As filed with the Securities and
Exchange Commission on May 19, 2021
1933 Act File No. 333-254017
1940 Act File No. 811-21583
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
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[X]
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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[X]
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Post-Effective Amendment No. 1
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and
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[X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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[X]
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Amendment No. 12
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Clough Global Dividend and Income
Fund
(Exact Name of Registrant as
Specified in Charter)
1290 Broadway, Suite 1000
Denver, Colorado 80203
(Address of Principal Executive
Offices)
(Number, Street, City, State, Zip
Code)
(303) 623-2577
Registrant's Telephone Number,
including Area Code
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Clifford J. Alexander, Esq.
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Sareena Khwaja-Dixon
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K&L Gates LLP
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ALPS Fund Services, Inc.
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1601 K Street, NW
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1290 Broadway, Suite 1000
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Washington, DC 20006
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Denver, CO 80203
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(202) 778-9068
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(303) 623-2577
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Name and Address of Agent for
Service
(Number, Street, City, State, Zip
Code)
Approximate Date of Proposed Public
Offering: As soon as practicable after the effective date of this Registration Statement.
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Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans.
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[X]
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Check box if any securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933 (“Securities Act”), other than securities offered in connection with a dividend reinvestment plan.
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[X]
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Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto.
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Check box if this Form is a registration statement pursuant to General Instruction B or a post-effective amendment thereto that will become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act.
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Check box if this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction B to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act.
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It is proposed that this filing
will become effective (check appropriate box)
[X]
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when declared effective pursuant to Section 8(c) of the Securities Act
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The following boxes should only
be included and completed if the registrant is making this filing in accordance with Rule 486 under the Securities Act.
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immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a)
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If appropriate, check the following
box:
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This [post-effective] amendment designates a new effective date for a previously filed [post-effective amendment] [registration statement].
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This Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is:
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This Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is:
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This Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, and the Securities Act registration statement number of the earlier effective registration statement for the same offering is:___._
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Check each box that appropriately
characterizes the Registrant:
[X]
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Registered Closed-End Fund (closed-end company that is registered under the Investment Company Act of 1940 (“Investment Company Act”)).
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Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act).
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Interval Fund (Registered Closed-End Fund or a Business Development Company that makes periodic repurchase offers under Rule 23c-3 under the Investment Company Act).
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[X]
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A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).
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Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act).
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Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”).
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If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.
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New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing).
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CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933
Title of Securities Being
Registered
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Proposed Maximum Aggregate
Offering Price (1)
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Amount of Registration
Fee (3)
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Common Shares, no par value(2)
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$40,975,000
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$4,470.37
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Preferred Shares, no par value(2)
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Subscription Rights for Common Shares(2)
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Subscription Rights for Preferred Shares(2)
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Subscription Rights for Common Shares and Preferred Shares(2)
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Total
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$40,975,000
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$4,470.37
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(1)
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Estimated pursuant to Rule 457(o) solely for the purpose of determining the registration fee. The proposed maximum offering price per security will be determined, from time to time, by the Registrant in connection with the sale by the Registrant of the securities registered under this registration statement.
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(2)
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There is being registered hereunder an indeterminate principal amount of common or preferred shares, or subscription rights to purchase common shares, preferred shares or common and preferred shares as may be sold, from time to time. In no event will the aggregate offering price of all securities issued from time to time pursuant to this registration statement exceed $40,975,000.
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(3)
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$109.10 of which has been previously paid.
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PROSPECTUS DATED MAY 19, 2021
Clough Global Dividend and Income Fund
$40,975,000
Common Shares
Preferred Shares
Subscription Rights to Purchase Common Shares
Subscription Rights to Purchase Preferred Shares
Subscription Rights to Purchase Common and Preferred
Shares
Important Note: Beginning on January 1, 2021, as permitted by regulations
adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will
no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on
the Fund’s website at www.cloughglobal.com, and you will be notified by mail each time a report is posted and provided with a website
link to access the report.
Investment Objective. Clough Global Dividend
and Income Fund (the “Fund”) is a diversified, closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the “1940 Act”). The Fund’s investment objective is to provide a high level of total return
and current income. The Fund seeks to pursue this objective by applying a fundamental research-driven investment process and will invest
in equity securities of companies of any market capitalization and equity-related securities, including equity swaps and call options,
as well as fixed income securities, including both corporate and sovereign debt in both U.S. and non-U.S. markets. There is no assurance
that the Fund will achieve its investment objective.
The Fund invests in a managed mix of equity and
debt securities. The Fund is flexibly managed so that, depending on the Fund’s investment adviser’s outlook, it sometimes
will be more heavily invested in equity securities or in debt or fixed income securities. The fixed income securities that the Fund invests
in will generally have a maturity ranging from 30 days to over 30 years. Under normal circumstances, the Fund expects to invest in securities
of issuers located in at least three countries (in addition to the United States). Unless market conditions are deemed unfavorable, the
Fund expects that the market value of the Fund's long and short positions in securities of issuers organized outside the United States
and issuers doing a substantial amount of business outside the United States (greater than 50% of revenues derived from outside of the
United States) will represent at least 40% of the Fund's net assets. The Fund also may invest in call options, both on specific equity
securities, as well as securities representing exposure to equity sectors or indices and fixed income indices, including options on indices.
The Fund may acquire put and call options and options on stock indices and enter into stock index futures contracts, certain credit derivatives
transactions and short sales in connection with its equity investments. In connection with the Fund’s investments in debt securities,
it may enter into related derivatives transactions such as interest rate futures, swaps and options thereon and certain credit derivatives
transactions. Investments in non-U.S. markets will be made primarily through liquid securities, including depositary receipts (which
evidence ownership of underlying foreign securities) such as American Depositary Receipts (“ADRs”), European Depositary Receipts
(“EDRs”) and Global Depositary Receipts (“GDRs”), as well as in stocks traded on non-U.S. exchanges. Investments
in debt may include both investment grade and non-investment grade issues. Investments in corporate debt may include bonds issued by
companies in countries considered emerging markets. Investments in sovereign debt may include bonds issued by countries considered emerging
markets. The Fund will not invest more than 33% of its total assets, at the time of acquisition, in securities (including equity and
fixed income securities) of governments and companies in emerging markets. The Fund may also invest a portion of its assets in real estate
investment trusts, or “REITs”, but the Fund does not expect that portion to be significant.
The Fund may use various hedging strategies for return generation,
or to express a specific view on an industry or individual company. In addition to shorting to hedge equity risk, the Fund may utilize
instruments including, for example, derivative positions and U.S. Treasury securities as a means to seek to reduce volatility and limit
exposure to market declines. These instruments can be effective in seeking to reduce volatility, and can help to prevent the Fund from
selling long positions at sub-optimal times.
The Fund may also engage in frequent portfolio
turnover.
The Fund will place a high priority on capital
preservation. The Fund may use a variety of investment techniques including shorting strategies, use of derivatives, and use of long-dated
bonds, designed to capitalize on declines in the market price of equity securities or declines in market indices (e.g., the Fund may
establish short positions in specific stocks or stock indices) based on the Fund’s investment adviser’s investment outlook.
Subject to the requirements of the 1940 Act and the Internal Revenue Code of 1986, as amended (the "Code"), the Fund will not
make a short sale if, after giving effect to such sale, the market value of all securities sold short by the Fund exceeds 30% of the
value of its total assets. No assurances can be given that the Fund’s investment objective will be achieved.
The Fund was organized as a Delaware statutory
trust on April 27, 2004, and commenced its investment operations on July 28, 2004. An investment in the Fund is not appropriate for all
investors.
The Fund may offer, from time to time, in one
or more offerings, its common and/or preferred shares, each with a par value $0.001 per share (together, “shares”), and/or
its subscription rights to purchase its common and/or preferred shares, which are referred to collectively as the “securities.”
Securities may be offered at prices and on terms to be set forth in one or more supplements to this prospectus (this “Prospectus,”
and each supplement thereto, a “Prospectus Supplement”). You should read this Prospectus and the applicable Prospectus Supplement
carefully before you invest in the Fund’s securities.
The Fund’s securities may be offered directly
to one or more purchasers, through agents designated from time to time by us, or to or through underwriters or dealers. The Prospectus
Supplement relating to the offering will identify any agents or underwriters involved in the sale of the Fund’s securities, and
will set forth any applicable purchase price, fee, commission or discount arrangement between the Fund and the Fund’s agents or
underwriters, or among its underwriters, or the basis upon which such amount may be calculated. The Prospectus Supplement relating to
any sale of preferred shares will set forth the liquidation preference and information about the dividend period, dividend rate, any
call protection or non-call period and other matters. The Prospectus Supplement relating to any sale of notes will set forth the principal
amount, interest rate, interest payment dates, maturities, prepayment protection (if any) and other matters. The Prospectus Supplement
relating to any offering of subscription rights will set forth the number of common and/or preferred shares issuable upon the exercise
of each right and the other terms of such rights offering. The Fund may offer subscription rights for common shares, preferred shares
or common and preferred shares. The Fund may not sell any of its securities through agents, underwriters or dealers without delivery
of a Prospectus Supplement describing the method and terms of the particular offering of the Fund’s securities.
The Fund’s common shares are listed on
the NYSE American LLC (the “NYSE American”) under the symbol “GLV”. On May 14, 2021, the last reported sale
price of the Fund common shares was $11.77. The net asset value of the Fund's common shares at the close of business on May 14,
2021, was $11.61 per share.
Shares of closed-end funds often trade at a
discount from net asset value. This creates a risk of loss for an investor purchasing shares in a public offering.
Investing in the Fund’s securities involves
risks. See “Risk Factors and Special Considerations” beginning on page 38, “Risk Factors and Special Considerations—Special
Risks to Holders of Common Shares” beginning on page 45, and “Risk Factors and Special Considerations—Special Risks
to Holders of Preferred Shares” beginning on page 48, for factors that should be considered before investing in securities of the
Fund, including risks related to a leveraged capital structure.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved these securities or determined if this Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
This Prospectus may not be used to consummate
sales of securities by us through agents, underwriters or dealers unless accompanied by a Prospectus Supplement.
This Prospectus, together with an applicable Prospectus
Supplement, sets forth concisely the information about the Fund that a prospective investor should know before investing. You should
read this Prospectus, together with an applicable Prospectus Supplement, which contains important information about the Fund, before
deciding whether to invest in the securities, and retain it for future reference. A Statement of Additional Information, dated May 19,
2021, containing additional information about the Fund, has been filed with the SEC and is incorporated by reference in its entirety
into this Prospectus. You may request a free copy of the Fund’s annual and semiannual reports, request a free copy of the Statement
of Additional Information, or request other information about us and make shareholder inquiries by calling (877) 256-8445 (toll-free)
or by writing to ALPS Fund Services, Inc., 1290 Broadway, Suite 1000, Denver, Colorado 80203, or obtain a copy of such documents (and
other information regarding the Fund) from the Fund’s website (www.cloughglobal.com/closed-end-funds/overview/glv) or the SEC’s
web site (http://www.sec.gov). The Fund’s annual and semiannual reports are also available on the Fund’s website (www.cloughglobal.com).
The Statement of Additional Information is only updated in connection with an offering and is therefore not available on the Fund’s
website.
The Fund’s securities do not represent a
deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency.
You should rely only on the information contained
or incorporated by reference in this Prospectus and any applicable Prospectus Supplement. The references in this prospectus to the SEC’s
website are not intended to and do not include or incorporate by reference into this prospectus the information on that website. Similarly,
references to the Fund’s website are not intended to and do not include or incorporate by reference into this prospectus the information
on that website. The Fund has not authorized anyone to provide you with different information. The Fund is not making an offer to sell
these securities in any state where the offer or sale is not permitted. You should not assume that the information contained in this
Prospectus and any applicable Prospectus Supplement is accurate as of any date other than the date of this Prospectus or the date of
the applicable Prospectus Supplement.
Table of Contents
PROSPECTUS SUMMARY
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5
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
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17
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SUMMARY OF FUND EXPENSES
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18
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USE OF PROCEEDS
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20
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THE FUND
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20
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INVESTMENT OBJECTIVE AND POLICIES
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20
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USE OF LEVERAGE
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36
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RISK FACTORS AND SPECIAL CONSIDERATIONS
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38
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MANAGEMENT OF THE FUND
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49
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NET ASSET VALUE
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51
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DISTRIBUTIONS
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51
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DIVIDEND REINVESTMENT PLAN
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53
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FEDERAL INCOME TAX MATTERS
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54
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DESCRIPTION OF CAPITAL STRUCTURE
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56
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ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST
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67
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CONVERSION TO OPEN-END FUND
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68
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CUSTODIAN AND TRANSFER AGENT
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69
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LEGAL MATTERS
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69
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REPORTS TO SHAREHOLDERS
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69
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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69
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ADDITIONAL INFORMATION
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69
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INCORPORATION BY REFERENCE
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70
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THE FUND’S PRIVACY POLICY
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70
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety
by reference to the more detailed information appearing elsewhere in this Prospectus. This summary does not contain all of the information
that you should consider before investing in the Fund. You should review the more detailed information contained in this Prospectus,
the applicable Prospectus Supplement, and in the Statement of Additional Information dated May 19, 2021, especially the information set
forth under the heading “Risk Factors.”
The Fund
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Clough Global Dividend and Income Fund (the
“Fund”) is a diversified, closed-end management investment company. The Fund’s outstanding common shares are
listed on the NYSE American LLC (the “NYSE American”) under the symbol “GLV”. As of May 14, 2021, the net
assets of the Fund were $97,766,430. As of May 14, 2021, the Fund had outstanding 8,422,354 common shares. The Fund has no other
outstanding securities. See “The Fund.”
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The Offering
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The Fund may offer, from time to time, in
one or more offerings, its common and/or preferred shares, $0.001 par value per share, or the Fund’s
subscription rights to purchase its common or preferred shares or both, which are referred to collectively
as the “securities.” The securities may be offered at prices and on terms to be set forth in one
or more supplements to this Prospectus (each a “Prospectus Supplement”). The offering price per
common share of the Fund will not be less than the net asset value per common share at the time the Fund makes
the offering, exclusive of any underwriting commissions or discounts; however, transferable rights offerings
that meet certain conditions may be offered at a price below the then current net asset value per common share
of the Fund. You should read this Prospectus and the applicable Prospectus Supplement carefully before you
invest in the Fund’s securities.
The Fund’s securities may be offered directly to one or more
purchasers, through agents designated from time to time by us, or through underwriters or dealers. The Prospectus Supplement relating
to the offering will identify any agents, underwriters or dealers involved in the sale of the Fund’s securities, and will set
forth any applicable purchase price, fee, commission or discount arrangement between the Fund and the Fund’s agents or underwriters,
or among its underwriters, or the basis upon which such amount may be calculated. The Prospectus Supplement relating to any sale
of preferred shares will set forth the liquidation preference and information about the dividend period, dividend rate, any call
protection or non-call period and other matters. The Prospectus Supplement relating to any sale of notes will set forth the principal
amount, interest rate, interest payment dates, maturities, prepayment protection (if any), and other matters. The Prospectus Supplement
relating to any offering of subscription rights will set forth the number of common and/or preferred shares issuable upon the exercise
of each right and the other terms of such rights offering.
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While the aggregate number and amount of securities
the Fund may issue pursuant to this registration statement is limited to $40.975 million of securities, the Board of Trustees (the
“Board” and each member of the Board individually a “Trustee”) may, without any action by the shareholders,
amend the Declaration of Trust from time to time to increase or decrease the aggregate number of shares or the number of shares of
any class or series that the Fund has authority to issue. The Fund may not sell any of its securities through agents, underwriters
or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular offering.
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Use of Proceeds
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The Fund will use the net proceeds from the offering
to purchase portfolio securities in accordance with its Investment Objectives and Policies. Clough anticipates that the investment
of the proceeds will be made as appropriate investment opportunities are identified, which is expected to substantially be completed
within one month; however, changes in market conditions could result in the Fund’s anticipated investment period extending
to as long as six months. This could occur because market conditions could result in Clough delaying the investment of proceeds if
it believes the margin of risk in making additional investments is not favorable in light investment strategy. See “Investment
Objective and Policies”. Depending on market conditions and operations, a portion of the proceeds to be identified in any relevant
Prospectus Supplement may be used to pay distributions in accordance with the Fund’s distribution policy. See “Use of
Proceeds”.
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Investment Objective and Policies
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The Fund’s investment objective is
to provide a high level of total return and current income. The Fund seeks to pursue this objective by applying
a fundamental research-driven investment process and will invest in equity securities of companies of any
market capitalization and equity-related securities, including equity swaps and call options, as well as fixed
income securities, including both corporate and sovereign debt, in both U.S. and non-U.S. markets. There is
no assurance that the Fund will achieve its investment objective.
The Fund invests in a managed mix
of equity and debt securities. The Fund is flexibly managed so that, depending on the Fund’s investment
adviser’s outlook, it sometimes will be more heavily invested in equity securities or in debt or fixed
income securities. The fixed income securities that the Fund invests in will generally have a maturity ranging
from 30 days to over 30 years. Under normal circumstances, the Fund expects to invest in securities of issuers
located in at least three countries (in addition to the United States). Unless market conditions are deemed
unfavorable, the Fund expects that the market value of the Fund's long and short positions in securities of
issuers organized outside the United States and issuers doing a substantial amount of business outside the
United States (greater than 50% of revenues derived from outside of the United States) will represent at least
40% of the Fund's net assets. The Fund also may invest in call options, both on specific equity securities,
as well as securities representing exposure to equity sectors or indices and fixed income indices, including
options on indices. The Fund may acquire put and call options and options on stock indices and enter into
stock index futures contracts, certain credit derivatives transactions and short sales in connection with
its equity investments. In connection with the Fund’s investments in debt securities, it may enter into
related derivatives transactions such as interest rate futures, swaps and options thereon and certain credit
derivatives transactions. Investments in non-U.S. markets will be made primarily through liquid securities,
including depositary receipts (which evidence ownership of underlying foreign securities) such as American
Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) and Global Depositary
Receipts (“GDRs”). Investments in sovereign debt may also include bonds issued by countries considered
emerging markets. The Fund will not invest more than 33% of its total assets, at the time of acquisition,
in securities (including equity and fixed income securities) of governments and companies in emerging markets.
The Fund may also invest a portion of its assets in real estate investment trusts, or “REITs”,
but the Fund does not expect that portion to be significant.
The Fund may use various hedging strategies for return generation,
or to express a specific view on an industry or individual company. In addition to shorting to hedge equity risk, the Fund may utilize
instruments including, for example, derivative positions and U.S. Treasury securities as a means to seek to reduce volatility and
limit exposure to market declines. These instruments can be effective in seeking to reduce volatility, and can help to prevent the
Fund from selling long positions at sub-optimal times.
The Fund may also engage in frequent portfolio turnover.
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The Fund will place a high priority on capital
preservation, The Fund may use a variety of investment techniques, including shorting strategies, use of derivatives, and use of
long-dated bonds, designed to capitalize on the declines in the market price of equity securities or declines in market indices (e.g.,
the Fund may establish short positions in specific stocks or stock indices) based on the Fund’s investment adviser’s
investment outlook. Subject to the requirements of the 1940 Act and the Internal Revenue Code of 1986, as amended (the "Code"),
the Fund will not make a short sale if, after giving effect to such sale, the market value of all securities sold short by the Fund
exceeds 30% of the value of its total assets. No assurances can be given that the Fund’s investment objective will be achieved.
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Preferred Shares
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The terms of preferred shares
are expected to be fixed by the Board and may materially limit and/or qualify the rights of holders of the Fund’s common shares.
If the Board determines that it may be advantageous to the holders of the Fund’s common shares for the Fund to utilize additional
leverage, the Fund may issue additional series of preferred shares. Any preferred shares issued by the Fund will pay distributions
at a fixed rate. Leverage creates a greater risk of loss as well as a potential for more gains for the common shares than if leverage
were not used. See “Risk Factors and Special Considerations—Special Risks to Holders of Common Shares—Leverage
Risk.” The Fund may also determine in the future to issue other forms of senior securities, such as securities representing
debt, subject to the limitations of the 1940 Act. The Fund may also engage in investment management techniques, which will not be
considered senior securities if the Fund establishes a segregated account with cash or other liquid assets or sets aside assets on
the accounting records equal to the Fund’s obligations in respect of such techniques. The Fund may also borrow money, to the
extent permitted by the 1940 Act.
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Investment Adviser
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Clough Capital Partners L.P. (“Clough”),
the investment adviser of the Fund, is registered with the Securities and Exchange Commission as an investment adviser under the
Investment Advisers Act of 1940, as amended. As of March 31, 2021, Clough had approximately $2.2 billion of assets under management.
Clough is entitled to receive a monthly fee at the annual rate of 0.70% of the Fund’s average daily total assets.
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Administrator
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ALPS Fund Services, Inc. (“ALPS”),
located at 1290 Broadway, Suite 1000, Denver, Colorado 80203, serves as administrator to the Fund. Under the Administration Agreement,
ALPS is responsible for calculating the net asset value of the Common Shares, and generally managing the business affairs of the
Fund. The Administration Agreement between the Fund and ALPS provides that ALPS will pay all expenses incurred by the Fund, with
the exception of advisory fees, trustees’ fees, interest expenses, if any, portfolio transaction expenses, litigation expenses,
taxes, costs of preferred shares, expenses of conducting repurchase offers for the purpose of repurchasing Fund shares and extraordinary
expenses. ALPS is entitled to receive a monthly fee at the annual rate of 0.285% of the Fund’s average daily total assets.
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Use of Leverage
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The Fund currently uses leverage through
borrowing. More specifically, the Fund has entered into a credit agreement (the “Credit Agreement”)
with a commercial bank (“Bank”). As of March 31, 2021, the Fund had outstanding $50,500,000 in
principal amount of borrowings from the Credit Agreement representing approximately 30.6% of the Fund’s
total assets (including assets attributable to the Fund’s use of leverage). The Bank has the ability
to terminate the Credit Agreement upon 179-days’ notice or following an event of default.
The Fund also may borrow money as a temporary measure for extraordinary
or emergency purposes.
Leverage creates risks for holders of the Common Shares, including the likelihood of greater volatility of net asset value and market
price of, and dividends paid on, the Common Shares. There is a risk that fluctuations in the dividend rates on any preferred shares
issued by the Fund may adversely affect the return to the holders of the Common Shares. If the income from the securities purchased
with such funds is not sufficient to cover the cost of leverage, the return on the Fund will be less than if leverage had not been
used, and therefore the amount available for distribution to Common Shareholders as dividends and other distributions will be reduced
and may not satisfy the level dividend rate distribution policy set by the Board of Trustees.
