|
|
|
|
|
ASSETS
|
|
|
|
|
Investments in securities, at value (cost $2,390,601,445)
|
|
$
|
2,322,924,267
|
|
Receivables:
|
|
|
|
|
Accrued interest and dividends
|
|
|
14,735,895
|
|
Investments sold
|
|
|
9,604,437
|
|
Prepaid expenses
|
|
|
90,012
|
|
Other assets
|
|
|
257,951
|
|
Total assets
|
|
|
2,347,612,562
|
|
LIABILITIES
|
|
|
|
|
Unrealized depreciation on interest rate swaps
|
|
|
8,315,936
|
|
Payables:
|
|
|
|
|
Note payable
|
|
|
606,000,000
|
|
Investments purchased
|
|
|
5,793,912
|
|
Affiliates:
|
|
|
|
|
Investment advisory fees
|
|
|
1,892,827
|
|
Deferred compensation to trustees
|
|
|
257,951
|
|
Financial accounting fees
|
|
|
21,714
|
|
Trustees fees and officer compensation
|
|
|
11,441
|
|
Other accounts payable and accrued liabilities
|
|
|
413,006
|
|
Total liabilities
|
|
|
622,706,787
|
|
NET ASSETS
|
|
$
|
1,724,905,775
|
|
COMPOSITION OF NET ASSETS
|
|
|
|
|
Common stock, no par value, unlimited shares authorized 154,514,000 shares issued and outstanding
|
|
$
|
2,046,371,172
|
|
Undistributed net investment income (loss)
|
|
|
(61,107,689
|
)
|
Accumulated net realized gain (loss) on investments, foreign currency transactions and interest rate swaps
|
|
|
(184,363,811
|
)
|
Unrealized appreciation (depreciation) of investments, foreign currency translations and
interest rate swaps
|
|
|
(75,993,897
|
)
|
NET ASSETS
|
|
$
|
1,724,905,775
|
|
Net asset value per common shares based upon 154,514,000 shares issued and
outstanding
|
|
$
|
11.16
|
|
|
|
|
|
|
16
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
See accompanying Notes to Financial Statements
|
Statement of Operations
Six Months Ended
April 30, 2013 (Unaudited)
|
|
|
|
|
INVESTMENT INCOME
|
|
|
|
|
Interest
|
|
$
|
26,081,247
|
|
Dividends
|
|
|
21,766,986
|
|
Securities lending income
|
|
|
244,963
|
|
Dividend taxes withheld
|
|
|
(233,644
|
)
|
Total investment income
|
|
|
47,859,552
|
|
|
|
EXPENSES
|
|
|
|
|
Investment advisory fees
|
|
|
11,195,940
|
|
Interest expense and related fees
|
|
|
2,980,922
|
|
Financial accounting fees
|
|
|
128,329
|
|
Printing and mailing fees
|
|
|
126,019
|
|
Accounting fees
|
|
|
65,804
|
|
Custodian fees
|
|
|
58,890
|
|
Audit fees
|
|
|
53,199
|
|
Trustees fees and officer compensation
|
|
|
50,077
|
|
Transfer agent fees
|
|
|
9,983
|
|
Registration fees
|
|
|
1,979
|
|
Legal fees
|
|
|
(61,269
|
)
|
Other
|
|
|
88,441
|
|
Total expenses
|
|
|
14,698,314
|
|
NET INVESTMENT INCOME (LOSS)
|
|
|
33,161,238
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS)
|
|
|
|
|
Net realized gain (loss) from:
|
|
|
|
|
Investments
|
|
|
(26,136,393
|
)
|
Foreign currency transactions
|
|
|
(52,832
|
)
|
Interest rate swaps
|
|
|
(3,211,975
|
)
|
Change in net unrealized appreciation/(depreciation) on:
|
|
|
|
|
Investments, excluding purchased options
|
|
|
152,407,771
|
|
Purchased options
|
|
|
(160,596
|
)
|
Foreign currency translations
|
|
|
14,075
|
|
Interest rate swaps
|
|
|
2,356,008
|
|
NET GAIN (LOSS)
|
|
|
125,216,058
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
|
|
$
|
158,377,296
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
17
|
|
Statements of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
(UNAUDITED)
SIX MONTHS ENDED
APRIL 30,
2013
|
|
|
YEAR ENDED
OCTOBER 31,
2012
|
|
OPERATIONS
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
$
|
33,161,238
|
|
|
$
|
67,974,528
|
|
Net realized gain (loss)
|
|
|
(29,401,200
|
)
|
|
|
30,601,518
|
|
Change in unrealized appreciation/(depreciation)
|
|
|
154,617,258
|
|
|
|
86,647,937
|
|
Net increase (decrease) in net assets applicable to shareholders resulting from
operations
|
|
|
158,377,296
|
|
|
|
185,223,983
|
|
|
|
|
DISTRIBUTIONS FROM
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(64,895,880
|
)
|
|
|
(103,822,713
|
)
|
Return of capital
|
|
|
|
|
|
|
(17,857,062
|
)
|
Net decrease in net assets from distributions
|
|
|
(64,895,880
|
)
|
|
|
(121,679,775
|
)
|
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
|
|
93,481,416
|
|
|
|
63,544,208
|
|
|
|
|
NET ASSETS
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
$
|
1,631,424,359
|
|
|
$
|
1,567,880,151
|
|
End of period
|
|
|
1,724,905,775
|
|
|
|
1,631,424,359
|
|
Undistributed net investment income (loss)
|
|
$
|
(61,107,689
|
)
|
|
$
|
(29,373,047
|
)
|
|
|
|
|
|
18
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
See accompanying Notes to Financial Statements
|
Statement of Cash Flows
Six Months Ended
April 30, 2013 (Unaudited)
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net increase/(decrease) in net assets from operations
|
|
$
|
158,377,296
|
|
Adjustments to reconcile net increase/(decrease) in net assets from operations to net cash provided by operating
activities:
|
|
|
|
|
Purchase of investment securities
|
|
|
(620,455,831
|
)
|
Net proceeds from disposition of short term investments
|
|
|
569,746
|
|
Proceeds from written options
|
|
|
354,015
|
|
Proceeds from disposition of investment securities
|
|
|
620,895,677
|
|
Amortization and accretion of fixed-income securities
|
|
|
371,480
|
|
Net realized gains/losses from investments
|
|
|
26,136,393
|
|
Change in unrealized appreciation or depreciation on investments, excluding purchased options
|
|
|
(152,407,771
|
)
|
Change in unrealized appreciation or depreciation on purchased options
|
|
|
160,596
|
|
Change in unrealized appreciation or depreciation on interest rate swaps
|
|
|
(2,356,008
|
)
|
Net change in assets and liabilities:
|
|
|
|
|
(Increase)/decrease in assets:
|
|
|
|
|
Accrued interest and dividends receivable
|
|
|
3,123,041
|
|
Prepaid expenses
|
|
|
(73,935
|
)
|
Other assets
|
|
|
(14,625
|
)
|
Increase/(decrease) in liabilities:
|
|
|
|
|
Payables to affiliates
|
|
|
24,340
|
|
Other accounts payable and accrued liabilities
|
|
|
191,466
|
|
Net cash provided by/(used in) operating activities
|
|
$
|
34,895,880
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Distributions to shareholders
|
|
|
(64,895,880
|
)
|
Proceeds from note payable
|
|
|
30,000,000
|
|
Net cash provided by/(used in) financing activities
|
|
$
|
(34,895,880
|
)
|
Cash at beginning of period
|
|
$
|
|
|
Cash at end of period
|
|
$
|
|
|
Supplemental disclosure
|
|
|
|
|
Cash paid for interest and related fees
|
|
$
|
2,821,441
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
19
|
|
Notes to Financial Statements
(Unaudited)
Note 1 Organization and Significant Accounting Policies
Organization.
