 90071
|
The
views expressed in this report and the information about the Fund’s portfolio holdings are for the period covered by this
report and are subject to change thereafter.
Statistics
and projections in this report are derived from sources deemed to be reliable but cannot be regarded as a representation of future
results of the Fund. This report is prepared for the general information of stockholders and is not a prospectus, circular or
representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
www.srhtotalreturnfund.com
SRH
TOTAL RETURN FUND, INC.
c/o
Computershare
P.O.
Box 43078
Providence, RI 02940-3078
(b)
Not applicable.
Item
2. Code of Ethics.
Not
applicable.
Item
3. Audit Committee Financial Expert.
Not
applicable.
Item
4. Principal Accountant Fees and Services.
Not
applicable.
Item
5. Audit Committee of Listed Registrants.
Not
applicable.
Item
6. Investments.
(a) The
Registrant’s full schedule of investments is included as part of the report to stockholders 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.
Item
8. Portfolio Managers of Closed-End Management Investment Companies.
No
changes have occurred that require reporting under this Item 8.
Item
9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
None.
Item
10. Submission of Matters to a Vote of Security Holders.
No
material changes to the procedures by which the stockholders may recommend nominees to the Registrant’s Board of Directors
have been implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation
S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item
11. Controls and Procedures.
(a)
The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded
that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940,
as amended (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 their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange
Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(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 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not
applicable.
Item
13. Exhibits.
| (a)(1) | Not
applicable to this semi-annual filing. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) |
SRH TOTAL RETURN FUND, INC. |
|
| |
|
|
|
| By (Signature and Title) |
|
/s/ Joel W. Looney |
|
| |
|
Joel W. Looney, President |
|
| |
|
(Principal Executive Officer) |
|
| |
|
|
|
| Date: |
August
4, 2023 |
|
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as amended, this
report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
| By (Signature and Title) |
|
/s/ Joel W. Looney |
|
| |
|
Joel W. Looney, President |
|
| |
|
(Principal Executive Officer) |
|
| |
|
|
|
| Date: |
August
4, 2023 |
|
|
|
| |
|
|
|
| By (Signature and Title) |
|
/s/ Jill Kerschen |
|
| |
|
Jill Kerschen, Treasurer |
|
| |
|
(Principal Financial Officer) |
|
| |
|
|
|
| Date: |
August
4, 2023 |
|
|
|
Exhibit
99.302(i) CERT
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I,
Joel W. Looney, certify that:
1.
I have reviewed this report on Form N-CSR of SRH Total Return Fund, Inc.
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements
are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this
report;
4.
The Registrant’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and
internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant
and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
the financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this
report based on such evaluation; and
(d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during 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; and
5.
The Registrant’s other certifying officer and I have disclosed to the Registrant’s
auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting.
| Date:
|
August
4, 2023 |
|
/s/
Joel W. Looney |
|
| |
Joel
W. Looney, President |
| |
(Principal
Executive Officer) |
Exhibit
99.302(ii) CERT
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I,
Jill Kerschen, certify that:
1.
I have reviewed this report on Form N-CSR of SRH Total Return Fund, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements
are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;
4.
The Registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act
of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
for the Registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
the financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this
report based on such evaluation; and
(d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during 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; and
5.
The Registrant’s other certifying officer and I have disclosed to
the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting.
| Date: |
August
4, 2023 |
|
/s/
Jill Kerschen |
|
| |
|
Jill
Kerschen, Treasurer |
| |
|
(Principal
Financial Officer) |
Exhibit 99.906CERT
CERTIFICATIONS
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
I,
Joel W. Looney, President of SRH Total Return Fund, Inc. (the “Registrant”), certify that:
1.
The Form N-CSR of the Registrant (the “Report”) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
| Date: |
August 4, 2023 |
|
/s/
Joel W. Looney |
|
| |
Joel W. Looney, President |
| |
(Principal Executive Officer) |
I,
Jill Kerschen, Treasurer of SRH Total Return Fund, Inc. (the “Registrant”), certify that:
1.