Changes in the value of the Fund’s portfolio (including investments bought with the proceeds of the leverage program) will
be borne entirely by the Common Shareholders. If there is a net decrease (or increase) in the value of the Fund’s investment
portfolio, the leverage will decrease (or increase) the net asset value per share to a greater extent than if the Fund were not leveraged.
The issuance of a class of preferred shares or incurrence of borrowings having priority over the Fund’s Common Shares creates
an opportunity for greater return per Common Share, but at the same time such leveraging is a speculative technique in that it will
increase the Fund’s exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with leverage
proceeds equal or exceed the associated costs of the leverage program (and other Fund expenses), the use of leverage will diminish
the investment performance of the Fund’s Common Shares compared with what it would have been without leverage. The fees to
be received by Clough and ALPS are based on the total assets of the Fund, including assets represented by leverage. During periods
in which the Fund is using leverage, the fees paid to Clough for investment advisory services and to ALPS for administrative services
will be higher than if the Fund did not use leverage because the fees paid will be calculated on the basis of the Fund’s total
assets, including proceeds from borrowings and the issuance of preferred shares.
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Under the 1940 Act, the Fund is not permitted
to issue preferred shares unless immediately after such issuance the total asset value of the Fund’s
portfolio is at least 200% of the liquidation value of the outstanding preferred shares (i.e., such
liquidation value may not exceed 50% of the Fund’s total assets). In addition, the Fund is not permitted
to declare any cash dividend or other distribution on its Common Shares unless, at the time of such declaration,
the net asset value of the Fund’s portfolio (determined after deducting the amount of such dividend
or other distribution) is at least 200% of such liquidation value.
Also under the 1940 Act, the Fund must satisfy an asset coverage
requirement of 300% of its indebtedness, including amounts borrowed, measured at the time the investment company incurs the indebtedness.
This means that the value of the investment company’s total indebtedness may not exceed one-third of the value of its total
assets (including such indebtedness). In addition, the Fund is not permitted to declare any cash dividend or other distribution on
any class of its capital stock (including the Common Shares), and is not permitted to purchase any of its capital stock, unless,
at the time of such declaration or purchase, the net asset value of the Fund’s portfolio (determined after deducting the amount
of such dividend or other distribution, or purchase price) is at least 300% of its outstanding indebtedness; except that dividends
may be declared upon any preferred stock of the Fund if the Fund, at the time of such declaration (and after deducting the amount
of the dividend), maintains an asset coverage with respect to its preferred stock of at least 200%.
To qualify for federal income taxation as a “regulated investment
company”, the Fund must satisfy certain requirements relating to sources of its income and diversification of its assets, and
must distribute in each taxable year at least 90% of its net investment income (including net interest income and net short-term
gain). The Fund also will be required to distribute annually substantially all of its income and capital gain, if any, to avoid imposition
of a nondeductible 4% federal excise tax.
The Fund’s willingness to issue new securities for investment
purposes, and the amount the Fund will issue, will depend on many factors, the most important of which are market conditions and
interest rates. There is no assurance that a leveraging strategy will be successful during any period in which it is employed.
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Risk Factors
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Risk is inherent in all investing. Investing
in any investment company security involves risk, including the risk that you may receive little or no return
on your investment or even that you may lose part or all of your investment. Therefore, before investing in
the Fund you should consider carefully the following risks described in this Prospectus and any applicable
Prospectus Supplement that you assume when you invest in the Fund:
Investment and Market Risk. An investment in common shares
is subject to investment risk, including the possible loss of the entire principal amount invested. An investment in common shares
represents an indirect investment in the securities owned by the Fund, which are generally traded on a securities exchange or in
the over-the-counter markets. The value of these securities, like other market investments, may move up or down, sometimes rapidly
and unpredictably. The common shares at any point in time may be worth less than the original investment, even after taking into
account any reinvestment of dividends and distributions.
Key Adviser Personnel Risk. The Fund’s ability to
identify and invest in attractive opportunities is dependent upon Clough, its investment adviser. If one or more key individuals
leaves Clough, Clough may not be able to hire qualified replacements, or may require an extended time to do so. This could prevent
the Fund from achieving its investment objective.
Issuer Risk. The value of an issuer’s securities may
decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced
demand for the issuer’s goods and services.
Common Stock Risk. Investments in common stocks are subject
to special risks. Although common stocks have historically generated higher average returns than fixed income securities over the
long term, common stocks also have experienced significantly more volatility in returns. Common stocks may be more susceptible to
adverse changes in market value due to issuer specific events or general movements in the equities markets. A drop in the stock market
may depress the price of common stocks held by the Fund. These risks may be heightened for common stocks of small and medium capitalization
companies because these issuers may have more limited product lines or markets and may be less financially secure than larger, more
established issuers.
Foreign Securities Risk. The Fund may invest in securities
principally traded in securities markets outside the United States. Foreign investments may be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations. There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be subject to accounting, auditing and financial reporting standards
and requirements comparable to those applicable to U.S. companies. Securities of some foreign companies may be less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions and custodian fees are generally higher than in the
United States. Investments in foreign securities may also be subject to other risks different from those affecting U.S. investments,
including local political or economic developments, expropriation or nationalization of assets and imposition of withholding taxes
on dividend or interest payments.. See “Risk Factors and Special Considerations—Foreign Securities Risk.”
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Depositary Receipts Risk. Investments
in depositary receipts (including American Depositary Receipts, European Depositary Receipts and Global Depositary
Receipts) are generally subject to the same risks of investing directly in the foreign securities that they
evidence or into which they may be converted.
Emerging Markets Risk. Investing in securities of issuers
based in underdeveloped emerging markets entails all of the risks of investing in securities of foreign issuers to a heightened degree.
These heightened risks include: (i) greater risks of expropriation, confiscatory taxation, nationalization and less social, political
and economic stability; (ii) the smaller size of the market for such securities and a lower volume of trading, resulting in a lack
of liquidity and in price volatility; and (iii) certain national policies that may restrict the Fund’s investment opportunities
including restrictions on investing in issuers or industries deemed sensitive to relevant national interests. The Fund defines emerging
markets to be countries that are included in the MSCI Emerging Markets Index.
Non-Investment Grade Securities Risk. The Fund’s investments
in preferred stocks and bonds of below investment grade quality (commonly referred to as “junk bonds”), if any, are predominantly
speculative because of the credit risk of their issuers. While offering a greater potential opportunity for capital appreciation
and higher yields, preferred stocks and bonds of below investment grade quality entail greater potential price volatility and may
be less liquid than higher-rated securities. Issuers of below investment grade quality preferred stocks and bonds are more likely
to default on their payments of dividends/interest and liquidation value/principal owed to the Fund, and such defaults will reduce
the Fund’s net asset value and income distributions. The Fund will not invest more than 20% of its total assets in securities
rated, at the time of acquisition, below investment grade.
REIT Risk. If the Fund invests in real estate investment
trusts, or “REITs,” such investment will subject the Fund to various risks. The first, real estate industry risk, is
the risk that the REIT share prices will decline because of adverse developments affecting the real estate industry and real property
values. In general, real estate values can be affected by a variety of factors, including supply and demand for properties, the economic
health of the country or of different regions, and the strength of specific industries that rent properties. The second, investment
style risk, is the risk that returns from REITs—which typically are small or medium capitalization stocks—will trail
returns from the overall stock market. The third, interest rate risk, is the risk that changes in interest rates may hurt real estate
values or make REIT shares less attractive than other income-producing investments..
Qualification as a REIT in any particular year is a complex analysis
that depends on a number of factors. There can be no assurance that the entities in which the Fund invests with the expectation that
they will be taxed as a REIT will qualify as a REIT. An entity that fails to qualify as a REIT, would be subject to a corporate level
tax, would not be entitled to a deduction for dividends paid to its shareholders and would not pass through to its shareholders the
character of income earned by the entity. If the Fund were to invest in an entity that failed to qualify as a REIT, such failure
could drastically reduce the Fund’s yield on that investment.
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The Fund does not expect to invest a significant
portion of its assets in REITs but does not have any investment restrictions with respect to such investments.
Credit Risk. Credit risk is the risk that an issuer of a
preferred or debt security will become unable to meet its obligation to make dividend, interest and principal payments. In general,
lower rated preferred or debt securities carry a greater degree of credit risk. If rating agencies lower their ratings of preferred
or debt securities in the Fund's portfolio, the value of those obligations could decline. In addition, the underlying revenue source
for a preferred or debt security may be insufficient to pay dividends, interest or principal in a timely manner. Because a significant
source of income for the Fund can be the dividend, interest and principal payments on the preferred or debt securities in which it
invests, any default by an issuer of a preferred or debt security could have a negative impact on the Fund's ability to pay dividends
on Common Shares. Even if the issuer does not actually default, adverse changes in the issuer's financial condition may negatively
affect its credit rating or presumed creditworthiness. These developments would adversely affect the market value of the issuer's
obligations or the value of credit derivatives if the Fund has sold credit protection.
Interest Rate Risk. Interest rate risk is the risk that
preferred stocks paying fixed dividend rates and fixed-rate debt securities will decline in value because of changes in market interest
rates. When interest rates rise the market value of such securities generally will fall. The Fund’s investment in preferred
stocks and fixed-rate debt securities means that the net asset value and price of the Common Shares may decline if market interest
rates rise. Interest rates are currently low relative to historic levels. During periods of declining interest rates, an issuer of
preferred stock or fixed-rate debt securities may exercise its option to redeem securities prior to maturity, forcing the Fund to
reinvest in lower yielding securities. During periods of rising interest rates, the average life of certain types of securities may
be extended because of slower than expected payments. This may lock in a below market yield, increase the security’s duration,
and reduce the value of the security. Investments in debt securities with long-term maturities may experience significant price declines
if long-term interest rates increase. The value of the Fund’s common stock investments may also be influenced by changes in
interest rates.
Derivatives Risk. The Fund may acquire put and call options
and options on stock indices and enter into stock index futures contracts, certain credit derivatives transactions and short sales
in connection with its equity investments. In connection with the Fund's investments in debt securities, it may enter into related
derivatives transactions such as interest rate futures, swaps and options thereon and certain credit derivatives transactions. Derivatives
transactions subject the Fund to increased risk of principal loss due to imperfect correlation or unexpected price or interest rate
movements. The Fund also will be subject to credit risk with respect to the counterparties to the derivatives contracts purchased
by the Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivatives contract due to
financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivatives contract in a
bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
Hedging Strategy Risk. There may be an imperfect correlation
between changes in the value of the Fund’s portfolio holdings and hedging positions entered into by the Fund, which may prevent
the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, the Fund’s success in using hedge
instruments is subject to Clough’s ability to predict correctly changes in the relationships of such hedge instruments to the
Fund’s portfolio holdings, and there can be no assurance that Clough’s judgment in this respect will be accurate. Consequently,
the use of hedging transactions might result in a poorer overall performance for the Fund, whether or not adjusted for risk, than
if the Fund had not hedged its portfolio holdings.
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Inflation Risk. Inflation
risk is the risk that the purchasing power of assets or income from investments will be worth less in the future as inflation decreases
the value of money. As inflation increases, the real value of the Common Shares and distributions thereon can decline. In addition,
during any periods of rising inflation, dividend rates of preferred shares of the Fund would likely increase, which would tend to
further reduce returns to Common Shareholders.
Market Price of Shares. The shares of closed-end management investment companies often trade at a discount from their net
asset value, and the Fund’s Common Shares may likewise trade at a discount from net asset value. The trading price of the Fund’s
Common Shares may be less than the public offering price. The returns earned by Common Shareholders who sell their Common Shares
below net asset value will be reduced.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Clough and the individual
portfolio managers will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can
be no guarantee that these will produce the desired results.
Small and Medium Cap Company Risk. Compared to investment companies that focus only on large capitalization companies, the
Fund’s share price may be more volatile because it also invests in small and medium capitalization companies. Compared to large
companies, small and medium capitalization companies are more likely to have (i) more limited product lines or markets and less mature
businesses, (ii) fewer capital resources, (iii) more limited management depth, and (iv) shorter operating histories. Further, compared
to large cap stocks, the securities of small and medium capitalization companies are more likely to experience sharper swings in
market values, be harder to sell at times and at prices that Clough believes appropriate, and offer greater potential for gains and
losses.
Leverage Risk. Leverage creates risks for the holders of Common Shares, including the likelihood of greater volatility of
net asset value and market price of the Common Shares. There is a risk that fluctuations in the dividend rates on any preferred shares
may adversely affect the return to the Common Shareholders. If the income from the securities purchased with such funds is not sufficient
to cover the cost of leverage, the return on the Fund will be less than if leverage had not been used, and therefore the amount available
for distribution to holders of the Common Shares as dividends and other distributions will be reduced and may not satisfy the level
dividend rate distribution policy set by the Board of Trustees. Clough in its best judgment nevertheless may determine to maintain
the Fund’s leveraged position if it deems such action to be appropriate in the circumstances.
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Convertible Securities Risk.
The value of a convertible security is a function of its “investment value” (determined by its yield in comparison
with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its “conversion
value” (the security’s worth, at market value, if converted into the underlying common stock). The investment value of
a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and
increasing as interest rates decline. The credit standing of the issuer and other factors may also have an effect on the convertible
security’s investment value. The conversion value of a convertible security is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed
principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its
conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a
fixed-income security.
A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s
governing instrument. If a convertible security held by the Fund is called for redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could
have an adverse effect on the Fund's ability to achieve its investment objective.
Liquidity Risk. Restricted securities and other illiquid investments of the Fund involve the risk that the securities will
not be able to be sold at the time desired by Clough or at prices approximating the value at which the Fund is carrying the securities.
Where registration is required to sell a security, the Fund may be obligated to pay all or part of the registration expenses, and
a considerable period may elapse between the decision to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities for which no market exists and other illiquid investments
are valued at fair value as determined in accordance with procedures approved and periodically reviewed by the trustees of the Fund.
Market Disruption and Geopolitical Risk. The ongoing U.S. military and related actions in Iraq and Afghanistan and events
in the Middle East and Ukraine, as well as the continuing threat of terrorist attacks, could have significant adverse effects on
the U.S. economy, the stock market and world economies and markets generally. A disruption of financial markets or other terrorist
attacks could adversely affect the Fund’s service providers and/or the Fund’s operations as well as interest rates, secondary
trading, credit risk, inflation and other factors relating to the common shares. The Fund cannot predict the effects or likelihood
of similar events in the future on the U.S. and world economies, the value of the common shares or the net asset value of the Fund.
Assets of companies, including those held in the Fund’s portfolio, could be direct targets, or indirect casualties, of an act
of terrorism. The U.S. government has issued warnings that assets of utility companies and energy sector companies, specifically
the United States’ pipeline infrastructure, may be the future target of terrorist organizations.
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Pandemic
Risks. An outbreak of Covid-19 respiratory disease caused by a novel coronavirus was first detected in
late 2019 and subsequently spread globally in early 2020. The impact of the outbreak has been rapidly evolving,
and cases of the virus have continued to be identified in most developed and emerging countries throughout
the world. Many local, state, and national governments, as well as businesses, have reacted by instituting
quarantines, border closures, restrictions on travel, and other measures designed to arrest the spread of
the virus. The outbreak and public and private sector responses thereto have led to large portions of the
populations of many nations working from home for indefinite periods of time, temporary or permanent layoffs,
disruptions in supply chains, lack of availability of certain goods, and adversely impacted many industries.
These circumstances are evolving, and further developments could result in additional disruptions and uncertainty.
The impact of the coronavirus outbreak may last for an extended period of time and result in a substantial
economic downturn. Pandemics, including the coronavirus outbreak, have resulted in a general decline in the
global economy and negative effects on the performance of individual countries, industries, or sectors. Such
negative impacts can be significant in unforeseen ways. Deteriorating economic fundamentals may in turn increase
the risk of default or insolvency of particular companies, negatively impact market value, increase market
volatility, cause credit spreads to widen, and reduce liquidity. All of these risks may have a material adverse
effect on the performance and financial condition of the Fund’s investments, and on the overall performance
of the Fund.
Portfolio Turnover Risk.
The techniques and strategies contemplated by the Fund might result in a high degree of portfolio turnover. The Fund cannot accurately
predict its securities portfolio turnover rate, but anticipates that its annual portfolio turnover rate will exceed 100% under normal
market conditions, although it could be materially higher under certain conditions. Higher portfolio turnover rates could result
in corresponding increases in brokerage commissions and generate short-term capital gains taxable as ordinary income.
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Anti-Takeover
Provisions
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The Fund’s Amended Agreement and Declaration
of Trust dated July 7, 2004 (the “Declaration of Trust”), and By-laws include provisions that could have the effect of
inhibiting the Fund’s possible conversion to open-end status and limiting the ability of other entities or persons to acquire
control of the Board of Trustees. In certain circumstances, these provisions might also inhibit the ability of shareholders to sell
their shares at a premium over prevailing market prices. See “Conversion to Open-End Fund” and “Anti-Takeover Provisions
in the Declaration of Trust.”
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Distributions
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The Fund, acting pursuant to a Securities
and Exchange Commission (“SEC”) exemptive order and with the approval of the Board, has adopted
a plan, consistent with the Fund’s investment objective and policies to support a level distribution
of income, capital gains and/or return of capital (the “Plan”). In accordance with the Plan, until
December 2021, the Fund will pay monthly distributions in an annualized amount of not less than 10% of the
Fund’s average monthly net asset value (“NAV”). Until July 2021, the Fund will pay monthly
distributions in an amount not less than the average distribution rate of a peer group of closed-end funds
selected by the Board. The Board of the Fund will determine the distribution policy based on prevailing market
conditions and related considerations at the time when the Board is making this determination. Based on current
conditions, Clough expects it will likely recommend that the rate continue to be set at 10% as per the current
policy after December 2021.Under the Plan, the Fund will distribute all available investment income to its
shareholders, consistent with the Fund’s primary investment objectives and as required by the Code.
If sufficient investment income is not available on a monthly basis, the Fund will distribute long-term capital
gains and/or return of capital to shareholders in order to maintain a level distribution. Each monthly distribution
to shareholders is expected to be at the fixed amount established by the Board, except for extraordinary distributions
and potential distribution rate increases to enable the Fund to comply with the distribution requirements
imposed by the Code.
Shareholders 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 in the Annual Report dated October 31, 2020, which is incorporated
by reference. The Board may amend, suspend or terminate the Fund’s Plan without prior notice if the Board determines in good
faith that continuation would constitute a breach of fiduciary duty or would violate the Investment Company Act of 1940. 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, increased market volatility, companies suspending or decreasing corporate dividend distributions and changes in the
Code. Please refer to the Notes to Financial Statements in the Annual Report to Shareholders for a more complete description of its
risks.
The level dividend rate may be modified by the Board of Trustees
from time to time. If, for any monthly distribution, net investment company taxable income, if any (which term includes net short-term
capital gain) and net tax-exempt income, if any, is less than the amount of the distribution, the difference will generally be a
tax-free return of capital distributed from the Fund’s assets. The Fund’s final distribution for each calendar year will
include any remaining net investment company taxable income and net tax-exempt income undistributed during the year, as well as all
net capital gain, if any, realized during the year. If the total distributions made in any calendar year exceed net investment company
taxable income, net tax-exempt income and net capital gain, such excess distributed amount would be treated as ordinary dividend
income to the extent of the Fund’s current and accumulated earnings and profits.
Distributions in excess of the earnings and profits would first
be a tax-free return of capital to the extent of the adjusted tax basis in the shares. After such adjusted tax basis is reduced to
zero, the distribution would constitute capital gain (assuming the shares are held as capital assets). In addition, the amount treated
as a tax-free return of capital will reduce a shareholder’s adjusted tax basis in its shares, thereby increasing the shareholder’s
potential taxable gain or reducing the potential taxable loss on the sale of the shares. This distribution policy may, under certain
circumstances, have certain adverse consequences to the Fund and its shareholders. See “Distributions.”
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The level dividend distribution
described above would result in the payment of approximately the same amount or percentage to Common Shareholders each quarter. Section
19(a) of the 1940 Act and Rule 19a-1 thereunder require the Fund to provide a written statement accompanying any such payment that
adequately discloses its source or sources. Thus, if the source of the dividend or other distribution were the original capital contribution
of the Common Shareholder, and the payment amounted to a return of capital, the Fund would be required to provide written disclosure
to that effect. Nevertheless, persons who periodically receive the payment of a dividend or other distribution may be under the impression
that they are receiving net profits when they are not. Common Shareholders should read any written disclosure provided pursuant to
Section 19(a) and Rule 19a-1 carefully, and should not assume that the source of any distribution from the Fund is net profit. In
addition, in cases where the Fund would return capital to Common Shareholders, such distribution may impact the Fund’s ability
to maintain its asset coverage requirements and to pay the interest on any preferred shares that the Fund may issue, if ever. See
“Distributions.”
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Dividend Reinvestment Plan
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Unless a Common Shareholder elects otherwise,
the shareholder’s distributions will be reinvested in additional Common Shares under the Fund’s dividend reinvestment
plan. Common Shareholders who elect not to participate in the Fund’s dividend reinvestment plan will receive all distributions
in cash paid by check mailed directly to the shareholder of record (or, if the Common Shares are held in street or other nominee
name, then to such nominee). See “Dividend Reinvestment Plan.”
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Stock Purchases and Tenders
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The Fund’s Board of Trustees currently
contemplates that the Fund, at least once each year, may consider repurchasing Common Shares in the open market or in private transactions,
or tendering for shares, in an attempt to reduce or eliminate a market value discount from net asset value, if one should occur.
There can be no assurance that the Board of Trustees will determine to effect any such repurchase or tender or that it would be effective
in reducing or eliminating any market value discount.
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Custodian and Transfer Agent
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State Street Bank and Trust Company serves
as the Fund’s custodian and DST Systems, Inc. is the Fund’s transfer agent. See “Custodian and Transfer Agent.”
