Calamos Strategic Total Return Fund (the "Fund")
Supplement dated September 30, 2022 to the Fund's Prospectus dated April 30, 2021, and as
supplemented from time to time and to the Fund's Statement of Information ("SAI") dated
April 30, 2021, and as supplemented from time to time
I. Recent Developments — Mandatory Redeemable Preferred Shares
On September 6, 2022, the Fund redeemed 100% (3,220,000) of outstanding Series A mandatory redeemable preferred shares ("MRP Shares") with an aggregate liquidation preference totaling $80,500,000.
Additional updated information regarding the Fund's MRP Shares is included in the restated disclosures set forth below.
Revised Disclosure Related to MRP Shares
In accordance with the above, the Fund's Prospectus, SAI and Prospectus Supplement are hereby amended as follows:
The section titled "Capitalization" beginning on page SUP-2 of the Prospectus Supplement is deleted in its entirety and replaced with the following:
CAPITALIZATION
The Fund may offer and sell up to 26,228,501 of our common shares, no par value per share, from time to time through the Sub-Placement Agent as sub-placement agent under this prospectus supplement and the accompanying prospectus. There is no guarantee that there will be any sales of our common shares pursuant to this prospectus supplement and the accompanying prospectus. The table below assumes that we will sell 26,228,501 common shares (the number of common shares remaining to be sold under the current sales agreement as of September 6, 2022) at a price of $14.47 per share (the last reported sale price per share of our common shares on NASDAQ on September 6, 2022).
The table below shows our historical capitalization as of April 30, 2022 and the estimated capitalization of the Fund assuming the sale of all 26,228,501 common shares that are subject to the sales agreement at a price of $14.47 per share, the last reported sales price per share of our common shares on a pro forma, as adjusted basis as of September 6, 2022. Actual sales, if any, of the Fund's common shares under this prospectus supplement and accompanying prospectus may be different than as set forth in the table below. In addition, the price per share of any such sale may be greater or less than $14.47 per share, depending on the market price of the Fund's common shares at the time of any such sale and/or the Fund's net asset value ("NAV") for purposes of calculating the Minimum Price. The Fund and the Distributor will determine whether any sales of the Fund's common shares will be authorized on a particular day; the Fund and the Distributor, however, will not authorize sales of the Fund's common shares if the per share price of the shares is less than the Minimum Price. The Fund and the Distributor may elect not to authorize sales of the Fund's common shares on a particular day even if the per share price of the shares is equal to or greater than the Minimum Price, or may only authorize a fixed number of shares to be sold on any particular day. The Fund and the Distributor will have full discretion regarding whether sales of Fund common shares will be authorized on a particular day and, if so, in what amounts.
The following table sets forth our capitalization:
• on an actual basis as of April 30, 2022; and
• on a pro forma as adjusted basis to reflect (1) the assumed sale of 26,228,501 common shares at $14.47 per share (the last reported sale price of the Fund's common shares on NASDAQ on September 6, 2022), in an offering under this prospectus supplement and the accompanying prospectus, (2) the investment of net proceeds assumed from such offering in accordance with the Fund's investment objective and policies, after deducting the assumed aggregate commission of $3,794,148 (representing an estimated commission to the Distributor of 1% of the gross proceeds of the sale of the Fund's common shares, out of which the Distributor will compensate the Sub-Placement Agent at a rate of 0.80% of the gross sales proceeds of the sale of the Fund's common shares sold through the Sub-Placement Agent), (3) the issuance of 150,906 of our common shares through the Fund's dividend reinvestment plan at an average price of $14.75, (4) the issuance of 4,000,000 Series F MRP Shares on May 24, 2022, and (5) the redemption of $80,500,000 of Series A MRP Shares on September 6, 2022.
Actual | As Adjusted | |||||||
Loans(1) | $ | 107,000,000 | $ | 130,000,000 | ||||
Preferred Shares | 304,000,000 | 323,500,000 | ||||||
Common shares, no par value per share, unlimited shares authorized, 157,874,945 outstanding (actual) and 184,815,976 shares outstanding (as adjusted) | 1,856,910,652 | 2,243,423,321 | ||||||
Accumulated distributable earnings (loss) | 596,097,211 | 596,097,211 | ||||||
Net assets applicable to common shareholders | 2,453,007,863 | 2,839,520,532 | ||||||
Total Capitalization | $ | 2,864,007,863 | $ | 3,293,020,532 |
(1) Figures do not reflect additional structural leverage related to certain securities lending programs, which were $773 million and $671 million as of April 30, 2022 and September 6, 2022, respectively.