Calamos Strategic Total Return Fund (the Fund) was organized as a Delaware statutory trust on December 31, 2003 and
is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, closed-end management investment company. The Fund commenced operations on March 26, 2004. The Funds investment objective is to provide
total return through a combination of capital appreciation and current income. Under normal circumstances, the Fund invests primarily in common and preferred stocks and income producing securities such as investment grade and below investment grade
debt securities.
Fund Valuation.
The valuation of the Funds investments is in accordance with policies and procedures adopted by
and under the ultimate supervision of the board of trustees.
Fund securities that are traded on U.S. securities exchanges, except option securities, are
valued at the last current reported sales price at the time a Fund determines its net asset value (NAV). Securities traded in the over-the-counter market and quoted on The NASDAQ Stock Market are valued at the NASDAQ Official Closing
Price, as determined by NASDAQ, or lacking a NASDAQ Official Closing Price, the last current reported sale price on NASDAQ at the time the Fund determines its NAV. When a last sale or closing price is not available, equity securities, other than
option securities, that are traded on a U.S. securities exchange and other equity securities traded in the over-the-counter market are valued at the mean between the most recent bid and asked quotations in accordance with guidelines adopted by the
board of trustees. Each option security traded on a U.S. securities exchange is valued at the mid-point of the consolidated bid/ask quote for the option security, also in accordance with guidelines adopted by the board of trustees. Each
over-the-counter option that is not traded through the Options Clearing Corporation is valued based on a quotation provided by the counterparty to such option under the ultimate supervision of the board of trustees.
Fixed income securities, certain convertible preferred securities, and non-exchange traded derivatives are normally valued by independent pricing services or by
dealers or brokers who make markets in such securities. Valuations of such fixed income securities, certain convertible preferred securities, and non-exchange traded derivatives consider yield or price of equivalent securities of comparable quality,
coupon rate, maturity, type of issue, trading characteristics and other market data and do not rely exclusively upon exchange or over-the-counter prices.
Trading on European and Far Eastern exchanges and over-the-counter markets is typically completed at various times before the close of business on each day on which
the New York Stock Exchange (NYSE) is open. Each security trading on these exchanges or over-the-counter markets may be valued utilizing a systematic fair valuation model provided by an independent pricing service approved by the board
of trustees. The valuation of each security that meets certain criteria in relation to the valuation model is systematically adjusted to reflect the impact of movement in the U.S. market after the foreign markets close. Securities that do not meet
the criteria, or that are principally traded in other foreign markets, are valued as of the last reported sale price at the time the Fund determines its NAV, or when reliable market prices or quotations are not readily available, at the mean between
the most recent bid and asked quotations as of the close of the appropriate exchange or other designated time. Trading of foreign securities may not take place on every NYSE business day. In addition, trading may take place in various foreign
markets on Saturdays or on other days when the NYSE is not open and on which the Funds NAV is not calculated.
If the pricing committee determines
that the valuation of a security in accordance with the methods described above is not reflective of a fair value for such security, the security is valued at a fair value by the pricing committee, under the ultimate supervision of the board of
trustees, following the guidelines and/or procedures adopted by the board of trustees.
The Fund also may use fair value pricing, pursuant to guidelines
adopted by the board of trustees and under the ultimate supervision of the board of trustees, if trading in the security is halted or if the value of a security it holds is materially affected by events occurring before the Funds pricing time
but after the close of the primary market or exchange on which the security is listed. Those procedures may utilize valuations furnished by pricing services approved by the board of trustees, which may be based on market transactions for comparable
securities and various relationships between securities that are generally recognized by institutional traders, a computerized matrix system, or appraisals derived from information concerning the securities or similar securities received from
recognized dealers in those securities.
When fair value pricing of securities is employed, the prices of securities used by a Fund to calculate its NAV
may differ from market quotations or official closing prices. In light of the judgment involved in fair valuations, there can be no assurance that a fair value assigned to a particular security is accurate.
|
|
|
|
|
20
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Notes to Financial Statements
(Unaudited)
Investment Transactions
. Investment transactions are recorded on a trade date basis. Net realized gains and losses from investment transactions
are reported on an identified cost basis. Interest income is recognized using the accrual method and includes accretion of original issue and market discount and amortization of premium. Dividend income is recognized on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as the information becomes available after the ex-dividend date.
Foreign Currency
Translation.
Values of investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using a rate quoted by a major bank or dealer in the particular currency market, as reported by a
recognized quotation dissemination service.
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 currency gains or losses arise from disposition of foreign currency, the difference in the foreign exchange rates 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 ex-date or accrual date and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies held at period end.
Allocation of Expenses Among Funds.
Expenses directly attributable to the Fund are charged to the Fund; certain other common expenses of Calamos
Advisors Trust, Calamos Investment Trust, Calamos Convertible Opportunities and Income Fund, Calamos Convertible and High Income Fund, Calamos Strategic Total Return Fund, Calamos Global Total Return Fund and Calamos Global Dynamic Income Fund are
allocated proportionately among each fund to which the expenses relate in relation to the net assets of each fund or on another reasonable basis.
Use
of Estimates.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
Income Taxes.
No provision has been made for U.S. income taxes
because the Funds policy is to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended, and distribute to shareholders substantially all of the Funds taxable income and net realized
gains.
Dividends and distributions paid to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains is determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. To the extent these book/tax differences are permanent
in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment. These differences are primarily due to differing treatments for foreign currency transactions, contingent payment debt instruments and
methods of amortizing and accreting for fixed income securities. The financial statements are not adjusted for temporary differences.
The Fund
recognized no liability for uncertain tax positions. A reconciliation is not provided as the beginning and ending amounts of unrecognized benefits are zero, with no interim additions, reductions or settlements. Tax years 2008 2012 remain
subject to examination by the U.S. and the State of Illinois tax jurisdictions.
Indemnifications.
Under the Funds organizational
documents, the Fund is obligated to indemnify its officers and trustees against certain liabilities incurred by them by reason of having been an officer or trustee of the Fund. In addition, in the normal course of business, the Fund may enter into
contracts that provide general indemnifications to other parties. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. Currently, the
Funds management expects the risk of material loss in connection to a potential claim to be remote.
Note 2 Investment Adviser and
Transactions With Affiliates Or Certain Other Parties
Pursuant to an investment advisory agreement with Calamos Advisors LLC (Calamos
Advisors), the Fund pays an annual fee, payable monthly, equal to 1.00% based on the average weekly managed assets. Managed assets means a funds total assets
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
21
|
|
Notes to
Financial Statements
(Unaudited)
(including any assets attributable to any leverage that may be outstanding) minus total liabilities (other than debt representing financial leverage).
Pursuant to a financial accounting services agreement, during the period the Fund paid Calamos Advisors a fee for financial accounting services payable monthly at
the annual rate of 0.0175% on the first $1 billion of combined assets, 0.0150% on the next $1 billion of combined assets and 0.0110% on combined assets above $2 billion (for purposes of this calculation combined assets means the sum of
the total average daily net assets of Calamos Investment Trust, Calamos Advisors Trust and the total average weekly managed assets of Calamos Convertible and High Income Fund, Calamos Strategic Total Return Fund, Calamos Convertible Opportunities
and Income Fund, Calamos Global Total Return Fund and Calamos Global Dynamic Income Fund). Financial accounting services include, but are not limited to, the following: managing expenses and expense payment processing; monitoring the calculation of
expense accrual amounts; calculating, tracking and reporting tax adjustments on all assets; and monitoring trustee deferred compensation plan accruals and valuations. The Fund pays its pro rata share of the financial accounting services fee payable
to Calamos Advisors based on its relative portion of combined assets used in calculating the fee.