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS
This Prospectus, and the Statement of Additional Information (the “SAI”),
incorporated by reference into the Prospectus, contain “forward-looking statements.” Forward-looking statements can be identified
by the words “may,” “will,” “intend,” expect,” “estimate,” “continue,”
“plan,” “anticipate,” and similar terms with the negative of such terms. By their nature, all forward-looking
statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking
statements. Several factors that could materially affect the Fund’s actual results are the performance of the portfolio of securities
the Fund holds, the price at which the Fund’s shares will trade in the public markets and other factors discussed in the Fund’s
periodic filings with the SEC.
Although the Fund believes that the expectations expressed in the forward-looking
statements are reasonable, actual results could differ materially from those projected or assumed in the Fund’s forward-looking
statements. Future financial condition and results of operations, as well as any forward-looking statements, are subject to change and
are subject to inherent risks and uncertainties, such as those disclosed in the “Risk Factors and Special Considerations”
and “The Offering” sections of this Prospectus. All forward-looking statements contained in this Prospectus or in the SAI
are made as of the date of this Prospectus or SAI, as the case may be. Except for ongoing obligations under the federal securities laws,
the Fund does not intend and is not obligated, to update any forward-looking statement.
SUMMARY OF FUND EXPENSES
The following table shows the Fund’s expenses, including preferred
shares offering expenses, as a percentage of net assets attributable to common shares. All expenses of the Fund are borne, directly or
indirectly, by the common shareholders. The purpose of the table and example below is to help you understand all fees and expenses that
you, as a holder of common shares, would bear directly or indirectly.
The table assumes the use of leverage in an amount
equal to 33% of the Fund’s total assets in the forms of: (1) amounts borrowed by the Fund under a credit agreement in an amount
equal to 13% of the Fund’s total assets and (2) preferred shares offered in an amount equal to 20% of the Fund’s total assets
(including the amounts of any additional leverage obtained), also taking into account the additional assets to be raised in the offering,
as estimated above. The extent of the Fund’s assets attributable to leverage, and the Fund’s associated expenses, are likely
to vary (perhaps significantly) from these assumptions. Interest payments on borrowings are included in the total annual expenses of
the Fund.
Shareholder
Transaction Expenses
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Sales Load (as a percentage
of offering price)
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None
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Offering Expenses Borne
by the Fund (Excluding Preferred Shares Offering Expenses)1
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0.19%
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Dividend Reinvestment
Plan Fees2
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None
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Preferred Shares Offering
Expenses Borne by the Fund3
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0.13%
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Annual Expenses
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Percentage
of Net Assets Attributable to Common Shares
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Investment Advisory Fees4
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1.25%
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Interest Payments on Borrowed Funds5
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0.20%
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Other Expenses6
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0.74%
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Acquired Fund Fees and Expenses
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0.48%
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Total Annual Fund Operating Expenses
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2.67%
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Dividends on Preferred Shares7
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1.49%
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Total Annual Expenses and Dividends on
Preferred Shares
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4.16%
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(1)
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Estimated maximum amount based on offering of $41,303,000 in common
shares and $49,564,000 in preferred shares.
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(2)
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There will be no brokerage charges under
the Fund’s dividend reinvestment plan with respect to shares of common stock issued by the Fund in connection with the offering.
However, you may pay brokerage charges if you sell your shares of common stock held in a dividend reinvestment account. You also
may pay a pro rata share of brokerage commissions incurred in connection with your market purchases pursuant to the Fund’s
dividend reinvestment plan.
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(3)
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Assumes issuance of $49,564,000 in preferred
shares, net assets attributable to common shares of approximately $133,400,423. The actual amounts in connection with any offering
will be set forth in the Prospectus Supplement if applicable.
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(4)
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The Investment Adviser fee is 0.70% of the
Fund’s average daily total assets. Consequently, if the Fund has preferred shares or debt outstanding, the investment management
fee and other expenses as a percentage of net assets attributable to common shares may be higher than if the Fund does not utilize
a leveraged capital structure.
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(5)
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Assumes the use of leverage in the form of
borrowing under the Credit Agreement representing 13% of the Fund’s total assets (including any additional leverage obtained
through the use of borrowed funds), also taking into account the additional assets to be raised in an offer, as estimated above,
at an annual interest rate cost to the Fund of 0.91%.
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(6)
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Other Expenses are estimated based on the
Fund’s fiscal year ended on October 31, 2020 assuming completion of the proposed issuances.
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(7)
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Dividends on Preferred Shares assumes that
$49,564,000 of additional preferred shares are issued with a dividend rate of 4.00%. There can, of course, be no guarantee that any
preferred shares would be issued or, if issued, the terms thereof.
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For a more complete description of the various costs and expenses a
common shareholder would bear in connection with the issuance and ongoing maintenance of any preferred shares issued by the Fund, see
“Risk Factors and Special Considerations—Special Risks to Holders of Common Shares—Leverage Risk.”
Example
The following example illustrates the expenses you would pay on a $1,000
investment in common shares, followed by a preferred share offering, assuming a 5% annual portfolio total return.* The expenses illustrated
in the following example include the estimated offering expenses of $424,926 from the issuance of $41.303 million in common shares and
$49.564 million in preferred shares in the first year. The actual amounts in connection with any offering will be set forth in the Prospectus
Supplement if applicable.
1
Year
|
3
Years
|
5
Years
|
10
Years
|
$45
|
$129
|
$215
|
$436
|
|
*
|
The
example should not be considered a representation of future expenses or rate of return.
|
The example is based on total Annual Expenses and Dividends on Preferred
Shares shown in the table above and assumes that the amounts set forth in the table do not change and that all distributions are reinvested
at net asset value. Actual expenses may be greater or less than those assumed. Moreover, the Fund’s actual rate of return may be
greater or less than the hypothetical 5% return shown in the example.
The example includes Dividends of Preferred Shares. If Dividends on
Preferred Shares were not included in the example calculation, the expenses for the 1-, 3-, 5- and 10-year periods in the table above
would be as follows (based on the same assumptions as above): $30, $86, $145 and $303.
INFORMATION REGARDING
SENIOR SECURITIES
The following table
sets forth certain information regarding the Fund’s senior securities as of the end of each of the Fund’s prior ten fiscal
years. The Fund’s senior securities during this time period are comprised of outstanding indebtedness, which constitutes a “senior
security” as defined in the 1940 Act.
Senior Securities Representing
Indebtedness
Fiscal Year
|
Principal Amount
|
Asset Coverage Per
|
Ended
|
Outstanding (000s)1
|
$1000 2
|
October 31, 2020
|
$50,500
|
$2,703
|
October 31, 2019
|
$49,500
|
$3,074
|
October 31, 2018
|
$55,000
|
$2,598
|
October 31, 2017
|
$72,000
|
$3,128
|
October 31, 2016
|
$72,000
|
$2,991
|
October 31, 2015
|
$93,300
|
$2,743
|
October 31, 20143
|
$93,300
|
$2,897
|
March 31, 2014
|
$93,300
|
$2,959
|
March 31, 2013
|
$89,800
|
$3,019
|
March 31, 2012
|
$89,800
|
$2,894
|
March 31, 2011
|
$89,800
|
$3,133
|
|
(1)
|
Principal amount
outstanding represents the principal amount owed by the Fund to lenders under credit facility
arrangements in place at the time.
|
|
(2)
|
Asset coverage
per $1,000 of debt is calculated by subtracting the Fund’s liabilities and indebtedness
not represented by senior securities from the Fund’s total assets, dividing the result
by the aggregate amount of the Fund’s senior securities representing indebtedness then
outstanding, and multiplying the result by 1,000.
|
|
(3)
|
The Board announced,
on September 12, 2014, approval to change the fiscal year-end of the Fund from March 31 to
October 31.
|
USE OF PROCEEDS
Clough expects that it will initially invest the proceeds of the offering
in high-quality short-term debt securities and instruments. Clough anticipates that the investment of the proceeds will be made in accordance
with the Fund’s investment objective and policies as appropriate investment opportunities are identified, which is expected to
be completed or substantially completed within approximately one month.
Adverse market conditions could cause certain investments to be made
after one month but no later than six months. Pending such investment, the proceeds will be held in high quality short-term debt securities
and instruments.
THE FUND
The Fund is a diversified, closed-end management investment company
registered under the 1940 Act. The Fund was organized as a Delaware statutory trust on April 27, 2004, pursuant to a Certificate of Trust
governed by the laws of the state of Delaware. The Fund’s principal office is located at 1290 Broadway, Suite 1000, Denver, Colorado
80203 and its telephone number is (877) 256-8445 (toll-free).
INVESTMENT OBJECTIVE AND POLICIES
General
The Fund’s investment objective is to provide a high level of
total return and current income. The Fund seeks to pursue this objective by applying a fundamental research-driven investment process
and will invest in equity securities of companies of any market capitalization and equity-related securities, including equity swaps
and call options, as well as fixed income securities, including both corporate and sovereign debt, in both U.S. and non-U.S. markets.
There is no assurance that the Fund will achieve its investment objective.
The Fund invests in a managed mix of equity and debt securities. The
Fund is flexibly managed so that, depending on the Fund’s investment adviser’s outlook, it sometimes will be more heavily
invested in equity securities or in debt or fixed income securities. The fixed income securities that the Fund invests in will generally
have a maturity ranging from 30 days to over 30 years. Under normal circumstances, the Fund expects to invest in securities of issuers
located in at least three countries (in addition to the United States). Unless market conditions are deemed unfavorable, the Fund expects
that the market value of the Fund's long and short positions in securities of issuers organized outside the United States and issuers
doing a substantial amount of business outside the United States (greater than 50% of revenues derived from outside of the United States)
will represent at least 40% of the Fund's net assets. The Fund also may invest in call options, both on specific equity securities, as
well as securities representing exposure to equity sectors or indices and fixed income indices, including options on indices and ETFs.
The Fund may acquire put and call options and options on stock indices and enter into stock index futures contracts, certain credit derivatives
transactions and short sales in connection with its equity investments. In connection with the Fund’s investments in debt securities,
it may enter into related derivatives transactions such as interest rate futures, swaps and options thereon and certain credit derivatives
transactions. Investments in non-U.S. markets will be made primarily through liquid securities, including depositary receipts (which
evidence ownership of underlying foreign securities) such as ADRs, EDRs, GDRs, ETFs and in stocks traded on non-U.S. exchanges. Investments
in debt may include both investment grade and non-investment grade issues. Investments in corporate debt may include bonds issued by
companies in countries considered emerging markets. Investments in sovereign debt may also include bonds issued by countries considered
emerging markets. The Fund will not invest more than 33% of its total assets, at the time of acquisition, in securities (including equity
and fixed income securities) of governments and companies in emerging markets. The Fund may also invest a portion of its assets in real
estate investment trusts, or “REITs”, but the Fund does not expect that portion to be significant.
The Fund may use various hedging strategies for return generation,
or to express a specific view on an industry or individual company. In addition to shorting to hedge equity risk, the Fund may utilize
instruments including, for example, exchange traded funds (“ETFs”), derivative positions and U.S. Treasury securities as
a means to seek to reduce volatility and limit exposure to market declines. These instruments can be effective in seeking to reduce volatility,
and can help to prevent the Fund from selling long positions at sub-optimal times.
The Fund may also engage in frequent portfolio turnover.
The Fund will place a high priority on capital preservation and should
the Fund’s investment adviser believe that extraordinary conditions affecting global financial markets warrant, the Fund may temporarily
be primarily invested in money market securities or money market mutual funds. When the Fund is invested in these instruments for temporary
or defensive purposes, it may not achieve its investment objective. The Fund may use a variety of investment techniques including shorting
strategies, use of derivatives, and use of long-dated bonds, designed to capitalize on declines in the market price of equity securities
or declines in market indices (e.g., the Fund may establish short positions in specific stocks or stock indices) based on the
Fund’s investment adviser’s investment outlook. Subject to the requirements of the 1940 Act and the Internal Revenue Code
of 1986, as amended (the "Code"), the Fund will not make a short sale if, after giving effect to such sale, the market value
of all securities sold short by the Fund exceeds 30% of the value of its total assets.
Investment Strategy
Clough believes that above average investment returns can be achieved
when key, proprietary insights into industry or economic trends are discovered, and their significance understood, before they become
obvious to other investors. Within this context, the investment process will focus on investing in a number of major global investment
themes identified by Clough. Industry consolidation, technological change, an emerging shortage of a product or raw material which derives
from a period of under-investment, changes in government regulation, or major economic or investment cycles are examples of themes Clough
would emphasize in its investment focus. Attractive investment themes will often be influenced by global trends, which make investments
in certain industries across more than one geographic market likely.
Once attractive themes are identified, Clough will generally utilize
a “bottom-up” research process to identify companies it believes are best positioned to benefit from those specific themes.
Individual positions will be selected based upon a host of qualitative and quantitative factors including, but not limited to, such factors
as a company’s competitive position, quality of company management, quality and visibility of earnings and cash flow, balance sheet
strength and relative valuation. This approach may provide investment opportunities in various levels of a company’s capital structure,
including common and preferred stock, as well as corporate bonds, including convertible debt securities.
Under the Fund’s theme-oriented investment approach, the portfolio
may be invested in only a relatively small number of industries. The Fund will attempt to diversify within its investment themes, as
appropriate, to lower volatility. Individual equity positions on both the long and short side of the portfolio will typically be below
5 % of total assets. The Fund also does not have restrictions on the levels of portfolio turnover. However, since major industry trends
often last years, Clough believes that a theme-based investment approach can result in opportunities for tax efficient investing (as
a result of lower portfolio turnover).
The Fund is not required to maintain any particular percentage of its
assets in equity securities, or in fixed income securities, and Clough may change the weightings of the Fund’s investments in equity
and fixed income securities based upon Clough’s assessment of the prevailing interest rate environment and expected returns relative
to other identified investment opportunities. Generally, the Fund will increase its investments in fixed income securities when Clough
anticipates that the return on these securities will exceed the return on equity securities, and vice versa.
Clough believes that its theme-based portfolio strategy will present
periods of time when Clough has a particularly high degree of confidence in the Fund’s investment positions. During these occasions,
the Fund may purchase call options in order to enhance investment returns. The Fund may also purchase such options at other times if
Clough believes it would be beneficial to the Fund to do so. The Fund’s use of such option strategies is expected to be opportunistic
in nature and the Fund is not required to maintain any particular percentage of assets in call option premium. Call option premiums,
when utilized, will typically be less than 12% of total assets.
Generally, securities will be purchased or sold by the Fund on national
securities exchanges and in the over-the-counter market. From time to time, securities may be purchased or sold in private transactions,
including securities that are not publicly traded or that are otherwise illiquid. Clough does not expect such investments to comprise
more than 10% of the Fund’s total assets (determined at the time the investment is made).
Clough may invest the Fund’s cash balances in any investments
it deems appropriate, including, without limitation and as permitted under the 1940 Act, money market funds, repurchase agreements, U.S.
Treasury, U.S. agency securities, municipal bonds and bank accounts. Any income earned from such investments is ordinarily reinvested
by the Fund in accordance with its investment program. Many of the considerations entering into Clough’s recommendations and the
portfolio managers’ decisions are subjective.
The Fund’s portfolio will be actively managed and securities
may be bought or sold on a daily basis. Investments may be added to the portfolio if they satisfy value-based criteria or contribute
to the portfolio’s risk profile. Investments may be removed from the portfolio if Clough believes that their market value exceeds
full value, they add inefficient risk or the initial investment thesis fails.
Portfolio Investments
Common Stocks
Common stock represents an equity ownership interest in an issuer.
The Fund will have substantial exposure to common stocks. Although common stocks have historically generated higher average returns than
fixed-income securities over the long term, common stocks also have experienced significantly more volatility in returns. An adverse
event, such as an unfavorable earnings report, may depress the value of a particular common stock held by the Fund. Also, the prices
of common stocks are sensitive to general movements in the stock market and a drop in the stock market may depress the prices of common
stocks to which the Fund has exposure. Common stock prices fluctuate for many reasons, including changes in investors’ perceptions
of the financial condition of an issuer or the general condition of the relevant stock market, or when political or economic events affecting
the issuer occur. In addition, common stock prices may be sensitive to rising interest rates, as the costs of capital rise and borrowing
costs increase.
Small and Medium Cap Companies
The Fund may invest in securities of small capitalization companies,
currently considered by Clough to mean companies with market capitalization at or below $1 billion. It may also invest in medium capitalization
companies, currently considered by Clough to mean companies with market capitalization of between $1 billion and $5 billion.
Preferred Stocks
Preferred stock, like common stock, represents an equity ownership
in an issuer. Generally, preferred stock has a priority of claim over common stock in dividend payments and upon liquidation of the issuer.
Unlike common stock, preferred stock does not usually have voting rights. Preferred stock in some instances is convertible into common
stock.
Although they are equity securities, preferred stocks have certain
characteristics of both debt and common stock. They are debt-like in that their promised income is contractually fixed. They are common
stock-like in that they do not have rights to precipitate bankruptcy proceedings or collection activities in the event of missed payments.
Furthermore, they have many of the key characteristics of equity due to their subordinated position in an issuer’s capital structure
and because their quality and value are heavily dependent on the profitability of the issuer rather than on any legal claims to specific
assets or cash flows.
In order to be payable, dividends on preferred stock must be declared
by the issuer’s board of directors or trustees. In addition, distributions on preferred stock may be subject to deferral and thus
may not be automatically payable. Income payments on some preferred stocks are cumulative, causing dividends and distributions to accrue
even if not declared by the board of directors or trustees or otherwise made payable. Other preferred stocks are non-cumulative, meaning
that skipped dividends and distributions do not continue to accrue. There is no assurance that dividends on preferred stocks in which
the Fund invests will be declared or otherwise made payable. The Fund may invest in non-cumulative preferred stock, although Clough would
consider, among other factors, their non-cumulative nature in making any decision to purchase or sell such securities.
Shares of preferred stock have a liquidation value that generally equals
the original purchase price at the date of issuance. The market values of preferred stock may be affected by favorable and unfavorable
changes impacting the issuers’ industries or sectors. They may also be affected by actual and anticipated changes or ambiguities
in the tax status of the security and by actual and anticipated changes or ambiguities in tax laws, such as changes in corporate and
individual income tax rates.
Because the claim on an issuer’s earnings represented by preferred
stock may become onerous when interest rates fall below the rate payable on the stock or for other reasons, the issuer may redeem preferred
stock, generally after an initial period of call protection in which the stock is not redeemable. Thus, in declining interest rate environments
in particular, the Fund’s holdings of higher dividend-paying preferred stocks may be reduced and the Fund may be unable to acquire
securities paying comparable rates with the redemption proceeds.
Restricted and Illiquid Securities
Although the Fund will invest primarily in publicly traded securities,
it may invest a portion of its assets (generally, no more than 15% of its value) in restricted securities and other investments which
are illiquid. Restricted securities are securities that may not be sold to the public without an effective registration statement under
the Securities Act of 1933, as amended (the “Securities Act”), or, if they are unregistered, may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In recognition of the increased size and liquidity of the institutional
markets for unregistered securities and the importance of institutional investors in the formation of capital, the SEC has adopted Rule
144A under the Securities Act, which is designed to further facilitate efficient trading among eligible institutional investors by permitting
the sale of certain unregistered securities to qualified institutional buyers. To the extent privately placed securities held by the
Fund qualify under Rule 144A, and an institutional market develops for those securities, the Fund likely will be able to dispose of the
securities without registering them under the Securities Act. To the extent that institutional buyers become, for a time, uninterested
in purchasing these securities, investing in Rule 144A securities could have the effect of increasing the level of the Fund’s illiquidity.
The Fund has adopted procedures under which certain Rule 144A securities will not be deemed to be illiquid, if certain criteria are satisfied
with respect to those securities and the market therefor. Foreign securities that can be freely sold in the markets in which they are
principally traded are not considered by the Fund to be restricted. Regulation S under the Securities Act permits the sale abroad of
securities that are not registered for sale in the United States. Repurchase agreements with maturities of more than seven days will
be treated as illiquid.
Corporate Bonds, Government Debt Securities and Other Debt Securities
The Fund may invest in corporate bonds, debentures and other debt securities.
Debt securities in which the Fund may invest may pay fixed or variable rates of interest. Bonds and other debt securities generally are
issued by corporations and other issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest
and normally must repay the amount borrowed on or before maturity. Certain debt securities are “perpetual” in that they have
no maturity date.
The Fund will invest in government debt securities, including those
of emerging market issuers or of other non-U.S. issuers. These securities may be U.S. dollar-denominated on non-U.S. dollar-denominated
and include: (a) debt obligations issued or guaranteed by foreign national, provincial, state, municipal or other governments with taxing
authority or by their agencies or instrumentalities; and (b) debt obligations of supranational entities. Government debt securities include:
debt securities issued or guaranteed by governments, government agencies or instrumentalities and political subdivisions; debt securities
issued by government owed, controlled or sponsored entities; interests in entities organized and operated for the purpose of restructuring
the investment characteristics issued by the above-noted issuers; or debt securities issued by supranational entities such as the World
Bank or the European Union. The Fund may also invest in securities denominated in currencies of emerging market countries. Emerging market
debt securities generally are rated in the lower rating categories of recognized credit rating agencies or are unrated and considered
to be of comparable quality to lower rated debt securities. A non-U.S. issuer of debt or the non-U.S. governmental authorities that control
the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the Fund may have limited resources
in the event of a default. Some of these risks do not apply to issuers in large, more developed countries. These risks are more pronounced
in investments in issuers in emerging markets or if the Fund invests significantly in one country.
The Fund will not invest more than 20% of its total assets in debt
securities rated below investment grade (i.e., securities rated lower than Baa by Moody’s Investors Service, Inc. (“Moody’s”)
or lower than BBB by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”)),
or their equivalent as determined by Clough. These securities are commonly referred to as “junk bonds.” The foregoing credit
quality policy applies only at the time a security is purchased, and the Fund is not required to dispose of securities already owned
by the Fund in the event of a change in assessment of credit quality or the removal of a rating.
Exchange Traded Funds
The Fund may invest in ETFs, which are investment companies that typically
aim to track or replicate a desired index, such as a sector, market or global segment. Such ETFs are passively managed and their shares
are traded on a national exchange or the National Association of Securities Dealers’ Automatic Quotation System (“NASDAQ”).
Certain ETFs are actively managed by a portfolio manager or management team that makes investment decisions without seeking to replicate
the performance of a reference index. ETFs do not sell individual shares directly to investors and only issue their shares in large blocks
known as “creation units.” The investor purchasing a creation unit may sell the individual shares on a secondary market.