The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
| Date: |
August 4, 2023 |
|
/s/
Jill Kerschen |
|
| |
Jill Kerschen, Treasurer |
| |
(Principal Financial Officer) |
Notification
of Sources of Distribution
Statement Pursuant
to Section 19(a) of the Investment Company Act of 1940
On
January 31, 2023, SRH Total Return Fund, Inc. (NYSE: STEW) (the “Fund”), a closed-end investment company, will pay
a distribution on its common stock of $0.125 per share to stockholders of record at the close of business on January 24, 2023.
The Fund, acting in accordance with an exemptive order received from the Securities and Exchange Commission and with approval
of its Board of Directors, adopted a managed distribution policy under which the Fund may utilize capital gains, where applicable,
as part of regular quarterly cash distributions to its stockholders. This policy gives the Fund greater flexibility to realize
capital gains and to distribute those gains to stockholders.
The
following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal
year-to-date from the sources indicated in the table. In addition, the table shows the percentages of the total distribution
amount per share attributable to (i) net investment income, (ii) net realized short-term capital gain, (iii) net realized long-term
capital gain and (iv) return of capital or other capital source. These percentages are disclosed for the current distribution
as well as the fiscal year-to-date cumulative distribution amount per share for the Fund.
| Current
Distribution from: |
|
| |
Per
Share ($) |
Percentage
(%) |
| Net
Investment Income |
0.00510 |
4.08% |
| Net
Realized Short-Term Capital Gains |
0.02317 |
18.54% |
| Net
Realized Long-Term Capital Gains |
0.01594 |
12.75% |
| Return
of Capital or other Capital Source |
0.08079 |
64.63% |
| Total
(per common share) |
0.12500 |
100.00% |
| |
|
|
| Fiscal
Year-to-Date Cumulative Distributions from1: |
|
|
| |
Per
Share ($) |
Percentage
(%) |
| Net
Investment Income |
0.00510 |
4.08% |
| Net
Realized Short-Term Capital Gains |
0.02317 |
18.54% |
| Net
Realized Long-Term Capital Gains |
0.01594 |
12.75% |
| Return
of Capital or other Capital Source |
0.08079 |
64.63% |
| Total
(per common share) |
0.12500 |
100.00% |
Stockholders
should not draw any conclusions about the Fund’s investment performance from the amount of this distribution or from the
terms of the Fund’s managed distribution policy. The amounts and sources of distributions reported in this 19(a) Notice
are only estimates, are likely to change over time, and are not being provided for tax reporting purposes.
The
actual amounts and sources of the amounts for accounting and tax reporting purposes will depend upon the Fund’s investment
experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The amounts and sources
of distributions year-to-date may be subject to additional adjustments.
THE
FUND WILL SEND YOU A FORM 1099-DIV FOR THE CALENDAR YEAR THAT WILL TELL YOU HOW TO REPORT THESE DISTRIBUTIONS FOR FEDERAL INCOME
TAX PURPOSES.
| 1 | The Fund’s fiscal year is December 1 to November
30. Information shown is for the period beginning December 1, 2022. |
Presented
below are return figures, based on the change in the Fund’s Net Asset Value per share (“NAV”), compared to the
annualized distribution rate for this current distribution as a percentage of the NAV on the last day of the month prior to the
distribution declaration date. While the NAV performance may be indicative of the Fund’s investment performance, it does
not measure the value of a stockholder’s investment in the Fund. The value of a stockholder’s investment in the Fund
is determined by the Fund’s market price, which is based on the supply and demand for the Fund’s shares in the open
market.