The Fund reimburses Calamos Advisors for a portion of
compensation paid to the Funds Chief Compliance Officer. This compensation is reported as part of Trustees fees and officer compensation expense on the Statement of Operations.
A trustee and certain officers of the Fund are also officers and directors of Calamos Advisors. Such trustee and officers serve without direct compensation from the
Fund.
The Fund has adopted a deferred compensation plan (the Plan). Under the Plan, a trustee who is not an interested person
(as defined in the 1940 Act) and has elected to participate in the Plan (a participating trustee) may defer receipt of all or a portion of his compensation from the Fund. The deferred compensation payable to the participating trustee is
credited to the trustees deferral account as of the business day such compensation would have been paid to the participating trustee. The value of amounts deferred for a participating trustee is determined by reference to the change in value
of Class I shares of one or more funds of Calamos Investment Trust designated by the participant. The value of the account increases with contributions to the account or with increases in the value of the measuring shares, and the value of the
account decreases with withdrawals from the account or with declines in the value of the measuring shares. Deferred compensation of $257,951 is included in Other assets on the Statement of Assets and Liabilities at April 30, 2013.
The Funds obligation to make payments under the Plan is a general obligation of the Fund and is included in Payable for deferred compensation to trustees on the Statement of Assets and Liabilities at April 30, 2013.
Note 3 Investments
The cost of purchases
and proceeds from sale of long-term investments for the period ended April 30, 2013 were as follows:
|
|
|
|
|
Cost of purchases
|
|
$
|
608,967,683
|
|
Proceeds from sales
|
|
|
613,841,418
|
|
The following information is presented on a federal income tax basis as of April 30, 2013. Differences between the cost basis
under U.S. generally accepted accounting principles and federal income tax purposes are primarily due to temporary differences.
The cost basis of
investments for federal income tax purposes at April 30, 2013 was as follows:
|
|
|
|
|
Cost basis of investments
|
|
$
|
2,495,009,875
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
|
164,055,376
|
|
Gross unrealized depreciation
|
|
|
(336,140,984
|
)
|
|
|
|
|
|
Net unrealized appreciation (depreciation)
|
|
$
|
(172,085,608
|
)
|
|
|
|
|
|
Note 4 Income Taxes
The Fund intends to make monthly distributions from its income available for distribution, which consists of the Funds dividends and interest income after
payment of Fund expenses, and net realized gains on stock investments. At least annually, the Fund intends to distribute all or substantially all of its net realized capital gains, if any. Distributions are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in
the financial
|
|
|
|
|
22
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Notes to Financial Statements
(Unaudited)
statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in-capital. For tax purposes, distributions from
short-term capital gains are considered to be from ordinary income. Distributions in any year may include a return of capital component.
The tax
character of distributions for the period ended April 30, 2013 will be determined at the end of the Funds current fiscal year.
Distributions
for the year ended October 31, 2012 were characterized for federal income tax purposes as follows:
|
|
|
|
|
|
|
YEAR ENDED
OCTOBER 31, 2012
|
|
Distributions paid from:
|
|
|
|
|
Ordinary income
|
|
$
|
103,822,713
|
|
Return of capital
|
|
|
17,857,062
|
|
As of October 31, 2012, the components of accumulated earnings/(loss) on a tax basis were as follows:
|
|
|
|
|
Undistributed ordinary income
|
|
$
|
|
|
Undistributed capital gains
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings
|
|
|
|
|
Accumulated capital and other losses
|
|
|
(64,414,275
|
)
|
Net unrealized gains/(losses)
|
|
|
(350,324,636
|
)
|
|
|
|
|
|
Total accumulated earnings/(losses)
|
|
|
(414,738,911
|
)
|
Other
|
|
|
(207,902
|
)
|
Paid-in capital
|
|
|
2,046,371,172
|
|
|
|
|
|
|
Net assets applicable to common shareholders
|
|
$
|
1,631,424,359
|
|
|
|
|
|
|
The Regulated Investment Company Modernization Act of 2010 (the Act) modernized various tax rules for regulated
investment companies, and was effective for taxable years beginning after the enactment date of December 22, 2010. One significant change is to the treatment of capital loss carryforwards. Now, any capital losses recognized will retain their
character as either short-term or long-term capital losses, will be utilized before the pre-Act capital loss carryforwards, and will be carried forward indefinitely, until applied in offsetting future capital gains.
As of October 31, 2012, the Fund had pre-Act capital loss carryforwards which, if not used, will expire as follows:
|
|
|
|
|
2017
|
|
$
|
(34,615,980
|
)
|
2018
|
|
|
(29,798,295
|
)
|
Note 5 Common Shares
There are unlimited common shares of beneficial interest authorized and 154,514,000 shares outstanding at April 30, 2013. Calamos Advisors owned 317,328 of the
outstanding shares at April 30, 2013. Transactions in common shares were as follows:
|
|
|
|
|
|
|
|
|
|
|
PERIOD ENDED
APRIL 30, 2013
|
|
|
YEAR ENDED
OCTOBER 31, 2012
|
|
Beginning shares
|
|
|
154,514,000
|
|
|
|
154,514,000
|
|
Shares issued through reinvestment of distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending shares
|
|
|
154,514,000
|
|
|
|
154,514,000
|
|
|
|
|
|
|
Notice is hereby given in accordance with Section 23(c) of the 1940 Act that the Fund may from time to time purchase its shares
of common stock in the open market.
The Fund also may offer and sell common shares from time to time at an offering price equal to or in excess of the
net asset value per share of the Funds common shares at the time such common shares are initially sold.
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
23
|
|
Notes to
Financial Statements
(Unaudited)
Note 6 Derivative Instruments
Foreign Currency Risk.
The Fund may engage in portfolio
hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future
date at a negotiated forward rate. Risks associated with such contracts include, among other things, movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The net unrealized gain,
if any, represents the credit risk to the Fund on a forward foreign currency contract. The contracts are valued daily at forward foreign exchange rates. The Fund realizes a gain or loss when a position is closed or upon settlement of the contracts.
There were no open forward foreign currency contracts at April 30, 2013.
Equity Risk.
The Fund may engage in option transactions
and in doing so achieves similar objectives to what it would achieve through the sale or purchase of individual securities. A call option, upon payment of a premium, gives the purchaser of the option the right to buy, and the seller of the option
the obligation to sell, the underlying security, index or other instrument at the exercise price. A put option gives the purchaser of the option, upon payment of a premium, the right to sell, and the seller the obligation to buy, the underlying
security, index, or other instrument at the exercise price.
To seek to offset some of the risk of a potential decline in value of certain long
positions, the Fund may also purchase put options on individual securities, broad-based securities indexes or certain exchange traded funds (ETFs). The Fund may also seek to generate income from option premiums by writing (selling)
options on a portion of the equity securities (including securities that are convertible into equity securities) in the Funds portfolio, on broad-based securities indexes, or certain ETFs.
When a Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When a Fund writes an option, it receives a premium
and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, the Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost basis of the purchase. The difference between the premium and the amount received or paid on a
closing purchase or sale transaction is also treated as a realized gain or loss. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid. Gain or loss on written options and purchased options is presented separately as net realized gain or loss on written options and net realized gain or loss on purchased options, respectively.