Therefore, the liquidity of ETFs depends on the adequacy of the secondary market. There can be no assurance that an ETF’s investment
objective will be achieved. ETFs based on an index may not replicate and maintain exactly the composition and relative weightings of
securities in the index. ETFs are subject to the risks of investing in the underlying securities. The Fund, as a holder of the securities
of the ETF, will bear its pro rata portion of the ETF’s expenses, including advisory fees. These expenses are in addition to the
direct expenses of the Fund’s own operations.
Foreign Securities
Under normal circumstances, the Fund intends to invest a portion of
its assets in securities of issuers located in at least three countries (in addition to the United States). The value of foreign securities
is affected by changes in currency rates, foreign tax laws (including withholding tax), government policies (in this country or abroad),
relations between nations and trading, settlement, custodial and other operational risks. In addition, the costs of investing abroad
are generally higher than in the United States, and foreign securities markets may be less liquid, more volatile and less subject to
governmental supervision than markets in the United States. As an alternative to holding foreign-traded securities, the Fund may invest
in dollar-denominated securities of foreign companies that trade on U.S. exchanges or in the U.S. over-the-counter market (including
depositary receipts as described below, which evidence ownership in underlying foreign securities and ETFs as described above).
Because foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a domestic company. Volume and liquidity in most foreign debt markets is less
than in the United States and securities of some foreign companies are less liquid and more volatile than securities of comparable U.S.
companies. There is generally less government supervision and regulation of securities exchanges, broker-dealers and listed companies
than in the United States. Mail service between the United States and foreign countries may be slower or less reliable than within the
United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities.
Payment for securities before delivery may be required. In addition, with respect to certain foreign countries, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or diplomatic developments, which could affect investments
in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects
as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
Foreign securities markets, while growing in volume and sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies.
The Fund may purchase ADRs, EDRs and GDRs, which are certificates evidencing
ownership of shares of foreign issuers and are alternatives to purchasing directly the underlying foreign securities in their national
markets and currencies. However, they continue to be subject to many of the risks associated with investing directly in foreign securities.
These risks include foreign exchange risk as well as the political and economic risks of the underlying issuer’s country. ADRs,
EDRs and GDRs may be sponsored or unsponsored. Unsponsored receipts are established without the participation of the issuer. Unsponsored
receipts may involve higher expenses, they may not pass-through voting or other shareholder rights, and they may be less liquid.
The Fund’s investments in sovereign debt may also include bonds
issued by countries in emerging markets. Emerging market securities generally are less liquid and subject to wider price and currency
fluctuations than securities issued in more developed countries. While there is no limit on the amount of assets the Fund may invest
outside of the United States, the Fund will not invest more than 33% of its assets, at the time of acquisition, in securities (including
equity and fixed income securities) of governments and companies in emerging markets.
Real Estate Investment Trusts (REITs)
REITs are companies that own and manage real estate, including apartment
buildings, offices, shopping centers, industrial buildings, and hotels. By investing in REITs, the Fund may gain exposure to the real
estate market with greater liquidity and diversification than through direct ownership of property, which can be costly and require ongoing
management and maintenance, and which can be difficult to convert into cash when needed. The Fund does not expect to invest a significant
portion of its assets in REITs but does not have any investment restrictions with respect to such investments.
Warrants
The Fund may invest in equity and index warrants of domestic and international
issuers. Equity warrants are securities that give the holder the right, but not the obligation, to subscribe for equity issues of the
issuing company or a related company at a fixed price either on a certain date or during a set period. Changes in the value of a warrant
do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the
price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying security and do not represent any rights in the assets of the issuing company. A warrant ceases to have value
if it is not exercised prior to its expiration date. These factors can make warrants more speculative than other types of investments.
Convertible Securities and Bonds with Warrants Attached
The Fund may invest in preferred stocks and fixed-income obligations
that are convertible into common stocks of domestic and foreign issuers, and bonds issued as a unit with warrants to purchase equity
or fixed income securities. Convertible securities in which the Fund may invest, comprised of both convertible debt and convertible preferred
stock, may be converted at either a stated price or at a stated rate into underlying shares of common stock. Because of this feature,
convertible securities generally enable an investor to benefit from increases in the market price of the underlying common stock. Convertible
securities often provide higher yields than the underlying equity securities, but generally offer lower yields than non-convertible securities
of similar quality. The value of convertible securities fluctuates in relation to changes in interest rates like bonds, and, in addition,
fluctuates in relation to the underlying common stock.
Bonds with warrants attached to purchase equity securities have many
characteristics of convertible bonds and their prices may, to some degree, reflect the performance of the underlying stock. Bonds may
also be issued with warrants attached to purchase additional fixed income securities at the same coupon rate. A decline in interest rates
would permit the Fund to buy additional bonds at a favorable rate or to sell the warrants at a profit. If interest rates rise, the warrants
would generally expire with no value.
Investment Techniques
The Fund may, but is under no obligation to, from time to time employ
a variety of investment techniques, including those described below, to hedge against fluctuations in the price of portfolio securities,
to enhance total return or to provide a substitute for the purchase or sale of securities. Some of these techniques, such as purchases
of put and call options, options on stock indices and stock index futures and entry into certain credit derivative transactions and short
sales, may be used as hedges against or substitutes for investments in equity securities. Other techniques such as the purchase of interest
rate futures and entry into transactions involving interest rate swaps, options on interest rate swaps and certain credit derivatives
are hedges against or substitutes for investments in debt securities. The Fund’s ability to utilize any of the techniques described
below may be limited by restrictions imposed on its operations in connection with obtaining and maintaining its qualification as a regulated
investment company under the Code. Additionally, other factors (such as cost) may make it impractical or undesirable to use any of these
investment techniques from time to time.
Options on Securities
In order to hedge against adverse market shifts, the Fund may utilize
up to 12% of its total assets (in addition to the 12% limit applicable to options on stock indices described below) to purchase put and
call options on securities. The Fund also may invest in call options, both on specific equity securities, as well as securities representing
exposure to equity sectors or indices and fixed income indices, including options on indices and exchange traded funds (“ETFs”).
In addition, the Fund may seek to increase its income or may hedge a portion of its portfolio investments through writing (i.e.,
selling) covered put and call options. A put option embodies the right of its purchaser to compel the writer of the option to purchase
from the option holder an underlying security or its equivalent at a specified price at any time during the option period. In contrast,
a call option gives the purchaser the right to buy the underlying security or its equivalent covered by the option or its equivalent
from the writer of the option at the stated exercise price. Under interpretations of the Securities and Exchange Commission currently
in effect, which may change from time to time, a “covered” call option means that so long as the Fund is obligated as the
writer of the option, it will own (1) the underlying instruments subject to the option, (2) instruments convertible or exchangeable into
the instruments subject to the option or (3) a call option on the relevant instruments with an exercise price no higher than the exercise
price on the call option written.
Similarly, the Securities and Exchange Commission currently requires
that, to “cover” or support its obligation to purchase the underlying instruments if a put option is written by the Fund,
the Fund must (1) deposit with its custodian in a segregated account liquid securities having a value at least equal to the exercise
price of the underlying securities, (2) continue to own an equivalent number of puts of the same “series” (that is, puts
on the same underlying security having the same exercise prices and expiration dates as those written by the Fund), or an equivalent
number of puts of the same “class” (that is, puts on the same underlying security) with exercise prices greater than those
it has written (or, if the exercise prices of the puts it holds are less than the exercise prices of those it has written, it will deposit
the difference with its custodian in a segregated account) or (3) sell short the securities underlying the put option at the same or
a higher price than the exercise price on the put option written.
The Fund will receive a premium when it writes put and call options,
which increases the Fund’s return on the underlying security in the event the option expires unexercised or is closed out at a
profit. By writing a call, the Fund will limit its opportunity to profit from an increase in the market value of the underlying security
above the exercise price of the option for as long as the Fund’s obligation as the writer of the option continues. Upon the exercise
of a put option written by the Fund, the Fund may suffer an economic loss equal to the difference between the price at which the Fund
is required to purchase the underlying security and its market value at the time of the option exercise, less the premium received for
writing the option. Upon the exercise of a call option written by the Fund, the Fund may suffer an economic loss equal to an amount not
less than the excess of the security’s market value at the time of the option exercise over the Fund’s acquisition cost of
the security, less the sum of the premium received for writing the option and the difference, if any, between the call price paid to
the Fund and the Fund’s acquisition cost of the security. Thus, in some periods the Fund might receive less total return and in
other periods greater total return from its hedged positions than it would have received from leaving its underlying securities unhedged.
The Fund may purchase and write options on securities that are listed
on national securities exchanges or are traded over the counter, although it expects, under normal circumstances, to effect such transactions
on national securities exchanges.
As a holder of a put option, the Fund will have the right to sell the
securities underlying the option and as the holder of a call option, the Fund will have the right to purchase the securities underlying
the option, in each case at their exercise price at any time prior to the option’s expiration date. The Fund may choose to exercise
the options it holds, permit them to expire or terminate them prior to their expiration by entering into closing sale transactions. In
entering into a closing sale transaction, the Fund would sell an option of the same series as the one it has purchased. The ability of
the Fund to enter into a closing sale transaction with respect to options purchased and to enter into a closing purchase transaction
with respect to options sold depends on the existence of a liquid secondary market. There can be no assurance that a closing purchase
or sale transaction can be effected when the Fund so desires. The Fund’s ability to terminate option positions established in the
over-the-counter market may be more limited than in the case of exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would fail to meet their obligations to the Fund.
In purchasing a put option, the Fund will seek to benefit from a decline
in the market price of the underlying security, while in purchasing a call option, the Fund will seek to benefit from an increase in
the market price of the underlying security. If an option purchased is not sold or exercised when it has remaining value, or if the market
price of the underlying security remains equal to or greater than the exercise price, in the case of a put, or remains equal to or below
the exercise price, in the case of a call, during the life of the option, the option will expire worthless. For the purchase of an option
to be profitable, the market price of the underlying security must decline sufficiently below the exercise price, in the case of a put,
and must increase sufficiently above the exercise price, in the case of a call, to cover the premium and transaction costs. Because option
premiums paid by the Fund are small in relation to the market value of the instruments underlying the options, buying options can result
in large amounts of leverage. The leverage offered by trading in options could cause the Fund’s net asset value to be subject to
more frequent and wider fluctuation than would be the case if the Fund did not invest in options.
Options on Stock Indices
The Fund may utilize up to 12% of its total assets (in addition to
the 12% limit applicable to options on securities) to purchase put and call options on domestic stock indices to hedge against risks
of market-wide price movements affecting its assets. The Fund also may invest in call options, both on specific equity securities, as
well as securities representing exposure to equity sectors or indices and fixed income indices, including options on indices and exchange
traded funds (“ETFs”). In addition, the Fund may write covered put and call options on stock indices. A stock index measures
the movement of a certain group of stocks by assigning relative values to the common stocks included in the index. Options on stock indices
are similar to options on securities. Because no underlying security can be delivered, however, the option represents the holder’s
right to obtain from the writer, in cash, a fixed multiple of the amount by which the exercise price exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index on the exercise date. The advisability of using stock
index options to hedge against the risk of market-wide movements will depend on the extent of diversification of the Fund’s investments
and the sensitivity of its investments to factors influencing the underlying index. The effectiveness of purchasing or writing stock
index options as a hedging technique will depend upon the extent to which price movements in the Fund’s securities investments
correlate with price movements in the stock index selected. In addition, successful use by the Fund of options on stock indices will
be subject to the ability of Clough to predict correctly changes in the relationship of the underlying index to the Fund’s portfolio
holdings. No assurance can be given that Clough’s judgment in this respect will be correct.
When the Fund writes an option on a stock index, it will establish
a segregated account with its custodian in which the Fund will deposit liquid securities in an amount equal to the market value of the
option, and will maintain the account while the option is open.
Short Sales
The Fund intends to attempt to limit exposure to a possible market
decline in the value of its portfolio securities through short sales of securities that Clough believes possess volatility characteristics
similar to those being hedged. In addition, the Fund intends to use short sales for non-hedging purposes to pursue its investment objective.
Subject to the requirements of the 1940 Act and the Code, the Fund will not make a short sale if, after giving effect to such sale, the
market value of all securities sold short by the Fund exceeds 30% of the value of its total assets.
A short sale is a transaction in which the Fund sells a security it
does not own in anticipation that the market price of that security will decline. When the Fund makes a short sale, it must borrow the
security sold short from a broker-dealer and deliver it to the buyer upon conclusion of the sale. The Fund may have to pay a fee to borrow
particular securities and is often obligated to pay over any payments received on such borrowed securities.
The Fund’s obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealer, usually cash, U.S. government securities or other liquid securities. The Fund
will also be required to designate on its books and records similar collateral with its custodian to the extent, if any, necessary so
that the aggregate collateral value is at all times at least equal to the current market value of the security sold short. Depending
on arrangements made with the broker-dealer from which it borrowed the security regarding payment over of any payments received by the
Fund on such security, the Fund may not receive any payments (including interest) on its collateral deposited with such broker-dealer.
If the price of the security sold short increases between the time
of the short sale and the time the Fund replaces the borrowed security, the Fund will incur a loss; conversely, if the price declines,
the Fund will realize a gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. Although
the Fund’s gain is limited to the price at which it sold the security short, its potential loss is unlimited.
The Fund may also sell a security short if it owns at least an equal
amount of the security sold short or another security convertible or exchangeable for an equal amount of the security sold short without
payment of further compensation (a short sale against-the-box). In a short sale against-the-box, the short seller is exposed to the risk
of being forced to deliver stock that it holds to close the position if the borrowed stock is called in by the lender, which would cause
gain or loss to be recognized on the delivered stock. The Fund expects normally to close its short sales against-the-box by delivering
newly acquired stock.
Purchasing securities to close out the short position can itself cause
the price of the securities to rise further, thereby exacerbating the loss. Short-selling exposes the Fund to unlimited risk with respect
to that security due to the lack of an upper limit on the price to which an instrument can rise. Although the Fund reserves the right
to utilize short sales, and currently intends to utilize short sales, Clough is under no obligation to utilize short sales at all.
Futures Contracts and Options on Futures Contracts
The Fund may enter into interest rate and stock index futures contracts
and may purchase and sell put and call options on such futures contracts. The Fund will enter into such transactions for hedging and
other appropriate risk-management purposes or to increase return, in accordance with the rules and regulations of the Commodity Futures
Trading Commission (“CFTC”) and the Securities and Exchange Commission.
An interest rate futures contract is a standardized contract for the
future delivery of a specified security (such as a U.S. Treasury Bond or U.S. Treasury Note) or its equivalent at a future date at a
price set at the time of the contract. A stock index futures contract is an agreement to take or make delivery of an amount of cash equal
to the difference between the value of the index at the beginning and at the end of the contract period. The Fund may only enter into
futures contracts traded on regulated commodity exchanges.
Parties to a futures contract must make “initial margin”
deposits to secure performance of the contract. There are also requirements to make “variation margin” deposits from time
to time as the value of the futures contract fluctuates. Clough has claimed an exclusion from the definition of commodity pool operator
under the Commodity Exchange Act (“CEA”) and, therefore, Clough will not be subject to registration or regulation as a commodity
pool operator under the CEA. The Fund reserves the right to engage in transactions involving futures and options thereon and in accordance
with the Fund’s policies. In addition, certain provisions of the Code may limit the extent to which the Fund may enter into futures
contracts or engage in options transactions.
Pursuant to the views of the Securities and Exchange Commission currently
in effect, which may change from time to time, with respect to futures contracts to purchase securities or stock indices, call options
on futures contracts purchased by the Fund and put options on futures contracts written by the Fund, the Fund will set aside in a segregated
account liquid securities with a value at least equal to the value of instruments underlying such futures contracts less the amount of
initial margin on deposit for such contracts. The current view of the staff of the Securities and Exchange Commission is that the Fund’s
long and short positions in futures contracts as well as put and call options on futures written by it must be collateralized with cash
or certain liquid assets held in a segregated account or “covered” in a manner similar to that described below for covered
options on securities. See “Investment Objective and Policies—Investment Techniques—Options on Securities”. However,
even if “covered,” these instruments could have the effect of leveraging the Fund’s portfolio.
The Fund may either accept or make delivery of cash or the underlying
instrument specified at the expiration of an interest rate futures contract or cash at the expiration of a stock index futures contract
or, prior to expiration, enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions
with respect to futures contracts are effected on the exchange on which the contract was entered into (or a linked exchange).
The Fund may purchase and write put and call options on interest rate
futures contracts and stock index futures contracts in order to hedge all or a portion of its investments and may enter into closing
purchase transactions with respect to options written by the Fund in order to terminate existing positions. There is no guarantee that
such closing transactions can be effected at any particular time or at all. In addition, daily limits on price fluctuations on exchanges
on which the Fund conducts its futures and options transactions may prevent the prompt liquidation of positions at the optimal time,
thus subjecting the Fund to the potential of greater losses.
An option on an interest rate futures contract or stock index futures
contract, as contrasted with the direct investment in such a contract, gives the purchaser of the option the right, in return for the
premium paid, to assume a position in a stock index futures contract or interest rate futures contract at a specified exercise price
at any time on or before the expiration date of the option. Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer’s futures margin
account, which represents the amount by which the market price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract. The potential loss related to the purchase of an option
on a futures contract is limited to the premium paid for the option (plus transaction costs).
With respect to options purchased by the Fund, there are no daily cash
payments made by the Fund to reflect changes in the value of the underlying contract; however, the value of the option does change daily
and that change would be reflected in the net asset value of the Fund.
While the Fund may enter into futures contracts and options on futures
contracts for hedging purposes, the use of futures contracts and options on futures contracts might result in a poorer overall performance
for the Fund than if it had not engaged in any such transactions. If, for example, the Fund had insufficient cash, it might have to sell
a portion of its underlying portfolio of securities in order to meet daily variation margin requirements on its futures contracts or
options on futures contracts at a time when it might be disadvantageous to do so. There may be an imperfect correlation between the Fund’s
portfolio holdings and futures contracts or options on futures contracts entered into by the Fund, which may prevent the Fund from achieving
the intended hedge or expose the Fund to risk of loss. Further, the Fund’s use of futures contracts and options on futures contracts
to reduce risk involves costs and will be subject to Clough’s ability to predict correctly changes in interest rate relationships
or other factors. No assurance can be given that Clough’s judgment in this respect will be correct.
When-Issued and Delayed Delivery Transactions
New issues of preferred and debt securities may be offered on a when-issued
or delayed delivery basis, which means that delivery and payment for the security normally take place within 45 days after the date of
the commitment to purchase. The payment obligation and the dividends that will be received on the security are fixed at the time the
buyer enters into the commitment. The Fund will make commitments to purchase securities on a when-issued or delayed delivery basis only
with the intention of acquiring the securities, but may sell these securities before the settlement date if Clough deems it advisable.
No additional when-issued or delayed delivery commitments will be made if more than 20% of the Fund’s total assets would be so
committed. Securities purchased on a when-issued or delayed delivery basis may be subject to changes in value based upon the public’s
perception of the creditworthiness of the issuer and changes, real or anticipated, in the level of interest rates. Securities purchased
or sold on a when-issued or delayed delivery basis may expose the Fund to risk because they may experience these fluctuations prior to
their actual delivery. The Fund will not accrue income with respect to a debt security it has purchased on a when-issued or delayed delivery
basis prior to its stated delivery date but will accrue income on a delayed delivery security it has sold. Purchasing or selling securities
on a when-issued or delayed delivery basis can involve the additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A segregated account of the Fund consisting of liquid securities
equal at all times to the amount of the Fund’s when-issued and delayed delivery purchase commitments will be established and maintained
with the Fund’s custodian. Placing securities rather than cash in the segregated account may have a leveraging effect on the Fund’s
net asset value per share; that is, to the extent that the Fund remains substantially fully invested in securities at the same time that
it has committed to purchase securities on a when-issued or delayed delivery basis, greater fluctuations in its net asset value per share
may occur than if it has set aside cash to satisfy its purchase commitments.
Interest Rate Swaps and Options Thereon (“Swaptions”)
The Fund may enter into interest rate swap agreements and may purchase
and sell put and call options on such swap agreements, commonly referred to as swaptions. The Fund will enter into such transactions
for hedging some or all of its interest rate exposure in its holdings of preferred securities and debt securities. Interest rate swap
agreements and swaptions are highly specialized investments and are not traded on or regulated by any securities exchange or regulated
by the CFTC or the Securities and Exchange Commission.
An interest rate swap is an agreement between two parties where one
party agrees to pay a contractually stated fixed income stream, usually denoted as a fixed percentage of an underlying “notional”
amount, in exchange for receiving a variable income stream, usually based on the London Interbank Offered Rate (LIBOR), and denoted as
a percentage of the underlying notional amount. From the perspective of a fixed rate payer, if interest rates rise, the payer will expect
a rising level of income since the payer is a receiver of floating rate income. This would cause the value of the swap contract to rise
in value, from the payer’s perspective, because the discounted present value of its obligatory payment stream is diminished at
higher interest rates, all at the same time it is receiving higher income. Alternatively, if interest rates fall, the reverse occurs
and it simultaneously faces the prospects of both a diminished floating rate income stream and a higher discounted present value of his
fixed rate payment obligation. These value changes all work in reverse from the perspective of a fixed rate receiver.
A swaption is an agreement between two parties where one party purchases
the right from the other party to enter into an interest rate swap at a specified date and for a specified “fixed rate” yield
(or “exercise” yield). In a pay-fixed swaption, the holder of the swaption has the right to enter into an interest rate swap
as a payer of fixed rate and receiver of variable rate, while the writer of the swaption has the obligation to enter into the other side
of the interest rate swap. In a received-fixed swaption, the holder of the swaption has the right to enter into an interest rate swap
as a receiver of fixed rate and a payer of variable rate, while the writer of the swaption has the obligation to enter into the opposite
side of the interest rate swap.
A pay-fixed swaption is analogous to a put option on Treasury securities
in that it rises in value as interest rate swap yields rise. A receive-fixed swaption is analogous to a call option on Treasury securities
in that it rises in value as interest rate swap yields decline. As with other options on securities, indices, or futures contracts, the
price of any swaption will reflect both an intrinsic value component, which may be zero, and a time premium component. The intrinsic
value component represents what the value of the swaption would be if it were immediately exercisable into the underlying interest rate
swap. The intrinsic value component measures the degree to which an option is in-the-money, if at all. The time premium represents the
difference between the actual price of the swaption and the intrinsic value.