Fund
Performance & Distribution Rate Information
| Annualized
Distribution Rate as a Percentage of NAV^ |
3.28% |
| Cumulative
Distribution Rate as a Percentage of NAV* |
0.82% |
| Cumulative
Total Return as a Percentage of NAV** |
-4.03% |
| Average
Annual Total Return*** |
6.92% |
| ^ | Based
on the Fund’s NAV as of December 31, 2022 and the quarterly distribution of $0.125. |
| * | Based
on the Fund’s NAV as of December 31, 2022 and includes distributions through January 31, 2023. |
| ** | Cumulative
Total Return is the percentage change in the Fund’s NAV including distributions paid and assuming reinvestment of these
distributions for the period December 1, 2022 through December 31, 2022. |
| *** | Average
Annual Total Return represents the compound average of the Annual NAV Total Returns of the Fund for the five-year period ending
December 31, 2022. Annual NAV Total Return is the percentage change in the Fund’s NAV over a year including distributions
paid and assuming reinvestment of these distributions. |
The
Fund has a managed distribution policy that seeks to deliver the Fund’s long term total return potential through regular
quarterly distributions declared at a fixed rate per share. Distributions may be paid in part or in full from net investment income,
realized capital gains and by returning capital, or a combination thereof. Stockholders should note, however, that if the Fund’s
aggregate net investment income and net realized capital gains are less than the amount of the distribution level, the difference
will be distributed from the Fund’s assets and will constitute a return of the stockholder’s capital. A return of
capital is not taxable; rather it reduces a stockholder’s tax basis in his or her shares of the Fund.
The
Fund’s Board of Directors reviews the amount of any distributions made pursuant to the Fund’s distribution policy
and considers the income earned and capital gains realized by the Fund, as well as the Fund’s available capital. The Board
of Directors will continue to monitor the Fund’s distribution level, taking into consideration, among other things, the
Fund’s net asset value and market conditions. The Fund’s distribution policy is subject to modification, suspension
or termination by the Board of Directors at any time, which could have an adverse effect on the market price of the Fund’s
shares. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.
For
more information on the Fund, please visit us on the web at www.srhtotalreturnfund.com.
NOT
FDIC INSURED | May Lose Value | No Bank Guarantee
Notification
of Sources of Distribution
Statement Pursuant
to Section 19(a) of the Investment Company Act of 1940
On
April 28, 2023, SRH Total Return Fund, Inc. (NYSE: STEW) (the “Fund”), a closed-end investment company, will pay a
distribution on its common stock of $0.125 per share to stockholders of record at the close of business on April 21, 2023. The
Fund, acting in accordance with an exemptive order received from the Securities and Exchange Commission and with approval of its
Board of Directors, adopted a managed distribution policy under which the Fund may utilize capital gains, where applicable, as
part of regular quarterly cash distributions to its stockholders. This policy gives the Fund greater flexibility to realize capital
gains and to distribute those gains to stockholders.
The
following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal
year-to-date from the sources indicated in the table. In addition, the table shows the percentages of the total distribution
amount per share attributable to (i) net investment income, (ii) net realized short-term capital gain, (iii) net realized long-term
capital gain and (iv) return of capital or other capital source. These percentages are disclosed for the current distribution
as well as the fiscal year-to-date cumulative distribution amount per share for the Fund.
| Current
Distribution from: |
|
| |
Per
Share ($) |
Percentage
(%) |
| Net
Investment Income |
0.04338 |
34.70% |
| Net
Realized Short-Term Capital Gains |
0.0000 |
0.00% |
| Net
Realized Long-Term Capital Gains |
0.00092 |
0.74% |
| Return
of Capital or other Capital Source |
0.08070 |
64.56% |
| Total
(per common share) |
0.12500 |
100.00% |
| |
|
|
| Fiscal
Year-to-Date Cumulative Distributions
from1: |
|
|
| |
Per
Share ($) |
Percentage
(%) |
| Net
Investment Income |
0.04848 |
19.39% |
| Net
Realized Short-Term Capital Gains |
0.02317 |
9.27% |
| Net
Realized Long-Term Capital Gains |
0.01686 |
6.75% |
| Return
of Capital or other Capital Source |
0.16149 |
64.59% |
| Total
(per common share) |
0.25000 |
100.00% |
Stockholders
should not draw any conclusions about the Fund’s investment performance from the amount of this distribution or from the
terms of the Fund’s managed distribution policy. The amounts and sources of distributions reported in this 19(a) Notice
are only estimates, are likely to change over time, and are not being provided for tax reporting purposes.