As of April 30, 2013, the Fund had outstanding purchased options and/or written options as listed on the Schedule of Investments. For the period ended
April 30, 2013, the Fund had the following transactions in options written:
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF CONTRACTS
|
|
|
PREMIUMS RECEIVED
|
|
Options Outstanding at October 31, 2012
|
|
|
|
|
|
$
|
|
|
Options written
|
|
|
200
|
|
|
|
354,015
|
|
Options closed
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(200
|
)
|
|
|
(354,015
|
)
|
Options expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at April 30, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
Interest Rate Risk.
The Fund engages in interest rate swaps primarily to hedge the interest rate risk on the Funds
borrowings (see Note 7 Borrowings). An interest rate swap is a contract that involves the exchange of one type of interest rate for another type of interest rate. If interest rates rise, resulting in a diminution in the value of the
Funds portfolio, the Fund would receive payments under the swap that would offset, in whole or in part, such diminution in value; if interest rates fall, the Fund would likely lose money on the swap transaction. Unrealized gains are reported
as an asset, and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of swaps, including accruals of periodic amounts of interest to be paid or received on swaps, is reported as change in net
unrealized appreciation/depreciation on interest rate swaps in the Statement of Operations. A realized gain or loss is recorded in net realized gain (loss) on interest rate swaps in the Statement of Operations upon payment or receipt of a periodic
payment or termination of the swap agreements. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much
smaller. In connection with these contracts, securities may be identified as collateral in accordance with the terms of the respective swap contracts in the event of default or bankruptcy of the Fund.
|
|
|
|
|
24
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Notes to Financial Statements
(Unaudited)
Premiums paid to or by a Fund are accrued daily and included in realized gain (loss) when paid on swaps in the accompanying Statement of Operations. The contracts
are marked-to-market daily based upon third party vendor valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the contract. Risks may exceed amounts recognized
in the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts terms, counterpartys creditworthiness, and the possible
lack of liquidity with respect to the contracts.
As of April 30, 2013, the Fund had outstanding interest rate swap agreements as listed on the
Schedule of Investments.
As of April 30, 2013, the Fund had outstanding derivative contracts which are reflected on the Statement of Assets and
Liabilities as follows:
|
|
|
|
|
|
|
ASSET DERIVATIVES
FAIR VALUE
|
|
Options purchased
1
|
|
$
|
2,069,100
|
|
|
|
|
|
LIABILITY DERIVATIVES
|
|
Interest rate swaps
2
|
|
$
|
8,315,936
|
|
(1)
|
Generally, the statement of assets and liabilities location for Options purchased is Investment in securities.
|
(2)
|
Generally, the statement of assets and liabilities location for Interest rate swaps is Unrealized appreciation (depreciation) on swaps.
|
For the six months ended April 30, 2013, the volume of derivative activity for the Fund is reflected below*
|
|
|
|
|
|
|
DERIVATIVE TYPE
|
|
Option purchased
|
|
|
4,275
|
|
Option written
|
|
|
200
|
|
*
|
Activity during the period is measured by opened number of contracts for options purchased or written.
|
Note 7 Borrowings
The Fund, with the approval of its board of trustees, including its independent
trustees, has entered into a financing package that includes a Committed Facility Agreement (the BNP Agreement) with BNP Paribas Prime Brokerage International Ltd. (BNP) that allows the Fund to borrow up to $367.5 million,
and a lending agreement (Lending Agreement), as defined below. In addition, the financing package also includes a Credit Agreement (the SSB Agreement, together with the BNP Agreement, Agreements) with State Street
Bank and Trust Company (SSB) that allows the Fund to borrow up to an initial limit of $367.5 million, and a related securities lending authorization agreement (Authorized Agreement). Borrowings under the BNP Agreement and the
SSB Agreement are secured by assets of the Fund that are held with the Funds custodian in a separate account (the Pledged Collateral). BNP and SSB share an equal claim on the Pledged Collateral, subject to any adjustment that may
be agreed upon between the lenders. Interest on the BNP Agreement is charged at the three month LIBOR (London Inter-bank Offered Rate) plus .65% on the amount borrowed and .55% on the undrawn balance. Interest on the SSB Agreement is charged on the
drawn amount at the rate of Overnight LIBOR plus .80% and .10% on the undrawn balance (if the undrawn amount is more than 75% of the borrowing limit, the commitment fee is .20%). For the period ended April 30, 2013, the average borrowings under
the Agreements were $529.4 million. For the period ended April 30, 2013, the average interest rate was 0.96%. As of April 30, 2013, the amount of outstanding borrowings was $530.2 million, which approximates fair value. The interest rate
applicable to the borrowings on April 30, 2013 was 0.94%.
The Lending Agreement with BNP is a separate side-agreement between the Fund and BNP
pursuant to which BNP may borrow a portion of the pledged collateral (the Lent Securities) in an amount not to exceed the outstanding borrowings owed by the Fund to BNP under the BNP Agreement. The Lending Agreement is intended to permit
the Fund to significantly reduce the cost of its borrowings under the BNP Agreement. BNP may re-register the Lent Securities in its own name or in another name other than the Fund, and may pledge, re-pledge, sell, lend or otherwise transfer or use
the Lent Securities with all attendant rights of ownership. (It is the Funds understanding that BNP will perform due diligence to determine the creditworthiness of any party that borrows Lent Securities from BNP.) The Fund may designate any
security within the pledged collateral as ineligible to be a Lent Security, provided
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
25
|
|
Notes to
Financial Statements
(Unaudited)
there are eligible securities within the pledged collateral in an amount equal to the outstanding borrowing owed by the Fund. During the period in which the Lent Securities are outstanding, BNP
must remit payment to the Fund equal to the amount of all dividends, interest or other distributions earned or made by the Lent Securities.
Under the
terms of the Lending Agreement with BNP, the Lent Securities are marked to market daily, and if the value of the Lent Securities exceeds the value of the then-outstanding borrowings owed by the Fund to BNP under the Agreement (the Current
Borrowings), BNP must, on that day, either (1) return Lent Securities to the Funds custodian in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings; or (2) post cash
collateral with the Funds custodian equal to the difference between the value of the Lent Securities and the value of the Current Borrowings. If BNP fails to perform either of these actions as required, the Fund will recall securities, as
discussed below, in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings. The Fund can recall any of the Lent Securities and BNP shall, to the extent commercially possible, return such security
or equivalent security to the Funds custodian no later than three business days after such request. If the Fund recalls a Lent Security pursuant to the Lending Agreement, and BNP fails to return the Lent Securities or equivalent securities in
a timely fashion, BNP shall remain liable to the Funds custodian for the ultimate delivery of such Lent Securities, or equivalent securities, and for any buy-in costs that the executing broker for the sales transaction may impose with respect
to the failure to deliver. The Fund shall also have the right to apply and set-off an amount equal to one hundred percent (100%) of the then-current fair market value of such Lent Securities against the Current Borrowings.
Under the terms of the Authorized Agreement with SSB, all securities lent through SSB must be secured continuously by collateral received in cash, cash equivalents,
or U.S. Treasury bills and maintained on a current basis at an amount at least equal to the market value of the securities loaned. Cash collateral held by SSB on behalf of the Fund may be credited against the amounts borrowed under the SSB
Agreement. Any amounts credited against the SSB Agreement would count against the Funds leverage limitations under the 1940 Act, unless otherwise covered in accordance with SEC release IC-10666. Under the terms of the Authorized Agreement with
SSB, SSB will return the value of the collateral to the borrower upon the return of the lent securities, which will eliminate the credit against the SSB Agreement and will cause the amount drawn under the SSB Agreement to increase in an amount equal
to the returned collateral. Under the terms of the Authorized Agreement with SSB, the Fund will make a variable net income payment related to any collateral credited against the SSB Agreement which will be paid to the securities
borrower, less any payments due to the Fund or SSB under the terms of the Authorized Agreement. As of April 30, 2013, the Fund used approximately $75.8 million of its cash collateral to offset the SSB Agreement, representing 3.3% of
managed assets, and was required to pay a net income payment equal to an annualized interest rate of 0.47%, which can fluctuate depending on interest rates.