It is customary market practice for swaptions to be “cash settled”
rather than an actual position in an interest rate swap being established at the time of swaption expiration. For reasons set forth more
fully below, Clough expects to enter strictly into cash settled swaptions (i.e., where the exercise value of the swaption is determined
by reference to the market for interest rate swaps then prevailing).
Credit Derivatives
The Fund may enter into credit derivative transactions, either to hedge
credit exposure or to gain exposure to an issuer or group of issuers more economically than can be achieved by investing directly in
preferred or debt securities. Credit derivatives fall into two broad categories: credit default swaps and market spread swaps, both of
which can reference either a single issuer or obligor or a portfolio of preferred and/or debt securities. In a credit default swap, which
is the most common form of credit derivative, the purchaser of credit protection makes a periodic payment to the seller (swap counterparty)
in exchange for a payment by the seller should a referenced security or loan, or a specified portion of a portfolio of such instruments,
default during the life of the swap agreement. If there were a default event as specified in the swap agreement, the buyer either (i)
would receive from the seller the difference between the par (or other agreed-upon) value of the referenced instrument(s) and the then-current
market value of the instrument(s) or (ii) have the right to make delivery of the reference instrument to the counterparty. If there were
no default, the buyer of credit protection would have spent the stream of payments and received no benefit from the contract. Market
spread swaps are based on relative changes in market rates, such as the yield spread between a preferred security and a benchmark Treasury
security, rather than default events.
In a market spread swap, two counterparties agree to exchange payments
at future dates based on the spread between a reference security (or index) and a benchmark security (or index). The buyer (fixed-spread
payer) would receive from the seller (fixed-spread receiver) the difference between the market rate and the reference rate at each payment
date, if the market rate were above the reference rate. If the market rate were below the reference rate, then the buyer would pay to
the seller the difference between the reference rate and the market rate. The Fund may utilize market spread swaps to “lock in”
the yield (or price) of a security or index without having to purchase the reference security or index. Market spread swaps may also
be used to mitigate the risk associated with a widening of the spread between the yield or price of a security in the Fund’s portfolio
relative to a benchmark Treasury security. Market spread options, which are analogous to swaptions, give the buyer the right but not
the obligation to buy (in the case of a call) or sell (in the case of a put) the referenced market spread at a fixed price from the seller.
Similarly, the seller of a market spread option has the obligation to sell (in the case of a call) or buy (in the case of a put) the
referenced market spread at a fixed price from the buyer. Credit derivatives are highly specialized investments and are not traded on
or regulated by any securities exchange or regulated by the CFTC or the Securities and Exchange Commission.
Interest Rate Swaps, Swaptions and Credit Derivatives (General)
The pricing and valuation terms of interest rate swaps, swaptions and
credit derivatives are not standardized and there is no clearinghouse whereby a party to any such derivative agreement can enter into
an offsetting position to close out a contract. Interest rate swaps, swaptions, and credit derivatives are usually (1) between an institutional
investor and a broker-dealer firm or bank or (2) between institutional investors. In addition, substantially all swaps are entered into
subject to the standards set forth by the International Swaps and Derivatives Association (“ISDA”). ISDA represents participants
in the privately negotiated derivatives industry, helps formulate the investment industry’s position on regulatory and legislative
issues, develops international contractual standards and offers arbitration on disputes concerning market practice.
Under the rating agency guidelines that would likely be imposed in
connection with any issuance of preferred shares by the Fund, it is expected that the Fund would be authorized to enter into swaptions
and to purchase credit default swaps without limitation but would be subject to limitation on entering into interest rate swap agreements
or selling credit protection. Certain rating agency guidelines may be changed from time to time and it is expected that those relating
to interest rate swaps, swaptions and credit derivatives would be able to be revised by the Board of Trustees, without shareholder vote
of the Common Shares or the Fund’s preferred shares, so long as the relevant rating agency(ies) has given written notice that such
revisions would not adversely affect the rating of the Fund’s preferred shares then in effect.
The Board of Trustees has currently limited the Fund’s use of
interest rate and credit swaps and swaptions as follows: (1) swaps and swaptions must be U.S. dollar-denominated and used for hedging
purposes only; (2) no more than 5% of the Fund’s total assets, at the time of purchase, may be invested in time premiums paid for
swaptions; (3) swaps and swaptions must conform to the standards of the ISDA Master Agreement; and (4) the counterparty must be a bank
or broker-dealer firm regulated under the laws of the United States that (a) is on a list approved by the Board of Trustees, (b) has
capital of at least $100 million and (c) is rated investment grade by both Moody’s and S&P. These criteria can be modified
by the Board of Trustees at any time in its discretion.
The market value of the Fund’s investments in credit derivatives
and/or premiums paid therefor as a buyer of credit protection will not exceed 12% of the Fund’s total assets and the notional value
of the credit exposure to which the Fund is subject when it sells credit derivatives will not exceed 33 1/3% of the Fund’s total
assets. The Fund has no other investment restrictions with respect to credit derivatives.
Clough expects that the Fund will be subject to the initial and subsequent
mark-to-market collateral requirements that are standard among ISDA participants. These requirements help insure that the party who is
a net obligor at current market value has pledged for safekeeping, to the counterparty or its agent, sufficient collateral to cover any
losses should the obligor become incapable, for whatever reason, of fulfilling its commitments under the swap or swaption agreements.
This is analogous, in many respects, to the collateral requirements in place on regular futures and options exchanges. The Fund will
be responsible for monitoring the market value of all derivative transactions to ensure that they are properly collateralized.
If Clough determines it is advisable for the Fund to enter into such
transactions, the Fund will institute procedures for valuing interest rate swap, swaption, or credit derivative positions to which it
is party. Interest rate swaps, swaptions, and credit derivatives will be valued by the counterparty to the swap or swaption in question.
Such valuation will then be compared with the valuation provided by a broker-dealer or bank that is not a party to the contract. In the
event of material discrepancies, the Fund has procedures in place for valuing the swap or swaption, subject to the direction of the Board
of Trustees, which include reference to third-party information services, such as Bloomberg, and a comparison with Clough’s valuation
models.
The use of interest rate swaps, swaptions and credit derivatives, as
the foregoing discussion suggests, is subject to risks and complexities beyond what might be encountered in standardized, exchange traded
options and futures contracts. Such risks include operational risk, valuation risk, credit risk and/or counterparty risk (i.e.,
the risk that the counterparty cannot or will not perform its obligations under the agreement). In addition, at the time the interest
rate swap, swaption, or credit derivative reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain
a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction. If this occurs,
it could have a negative impact on the performance of the Fund.
While the Fund may utilize interest rate swaps, swaptions, and credit
derivatives for hedging purposes or to enhance total return, their use might result in poorer overall performance for the Fund than if
it had not engaged in any such transactions. If, for example, the Fund had insufficient cash, it might have to sell or pledge a portion
of its underlying portfolio of securities in order to meet daily mark-to-market collateralization requirements at a time when it might
be disadvantageous to do so.
There may be an imperfect correlation between the Fund’s portfolio
holdings and swaps, swaptions, or credit derivatives entered into by the Fund, which may prevent the Fund from achieving the intended
hedge or expose the Fund to risk of loss. Further, the Fund’s use of swaps, swaptions, and credit derivatives to reduce risk involves
costs and will be subject to Clough’s ability to predict correctly changes in interest rate relationships, volatility, credit quality
or other factors. No assurance can be given that Clough’s judgment in this respect will be correct.
Temporary Investments
From time to time, as Clough deems warranted based on market conditions,
the Fund may invest temporarily in cash, money market securities, money market mutual funds or cash equivalents, which may be inconsistent
with the Fund’s investment objective. Cash equivalents are highly liquid, short-term securities such as commercial paper, time
deposits, certificates of deposit, short-term notes and short-term U.S. government obligations.
Portfolio Turnover
Although the Fund cannot accurately predict its portfolio turnover
rate, it is likely to exceed 100% (excluding turnover of securities having a maturity of one year or less). A high turnover rate (100%
or more) necessarily involves greater expenses to the Fund and may result in realization of net short-term capital gains.
Foreign Currency Transactions
The value of foreign assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency rates and exchange control regulations. Currency exchange rates can also be affected
unpredictably by intervention by U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or
political developments in the United States or abroad. Foreign currency exchange transactions may be conducted on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into derivative currency transactions.
Currency futures contracts are exchange-traded and change in value to reflect movements of a currency or a basket of currencies. Settlement
must be made in a designated currency.
Forward foreign currency exchange contracts are individually negotiated
and privately traded so they are dependent upon the creditworthiness of the counterparty. Such contracts may be used when a security
denominated in a foreign currency is purchased or sold, or when the Fund anticipates receipt in a foreign currency of dividend or interest
payments on such a security. A forward contract can then “lock in” the U.S. dollar price of the security or the U.S. dollar
equivalent of such dividend or interest payment, as the case may be. Additionally, when Clough believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may enter into a forward contract to sell, for a fixed amount
of dollars, the amount of foreign currency approximating the value of some or all of the securities held that are denominated in such
foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be
possible. In addition, it may not be possible to hedge against long-term currency changes. The Fund may engage in cross-hedging by using
forward contracts in one currency (or basket of currencies) to hedge against fluctuations in the value of securities denominated in a
different currency if Clough determines that there is an established historical pattern of correlation between the two currencies (or
the basket of currencies and the underlying currency). Use of a different foreign currency magnifies exposure to foreign currency exchange
rate fluctuations. The Fund may use forward contracts to shift exposure to foreign currency exchange rate changes from one currency to
another. Short-term hedging provides a means of fixing the dollar value of only a portion of portfolio assets.
Currency transactions are subject to the risk of a number of complex
political and economic factors applicable to the countries issuing the underlying currencies. Furthermore, unlike trading in most other
types of instruments, there is no systematic reporting of last sale information with respect to the foreign currencies underlying the
derivative currency transactions. As a result, available information may not be complete. In an over-the-counter trading environment,
there are no daily price fluctuation limits. There may be no liquid secondary market to close out options purchased or written, or forward
contracts entered into, until their exercise, expiration or maturity. There is also the risk of default by, or the bankruptcy of, the
financial institution serving as a counterparty.
Illiquid Securities
The Fund may invest in securities for which there is no readily available
trading market or which are otherwise illiquid. Illiquid securities include securities legally restricted as to resale, such as commercial
paper issued pursuant to Section 4(2) of the Securities Act and securities eligible for resale pursuant to Rule 144A thereunder. Section
4(2) and Rule 144A securities may, however, be treated as liquid by Clough pursuant to procedures adopted by the Board of Trustees, which
require consideration of factors such as trading activity, availability of market quotations and number of dealers willing to purchase
the security. If the Fund invests in Rule 144A securities, the level of portfolio illiquidity may be increased to the extent that eligible
buyers become uninterested in purchasing such securities.
It may be difficult to sell such securities at a price representing
their fair value until such time as such securities may be sold publicly. Where registration is required, a considerable period may elapse
between a decision to sell the securities and the time when it would be permitted to sell. Thus, the Fund may not be able to obtain as
favorable a price as that prevailing at the time of the decision to sell. The Fund may also acquire securities through private placements
under which it may agree to contractual restrictions on the resale of such securities. Such restrictions might prevent their sale at
a time when such sale would otherwise be desirable.
Repurchase Agreements
A repurchase agreement exists where the Fund sells a security (typically
U.S. government securities) to a party for cash and agrees to buy the same security back on a specific date (typically the next business
day) from the same party for cash. Repurchase agreements carry several risks. For instance, the Fund could incur a loss if the value
of the security sold has increased more than the value of the cash and collateral held. In addition, the other party to the agreement
may default, in which case the Fund would not re-acquire possession of the security and suffer full value loss (or incur costs when attempting
to purchase a similar security from another party). Also, in a bankruptcy proceeding involving the other party, a court may determine
that the security does not belong to the Fund and order that the security be used to pay off the debts of the bankrupt. The Fund will
reduce the risk by requiring the other party to put up collateral, whose value is checked and reset daily. The Fund also intends only
to deal with parties that appear to have the resources and the financial strength to live up to the terms of the agreement. Repurchase
agreements are limited to 50% of the Fund’s assets. Cash held for securities sold by the Fund are not included in the Fund’s
assets when making this calculation.
USE OF LEVERAGE
The Fund uses leverage through the issuance of preferred shares and/or
through borrowings, including the issuance of debt securities. The Fund may use leverage of up to 33% of its total assets (including
the amount obtained from leverage). The Fund generally will not use leverage if Clough anticipates that it would result in a lower return
to Common Shareholders for any significant amount of time. The Fund also may borrow money as a temporary measure for extraordinary or
emergency purposes, including the payment of dividends and the settlement of securities transactions, which otherwise might require untimely
dispositions of Fund securities.
Changes in the value of the Fund’s portfolio (including investments
bought with the proceeds of the preferred shares offering or borrowing program) will be borne entirely by the Common Shareholders. If
there is a net decrease (or increase) in the value of the Fund’s investment portfolio, the leverage will decrease (or increase)
the net asset value per share to a greater extent than if the Fund were not leveraged. During periods in which the Fund is using leverage,
the fees paid to Clough for investment advisory services and to ALPS for administrative services will be higher than if the Fund did
not use leverage because the fees paid will be calculated on the basis of the Fund’s total assets, including proceeds from borrowings
and the issuance of preferred shares, which may create an incentive to leverage the Fund. As discussed under “Description of Capital
Structure—Preferred Shares,” the Fund’s issuance of preferred shares may alter the voting power of Common Shareholders.
Capital raised through leverage will be subject to dividend or interest
payments, which may exceed the income and appreciation on the assets purchased. The issuance of preferred shares or entering into a borrowing
program involves expenses and other costs and may limit the Fund’s freedom to pay dividends on Common Shares or to engage in other
activities. The issuance of a class of preferred shares or incurrence of borrowings having priority over the Fund’s Common Shares
creates an opportunity for greater return per Common Share, but at the same time such leveraging is a speculative technique in that it
will increase the Fund’s exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with leverage
proceeds exceed the associated costs of such preferred shares or borrowings (and other Fund expenses), the use of leverage will diminish
the investment performance of the Fund’s Common Shares compared with what it would have been without leverage.
The Fund may be subject to certain restrictions on investments imposed
by guidelines of one or more rating agencies that may issue ratings for any preferred shares issued by the Fund and by borrowing program
covenants. These guidelines and covenants may impose asset coverage or Fund composition requirements that are more stringent than those
imposed on the Fund by the 1940 Act. It is not anticipated that these covenants or guidelines will significantly impede Clough from managing
the Fund’s portfolio in accordance with the Fund’s investment objective and policies.
Under the 1940 Act, the Fund is not permitted to issue preferred shares
unless immediately after such issuance the total asset value of the Fund’s portfolio is at least 200% of the liquidation value
of the outstanding preferred shares (i.e., such liquidation value may not exceed 50% of the Fund’s total assets). In addition,
the Fund is not permitted to declare any cash dividend or other distribution on its Common Shares unless, at the time of such declaration,
the net asset value of the Fund’s portfolio (determined after deducting the amount of such dividend or other distribution) is at
least 200% of such liquidation value. If preferred shares are issued, the Fund intends, to the extent possible, to purchase or redeem
preferred shares, from time to time, to maintain coverage of any preferred shares of at least 200%. Though the Fund may issue preferred
shares amounting to 50% leverage, it does not intend to exceed 33% leverage, at which point there will be an asset coverage of 303%.
Initially, holders of the Common Shares will elect each of the eight Trustees of the Fund. If the Fund issues preferred shares, the holders
of the preferred shares will elect two of the Trustees of the Fund. In the event the Fund failed to pay dividends on its preferred shares
for two years, preferred shareholders would be entitled to elect a majority of the Trustees until the dividends are paid.
To qualify for federal income taxation as a “regulated investment
company,” the Fund must distribute in each taxable year at least 90% of its net investment income (including net interest income
and net short-term gain). The Fund also will be required to distribute annually substantially all of its income and capital gain, if
any, to avoid imposition of a nondeductible 4% federal excise tax.
The Fund’s willingness to issue new securities for investment
purposes, and the amount the Fund will issue, will depend on many factors, the most important of which are market conditions and interest
rates. Successful use of a leveraging strategy may depend on Clough’s ability to predict correctly interest rates and market movements,
and there is no assurance that a leveraging strategy will be successful during any period in which it is employed.
For the period from November 1, 2019 to October 31, 2020, the average
amount borrowed under the Credit Agreement was $49,894,809, at an average rate of 1.64%. As of October 31, 2020, the amount of outstanding
borrowings was $50,500,000, the interest rate was 0.91% and the amount of pledged collateral was $83,532,536. Additional information
on senior securities of the Fund may be found in the Financial Highlights section of the Annual Report dated October 31, 2020 and Annual
Report dated October 31, 2015, which are incorporated by reference.
The following table is designed to illustrate the effect on the return
to a holder of the Fund’s Common Shares of leverage in the amount of approximately 33% of the Fund’s total assets, assuming
hypothetical annual returns of the Fund’s portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases
the return to Common Shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when
the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns
may be greater or less than those appearing in the table.
Assumed portfolio return (net
of expenses)
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
Corresponding Common Share return
|
(16)%
|
(8)%
|
(1)%
|
7%
|
15%
|
In addition to the credit facility, the Fund may use a variety of additional
strategies that would be viewed as potentially adding leverage to the portfolio. These include the sale of credit default swap contracts
and the use of other derivative instruments, reverse repurchase agreements and the issuance of preferred shares. By adding additional
leverage, these strategies have the potential to increase returns to Common Shareholders, but also involve additional risks. Additional
leverage will increase the volatility of the Fund’s investment portfolio and could result in larger losses than if the strategies
were not used. However, to the extent that the Fund enters into offsetting transactions or owns positions covering its obligations, the
leveraging effect is expected to be minimized or eliminated.
During the time in which the Fund is utilizing leverage, the fees paid
to Clough and the Administrator for services will be higher than if the Fund did not utilize leverage because the fees paid will be calculated
based on the Fund’s total assets. Only the Fund’s holders of Common Shares bear the cost of the Fund’s fees and expenses.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Fund involves risk, including the risk that you may
receive little or no return on your investment or that you may lose part or all of your investment. Therefore, before investing you should
consider carefully the following risks before investing in the Fund.
Investment and Market Risk
An investment in Common Shares is subject to investment risk, including
the possible loss of the entire principal amount invested. An investment in Common Shares represents an indirect investment in the securities
owned by the Fund, which are generally traded on a securities exchange or in the over-the-counter markets. The value of these securities,
like other market investments, may move up or down, sometimes rapidly and unpredictably. The Common Shares at any point in time may be
worth less than the original investment, even after taking into account any reinvestment of dividends and distributions.
Key Adviser Personnel Risk
The Fund’s ability to identify and invest in attractive opportunities
is dependent upon Clough, its investment adviser. If one or more of the key individuals leaves Clough, Clough may not be able to hire
qualified replacements at all, or may require an extended time to do so. This could prevent the Fund from achieving its investment objective.
Issuer Risk
The value of an issuer’s securities may decline for a number
of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s
goods and services.
Foreign Securities Risk
The Fund’s investments in securities of foreign issuers are subject
to risks not usually associated with owning securities of U.S. issuers. These risks can include fluctuations in foreign currencies, foreign
currency exchange controls, social, political and economic instability, differences in securities regulation and trading, expropriation
or nationalization of assets, and foreign taxation issues. In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depreciation of the Fund’s securities. It may also be more
difficult to obtain and enforce a judgment against a foreign issuer. To the extent the Fund focuses its investments in a particular country
or in countries within a particular geographic region, economic, political, regulatory and other conditions affecting such country or
region may have a greater impact on the Fund than on more geographically diversified funds. Any foreign investments made by the Fund
must be made in compliance with U.S. and foreign currency restrictions and tax laws restricting the amounts and types of foreign investments.
The Fund will not invest more than 33% of its assets, at the time of acquisition, in securities (including equity and fixed income securities)
of governments and companies in emerging markets, but has no other investment restrictions with respect to investing in foreign issuers.
Emerging Markets Risk
Investing in securities of issuers based in underdeveloped emerging
markets entails all of the risks of investing in securities of foreign issuers to a heightened degree. These heightened risks include:
(i) greater risks of expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the
smaller size of the market for such securities and a lower volume of trading, resulting in lack of liquidity and in price volatility;
and (iii) certain national policies which may restrict the Fund’s investment opportunities including restrictions on investing
in issuers or industries deemed sensitive to relevant national interests.
REIT Risk
If the Fund invests in REITs, such investment will subject the Fund
to various risks. The first, real estate industry risk, is the risk that the REIT share prices will decline because of adverse developments
affecting the real estate industry and real property values. In general, real estate values can be affected by a variety of factors,
including supply and demand for properties, the economic health of the country or of different regions, and the strength of specific
industries that rent properties. The second, investment style risk, is the risk that returns from REITs, which typically are small or
medium capitalization stocks, will trail returns from the overall stock market. The third, interest rate risk, is the risk that changes
in interest rates may hurt real estate values or make REIT shares less attractive than other income producing investments.
Qualification as a REIT in any particular year is a complex analysis
that depends on a number of factors. There can be no assurance that the entities in which the Fund invests with the expectation that
they will be taxed as a REIT will qualify as a REIT. An entity that fails to qualify as a REIT, would be subject to a corporate level
tax, would not be entitled to a deduction for dividends paid to its shareholders and would not pass through to its shareholders the character
of income earned by the entity. If the Fund were to invest in an entity that failed to qualify as a REIT, such failure could drastically
reduce the Fund’s yield on that investment.
The Fund does not expect to invest a significant portion of its assets
in REITs but does not have any investment restrictions with respect to such investments.
Income Risk
The income Common Shareholders receive from the Fund is based primarily
on the dividends and interest it earns from its investments, which can vary widely over the short and long term. If prevailing market
interest rates drop, distribution rates of the Fund’s preferred stock holdings and any bond holdings and Common Shareholder’s
income from the Fund could drop as well. The Fund’s income also would likely be affected adversely when prevailing short-term interest
rates increase and the Fund is utilizing leverage.
Non-Investment Grade Securities Risk
The Fund’s investments in preferred stocks and bonds of below
investment grade quality (commonly referred to as “high yield” or “junk bonds”), if any, are predominantly speculative
because of the credit risk of their issuers. While offering a greater potential opportunity for capital appreciation and higher yields,
preferred stocks and bonds of below investment grade quality entail greater potential price volatility and may be less liquid than higher-rated
securities. Issuers of below investment grade quality preferred stocks and bonds are more likely to default on their payments of dividends/interest
and liquidation value/principal owed to the Fund, and such defaults will reduce the Fund’s net asset value and income distributions.