The section titled "Summary of Fund Expenses" beginning on page SUP-3 of the Prospectus Supplement is deleted in its entirety and replaced with the following:
Shareholder Transaction Expenses | ||||
Sales Load (as a percentage of offering price) | 1.00 | %(1) | ||
Offering Expenses Borne by the Fund (as a percentage of offering price) | — | %(2) | ||
Dividend Reinvestment Plan Fees (per sales transaction fee)(3) | $ | 15.00 |
Annual Expenses | Percentage of Average Net Assets Attributable to Common Shareholders | |||
Management Fee(4) | 1.45 | % | ||
Interest Payments on Borrowed Funds(5) | 0.32 | % | ||
Preferred Stock Dividend Payments(6) | 0.50 | % | ||
Other Expenses(7) | 0.06 | % | ||
Acquired Fund Fees and Expenses(8) | 0.01 | % | ||
Total Annual Expenses | 2.34 | % |
1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Total Expenses Paid by Common Shareholders(9) | $ | 33 | $ | 82 | $ | 133 | $ | 274 |
Use of Leverage by the Fund
The Fund currently uses, and may in the future use, financial leverage. The Fund has obtained financial leverage (i) under the SSB Agreement that allows the Fund to borrow up to $1.13 billion and (ii) through the issuance of four series of MRP Shares with an aggregate liquidation preference of $323.5 million, as described in greater detail below. The SSB Agreement provides for securities lending and securities repurchase transactions that may offset some of the interest rate payments that would otherwise be due in respect of the borrowings under the SSB Agreement. The Fund's outstanding MRP Shares include 3,220,000 Series B MRP Shares, with an aggregate liquidation preference of $80,500,000 and a mandatory redemption date of September 6, 2024; 3,240,000 Series C MRP Shares, with an aggregate liquidation preference of $81,000,000 and a mandatory redemption date of September 6, 2027; 2,480,000 Series D MRP Shares, with an aggregate liquidation preference of $62,000,000 and a mandatory redemption date of August 24, 2026; and 4,000,000 Series F MRP Shares, with an aggregate liquidation preference of $100,000,000 and a mandatory redemption date of May 24, 2027. The Series B, Series C, Series D, and Series F MRP Shares are to pay monthly cash dividends initially at rates of 4.00%, 4.24%, 2.45% and 3.66%, respectively, subject to adjustment under certain circumstances. Additional details regarding the SSB Agreement and the MRP Shares are included under "Leverage."
As of September 6, 2022, the Fund had utilized $800.5 million of the $1.13 billion available under the SSB Agreement ($130.0 million in borrowings outstanding, and $670.5 million in structural leverage consisting of collateral received from SSB in connection with securities on loan), representing 24.0% of the Fund's managed assets as of that date, and had $323.5 million of MRP Shares outstanding, representing 9.7% of the Fund's managed assets. Combined, the borrowings under the SSB Agreement and the outstanding MRP Shares represented 33.7% of the Fund's managed assets.
The second and third paragraphs of the section titled "The Fund" beginning on page 30 of the Prospectus is deleted in its entirety and replaced with the following:
As of September 6, 2022, the Fund had utilized $800.5 million of the $1.13 billion available under the SSB Agreement ($130.0 million in borrowings outstanding, and $670.5 million in structural leverage consisting of collateral received from SSB in connection with securities on loan), representing 24.0% of the Fund's managed assets as of that date, and had $323.5 million of MRP Shares outstanding, representing 9.7% of the Fund's managed assets. Combined, the borrowings under the SSB Agreement and the outstanding MRP Shares represented 33.7% of the Fund's managed assets. Structural leverage refers to borrowings under the SSB Agreement in respect of which the Fund’s interest payments are reduced or eliminated by the Fund’s securities lending activities. See “Leverage.” The Fund’s common shares are listed on Nasdaq under the symbol “CSQ.” The Fund’s principal office is located at 2020 Calamos Court, Naperville, Illinois 60563, and its telephone number is 1-800-582-6959.