Note 8 Synthetic Convertible Securities
The Fund may establish a synthetic convertible
instrument by combining separate securities that possess the economic characteristics similar to a convertible security, i.e., fixed-income securities (fixed-income component), which may be a convertible or non-convertible security and
the right to acquire equity securities (convertible component). The fixed-income component is achieved by investing in fixed income securities such as bonds, preferred stocks, and money market instruments. The convertible component is
achieved by investing in warrants or purchased options to buy common stock at a certain exercise price, or options on a stock index. In establishing a synthetic instrument, the Fund may pool a basket of fixed-income securities and a basket of
warrants or purchased options that produce the economic characteristics similar to a convertible security. Within each basket of fixed-income securities and warrants or options, different companies may issue the fixed-income and convertible
components, which may be purchased separately and at different times.
The Fund may also purchase synthetic securities created by other parties,
typically investment banks, including convertible structured notes. Convertible structured notes are fixed-income debentures linked to equity. Convertible structured notes have the attributes of a convertible security; however, the investment bank
that issued the convertible note assumes the credit risk associated with the investment, rather than the issuer of the underlying common stock into which the note is convertible. Purchasing synthetic convertible securities may offer more flexibility
than purchasing a convertible security.
|
|
|
|
|
26
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Notes to Financial Statements
(Unaudited)
Note 9 Fair Value Measurements
Various inputs are
used to determine the value of the Funds investments. These inputs are categorized into three broad levels as follows:
|
|
|
Level 1 Prices are determined using inputs from unadjusted quoted prices from active markets (including securities actively traded on a securities
exchange) for identical assets.
|
|
|
|
Level 2 Prices are determined using significant observable market inputs other than unadjusted quoted prices, including quoted prices of similar
securities, fair value adjustments to quoted foreign securities, interest rates, credit risk, prepayment speeds, and other relevant data.
|
|
|
|
Level 3 Prices reflect unobservable market inputs (including the Funds own judgments about assumptions market participants would use in determining
fair value) when observable inputs are unavailable.
|
Debt securities are valued based upon evaluated prices received from an
independent pricing service or from a dealer or broker who makes markets in such securities. Pricing services utilize various observable market data and as such, debt securities are generally categorized as Level 2. The levels are not necessarily an
indication of the risk or liquidity of the Funds investments. Transfers between the levels for investment securities or other financial instruments are measured at the end of the reporting period.
The following is a summary of the inputs used in valuing the Funds holdings at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LEVEL 1
|
|
|
LEVEL 2
|
|
|
LEVEL 3
|
|
|
TOTAL
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds
|
|
$
|
|
|
|
$
|
651,217,323
|
|
|
$
|
|
|
|
$
|
651,217,323
|
|
Convertible Bonds
|
|
|
|
|
|
|
153,811,980
|
|
|
|
|
|
|
|
153,811,980
|
|
U.S. Government and Agency Security
|
|
|
|
|
|
|
9,150,528
|
|
|
|
|
|
|
|
9,150,528
|
|
Synthetic Convertible Securities (Corporate Bonds)
|
|
|
|
|
|
|
11,567,366
|
|
|
|
|
|
|
|
11,567,366
|
|
Synthetic Convertible Securities (U.S. Government and Agency Security)
|
|
|
|
|
|
|
161,956
|
|
|
|
|
|
|
|
161,956
|
|
Synthetic Convertible Securities (Purchased Option)
|
|
|
2,069,100
|
|
|
|
|
|
|
|
|
|
|
|
2,069,100
|
|
Convertible Preferred Stocks
|
|
|
61,490,145
|
|
|
|
63,249,078
|
|
|
|
|
|
|
|
124,739,223
|
|
Common Stocks
|
|
|
1,249,335,196
|
|
|
|
64,017,922
|
|
|
|
|
|
|
|
1,313,353,118
|
|
Warrants
|
|
|
2,904,187
|
|
|
|
|
|
|
|
|
|
|
|
2,904,187
|
|
Short Term Investment
|
|
|
53,949,486
|
|
|
|
|
|
|
|
|
|
|
|
53,949,486
|
|
|
|
|
|
|
Total
|
|
$
|
1,369,748,114
|
|
|
$
|
953,176,153
|
|
|
$
|
|
|
|
$
|
2,322,924,267
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
$
|
|
|
|
$
|
8,315,936
|
|
|
$
|
|
|
|
$
|
8,315,936
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
8,315,936
|
|
|
$
|
|
|
|
$
|
8,315,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
27
|
|
Financial Highlights
Selected data for a share outstanding throughout each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
Six Months
Ended
April 30,
|
|
|
Year Ended October 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net asset value, beginning of period
|
|
|
$10.56
|
|
|
|
$10.15
|
|
|
|
$10.27
|
|
|
|
$9.39
|
|
|
|
$7.92
|
|
|
|
$16.92
|
|
Income from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)*
|
|
|
0.21
|
|
|
|
0.44
|
|
|
|
0.46
|
|
|
|
0.51
|
|
|
|
0.51
|
|
|
|
0.73
|
|
Net realized and unrealized gain (loss)
|
|
|
0.81
|
|
|
|
0.76
|
|
|
|
0.05
|
|
|
|
1.00
|
|
|
|
1.82
|
|
|
|
(8.26
|
)
|
Distributions to preferred shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (common share equivalent basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
(0.13
|
)
|
Net realized gains (common share equivalent basis)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.08
|
)
|
Total from investment operations
|
|
|
1.02
|
|
|
|
1.20
|
|
|
|
0.51
|
|
|
|
1.51
|
|
|
|
2.32
|
|
|
|
(7.74
|
)
|
Less distributions to common shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.42
|
)
|
|
|
(0.67
|
)
|
|
|
(0.50
|
)
|
|
|
(0.51
|
)
|
|
|
(0.59
|
)
|
|
|
(1.12
|
)
|
Net realized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.14
|
)
|
Return of capital
|
|
|
|
|
|
|
(0.12
|
)
|
|
|
(0.13
|
)
|
|
|
(0.12
|
)
|
|
|
(0.26
|
)
|
|
|
|
|
Total distributions
|
|
|
(0.42
|
)
|
|
|
(0.79
|
)
|
|
|
(0.63
|
)
|
|
|
(0.63
|
)
|
|
|
(0.85
|
)
|
|
|
(1.26
|
)
|
Capital charge resulting from issuance of common and preferred shares and related offering
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
(a)
|
Premiums from shares sold in at the market offerings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period
|
|
|
$11.16
|
|
|
|
$10.56
|
|
|
|
$10.15
|
|
|
|
$10.27
|
|
|
|
$9.39
|
|
|
|
$7.92
|
|
Market value, end of period
|
|
|
$10.56
|
|
|
|
$10.25
|
|
|
|
$8.69
|
|
|
|
$9.06
|
|
|
|
$8.11
|
|
|
|
$6.94
|
|
Total investment return based on:(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value
|
|
|
10.10%
|
|
|
|
12.97%
|
|
|
|
5.84%
|
|
|
|
17.61%
|
|
|
|
34.79%
|
|
|
|
(47.73%
|
)
|
Market value
|
|
|
7.33%
|
|
|
|
28.08%
|
|
|
|
2.72%
|
|
|
|
20.13%
|
|
|
|
32.85%
|
|
|
|
(47.28%
|
)
|
Net assets, end of period (000)
|
|
|
$1,724,906
|
|
|
|
$1,631,424
|
|
|
|
$1,567,880
|
|
|
|
$1,586,968
|
|
|
|
$1,451,127
|
|
|
|
$1,223,443
|
|
Preferred shares, at redemption value ($25,000 per share liquidation preference) (000s
omitted)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$200,000
|
|
Ratios to average net assets applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses(c)
|
|
|
1.78%
|
(d)
|
|
|
1.91%
|
|
|
|
1.93%
|
|
|
|
2.24%
|
|
|
|
2.81%
|
|
|
|
2.35%
|
|
Gross expenses prior to expense reductions and earnings credits(c)
|
|
|
1.78%
|
(d)
|
|
|
1.91%
|
|
|
|
1.93%
|
|
|
|
2.24%
|
|
|
|
2.81%
|
|
|
|
2.35%
|
|
Net expenses, excluding interest expense
|
|
|
1.42%
|
(d)
|
|
|
1.45%
|
|
|
|
1.41%
|
|
|
|
1.46%
|
|
|
|
1.69%
|
|
|
|
1.72%
|
|
Net investment income (loss)(c)
|
|
|
4.02%
|
(d)
|
|
|
4.25%
|
|
|
|
4.31%