The prices of these lower quality preferred stocks and bonds are more sensitive to negative developments than higher rated securities.
Adverse business conditions, such as a decline in the issuer’s revenues or an economic downturn, generally lead to a higher non-payment
rate. In addition, such a security may lose significant value before a default occurs as the market adjusts to expected higher non-payment
rates. The Fund will not invest more than 20% of its total assets in securities rated below investment grade. The foregoing credit quality
policies apply only at the time a security is purchased, and the Fund is not required to dispose of securities already owned by the Fund
in the event of a change in assessment of credit quality or the removal of a rating.
Interest Rate Risk
Interest rate risk is the risk that preferred stocks paying fixed dividend
rates and fixed-rate debt securities will decline in value because of changes in market interest rates. When interest rates rise the
market value of such securities generally will fall. The Fund’s investment in preferred stocks and fixed-rate debt securities means
that the net asset value and price of the Common Shares may decline if market interest rates rise. Interest rates are currently low relative
to historic levels. During periods of declining interest rates, an issuer of preferred stock or fixed-rate debt securities may exercise
its option to redeem or prepay securities prior to maturity, which could result in the Fund’s having to reinvest in lower yielding
debt securities or other types of securities. This is known as call or prepayment risk. During periods of rising interest rates, the
average life of certain types of securities may be extended because of slower than expected payments. This may lock in a below market
yield, increase the security’s duration, and reduce the value of the security. This is known as extension risk. Investments in
debt securities with long-term maturities may experience significant price declines if long-term interest rates increase. This is known
as maturity risk. The value of the Fund’s common stock investments may also be influenced by changes in interest rates.
Hedging Strategy Risk
Certain of the investment techniques that the Fund may employ for hedging
or, under certain circumstances, to increase income or total return will expose the Fund to risks. In addition to the hedging techniques
described elsewhere (i.e., positions in Treasury Bond or Treasury Note futures contracts, use of options on these positions, positions
in interest rate swaps, options thereon (“swaptions”), and credit derivatives), such investment techniques may include entering
into interest rate and stock index futures contracts and options on interest rate and stock index futures contracts, purchasing and selling
put and call options on securities and stock indices, purchasing and selling securities on a when-issued or delayed delivery basis, entering
into repurchase agreements, lending portfolio securities and making short sales of securities “against the box.” The Fund
intends to comply with regulations of the Securities and Exchange Commission involving “covering” or segregating assets in
connection with the Fund’s use of options and futures contracts.
There are economic costs of hedging reflected in the pricing of futures,
swaps, options, and swaption contracts which can be significant, particularly when long-term interest rates are substantially above short-term
interest rates, as is the case at present. The desirability of moderating these hedging costs will be a factor in Clough’s choice
of hedging strategies, although costs will not be the exclusive consideration in selecting hedge instruments. In addition, the Fund may
select individual investments based upon their potential for appreciation without regard to the effect on current income, in an attempt
to mitigate the impact on the Fund’s assets of the expected normal cost of hedging.
There may be an imperfect correlation between changes in the value
of the Fund’s portfolio holdings and hedging positions entered into by the Fund, which may prevent the Fund from achieving the
intended hedge or expose the Fund to risk of loss. In addition, the Fund’s success in using hedge instruments is subject to Clough’s
ability to predict correctly changes in the relationships of such hedge instruments to the Fund’s portfolio holdings, and there
can be no assurance that Clough’s judgment in this respect will be accurate. Consequently, the use of hedging transactions might
result in a poorer overall performance for the Fund, whether or not adjusted for risk, than if the Fund had not hedged its portfolio
holdings.
Credit Risk
Credit risk is the risk that an issuer of a preferred or debt security
will become unable to meet its obligation to make dividend, interest and principal payments. In general, lower rated preferred or debt
securities carry a greater degree of credit risk. If rating agencies lower their ratings of preferred or debt securities in the Fund’s
portfolio, the value of those obligations could decline. In addition, the underlying revenue source for a preferred or debt security
may be insufficient to pay dividends, interest or principal in a timely manner. Because a significant source of income for the Fund can
be the dividend, interest and principal payments on the preferred or debt securities in which it invests, any default by an issuer of
a preferred or debt security could have a negative impact on the Fund’s ability to pay dividends on Common Shares. Even if the
issuer does not actually default, adverse changes in the issuer’s financial condition may negatively affect its credit rating or
presumed creditworthiness. These developments would adversely affect the market value of the issuer’s obligations or the value
of credit derivatives if the Fund has sold credit protection.
Derivatives Risk
Derivative transactions (such as futures contracts and options thereon,
options, swaps and short sales) subject the Fund to increased risk of principal loss due to imperfect correlation or unexpected price
or interest rate movements. The Fund also will be subject to credit risk with respect to the counterparties to the derivatives contracts
purchased by the Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due
to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy
or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. As a
general matter, dividends received on hedged stock positions are characterized as ordinary income and are not eligible for favorable
tax treatment. In addition, use of derivatives may give rise to short-term capital gains and other income that would not qualify for
payments by the Fund of tax-advantaged dividends.
The Securities and Exchange Commission (SEC) recently
adopted Rule 18f-4 under the Investment Company Act of 1940, as amended (1940 Act), which will regulate the use of derivatives for certain
funds registered under the 1940 Act. Unless the Fund qualifies as a “limited derivatives user” as defined in Rule 18f-4,
the rule would, among other things, require the Fund to establish a comprehensive derivatives risk management program, to comply with
certain value-at-risk based leverage limits, to appoint a derivatives risk manager and to provide additional disclosure both publicly
and to the SEC regarding its derivatives positions. If the Fund qualifies as a limited derivatives user, Rule 18f-4 would require the
Fund to have policies and procedures to manage its aggregate derivatives risk. These requirements could have an impact on the Fund, including
a potential increase in cost to enter into derivatives transactions and may require the Fund to alter, perhaps materially, its use of
derivatives.
Counterparty Risk
The Fund runs the risk that the issuer or guarantor of a fixed income
security, the counterparty to an over-the-counter derivatives contract, a borrower of the Fund’s securities or the obligor of an
obligation underlying an asset-backed security will be unable or unwilling to make timely principal, interest, or settlement payments
or otherwise honor its obligations. In addition, to the extent that the Fund uses over-the-counter derivatives, and/or has significant
exposure to a single counterparty, this risk will be particularly pronounced for the Fund.
Preferred Securities Risk
In addition to credit risk, investment in preferred securities carries
certain risks including:
|
•
|
Deferral Risk—Fully taxable
or hybrid preferred securities typically contain provisions that allow an issuer, at its discretion, to defer distributions for up
to 20 consecutive quarters. Traditional preferreds also contain provisions that allow an issuer, under certain conditions to skip
(in the case of “noncumulative preferreds”) or defer (in the case of “cumulative preferreds”), dividend payments.
If the Fund owns a preferred security that is deferring its distributions, the Fund may be required to report income for tax purposes
while it is not receiving any distributions.
|
|
•
|
Redemption Risk—Preferred
securities typically contain provisions that allow for redemption in the event of tax or security law changes in addition to call
features at the option of the issuer. In the event of a redemption, the Fund may not be able to reinvest the proceeds at comparable
rates of return.
|
|
•
|
Limited Voting Rights—Preferred
securities typically do not provide any voting rights, except in cases when dividends are in arrears beyond a certain time period,
which varies by issue.
|
|
•
|
Subordination—Preferred
securities are subordinated to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate
income and liquidation payments, and therefore will be subject to greater credit risk than those debt instruments.
|
|
•
|
Liquidity—Preferred securities
may be substantially less liquid than many other securities, such as U.S. government securities, corporate debt, or common stocks.
|
Debt Securities Risk
In addition to credit risk, investment in debt securities carries certain
risks including:
|
•
|
Redemption Risk—Debt securities
sometimes contain provisions that allow for redemption in the event of tax or security law changes in addition to call features at
the option of the issuer. In the event of a redemption, the Fund may not be able to reinvest the proceeds at comparable rates of
return.
|
|
•
|
Limited Voting Rights—Debt
securities typically do not provide any voting rights, except in cases when interest payments have not been made and the issuer is
in default.
|
|
•
|
Liquidity—Certain debt
securities may be substantially less liquid than many other securities, such as U.S. government securities or common stocks.
|
Convertible Securities Risk
The value of a convertible security is a function of its “investment
value” (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not
have a conversion privilege) and its “conversion value” (the security’s worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment
value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors
may also have an effect on the convertible security’s investment value. The conversion value of a convertible security is determined
by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price
of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a
premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while
holding a fixed-income security.
A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by the Fund
is called for redemption, the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common
stock or sell it to a third party. Any of these actions could have an adverse effect on the Fund’s ability to achieve its investment
objective.
Small and Medium Cap Company Risk
Compared to investment companies that focus only on large capitalization
companies, the Fund’s share price may be more volatile because it also invests in small and medium capitalization companies. Compared
to large companies, small and medium capitalization companies are more likely to have (i) more limited product lines or markets and less
mature businesses, (ii) fewer capital resources, (iii) more limited management depth, and, (iv) shorter operating histories. Further,
compared to large cap stocks, the securities of small and medium capitalization companies are more likely to experience sharper swings
in market values, be harder to sell at times and at prices that Clough believes appropriate, and offer greater potential for gains and
losses.
Leverage Risk
Leverage creates risks for the Common Shareholders, including the likelihood
of greater volatility of net asset value and market price of the Common Shares. There is a risk that fluctuations in the dividend rates
on any preferred shares may adversely affect the return to the Common Shareholders. If the income from the securities purchased with
such funds is not sufficient to cover the cost of leverage, the return on the Fund will be less than if leverage had not been used, and
therefore the amount available for distribution to Common Shareholders as dividends and other distributions will be reduced and may not
satisfy the level dividend rate distribution policy set by the Board of Trustees. Clough in its best judgment nevertheless may determine
to maintain the Fund’s leveraged position if it deems such action to be appropriate in the circumstances.
Liquidity Risk
Restricted securities and other illiquid investments of the Fund involve
the risk that the securities will not be able to be sold at the time desired by Clough or at prices approximating the value at which
the Fund is carrying the securities. Where registration is required to sell a security, the Fund may be obligated to pay all or part
of the registration expenses, and a considerable period may elapse between the decision to sell and the time the Fund may be permitted
to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the
Fund might obtain a less favorable price than prevailed when it decided to sell. Restricted securities for which no market exists and
other illiquid investments are valued at fair value as determined in accordance with procedures approved and periodically reviewed by
the Trustees of the Fund.
Inflation Risk
Inflation risk is the risk that the purchasing power of assets or income
from investment will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of
the Common Shares and distributions thereon can decline. In addition, during any periods of rising inflation, dividend rates of preferred
shares of the Fund would likely increase, which would tend to further reduce returns to Common Shareholders.
Market Price of Shares
The shares of closed-end management investment companies often trade
at a discount from their net asset value, and the Fund’s Common Shares may likewise trade at a discount from net asset value. The
trading price of the Fund’s Common Shares may be less than the public offering price. The returns earned by Common Shareholders
who sell their Common Shares below net asset value will be reduced.
Management Risk
The Fund is subject to management risk because it is an actively managed
portfolio. Clough and the individual portfolio managers will apply investment techniques and risk analyses in making investment decisions
for the Fund, but there can be no guarantee that these will produce the desired results.
Market Disruption and Geopolitical Risk
The ongoing U.S. military and related actions in Iraq and Afghanistan
and events in the Middle East and Ukraine, as well as the continuing threat of terrorist attacks, could have significant adverse effects
on the U.S. economy, the stock market and world economies and markets. The Fund cannot predict the effects of similar events in the future
on the U.S. economy and securities markets. These military actions and related events, including the conflicts in the Middle East, have
led to increased short-term market volatility and may have long-term effects on U.S. and world economies and markets. Similar disruptions
of the financial markets could impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors
relating to the Common Shares.
Pandemic Risks
An outbreak of Covid-19 respiratory disease caused by a novel coronavirus
was first detected in late 2019 and subsequently spread globally in early 2020. The impact of the outbreak has been rapidly evolving,
and cases of the virus have continued to be identified in most developed and emerging countries throughout the world. Many local, state,
and national governments, as well as businesses, have reacted by instituting quarantines, border closures, restrictions on travel, and
other measures designed to arrest the spread of the virus. The outbreak and public and private sector responses thereto have led to large
portions of the populations of many nations working from home for indefinite periods of time, temporary or permanent layoffs, disruptions
in supply chains, lack of availability of certain goods, and adversely impacted many industries. These circumstances are evolving, and
further developments could result in additional disruptions and uncertainty. The impact of the coronavirus outbreak may last for an extended
period of time and result in a substantial economic downturn. Pandemics, including the coronavirus outbreak, have resulted in a general
decline in the global economy and negative effects on the performance of individual countries, industries, or sectors. Such negative
impacts can be significant in unforeseen ways. Deteriorating economic fundamentals may in turn increase the risk of default or insolvency
of particular companies, negatively impact market value, increase market volatility, cause credit spreads to widen, and reduce liquidity.
All of these risks may have a material adverse effect on the performance and financial condition of the Fund’s investments, and
on the overall performance of the Fund.
Anti-Takeover Provisions
The Fund’s Declaration of Trust includes provisions that could
have the effect of inhibiting the Fund’s possible conversion to open-end status and limiting the ability of other entities or persons
to acquire control of the Fund or the Board of Trustees. In certain circumstances, these provisions might also inhibit the ability of
shareholders to sell their shares at a premium over prevailing market prices. See “Anti-Takeover Provisions in the Declaration
of Trust.”
Portfolio Turnover Risk
The techniques and strategies contemplated by the Fund might result
in a high degree of portfolio turnover. The Fund cannot accurately predict its securities portfolio turnover rate, but anticipates that
its annual portfolio turnover rate will exceed 100% under normal market conditions, although it could be materially higher under certain
conditions. Higher portfolio turnover rates could result in corresponding increases in brokerage commissions and generate short-term
capital gains taxable as ordinary income.
Special Risks to Holders of Common Shares
Dilution Risk. If the Fund determines to conduct a rights
offering to subscribe for common shares, holders of common shares may experience dilution of the aggregate net asset value of their common
shares. Such dilution will depend upon whether (i) such shareholders participate in the rights offering and (ii) the Fund’s net
asset value per common share is above or below the subscription price on the expiration date of the rights offering.
Shareholders who do not exercise their subscription rights may, at
the completion of such an offering, own a smaller proportional interest in the Fund than if they exercised their subscription rights.
As a result of such an offering, a shareholder may experience dilution in net asset value per share if the subscription price per share
is below the net asset value per share on the expiration date. If the subscription price per share is below the net asset value per share
of the Fund’s shares on the expiration date, a shareholder will experience an immediate dilution of the aggregate net asset value
of such shareholder’s shares if the shareholder does not participate in such an offering and the shareholder will experience a
reduction in the net asset value per share of such shareholder’s shares whether or not the shareholder participates in such an
offering. The Fund cannot state precisely the extent of this dilution (if any) if the shareholder does not exercise such shareholder’s
subscription rights because the Fund does not know what the net asset value per share will be when the offer expires or what proportion
of the subscription rights will be exercised.
Leverage Risk. The Fund currently uses financial leverage
for investment purposes by borrowing from a financial institution and is also permitted to use other types of financial leverage, such
as through the issuance of debt securities or additional preferred shares and borrowing from financial institutions. As provided in the
1940 Act and subject to certain exceptions, the Fund may issue additional senior securities (which may be stock, such as preferred shares,
and/or securities representing debt) only if immediately after such issuance the value of the Fund’s total assets, less certain
ordinary course liabilities, exceeds 300% of the amount of the debt outstanding and exceeds 200% of the amount of preferred shares and
debt outstanding. As of January 31, 2021, the amount of leverage represented approximately 31% of the Fund’s total assets.
The Fund’s leveraged capital structure creates special risks
not associated with unleveraged funds having a similar investment objective and policies. These include the possibility of greater loss
and the likelihood of higher volatility of the net asset value of the Fund and the asset coverage for the preferred shares. Such volatility
may increase the likelihood of the Fund having to sell investments in order to meet its obligations to make distributions on the preferred
shares or principal or interest payments on debt securities, or to redeem preferred shares or repay debt, when it may be disadvantageous
to do so. The Fund’s use of leverage may require it to sell portfolio investments at inopportune times in order to raise cash to
redeem preferred shares or otherwise de-leverage so as to maintain required asset coverage amounts or comply with the mandatory redemption
terms of any outstanding preferred shares. The use of leverage magnifies both the favorable and unfavorable effects of price movements
in the investments made by the Fund. To the extent that the Fund employs leverage in its investment operations, the Fund is subject to
substantial risk of loss. The Fund cannot assure you that borrowings or the issuance of preferred shares will result in a higher yield
or return to the holders of the common shares. Also, since the Fund utilizes leverage, a decline in net asset value could affect the
ability of the Fund to make common share distributions and such a failure to make distributions could result in the Fund ceasing to qualify
as a RIC under the Code. See “Federal Income Tax Matters.”
Any decline in the net asset value of the Fund’s investments
would be borne entirely by the holders of common shares. Therefore, if the market value of the Fund’s portfolio declines, the leverage
will result in a greater decrease in net asset value to the holders of common shares than if the Fund were not leveraged. This greater
net asset value decrease will also tend to cause a greater decline in the market price for the common shares. The Fund might be in danger
of failing to maintain the required asset coverage of its borrowings, notes or preferred shares or of losing its ratings on its notes
or preferred shares or, in an extreme case, the Fund’s current investment income might not be sufficient to meet the distribution
or interest requirements on the borrowings, preferred shares. In order to counteract such an event, the Fund might need to liquidate
investments in order to fund a redemption or repayment of some or all of the borrowings, preferred shares.
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Preferred Share Risk. The issuance of preferred
shares causes the net asset value and market value of the common shares to become more volatile. If the dividend rate on the preferred
shares approaches the net rate of return on the Fund’s investment portfolio, the benefit of leverage to the holders of the
common shares would be reduced. If the dividend rate on the preferred shares plus the management fee annual rate of 0.70% exceeds
the net rate of return on the Fund’s portfolio, the leverage will result in a lower rate of return to the holders of common
shares than if the Fund had not issued preferred shares. If the Fund has insufficient investment income and gains, all or a portion
of the distributions to preferred shareholders would come from the common shareholders’ capital. Such distributions and interest
payments reduce the net assets attributable to common shareholders. The Prospectus Supplement relating to any sale of preferred shares
will set forth dividend rate on such preferred shares.
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In addition, the Fund would pay (and the holders of common
shares will bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred shares, including the advisory
fees on the incremental assets attributable to the preferred shares.
Holders of preferred shares may have different interests than
holders of common shares and may at times have disproportionate influence over the Fund’s affairs. As provided in the 1940 Act
and subject to certain exceptions, the Fund may issue senior securities (which may be stock, such as preferred shares, and/or securities
representing debt) only if immediately after such issuance the value of the Fund’s total assets, less certain ordinary course liabilities,
exceeds 300% of the amount of the debt outstanding and exceeds 200% of the amount of preferred shares and debt outstanding, which is
referred to as the “asset coverage” required by the 1940 Act. In the event the Fund fails to maintain an asset coverage of
100% for any notes outstanding for certain periods of time, the 1940 Act requires that either an event of default be declared or that
the holders of such notes have the right to elect a majority of the Fund’s Trustees until asset coverage recovers to 110%. In addition,
holders of preferred shares, voting separately as a single class, have the right (subject to the rights of noteholders) to elect two
members of the Board at all times and in the event dividends become two full years in arrears would have the right to elect a majority
of the Trustees until such arrearage is completely eliminated. In addition, preferred shareholders have class voting rights on certain
matters, including changes in fundamental investment restrictions and conversion of the Fund to open-end status, and accordingly can
veto any such changes. The Fund’s common shares are structurally subordinated as to income and residual value to any preferred
shares in the Fund’s capital structure, in terms of priority to income and payment in liquidation. See “Description of the
Securities—Preferred Shares”.
Restrictions imposed on the declarations and payment of dividends
or other distributions to the holders of the Fund’s common shares and preferred shares, both by the 1940 Act and by requirements
imposed by rating agencies, might impair the Fund’s ability to maintain its qualification as a RIC for U.S. federal income tax
purposes. While the Fund intends to redeem its preferred shares to the extent necessary to enable the Fund to distribute its income as
required to maintain its qualification as a RIC under the Code, there can be no assurance that such actions can be effected in time to
meet the Code requirements.
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Portfolio Guidelines of Rating Agencies
for Preferred Shares and/or Credit Facility. In order to obtain and maintain attractive credit quality ratings for preferred
shares, the Fund must comply with investment quality, diversification and other guidelines established by the relevant rating agencies.
These guidelines could affect portfolio decisions and may be more stringent than those imposed by the 1940 Act. In the event that
a rating on the Fund’s preferred shares is lowered or withdrawn by the relevant rating agency, the Fund may also be required
to redeem all or part of its outstanding preferred shares, and the common shares of the Fund will lose the potential benefits associated
with a leveraged capital structure.
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Impact on Common Shares. Assuming
that leverage will (1) be equal in amount to approximately 33% of the Fund’s total assets, and (2) charge interest or involve
dividend payments at a projected blended annual average leverage dividend or interest rate of 2.84%, then the total return generated
by the Fund’s portfolio (net of estimated expenses) must exceed approximately 1.03% of the Fund’s total net assets in
order to cover such interest or dividend payments and other expenses specifically related to leverage. Of course, these numbers are
merely estimates, used for illustration. Actual dividend rates, interest or payment rates may vary frequently and may be significantly
higher or lower than the rate estimated above. The following table is furnished in response to requirements of the SEC. It is designed
to illustrate the effect of leverage on common share total return, assuming investment portfolio total returns (comprised of net
investment income of the Fund, realized gains or losses of the Fund and changes in the value of the securities held in the Fund’s
portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily
indicative of the investment portfolio returns experienced or expected to be experienced by the Fund, and actual investment portfolio
total returns may be greater or less than those appearing in the table. These assumptions are based on the Fund’s fiscal year
period ended October 31, 2020, $41.303 million in common share offerings and $49.564 million in preferred share offerings.