The following table provides information about our outstanding securities as of September 6, 2022:
Title of Class | Amount Authorized | Amount Held by the Fund for its Account | Amount Outstanding | |||||||||
Common Shares | Unlimited | 158,595,186 | 184,815,976 | |||||||||
MRPS-Series B | 3,220,000 | 0 | 3,220,000 | |||||||||
MRPS-Series C | 3,240,000 | 0 | 3,240,000 | |||||||||
MRPS-Series D | 2,480,000 | 0 | 2,480,000 | |||||||||
MRPS-Series F | 4,000,000 | 0 | 4,000,000 |
The first paragraph in the section titled "Leverage" beginning on page 38 of the Prospectus is deleted in its entirety and replaced with the following:
The Fund may issue preferred shares or debt securities or borrow to increase its assets available for investment. As of September 6, 2022, the Fund had $800.5 million in borrowings outstanding under the SSB Agreement, MRP Shares outstanding with an aggregate liquidation preference of $323.5 million, and used approximately $130.0 million of collateral obtained through securities lending arrangements as an offset against borrowings under the SSB Agreement, for a total of $1.13 billion of leverage representing 33.7% of managed assets as of that date. The SSB Agreement provides for additional credit availability for the Fund, such that it may borrow up to $1.13 billion. Additional information regarding the Fund's preferred shares is included below under "Mandatory Redeemable Preferred Shares."
The section titled "Mandatory Redeemable Preferred Shares" beginning on page 41 of the Prospectus is deleted in its entirety and replaced with the following:
MRP Shares | Applicable Rate | |||
Series B MRP Shares | 4.00 | % | ||
Series C MRP Shares | 4.24 | % | ||
Series D MRP Shares | 2.45 | % | ||
Series F MRP Shares | 3.66 | % |
Fitch Rating or KBRA Rating (Or Equivalent by an Other Rating Agency) | Enhanced Dividend Amount | |||
“A-” | 0.5 | % | ||
“BBB+” to “BBB-” | 2.0 | % | ||
“BB+” or below | 4.0 | % |
Assumed Portfolio Return (Net of Expenses) | (10.00 | )% | (5.00 | )% | 0.00 | % | 5.00 | % | 10.00 | % | ||||||||||
Corresponding Common Share Return(1) | (16.32 | )% | (8.77 | )% | (1.22 | )% | 6.33 | % | 13.88 | % |
DESCRIPTION OF SECURITIES
The Fund is authorized to issue an unlimited number of common shares, without par value. The Fund is also authorized to issue preferred shares and debt securities. As of September 6, 2022, the Fund had 158,587,475 common shares outstanding and MRP Shares outstanding in the following amounts: 3,220,000 Series B MRP Shares, and 3,240,000 Series C MRP Shares, 2,480,000 Series D MRP Shares, and 4,000,000 Series F MRP Shares. As of such date, the Fund had not issued any debt securities. Subject to the restrictions under the 1940 Act, the Board of Trustees may, from time to time, establish additional series or classes of Fund shares and set forth the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares and pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any existing class or series but the Board may not change any outstanding shares in a manner materially adverse to such shareholders. The Board of Trustees, without shareholder approval but subject to the governing documents of the Fund and the MRP Shares, is authorized to amend the Agreement and Declaration of Trust and By-Laws to reflect the terms of any such class or series.
As of September 6, 2022, the Fund had total leverage of approximately $1.13 billion representing approximately 33.7% of the Fund's managed assets as of that date. The Fund will pay, and common shareholders will effectively bear, any costs and expenses relating to any borrowings by the Fund, including the financial leverage described above, as well as any additional leverage incurred as a result of this offering. Such costs and expenses include the higher management fee resulting from the use of any such leverage, offering and/or issuance costs, and interest and/or dividend expense and ongoing maintenance. Borrowings under the SSB Agreement are secured by assets of the Fund that are held with the Fund's custodian in a separate account. Interest on the SSB Agreement is charged on the drawn amount at the rate of OBFR plus 0.80%, payable monthly in arrears. Interest on overdue amounts or interest on the drawn amount paid during an event of default will be charged at OBFR plus 2.80%. The SSB Agreement has a commitment fee of 0.10% of any undrawn amount. As of September 6, 2022, the interest rate charged under the SSB Agreement was 3.12%.
II. Further Revisions to Disclosure
All disclosure in the Fund's Prospectus, SAI and Prospectus Supplement not specifically referenced above is hereby amended to the extent necessary to conform to the information provided in this supplement.
Please retain this supplement for future reference.