|
|
|
|
5.16%
|
|
|
|
6.56%
|
|
|
|
5.43%
|
|
Preferred share distributions
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
0.09%
|
|
|
|
0.97%
|
|
Net investment income (loss), net of preferred share distributions from net investment
income
|
|
|
4.02%
|
(d)
|
|
|
4.25%
|
|
|
|
4.31%
|
|
|
|
5.16%
|
|
|
|
6.47%
|
|
|
|
4.46%
|
|
Portfolio turnover rate
|
|
|
28%
|
|
|
|
48%
|
|
|
|
30%
|
|
|
|
25%
|
|
|
|
11%
|
|
|
|
53%
|
|
Average commission rate paid
|
|
|
$0.0214
|
|
|
|
$0.0171
|
|
|
|
$
|
|
|
|
$0.0113
|
|
|
|
$0.0159
|
|
|
|
$0.0495
|
|
Asset coverage per preferred share, at end of period(e)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$177,949
|
|
Asset coverage per $1,000 of loan outstanding(f)
|
|
|
$3,846
|
|
|
|
$3,832
|
|
|
|
$3,722
|
|
|
|
$3,944
|
|
|
|
$3,692
|
|
|
|
$3,694
|
|
*
|
Net investment income allocated based on average shares method.
|
(a)
|
Amount equated to less than $0.005 per common share.
|
(b)
|
Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of the period reported.
Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds dividend reinvestment plan. Total return is not annualized for periods less than one year. Brokerage commissions are
not reflected. NAV per share is determined by dividing the value of the Funds portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the
market is willing to pay for shares of the Fund at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions.
|
(c)
|
Does not reflect the effect of dividend payments to Preferred Shareholders.
|
(e)
|
Calculated by subtracting the Funds total liabilities (not including Preferred Shares) from the Funds total assets and dividing this by the number of Preferred Shares
outstanding.
|
(f)
|
Calculated by subtracting the Funds total liabilities (not including Note payable) and preferred shares from the Funds total assets and dividing this by the amount of
note payable outstanding, and by multiplying the result by 1,000.
|
|
|
|
|
|
28
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Calamos Strategic Total Return Fund
We have reviewed the accompanying
statement of assets and liabilities, including the schedule of investments, for Calamos Strategic Total Return Fund (the Fund) as of April 30, 2013, and the related statements of operations, changes in net assets, and cash flows and
the financial highlights for the semi-annual period then ended. These interim financial statements and financial highlights are the responsibility of the Funds management.
We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical
procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial statements and financial highlights taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to such interim financial statements and financial highlights for them to be in conformity with accounting principles
generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the statement of changes in net assets of the Fund for the year ended October 31, 2012 and the financial highlights for each of the five years in the period then ended; and in our report dated December 14,
2012, we expressed an unqualified opinion on such statement of changes in net assets and financial highlights.
Chicago, Illinois
June 21, 2013
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
29
|
|
Trustee Approval of the Management
Agreement
(Unaudited)
The Board of Trustees of the Fund oversees the management of the Fund, and, as required by law, determines annually whether to continue the Funds management agreement with Calamos Advisors (the
Adviser) under which the Adviser serves as the investment manager and administrator for the Fund. The Independent Trustees, who comprise more than 80% of the Board, have never been affiliated with the Adviser.
In connection with their most recent consideration regarding the continuation of the management agreement, the Trustees received and reviewed a substantial amount
of information provided by the Adviser in response to detailed requests of the Independent Trustees and their independent legal counsel. In the course of their consideration of the agreement, the Independent Trustees were advised by their counsel
and, in addition to meeting with management of the Adviser, they met separately in executive session with their counsel.
At a meeting held on
June 28, 2012, based on their evaluation of the information referred to above and other information, the Trustees determined that the overall arrangements between the Fund and the Adviser were fair and reasonable in light of the nature, extent
and quality of the services provided by the Adviser and its affiliates, the fees charged for those services and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees, including
all of the Independent Trustees, approved the continuation of the management agreement through July 31, 2013, subject to possible earlier termination as provided in the agreement.
In connection with its consideration of the management agreement, the Board considered, among other things: (i) the nature, quality and extent of the Advisers services, (ii) the investment
performance of the Fund as well as performance information for comparable funds and other comparable clients of the advisor, (iii) the fees and other expenses paid by the Fund as well as expense information for comparable funds and for other,
comparable clients of the Adviser, (iv) the profitability of the Adviser and its affiliates from their relationship with the Fund, (v) the extent to which economies of scale may apply, and (vi) other benefits to the Adviser from its
relationship with the Fund. In the Boards deliberations, no single factor was responsible for the Boards decision to approve continuation of the management agreements.
Nature, Extent and Quality of Services
. The Boards consideration of the nature, extent and quality of the Advisers services to the Fund took into account the knowledge gained from the
Boards meetings with the Adviser throughout the prior year. In addition, the Board considered: the Advisers long-term history of managing the Fund; the consistency of investment approach; the background and experience of the
Advisers investment personnel responsible for managing the Fund; the Advisers performance as administrator of the Fund, including, among other things, in the areas of brokerage selection, trade execution, compliance and shareholder
communications; and frequent favorable recognition of the Adviser in the media and in industry publications. The Board also reviewed the Advisers resources and key personnel involved in providing investment management services to the Fund and
the investment results produced by the Advisers in-house research. The Board noted the personal investments that the Advisers key investment personnel have made in the Fund, which further aligns the interests of the Adviser and its
personnel with those of the Funds shareholders. In addition, the Board considered compliance reports about the Adviser from the Funds Chief Compliance Officer. The Board concluded that the nature, extent and quality of the services
provided by the Adviser to the Fund were appropriate and consistent with the management agreements and that the Fund was likely to continue to benefit from services provided under its management agreement with the Adviser.
Investment Performance of the Fund
. The Board considered the Funds investment performance over various time periods, including how the Fund
performed compared to the median performance of a group of comparable funds (the Funds Universe Median) selected by Lipper, Inc., an independent data service provider (Lipper). The performance periods considered by the
Board ended on March 31, 2012. Where available, the Board considered one-, three-, five- and ten-year performance.