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Assumed Return on Portfolio (Net
of Expenses)
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(10)%
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(5)%
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0%
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5%
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10%
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Corresponding Return to Common Shareholder
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(17)%
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(9)%
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(2)%
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6%
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14%
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Common share total return is composed of two elements—the
common share distributions paid by the Fund (the amount of which is largely determined by the taxable income of the Fund (including realized
gains or losses) after paying interest on any debt and/or dividends on any preferred shares) and unrealized gains or losses on the value
of the securities the Fund owns. As required by SEC rules, the table assumes that the Fund is more likely to suffer capital losses than
to enjoy total return. For example, to assume a total return of 0% the Fund must assume that the income it receives on its investments
is entirely offset by expenses and losses in the value of those investments.
Market Discount Risk. Common shares of closed-end funds
often trade at a discount to their net asset values and the Fund’s common shares may trade at such a discount. This risk may be
greater for investors expecting to sell their common shares of the Fund soon after completion of a public offering. The common shares
of the Fund are designed primarily for long-term investors and investors in the shares should not view the Fund as a vehicle for trading
purposes.
Special Risks to Holders of Preferred Shares
Illiquidity Prior to Exchange Listing. Prior to an offering,
there will be no public market for any series of preferred shares. In the event any series of preferred shares are issued, the Fund expects
to apply to list such shares on a national securities exchange, which will likely be the NYSE American. However, during an initial period,
which is not expected to exceed 30 days after the date of its initial issuance, such shares may not be listed on any securities exchange.
During such period, the underwriters may make a market in such shares, though they will have no obligation to do so. Consequently, an
investment in such shares may be illiquid during such period.
Market Price Fluctuation. Preferred shares may trade
at a premium to or discount from liquidation value for various reasons, including changes in interest rates, perceived credit quality
and other factors.
Special Risk to Holders of Subscription Rights
There is a risk that changes in market conditions may result in the
underlying common or preferred shares purchasable upon exercise of the subscription rights being less attractive to investors at the
conclusion of the subscription period. This may reduce or eliminate the value of the subscription rights. Investors who receive subscription
rights may find that there is no market to sell rights they do not wish to exercise. If investors exercise only a portion of the rights,
the number of common or preferred shares issued may be reduced, and the common or preferred shares may trade at less favorable prices
than larger offerings for similar securities.
MANAGEMENT OF THE FUND
Trustees and Officers
The Board of Trustees is responsible for the overall management of
the Fund, including supervision of the duties performed by Clough. There are eight Trustees of the Fund. One of the trustees is an “interested
person” (as defined in the 1940 Act) of the Fund. The name and business address of the Trustees and officers of the Fund and their
principal occupations and other affiliations during the past five years are set forth under “Management of the Fund” in the
Statement of Additional Information.
Investment Adviser
Clough Capital Partners L.P., located at 53 State Street, 27th Floor,
Boston, MA 02109, serves as investment adviser to the Fund.
Clough is registered with the Securities and Exchange Commission as
an investment adviser under the Investment Advisers Act of 1940, as amended. Clough began conducting business in 2000 and had approximately
$2.2 billion under management as of March 31, 2021. Clough is a Delaware limited partnership organized on September 27, 1999.
Pursuant to the Investment Advisory Agreement, Clough has agreed to
provide a continuous investment program for the Fund, including investment research and management with respect to the assets of the
Fund. Clough is entitled to receive management fees of 0.70% of the average daily total assets of the Fund. A discussion regarding the
basis for the Board of Trustees approving the Fund’s Investment Advisory Agreement is available in the Fund’s April 30, 2020
Semi-Annual Report to Shareholders.
Under its arrangements with other funds that it manages, Clough receives
a portion of the appreciation of such funds’ portfolios. This may create an incentive for Clough to allocate attractive investment
opportunities to such funds. However, Clough has procedures designed to allocate investment opportunities in a fair and equitable manner.
The following individuals are the Fund’s portfolio managers.
Charles I. Clough, Jr.
Charles I. Clough, Jr. has been active in the securities and investment
business for over 55 years. His experience covers most analytical functions from research analysis to portfolio management. In January
2000, Mr. Clough founded Clough Capital Partners L.P. From 1987 through January 2000, Mr. Clough was Chief Global Investment Strategist
at Merrill Lynch, where he was responsible for directing the global investment strategy research effort for one of the world’s
largest investment firms.
Prior to his tenure at Merrill Lynch, Mr. Clough was Director of Investment
Policy and Chief Strategist at Cowen & Co. Previously, he had been Director of Research and Portfolio Manager at The Boston Company,
Portfolio Manager at Colonial Management Associates and Vice President and Senior Research Analyst for Donaldson, Lufkin & Jenrette
and Alliance Capital Management Company. Mr. Clough serves on the boards and/or investment committees of a number of educational, hospital
and charitable institutions, including the Yawkey Foundation and his alma mater, Boston College, where he currently serves as a Trustee
Associate. He is also an ordained Deacon in the Roman Catholic Archdiocese of Boston and serves in that capacity at his local parish
in Concord, Massachusetts. Mr. Clough graduated magna cum laude in history from Boston College and earned an MBA at the University of
Chicago.
Robert Zdunczyk
Robert Zdunczyk joined Clough in 2005 and currently serves as a Portfolio
Manager of the firm’s closed-end mutual fund products and the Clough Global Long/Short Fund, an open-end mutual fund. In addition,
Rob is responsible for the trading of all fixed income securities in the Clough portfolios. He has 25 years of industry experience, including
significant expertise in mortgage REITs and other income-generating equity sectors. Prior to joining Clough, Mr. Zdunczyk worked at Wellington
Management Company as an Assistant Vice President on the Core Bond team. Mr. Zdunczyk earned a B.A. from Boston College and an M.S. in
Finance from Northeastern University.
Administrator
ALPS, located at 1290 Broadway, Suite 1000, Denver, Colorado 80203,
serves as administrator to the Fund. Under the Administration Agreement, ALPS is responsible for calculating the net asset value of the
Common Shares, and generally managing the business affairs of the Fund. The Administration Agreement between the Fund and ALPS provides
that ALPS will pay all expenses incurred by the Fund, with the exception of advisory fees, trustees’ fees, portfolio transactions
expenses, litigation expenses, taxes, costs of preferred shares, expenses of conducting repurchase offers for the purpose of repurchasing
Fund shares and extraordinary expenses. ALPS is entitled to receive a monthly fee at the annual rate of 0.285% of the Fund’s average
daily total assets.
Estimated Expenses
Clough and ALPS are each obligated to pay expenses associated with
providing the services contemplated by the agreements to which they are parties, including compensation of and office space for their
respective officers and employees connected with investment and economic research, trading and investment management and administration
of the Fund. Clough and ALPS are each obligated to pay the fees of any Trustee of the Fund who is affiliated with it. ALPS will pay all
expenses incurred by the Fund, with the exception of advisory fees, trustees’ fees, interest expenses, if any, portfolio transactions
expenses, litigation expenses, taxes, costs of preferred shares, expenses of conducting repurchase offers for the purpose of repurchasing
Fund shares and extraordinary expenses. The fees and expenses incident to the offering and issuance of Rights and Common Shares to be
issued by the Fund will be recorded as a reduction of capital of the Fund attributable to the Common Shares.
The Advisory Agreement authorizes Clough to select brokers or dealers
(including affiliates) to arrange for the purchase and sale of Fund securities, including principal transactions. Any commission, fee
or other remuneration paid to an affiliated broker or dealer is paid in compliance with the Fund’s procedures adopted in accordance
with Rule 17e-1 under the 1940 Act.
NET ASSET VALUE
The net asset value per Common Share of the Fund is determined no less
frequently than daily, on each day that the New York Stock Exchange (the “Exchange”) is open for trading, as of the close
of regular trading on the exchange (normally 4:00 p.m. New York time). Trading may take place in foreign issues held by the Fund at times
when the Fund is not open for business. As a result, the Fund’s net asset value may change at times when it is not possible to
purchase or sell shares of the Fund. ALPS calculates the Fund’s net asset value per Common Share by dividing the value of the Fund’s
total assets (the value of the securities the Fund holds plus cash or other assets, including interest accrued but not yet received),
less accrued expenses of the Fund, less the Fund’s other liabilities (including dividends payable, any borrowings and the liquidation
preference of any preferred shares issued by the Fund) and less the liquidation value of any outstanding preferred shares by the total
number of Common Shares outstanding. Valuations of certain securities held by the Fund may be made by a third-party pricing service.
For purposes of determining the net asset value of the Fund, readily
marketable portfolio securities listed on the Exchange are valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the Exchange on the Business Day as of which such value is being determined. If there has been no sale
on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted
on such day or if market prices may be unreliable because of events occurring after the close of trading, then the security is valued
by such method as the Board of Trustees shall determine in good faith to reflect its fair market value. Readily marketable securities
not listed on the Exchange but listed on other domestic or foreign securities exchanges are valued in a like manner. Portfolio securities
traded on more than one securities exchange are valued at the last sale price on the Business Day as of which such value is being determined
as reflected on the consolidated tape at the close of the exchange representing the principal market for such securities. Securities
trading on the National Association of Securities Dealers Automated Quotations, Inc. (“NASDAQ”) are valued at the closing
price.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by Clough to be over-the-counter, but excluding securities admitted to trading
on the NASDAQ National List, are valued at the mean of the current bid and asked prices as reported by NASDAQ or, in the case of securities
not quoted by NASDAQ, the National Quotation Bureau or such other comparable source as the Board of Trustees deem appropriate to reflect
their fair market value. However, certain fixed-income securities may be valued on the basis of prices provided by a pricing service
when such prices are believed by the Board of Trustees to reflect the fair market value of such securities. The prices provided by a
pricing service take into account institutional size trading in similar groups of securities and any developments related to specific
securities. Where securities are traded on more than one exchange and also over-the-counter, the securities will generally be valued
using the quotations the Board of Trustees believes reflect most closely the value of such securities. Instruments with maturities of
60 days or less are valued at amortized cost, which approximates value unless the Board of Trustees determine that under particular circumstances
such method does not result in fair value.
DISTRIBUTIONS
The Fund, acting pursuant to a Securities and Exchange Commission (“SEC”)
exemptive order and with the approval of the Fund’s Board of Trustees (the “Board”), has adopted a plan, consistent
with the Fund’s investment objective and policies to support a level distribution of income, capital gains and/or return of capital
(the “Plan”). In accordance with the Plan, until December 2021, the Fund will pay monthly distributions in an annualized
amount of not less than 10% of the Fund’s average monthly net asset value (“NAV”). Until July 2021, the Fund will pay
monthly distributions in an amount not less than the average distribution rate of a peer group of closed-end funds selected by the Board.
The Board of the Fund will determine the distribution policy based on prevailing market conditions and related considerations at the
time when the Board is making this determination. Based on current conditions, Clough expects it will likely recommend that the rate
continue to be set at 10% as per the current policy after December 2021.
Under the Plan, the Fund will distribute all available investment income
to its shareholders, consistent with the Fund’s primary investment objectives and as required by the Code. If sufficient investment
income is not available on a monthly basis, the Fund will distribute long-term capital gains and/or return of capital to shareholders
in order to maintain a level distribution. The monthly distribution to shareholders is expected to be at the fixed amount established
by the Board, except for extraordinary distributions and potential distribution rate increases to enable the Fund to comply with the
distribution requirements imposed by the Code.
Shareholders 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 in the Annual Report dated October 31, 2020, which is incorporated
by reference.
The Board may amend, suspend or terminate the Fund’s Plan without
prior notice if the Board determines in good faith that continuation would constitute a breach of fiduciary duty or would violate the
1940 Act. 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, increased market volatility, companies suspending or decreasing corporate dividend distributions and changes in
the Code. Please refer to the Notes to Financial Statements in the Annual Report to Shareholders for a more complete description of its
risks.
The level dividend rate may be modified by the Board of Trustees from
time to time. If, for any monthly distribution, net investment company taxable income, if any (which term includes net short-term capital
gain) and net tax-exempt income, if any, is less than the amount of the distribution, the difference will generally be a tax-free return
of capital distributed from the Fund’s assets. The Fund’s final distribution for each calendar year will include any remaining
net investment company taxable income and net tax-exempt income undistributed during the year, as well as all net capital gain realized
during the year. If the total distributions made in any calendar year exceed net investment company taxable income, net tax-exempt income
and net capital gain, such excess distributed amount would be treated as ordinary dividend income to the extent of the Fund’s current
and accumulated earnings and profits. Distributions in excess of the earnings and profits would first be a tax-free return of capital
to the extent of the adjusted tax basis in the shares. After such adjusted tax basis is reduced to zero, the distribution would constitute
capital gain (assuming the shares are held as capital assets). This distribution policy may, under certain circumstances, have certain
adverse consequences to the Fund and its shareholders because it may result in a return of capital resulting in less of a shareholder’s
assets being invested in the Fund and, over time, increase the Fund’s expense ratio. The distribution policy also may cause the
Fund to sell a security at a time it would not otherwise do so in order to manage the distribution of income and gain. See “Distributions.”
The level dividend distribution described above would result in the
payment of approximately the same amount or percentage to Common Shareholders each quarter. Section 19(a) of the 1940 Act and Rule 19a-1
thereunder require the Fund to provide a written statement accompanying any such payment that adequately discloses its source or sources.
Thus, if the source of the dividend or other distribution were the original capital contribution of the Common Shareholder, and the payment
amounted to a return of capital, the Fund would be required to provide written disclosure to that effect. Nevertheless, persons who periodically
receive the payment of a dividend or other distribution may be under the impression that they are receiving net profits when they are
not. Common Shareholders should read any written disclosure provided pursuant to Section 19(a) and Rule 19a-1 carefully, and should not
assume that the source of any distribution from the Fund is net profit. In addition, in cases where the Fund would return capital to
Common Shareholders, such distribution may impact the Fund’s ability to maintain its asset coverage requirements and to pay the
interest on any preferred shares that the Fund may issue, if ever.
DIVIDEND REINVESTMENT PLAN
Unless the registered owner of Common Shares elects to receive cash
by contacting DST Systems, Inc. (the “Plan Administrator”), all dividends declared on Common Shares will be automatically
reinvested by the Plan Administrator for shareholders in the Fund’s Plan, in additional Common Shares. Shareholders who elect not
to participate in the Plan will receive all dividends and other distributions in cash paid by check mailed directly to the shareholder
of record (or, if the Common Shares are held in street or other nominee name, then to such nominee) by DST Systems, Inc. as dividend
disbursing agent. You may elect not to participate in the Plan and to receive all dividends in cash by contacting DST Systems, Inc.,
as dividend disbursing agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated
or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the dividend record date;
otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.
Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional Common Shares for you.
If you wish for all dividends declared on your Common Shares to be automatically reinvested pursuant to the Plan, please contact your
broker.
The Plan Administrator will open an account for each Common Shareholder
under the Plan in the same name in which such Common Shareholder’s Common Shares are registered. Whenever the Fund declares a dividend
or other distribution (together, a “Dividend”) payable in cash, non-participants in the Plan will receive cash and participants
in the Plan will receive the equivalent in Common Shares. The Common Shares will be acquired by the Plan Administrator for the participants’
accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common Shares
from the Fund (“Newly Issued Common Shares”) or (ii) by purchase of outstanding Common Shares on the open market (“Open-Market
Purchases”) on the NYSE American or elsewhere. If, on the payment date for any Dividend, the closing market price plus estimated
brokerage commissions per Common Share is equal to or greater than the net asset value per Common Share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be
credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the net asset value
per Common Share on the payment date; provided that, if the net asset value is less than or equal to 95% of the closing market value
on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per Common Share on the payment
date. If, on the payment date for any Dividend, the net asset value per Common Share is greater than the closing market value plus estimated
brokerage commissions, the Plan Administrator will invest the Dividend amount in Common Shares acquired on behalf of the participants
in Open-Market Purchases. In the event of a market discount on the payment date for any Dividend, the Plan Administrator will have until
the last Business Day before the next date on which the Common Shares trade on an “ex-dividend” basis or 30 days after the
payment date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in Common Shares
acquired in Open-Market Purchases. It is contemplated that the Fund will pay monthly income Dividends. Therefore, the period during which
Open-Market Purchases can be made will exist only from the payment date of each Dividend through the date before the next “ex-dividend”
date which typically will be approximately ten days. If, before the Plan Administrator has completed its Open-Market Purchases, the market
price per Common Share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan Administrator
may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the Dividend had been
paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases,
the Plan provides that if the Plan Administrator 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 Administrator may cease making Open-Market
Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Shares at the net asset value per Common
Share at the close of business on the Last Purchase Date 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 Dividend will be divided by 95% of the market price on the payment date.
The Plan Administrator maintains all shareholders’ accounts in
the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax
records. Common Shares in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant,
and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Administrator will forward
all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions
of the participants.
In the case of Common Shareholders such as banks, brokers or nominees
which hold shares for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number
of Common Shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who
participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued
directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with Open-Market
Purchases. The automatic reinvestment of Dividends will not relieve participants of any federal, state or local income tax that may be
payable (or required to be withheld) on such Dividends. See “Federal Income Tax Matters.” Participants that request a sale
of Common Shares through the Plan Administrator are subject to brokerage commissions.
The Fund reserves the right to amend or terminate the Plan. There is
no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan
to include a service charge payable by the participants.
All correspondence or questions concerning the Plan should be directed
to the Plan Administrator, DST Systems, Inc., 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105.
FEDERAL INCOME TAX MATTERS
The following is a summary discussion of certain U.S. federal income
tax consequences that may be relevant to a Common Shareholder that acquires, holds and/or disposes of Common Shares of the Fund, and
reflects provisions of the Code, existing Treasury regulations, rulings published by the IRS, and other applicable authority, as of the
date of this Prospectus. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect.
The following discussion is only a summary of some of the important tax considerations generally applicable to investments in the Fund
and the discussion set forth herein does not constitute tax advice. For more detailed information regarding tax considerations, see the
Statement of Additional Information. There may be other tax considerations applicable to particular investors. In addition, income earned
through an investment in the Fund may be subject to state, local and foreign taxes.
The Fund intends to elect to be treated and to qualify each year for
taxation as a regulated investment company under Subchapter M of the Code. In order for the Fund to qualify as a regulated investment
company, it must meet an income and asset diversification test each year. If the Fund so qualifies and satisfies certain distribution
requirements, the Fund will not be subject to federal income tax on income distributed in a timely manner to its shareholders in the
form of dividends or capital gain distributions.
The Fund intends to make monthly distributions of net investment income
after payment of dividends on any outstanding preferred shares or interest on any outstanding borrowings. Unless a shareholder is ineligible
to participate or elects otherwise, all distributions will be automatically reinvested in additional Common Shares of the Fund pursuant
to the Plan. For U.S. federal income tax purposes, all dividends are generally taxable whether a shareholder takes them in cash or they
are reinvested pursuant to the Plan in additional shares of the Fund. Distributions of the Fund’s net capital gains (“capital
gain dividends”), if any, are taxable to Common Shareholders as long-term capital gains, regardless of the length of time Common
Shares have been held by Common Shareholders. Distributions, if any, in excess of the Fund’s earnings and profits will first reduce
the adjusted tax basis of a holder’s Common Shares and, after that basis has been reduced to zero, will constitute capital gains
to the Common Shareholder (assuming the Common Shares are held as a capital asset). See below for a summary of the maximum tax rates
applicable to capital gains (including capital gain dividends). A corporation that owns Fund shares generally will not be entitled to
the dividends received deduction with respect to all the dividends it receives from the Fund. Fund dividend payments that are attributable
to qualifying dividends received by the Fund from certain domestic corporations may be designated by the Fund as being eligible for the
dividends received deduction. With respect to the quarterly distributions of net investment income described above, it may be the case
that any “level load” distributions would result in a return of capital to the Common Shareholders. The determination of
the character for U.S. federal income tax purposes of any distribution from the Fund (i.e. ordinary income dividends, capital
gains dividends, qualified dividends, return of capital distributions) will be made as of the end of the Fund’s taxable year. The
Fund will report the tax impact of its distributions to shareholders annually. See “Distributions” for a more complete description.
Certain income distributions paid by the Fund to individual taxpayers
are taxed at rates equal to those applicable to net long-term capital gains (20%, or 15%, or 0% for taxpayers at certain annual income
levels). This tax treatment applies only if certain holding period requirements are satisfied by the Common Shareholder and the dividends
are attributable to qualified dividends received by the Fund itself. For this purpose, “qualified dividends” means dividends
received by the Fund from United States corporations and qualifying foreign corporations, provided that the Fund satisfies certain holding
period and other requirements in respect of the stock of such corporations. In the case of securities lending transactions, payments
in lieu of dividends are not qualified dividends. Dividends received by the Fund from REITs are qualified dividends eligible for this
lower tax rate only in limited circumstances.
A dividend paid by the Fund to a Common Shareholder will not be treated
as qualified dividend income of the Common Shareholder if (1) the dividend is received with respect to any share held for fewer than
61 days during the 120-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with
respect to such dividend, (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise)
to make related payments with respect to positions in substantially similar or related property or (3) if the recipient elects to have
the dividend treated as investment income for purposes of the limitation on deductibility of investment interest.
The Fund will inform Common Shareholders of the source and tax status
of all distributions promptly after the close of each calendar year.
Selling Common Shareholders will generally recognize gain or loss in
an amount equal to the difference between the Common Shareholder’s adjusted tax basis in the Common Shares sold and the amount
received. If the Common Shares are held as a capital asset, the gain or loss will be a capital gain or loss. The maximum tax rate applicable
to net capital gains recognized by individuals and other non-corporate taxpayers is (i) the same as the maximum ordinary income tax rate
for gains recognized on the sale of capital assets held for one year or less or (ii) 20% for gains recognized on the sale of capital
assets held for more than one year (as well as certain capital gain dividends) (0% or 15% for individuals at certain annual income levels).
Any loss on a disposition of Common Shares held for six months or less will be treated as a long-term capital loss to the extent of any
capital gain dividends received with respect to those Common Shares. For purposes of determining whether Common Shares have been held
for six months or less, the holding period is suspended for any periods during which the Common Shareholder’s risk of loss is diminished
as a result of holding one or more other positions in substantially similar or related property, or through certain options or short
sales. Any loss realized on a sale or exchange of Common Shares will be disallowed to the extent those Common Shares are replaced by
other Common Shares within a period of 61 days beginning 30 days before and ending 30 days after the date of disposition of the Common
Shares (whether through the reinvestment of distributions, which could occur, for example, if the Common Shareholder is a participant
in the Plan or otherwise). In that event, the basis of the replacement Common Shares will be adjusted to reflect the disallowed loss.