The
Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution
may be a return of capital. A return of capital may occur for example, when some or all of the money that you invested in the
Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and
should not be confused with ‘yield’ or ‘income’.
The
actual amounts and sources of the amounts for accounting and tax reporting purposes will depend upon the Fund’s investment
experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The amounts and sources
of distributions year-to-date may be subject to additional adjustments.
| 1 | The
Fund’s fiscal year is December 1 to November 30. Information shown is for the period
beginning December 1, 2022. |
THE
FUND WILL SEND YOU A FORM 1099-DIV FOR THE CALENDAR YEAR THAT WILL TELL YOU HOW TO REPORT THESE DISTRIBUTIONS FOR FEDERAL INCOME
TAX PURPOSES.
Presented
below are return figures, based on the change in the Fund’s Net Asset Value per share (“NAV”), compared to the
annualized distribution rate for this current distribution as a percentage of the NAV on the last day of the month prior to the
distribution declaration date. While the NAV performance may be indicative of the Fund’s investment performance, it does
not measure the value of a stockholder’s investment in the Fund. The value of a stockholder’s investment in the Fund
is determined by the Fund’s market price, which is based on the supply and demand for the Fund’s shares in the open
market.
Fund
Performance & Distribution Rate Information
| Annualized
Distribution Rate as a Percentage of NAV^ |
3.27% |
| Cumulative
Distribution Rate as a Percentage of NAV* |
1.63% |
| Cumulative
Total Return as a Percentage of NAV** |
-2.65% |
| Average
Annual Total Return*** |
7.53% |
| ^ | Based
on the Fund’s NAV as of March 31, 2023 and the quarterly distribution of $0.125. |
| * | Based
on the Fund’s NAV as of March 31, 2023 and includes distributions through April 30, 2023. |
| ** | Cumulative
Total Return is the percentage change in the Fund’s NAV including distributions paid and assuming reinvestment of these
distributions for the period December 1, 2022 through March 31, 2023. |
| *** | Average
Annual Total Return represents the compound average of the Annual NAV Total Returns of the Fund for the five-year period ending
March 31, 2023. Annual NAV Total Return is the percentage change in the Fund’s NAV over a year including distributions paid
and assuming reinvestment of these distributions. |
The
Fund has a managed distribution policy that seeks to deliver the Fund’s long term total return potential through regular
quarterly distributions declared at a fixed rate per share. Distributions may be paid in part or in full from net investment income,
realized capital gains and by returning capital, or a combination thereof. Stockholders should note, however, that if the Fund’s
aggregate net investment income and net realized capital gains are less than the amount of the distribution level, the difference
will be distributed from the Fund’s assets and will constitute a return of the stockholder’s capital. A return of
capital is not taxable; rather it reduces a stockholder’s tax basis in his or her shares of the Fund.
The
Fund’s Board of Directors reviews the amount of any distributions made pursuant to the Fund’s distribution policy
and considers the income earned and capital gains realized by the Fund, as well as the Fund’s available capital. The Board
of Directors will continue to monitor the Fund’s distribution level, taking into consideration, among other things, the
Fund’s net asset value and market conditions. The Fund’s distribution policy is subject to modification, suspension
or termination by the Board of Directors at any time, which could have an adverse effect on the market price of the Fund’s
shares. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.
For
more information on the Fund, please visit us on the web at www.srhtotalreturnfund.com.
NOT
FDIC INSURED | May Lose Value | No Bank Guarantee
Contact
info:
Website:
https://srhtotalreturnfund.com/
Email: info@srhtotalreturnfund.com
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