The Board considered that the
Fund underperformed its Universe Median during the one-, three- and five- year periods. The Board considered that the Fund has provided investors positive returns over the one-, three-, five- and since inception periods of 4.14%, 26.04%, 1.43% and
4.97%, respectively.
For the reasons noted above, the Board concluded that continuation of the management agreement for the Fund was in the best
interest of the Fund and its shareholders.
|
|
|
|
|
30
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Trustee Approval of the Management Agreement
(Unaudited)
Costs of Services Provided and Profits Realized by the Adviser
. Using information provided by Lipper, the Board evaluated the Funds actual
management fee rate compared to the median management fee rate for other mutual funds similar in size, character and investment strategy (the Funds Expense Group), and the Funds total expense ratio compared to the median
total expense ratio of the Funds Expense Group.
The Board considered that the Funds management fee rate and total expense ratio are higher
than the respective medians of the Funds Expense Group.
The Board also reviewed the Advisers management fee rates for its institutional
separate accounts and for its sub-advised funds (for which the Adviser provides portfolio management services only). The Board took into account the Advisers assertion that although, generally, the rates of fees paid by institutional clients
were lower than the rates of fees paid by the Fund, the differences reflected the Advisers greater level of responsibilities and significantly broader scope of services regarding the Fund, and the more extensive regulatory obligations and
risks associated with managing the Fund.
The Board also considered the Advisers costs in serving as the Funds investment adviser and
manager, including costs associated with technology, infrastructure and compliance necessary to manage the Fund. The Board reviewed the Advisers methodology for allocating costs among the Advisers lines of business. The Board also
considered information regarding the structure of the Advisers compensation program for portfolio managers, analysts and certain other employees and the relationship of such compensation to the attraction and retention of quality personnel.
Finally, the Board reviewed information on the profitability of the Adviser in serving as the Funds investment manager and of the Adviser and its affiliates in all of their relationships with the Fund, as well as an explanation of the
methodology utilized in allocating various expenses among the Fund and the Advisers other business units. Data was provided to the Board with respect to profitability, both on a pre- and post-marketing cost basis. The Board also reviewed the
annual report of the Advisers parent company and discussed its corporate structure.
After its review of all the matters addressed, including
those outlined above, the Board concluded that the rate of management fee paid by the Fund to the Adviser, in light of the nature and quality of the services provided, was reasonable and in the best interests of the Funds shareholders.
Economies of Scale and Fee Levels Reflecting Those Economies
. In reviewing the Funds fees and expenses, the Trustees examined
the potential benefits of economies of scale and whether any economies of scale should be reflected in the Funds fee structure. They noted that the Fund is a closed-end fund, and has therefore had a relatively stable asset base since
commencement of operations and that there do not appear to have been any significant economies of scale realized since that time.
Other Benefits
Derived from the Relationship with the Fund
. The Board also considered other benefits that accrue to the Adviser and its affiliates from their relationship with the Fund. The Board concluded that, other than the services to be
provided by the Adviser and its affiliates pursuant to their agreements with the Fund and the fees payable by the Fund therefore, the Fund and the Adviser may potentially benefit from their relationship with each other in other ways. The Board also
considered the Advisers use of a portion of the commissions paid by the Fund on their portfolio brokerage transactions to obtain research products and services benefiting the Fund and/or other clients of the Adviser and concluded, based on
reports from the Funds Chief Compliance Officer, that the Advisers use of soft commission dollars to obtain research products and services was consistent with regulatory requirements.
After full consideration of the above factors as well as other factors that were instructive in their consideration, the Trustees, including all of the Independent
Trustees, concluded that the continuation of the management agreement with the Adviser was in the best interest of the Fund and its shareholders.
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
31
|
|
About Closed-End Funds
What is a Closed-End Fund?
A closed-end fund is a publicly traded investment company that raises its initial
investment capital through the issuance of a fixed number of shares to investors in a public offering. Shares of a closed-end fund are listed on a stock exchange or traded in the over-the-counter market. Like all investment companies, a closed-end
fund is professionally managed and offers investors a unique investment solution based on its investment objective approved by the funds Board of Directors.
Potential Advantages of Closed-End Fund Investing
|
|
Defined Asset Pool Allows Efficient Portfolio Management
Although closed-end fund shares trade actively on a securities exchange, this
doesnt affect the closed-end fund manager because there are no new investors buying into or selling out of the funds portfolio.
|
|
|
More Flexibility in the Timing and Price of Trades
Investors can purchase and sell shares of closed-end funds throughout the trading day, just like
the shares of other publicly traded securities.
|
|
|
Lower Expense Ratios
The expense ratios of closed-end funds are oftentimes less than those of mutual funds. Over time, a lower expense ratio could
enhance investment performance.
|
|
|
Closed-End Structure Makes Sense for Less-Liquid Asset Classes
A closed-end structure makes sense for investors considering less-liquid asset
classes, such as high-yield bonds or micro-cap stocks.
|
|
|
Ability to Put Leverage to Work
Closed-end funds may issue senior securities (such as preferred shares or debentures) or borrow money to
leverage their investment positions.
|
|
|
No Minimum Investment Requirements
|
OPEN-END MUTUAL FUNDS VERSUS CLOSED-END FUNDS
|
|
|
OPEN-END FUND
|
|
CLOSED-END FUND
|
Issues new shares on an ongoing basis
|
|
Generally issues a fixed number of shares
|
Issues common equity shares
|
|
Can issue common equity shares and senior securities such as preferred shares and bonds
|
Sold at NAV plus any sales charge
|
|
Price determined by the marketplace
|
Sold through the funds distributor
|
|
Traded in the secondary market
|
Fund redeems shares at NAV calculated at the close of business day
|
|
Fund does not redeem shares
|
|
You can purchase or sell
common shares of closed-end funds daily. Like any other stock, market price will fluctuate with the market. Upon sale, your shares may have a market price that is above or below net asset value and may be worth more or less than your original
investment. Shares of closed-end funds frequently trade at a discount which is a market price that is below their net asset value.
Leverage creates
risks which may adversely affect return, including the likelihood of greater volatility of net asset value and market price of common shares and fluctuations in the variable rates of the leverage financing.
Each open-end or closed-end fund should be evaluated individually.
Before investing carefully consider the funds investment objectives, risks, charges and
expenses.
|
|
|
|
|
32
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
Level Rate Distribution Policy
Using a Level Rate Distribution Policy to Promote Dependable Income and Total Return
The goal of the
level rate distribution policy is to provide investors a predictable, though not assured, level of cash flow, which can either serve as a stable income stream or, through reinvestment, contribute significantly to long-term total return.
We understand the importance that investors place on the stability of dividends and their ability to contribute to long-term total return, which is why we have
instituted a level rate distribution policy for the Fund. Under the policy, monthly distributions paid may include net investment income, net realized short-term capital gains and, if necessary, return of capital. In addition, a limited number of
distributions per calendar year may include net realized long-term capital gains. There is no guarantee that the Fund will realize capital gains in any given year. Distributions are subject to re-characterization for tax purposes after the end of
the fiscal year. All shareholders with taxable accounts will receive written notification regarding the components and tax treatment for distributions via Form 1099-DIV.
Distributions from the Fund are generally subject to Federal income taxes. For purposes of maintaining the level rate distribution policy, the Fund may realize short-term capital gains on securities that, if sold
at a later date, would have resulted in long-term capital gains. Maintenance of a level rate distribution policy may increase transaction and tax costs associated with the Fund.
Automatic Dividend Reinvestment Plan
Maximizing Investment with an Automatic Dividend Reinvestment Plan
The Automatic Dividend Reinvestment Plan offers a simple, cost-efficient and convenient way to reinvest your dividends and capital gains distributions in additional shares of the Fund, allowing you to increase your
investment in the Fund.
Potential Benefits
|
|
Compounded Growth:
By automatically reinvesting with the Plan, you gain the potential to allow your dividends and capital gains to compound over time.
|
|
|
Potential for Lower Commission Costs:
Additional shares are purchased in large blocks, with brokerage commissions shared among all plan participants.
There is no cost to enroll in the Plan.
|
|
|
Convenience:
After enrollment, the Plan is automatic and includes detailed statements for participants. Participants can terminate their enrollment at any
time.
|
Pursuant to the Plan, unless a shareholder is ineligible or elects otherwise, all dividend and capital gains on common shares
distributions are automatically reinvested by Computershare, as agent for shareholders in administering the Plan (Plan Agent), in additional common shares of the Fund. Shareholders who elect not to participate in the Plan will receive
all dividends and distributions payable in cash paid by check mailed directly to the shareholder of record (or, if the shares are held in street or other nominee name, then to such nominee) by Plan Agent, as dividend paying agent. Shareholders may
elect not to participate in the Plan and to receive all dividends and distributions in cash by sending written instructions to Plan Agent, as dividend paying agent, at: Dividend Reinvestment Department, P.O. Box 358016, Pittsburgh, PA 15252.
Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by giving notice in writing to the Plan Agent; such termination will be effective with respect to a particular dividend or distribution if
notice is received prior to the record date for the applicable distribution.
|
|
|
|
|
|
|
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
33
|
|
Automatic
Dividend Reinvestment Plan
The shares are acquired by the Plan Agent for the participants account either (i) through receipt of additional common shares from the Fund (newly
issued shares) or (ii) by purchase of outstanding common shares on the open market (open-market purchases) on the NASDAQ or elsewhere. If, on the payment date, the net asset value per share of the common shares is equal to or
less than the market price per common share plus estimated brokerage commissions (a market premium), the Plan Agent will receive newly issued shares from the Fund for each participants account. The number of newly issued common
shares to be credited to the participants account will be determined by dividing the dollar amount of the dividend or distribution by the greater of (i) the net asset value per common share on the payment date, or (ii) 95% of the
market price per common share on the payment date.
If, on the payment date, the net asset value per common share exceeds the market price plus estimated
brokerage commissions (a market discount), the Plan Agent has a limited period of time to invest the dividend or distribution amount in shares acquired in open-market purchases. The weighted average price (including brokerage
commissions) of all common shares purchased by the Plan Agent as Plan Agent will be the price per common share allocable to each participant. If, the Plan Agent is unable to invest the full dividend amount in open-market purchases during the
purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Agent will cease making open-market purchases and will invest the uninvested portion of the dividend or distribution amount in newly issued
shares at the close of business on the last purchase date.
The automatic reinvestment of dividends and distributions will not relieve participants of
any federal, state or local income tax that may be payable (or required to be withheld) on such dividends even though no cash is received by participants.
There are no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or distributions payable either in shares or in cash.
However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agents open-market purchases in connection with the reinvestment of dividends or distributions. If a participant elects to have the
Plan Agent sell part or all of his or her common shares and remit the proceeds, such participant will be charged his or her pro rata share of brokerage commissions on the shares sold, plus a $15 transaction fee. There is no direct service charge to
participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
A participant
may request the sale of all of the common shares held by the Plan Agent in his or her Plan account in order to terminate participation in the Plan. If such participant elects in advance of such termination to have the Plan Agent sell part or all of
his shares, the Plan Agent is authorized to deduct from the proceeds a $15.00 fee plus the brokerage commissions incurred for the transaction. A participant may re-enroll in the Plan in limited circumstances.
The terms and conditions of the Plan may be amended by the Plan Agent or the Fund at any time upon notice are required by the Plan.
This discussion of the Plan is only summary, and is qualified in its entirety to the Terms and Conditions of the Dividend Reinvestment Plan filed as part of the
Funds registration statement.
For additional information about the Plan, please contact the Plan Agent, Computershare, at 866.226.8016. If you
wish to participate in the Plan and your shares are held in your own name, simply call the Plan Agent. If your shares are not held in your name, please contact your brokerage firm, bank, or other nominee to request that they participate in the Plan
on your behalf. If your brokerage firm, bank, or other nominee is unable to participate on your behalf, you may request that your shares be re-registered in your own name.
Were pleased to provide our shareholders with the additional benefit of the Funds Dividend Reinvestment Plan and hope that it may serve your financial plan.
|
|
|
|
|
34
|
|
CALAMOS STRATEGIC TOTAL RETURN FUND SEMIANNUAL REPORT
|
|
|
MANAGING YOUR CALAMOS FUNDS INVESTMENTS
Calamos Investments offers several convenient means to monitor, manage and feel confident about your Calamos investment choice.
PERSONAL ASSISTANCE:
800.582.6959
Dial this toll-free number to speak with a knowledgeable Client Services Representative who can help answer questions or address issues
concerning your Calamos Fund.
YOUR FINANCIAL ADVISOR
We encourage you to talk to your financial advisor to determine
how the Calamos Funds can benefit your investment portfolio based on your financial goals, risk tolerance, time horizon and income needs.
|
|
|
|
|
STAY CONNECTED
www.calamos.com
|
|
Visit our Web site for timely fund performance, detailed fund profiles, fund news and insightful market
commentary.
|
A description of the Calamos Proxy Voting Policies and Procedures and the Funds proxy voting record for the
12-month period ended June 30, 2012, are available free of charge upon request by calling 800.582.6959, by visiting the Calamos Web site at www.calamos.com, by writing Calamos at: Calamos Investments, Attn: Client Services, 2020 Calamos Court,
Naperville, IL 60563. The Funds proxy voting record is also available free of charge by visiting the SEC Web site at www.sec.gov.
The Fund files
its complete list of portfolio holdings with the SEC for the first and third quarters each fiscal year on Form N-Q . The Forms N-Q are available free of charge, upon request, by calling or writing Calamos Investments at the phone number or address
provided above or by visiting the SEC Web site at www.sec.gov. You may also review or, for a fee, copy the forms at the SECs Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by
calling 800.732.0330.
The Funds report to the SEC on Form N-CSR contains certifications by the funds principal executive officer and
principal financial officer as required by Rule 30a-2(a) under the 1940 Act, relating to, among other things, the quality of the Funds disclosure controls and procedures and internal control over financial reporting.
FOR 24-HOUR AUTOMATED SHAREHOLDER ASSISTANCE:
866.226.8016
TO OBTAIN INFORMATION ABOUT YOUR INVESTMENTS:
800.582.6959
VISIT OUR WEB SITE:
www.calamos.com
INVESTMENT ADVISER:
Calamos Advisors LLC
2020 Calamos Court
Naperville, IL 60563-2787
CUSTODIAN AND FUND ACCOUNTING
AGENT:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02111
TRANSFER AGENT:
Computershare
P.O. Box 358016
Pittsburgh, PA 15252
866.226.8016
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
Deloitte & Touche LLP
Chicago, IL
LEGAL COUNSEL:
K&L Gates LLP
Chicago, IL
2020 Calamos Court
Naperville,
IL 60563-2787
800.582.6959
www.calamos.com
©
2013 Calamos investments LLC. All Rights Reserved.
Calamos
®
and Calamos Investments
®
are registered
trademarks of Calamos investments LLC.
CSQSAN 1946 2013