An investor should be aware that, if Common Shares are purchased shortly
before the record date for any taxable dividend (including a capital gain dividend), the purchase price likely will reflect the value
of the dividend and the investor then would receive a taxable distribution likely to reduce the trading value of such Common Shares,
in effect resulting in a taxable return of some of the purchase price. Taxable distributions to individuals and certain other non-corporate
Common Shareholders, including those who have not provided their correct taxpayer identification number and other required certifications,
may be subject to “backup” federal income tax withholding at the fourth lowest rate of tax applicable to a single individual
(in 2021, 24%).
An investor should also be aware that the benefits of the reduced tax
rate applicable to long-term capital gains and qualified dividend income may be impacted by the application of the alternative minimum
tax to individual shareholders.
The foregoing briefly summarizes some of the important federal income
tax consequences to Common Shareholders of investing in Common Shares, reflects the federal tax law as of the date of this Prospectus,
and does not address special tax rules applicable to certain types of investors, such as corporate and foreign investors. Investors should
consult their tax advisers regarding other federal, state or local tax considerations that may be applicable in their particular circumstances,
as well as any proposed tax law changes.
DESCRIPTION OF CAPITAL STRUCTURE
The Fund is an unincorporated statutory trust established under the
laws of the state of Delaware by a Certificate of Trust dated April 27, 2004, as amended June 15, 2004 and July 27, 2016, and filed with
the Secretary of State of Delaware on that date. The Declaration of Trust provides that the Trustees of the Fund may authorize separate
classes of shares of beneficial interest. The Trustees have authorized an unlimited number of Common Shares. The Fund intends to hold
annual meetings of Common Shareholders in compliance with the requirements of the NYSE American.
Common Shares
The Declaration of Trust permits the Fund to issue an unlimited number
of full and fractional Common Shares of beneficial interest, no par value. Each Common Share represents an equal proportionate interest
in the assets of the Fund with each other Common Share in the Fund. Holders of Common Shares will be entitled to the payment of dividends
when, as and if declared by the Board of Trustees. The 1940 Act or the terms of any borrowings or preferred shares may limit the payment
of dividends to the holders of Common Shares. Each whole Common Share shall be entitled to one vote as to matters on which it is entitled
to vote pursuant to the terms of the Declaration of Trust on file with the Securities and Exchange Commission. Upon liquidation of the
Fund, after paying or adequately providing for the payment of all liabilities of the Fund and the liquidation preference with respect
to any outstanding preferred shares, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for
their protection, the Trustees may distribute the remaining assets of the Fund among the holders of the Common Shares. The Declaration
of Trust provides that Common Shareholders are not liable for any liabilities of the Fund. Although shareholders of an unincorporated
statutory trust established under Delaware law, in certain limited circumstances, may be held personally liable for the obligations of
the Fund as though they were general partners, the provisions of the Declaration of Trust described in the foregoing sentence make the
likelihood of such personal liability remote.
While there are any borrowings or preferred shares outstanding, the
Fund may not be permitted to declare any cash dividend or other distribution on its Common Shares, unless at the time of such declaration,
(i) all accrued dividends on preferred shares or accrued interest on borrowings have been paid and (ii) the value of the Fund’s
total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities and indebtedness of
the Fund not represented by senior securities, is at least 300% of the aggregate amount of such securities representing indebtedness
and at least 200% of the aggregate amount of securities representing indebtedness plus the aggregate liquidation value of the outstanding
preferred shares (expected to equal the aggregate original purchase price of the outstanding preferred shares plus redemption premium,
if any, together with any accrued and unpaid dividends thereon, whether or not earned or declared and on a cumulative basis). In addition
to the requirements of the 1940 Act, the Fund may be required to comply with other asset coverage requirements as a condition of the
Fund obtaining a rating of the preferred shares from a rating agency. These requirements may include an asset coverage test more stringent
than under the 1940 Act. This limitation on the Fund’s ability to make distributions on its Common Shares could in certain circumstances
impair the ability of the Fund to maintain its qualification for taxation as a regulated investment company for federal income tax purposes.
The Fund intends, however, to the extent possible to purchase or redeem preferred shares or reduce borrowings from time to time to maintain
compliance with such asset coverage requirements and may pay special dividends to the holders of the preferred shares in certain circumstances
in connection with any such impairment of the Fund’s status as a regulated investment company. Depending on the timing of any such
redemption or repayment, the Fund may be required to pay a premium in addition to the liquidation preference of the preferred shares
to the holders thereof.
The Fund has no present intention of offering additional Common Shares,
except as described herein. Other offerings of its Common Shares, if made, will require approval of the Board. Any additional offering
will not be sold at a price per Common Share below the then current net asset value (exclusive of underwriting discounts and commissions)
except in connection with an offering to existing Common Shareholders or with the consent of a majority of the Fund’s outstanding
Common Shares. The Common Shares have no preemptive rights.
The Fund generally will not issue Common Share certificates. However,
upon written request to the Fund’s transfer agent, a share certificate will be issued for any or all of the full Common Shares
credited to an investor’s account. Common Share certificates that have been issued to an investor may be returned at any time.
The common shares are listed on the NYSE American under the symbol
“GLV” and began trading on the NYSE American on July 30, 2004. The average daily trading volume of the common shares on the
NYSE American during the period from November 1, 2019 through October 31, 2020 was 42,702.34 common shares. Shares of closed-end investment
companies often trade on an exchange at prices lower than net asset value. The Fund’s common shares have traded in the market at
premiums in 2004, 2005 and 2006, and at discounts from net asset value per share in other years. The following table shows, for each
fiscal quarter since the quarter ended January 31, 2018: (i) the high and low closing sale prices per common share, as reported on the
NYSE American; (ii) the corresponding net asset values per common share; and (iii) the percentage by which the common shares traded at
a premium over, or discount from, the net asset values per common share at those high and low closing prices. The Fund’s net asset
value per common share is determined on a daily basis.
Quarter
Ended
|
Market
Price
|
Net
Asset Value at
|
Market
Premium (Discount) to net Asset Value at
|
|
|
High
|
Low
|
Market
High
|
Market
Low
|
Market
High
|
Market
Low
|
2021
|
January 31
|
$10.75
|
$10.42
|
$11.47
|
$11.32
|
-6.28%
|
-7.95%
|
2020
|
October 31
|
$10.12
|
$8.73
|
$10.99
|
$10.23
|
-7.92%
|
-14.66%
|
|
July 31
|
$9.54
|
$8.02
|
$10.84
|
$9.42
|
-11.99%
|
-14.86%
|
|
April 30
|
$11.81
|
$6.45
|
$12.27
|
$9.18
|
-3.75%
|
-29.74%
|
|
January 31
|
$11.49
|
$10.86
|
$12.24
|
$12.05
|
-6.13%
|
-9.88%
|
2019
|
October 31
|
$11.11
|
$10.59
|
$12.02
|
$12.41
|
-7.57%
|
-14.67%
|
|
July 31
|
$11.28
|
$10.65
|
$12.49
|
$12.38
|
-8.89%
|
-13.97%
|
|
April 30
|
$11.39
|
$10.91
|
$12.49
|
$12.24
|
-8.81%
|
-10.87%
|
|
January 31
|
$11.66
|
$9.48
|
$12.56
|
$11.37
|
-7.17%
|
-16.62%
|
2018
|
October 31
|
$12.86
|
$11.16
|
$13.65
|
$12.42
|
-5.79%
|
-10.14%
|
|
July 31
|
$13.04
|
$12.36
|
$13.86
|
$13.53
|
-5.92%
|
-8.65%
|
|
April 30
|
$13.58
|
$12.28
|
$14.17
|
$13.58
|
-4.16%
|
-9.57%
|
|
January 31
|
$14.39
|
$13.12
|
$14.93
|
$14.57
|
-3.62%
|
-9.95%
|
On March 31, 2021, the net asset value per common share was $11.53,
trading prices ranged between 11.64 and 11.57 (representing a premium to net asset value of 0.95 % and 0.35%, respectively) and the closing
price per common share was $11.59 (representing a premium to net asset value of 0.52%).
Preferred Shares
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest with preference rights, including preferred shares (the “preferred shares”), having no par
value, in one or more series, with rights as determined by the Board of Trustees, by action of the Board of Trustees without the approval
of the Common Shareholders.
Currently an unlimited number of the Fund’s shares have been
classified by the Board as preferred shares, par value $0.001 per share. The terms of such preferred shares may be fixed by the Board
and would materially limit and/or qualify the rights of holders of the Fund’s common shares. The Fund currently has no Preferred
Shares outstanding.
If the Fund issues preferred shares, it will pay dividends to the holders
of the preferred shares at a fixed rate, as described in a Prospectus Supplement accompanying each preferred share offering.
Upon a liquidation, each holder of the preferred shares will be entitled
to receive out of the assets of the Fund available for distribution to shareholders (after payment of claims of the Fund’s creditors
but before any distributions with respect to the Fund’s common shares or any other shares of the Fund ranking junior to the preferred
shares as to liquidation payments) an amount per share equal to such share’s liquidation preference plus any accumulated but unpaid
distributions (whether or not earned or declared, excluding interest thereon) to the date of distribution, and such shareholders shall
be entitled to no further participation in any distribution or payment in connection with such liquidation. Each series of the preferred
shares will rank on a parity with any other series of preferred shares of the Fund as to the payment of distributions and the distribution
of assets upon liquidation, and will be junior to the Fund’s obligations with respect to any outstanding senior securities representing
debt. The preferred shares carry one vote per share on all matters on which such shares are entitled to vote. The preferred shares will,
upon issuance, be fully paid and non-assessable and will have no preemptive, exchange or conversion rights. The Board may by resolution
classify or reclassify any authorized but unissued capital shares of the Fund from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to distributions or terms or conditions of redemption. The Fund
will not issue any class of shares senior to the preferred shares.
Redemption, Purchase and Sale of Preferred Shares By the Fund.
The terms of any preferred shares are expected to provide that (i) they are redeemable by the Fund at any time (either after the date
of initial issuance, or after some period of time following initial issuance) in whole or in part at the original purchase price per
share plus accumulated dividends per share, (ii) the Fund may tender for or purchase preferred shares and (iii) the Fund may subsequently
resell any shares so tendered for or purchased. Any redemption or purchase of preferred shares by the Fund will reduce the leverage applicable
to the common shares, while any resale of preferred shares by the Fund will increase that leverage.
Rating Agency Guidelines. The Preferred Shares are rated by
Moody’s and/or Fitch. Upon issuance, it is expected that any new series of preferred shares will be rated by Moody’s or Fitch.
The Fund is, and expects that it will be, required under the applicable
rating agency guidelines to maintain assets having in the aggregate a discounted value at least equal to a Basic Maintenance Amount (as
defined in the applicable Statement of Preferences and summarized below), for its outstanding preferred shares. To the extent any particular
portfolio holding does not satisfy the applicable rating agency’s guidelines, all or a portion of such holding’s value will
not be included in the calculation of discounted value (as defined by such rating agency). The Moody’s and Fitch guidelines also
impose certain diversification requirements and industry concentration limitations on the Fund’s overall portfolio, and apply specified
discounts to securities held by the Fund (except certain money market securities).
The “Basic Maintenance Amount” is generally equal to (a)
the sum of (i) the aggregate liquidation preference of any preferred shares then outstanding plus (to the extent not included in the
liquidation preference of such preferred shares) an amount equal to the aggregate accumulated but unpaid distributions (whether or not
earned or declared) in respect of such preferred shares, (ii) the Fund’s other liabilities (excluding dividends and other distributions
payable on the Fund’s common shares) and (iii) any other current liabilities of the Fund (including amounts due and payable by
the Fund pursuant to reverse repurchase agreements and payables for assets purchased) less (b) the value of the Fund’s assets if
such assets are either cash or evidences of indebtedness which mature prior to or on the date of redemption or repurchase of preferred
shares or payment of another liability and are either U.S. government securities or evidences of indebtedness rated at least “Aaa,”
“P-1”, “VMIG-1” or “MIG-1” by Moody’s or “AAA”, “SP-1+” or “A-1+”
by S&P and are held by the Fund for distributions, the redemption or repurchase of preferred shares or the Fund’s liabilities.
If the Fund does not cure in a timely manner a failure to maintain
a discounted value of its portfolio equal to the Basic Maintenance Amount in accordance with the requirements of the applicable rating
agency or agencies then rating the preferred shares at the request of the Fund, the Fund may, and in certain circumstances will be required
to, mandatorily redeem preferred shares.
The Fund may, but is not required to, adopt any modifications to the
rating agency guidelines that may hereafter be established by Moody’s and Fitch (or such other rating agency then rating the preferred
shares at the request of the Fund). Failure to adopt any such modifications, however, may result in a change in the relevant rating agency’s
ratings or a withdrawal of such ratings altogether. In addition, any rating agency providing a rating for the preferred shares at the
request of the Fund may, at any time, change or withdraw any such rating. The Board, without further action by shareholders, may amend,
alter, add to or repeal any provision of the Statement of Preferences adopted pursuant to rating agency guidelines if the Board determines
that such amendments or modifications are necessary to prevent a reduction in, or the withdrawal of, a rating of the preferred shares
and are in the aggregate in the best interests of the holders of the preferred shares. Additionally, the Board, without further action
by the shareholders, may amend, alter, add to or repeal any provision of the Statement of Preferences adopted pursuant to rating agency
guidelines if the Board determines that such amendments or modifications will not in the aggregate adversely affect the rights and preferences
of the holders of any series of the preferred shares, provided that the Fund has received advice from each applicable rating agency that
such amendment or modification is not expected to adversely affect such rating agency’s then-current rating of such series of the
Fund’s preferred shares.
As described by Moody’s and Fitch, the ratings assigned to preferred
shares are assessments of the capacity and willingness of the Fund to pay the obligations of the preferred shares. The ratings on the
preferred shares are not recommendations to purchase, hold or sell shares of any series, inasmuch as the ratings do not comment as to
market price or suitability for a particular investor. The rating agency guidelines also do not address the likelihood that an owner
of preferred shares will be able to sell such shares on an exchange, in an auction or otherwise. The ratings are based on current information
furnished to Moody’s and Fitch by the Fund and Clough and information obtained from other sources. The ratings may be changed,
suspended or withdrawn as a result of changes in, or the unavailability of, such information.
The rating agency guidelines will apply to any preferred shares, as
the case may be, only so long as such rating agency is rating such shares at the request of the Fund. The Fund will pay fees to Moody’s
and Fitch for rating the preferred shares.
Asset Maintenance Requirements. In addition to the requirements
summarized under, “— Rating Agency Guidelines” above, the Fund must satisfy asset maintenance requirements under the
1940 Act with respect to any preferred shares. Under the 1940 Act, debt or additional preferred shares may be issued only if immediately
after such issuance the value of the Fund’s total assets (less ordinary course liabilities) is at least 300% of the amount of any
debt outstanding and at least 200% of the amount of any preferred shares and debt outstanding.
The Fund is and likely will be required under the Statement of Preferences
of each series of preferred shares to determine whether it has, as of the last business day of each March, June, September and December
of each year, an “asset coverage” (as defined in the 1940 Act) of at least 200% (or such higher or lower percentage as may
be required at the time under the 1940 Act) with respect to all outstanding senior securities of the Fund that are debt or stock, including
any outstanding preferred shares. If the Fund fails to maintain the asset coverage required under the 1940 Act on such dates and such
failure is not cured by a specific time (generally within 49 calendar days), the Fund may, and in certain circumstances will be required
to, mandatorily redeem preferred shares sufficient to satisfy such asset coverage. See “—Redemption Procedures” below.
Distributions. Holders of any preferred shares will be entitled
to receive, when, as and if declared by the Board, out of funds legally available therefor, cumulative cash distributions, at an annual
rate set forth in the applicable Statement of Preferences or Prospectus Supplement, payable with such frequency as set forth in the applicable
Statement of Preferences or Prospectus Supplement. Such distributions will accumulate from the date on which such shares are issued.
Restrictions on Dividends and Other Distributions for the Preferred
Shares. So long as any preferred shares are outstanding, the Fund may not pay any dividend or distribution (other than a dividend
or distribution paid in common shares or in options, warrants or rights to subscribe for or purchase common shares) in respect of the
common shares or call for redemption, redeem, purchase or otherwise acquire for consideration any common shares (except by conversion
into or exchange for shares of the Fund ranking junior to the preferred shares as to the payment of dividends or distributions and the
distribution of assets upon liquidation), unless:
|
·
|
the Fund has declared and paid (or provided to the relevant dividend
paying agent) all cumulative distributions on the Fund’s outstanding preferred shares due on or prior to the date of such common
share dividend or distribution;
|
|
·
|
the Fund has redeemed the full number of preferred shares to be redeemed
pursuant to any mandatory redemption provision in the Fund’s Governing Documents; and
|
|
·
|
after making the distribution, the Fund meets applicable asset coverage
requirements described under “—Asset Maintenance Requirements” above.
|
No complete distribution due for a particular dividend period will
be declared or made on any series of preferred shares for any dividend period, or part thereof, unless full cumulative distributions
due through the most recent dividend payment dates therefor for all outstanding series of preferred shares of the Fund ranking on a parity
with such series as to distributions have been or contemporaneously are declared and made. If full cumulative distributions due have
not been made on all outstanding preferred shares of the Fund ranking on a parity with such series of preferred shares as to the payment
of distributions, any distributions being paid on the preferred shares will be paid as nearly pro rata as possible in proportion to the
respective amounts of distributions accumulated but unmade on each such series of preferred shares on the relevant dividend payment date.
The Fund’s obligation to make distributions on the preferred shares will be subordinate to its obligations to pay interest and
principal, when due, on any senior securities representing debt.
Mandatory Redemption Relating to Asset Coverage Requirements.
The Fund may, at its option, consistent with the Governing Documents and the 1940 Act, and in certain circumstances will be required
to, mandatorily redeem preferred shares in the event that:
|
·
|
the Fund fails to maintain the asset coverage requirements specified
under the 1940 Act on a quarterly valuation date (generally the last business day of March, June, September and December) and such
failure is not cured on or before a specified period of time, following such failure; or
|
|
·
|
the Fund fails to maintain the asset coverage requirements as calculated
in accordance with any applicable rating agency guidelines as of any monthly valuation date, and such failure is not cured on or
before a specified period of time after such valuation date.
|
The redemption price for preferred shares subject to mandatory redemption
will generally be the liquidation preference, as stated in the Statement of Preferences of each existing series of preferred shares or
the Prospectus Supplement accompanying the issuance of any series of preferred shares, plus an amount equal to any accumulated but unpaid
distributions (whether or not earned or declared) to the date fixed for redemption, plus any applicable redemption premium determined
by the Board and included in the Statement of Preferences.
The number of preferred shares that will be redeemed in the case of
a mandatory redemption will equal the minimum number of outstanding preferred shares, the redemption of which, if such redemption had
occurred immediately prior to the opening of business on the applicable cure date, would have resulted in the relevant asset coverage
requirement having been met or, if the required asset coverage cannot be so restored, all of the preferred shares. In the event that
preferred shares are redeemed due to a failure to satisfy the 1940 Act asset coverage requirements, the Fund may, but is not required
to, redeem a sufficient number of preferred shares so that the Fund’s assets exceed the asset coverage requirements under the 1940
Act after the redemption by 10% (that is, 220% asset coverage) or some other amount specified in the Statement of Preferences. In the
event that preferred shares are redeemed due to a failure to satisfy applicable rating agency guidelines, the Fund may, but is not required
to, redeem a sufficient number of preferred shares so that the Fund’s discounted portfolio value (as determined in accordance with
the applicable rating agency guidelines) after redemption exceeds the asset coverage requirements of each applicable rating agency by
up to 10% (that is, 110% rating agency asset coverage) or some other amount specified in the Statement of Preferences.
If the Fund does not have funds legally available for the redemption
of, or is otherwise unable to redeem, all the preferred shares to be redeemed on any redemption date, the Fund will redeem on such redemption
date that number of shares for which it has legally available funds, or is otherwise able to redeem, from the holders whose shares are
to be redeemed ratably on the basis of the redemption price of such shares, and the remainder of those shares to be redeemed will be
redeemed on the earliest practicable date on which the Fund will have funds legally available for the redemption of, or is otherwise
able to redeem, such shares upon written notice of redemption.
If fewer than all of the Fund’s outstanding preferred shares
are to be redeemed, the Fund, at its discretion and subject to the limitations of the Governing Documents, the 1940 Act, and applicable
law, will select the one or more series of preferred from which shares will be redeemed and the amount of preferred to be redeemed from
each such series. If fewer than all shares of a series of preferred are to be redeemed, such redemption will be made as among the holders
of that series pro rata in accordance with the respective number of shares of such series held by each such holder on the record date
for such redemption (or by such other equitable method as the Fund may determine). If fewer than all preferred shares held by any holder
are to be redeemed, the notice of redemption mailed to such holder will specify the number of shares to be redeemed from such holder,
which may be expressed as a percentage of shares held on the applicable record date.
Optional Redemption. Preferred shares are not subject to optional
redemption by the Fund until the date, if any, specified in the applicable Prospectus or Prospectus Supplement, unless such redemption
is necessary, in the judgment of the Fund, to maintain the Fund’s status as a RIC under the Code. Commencing on such date and thereafter,
the Fund may at any time redeem such preferred shares in whole or in part for cash at a redemption price per share equal to the liquidation
preference per share plus accumulated and unpaid distributions (whether or not earned or declared) to the redemption date plus any premium
specified in or pursuant to the Statement of Preferences. Such redemptions are subject to the notice requirements set forth under “—Redemption
Procedures” below and the limitations of the Governing Documents, the 1940 Act and applicable law.
Redemption Procedures. If the Fund determines or is required
to redeem preferred shares, it will mail a notice of redemption to holders of the shares to be redeemed. Each notice of redemption will
state (i) the redemption date, (ii) the number or percentage of preferred shares to be redeemed (which may be expressed as a percentage
of such shares outstanding), (iii) the CUSIP number(s) of such shares, (iv) the redemption price (specifying the amount of accumulated
distributions to be included therein), (v) the place or places where such shares are to be redeemed, (vi) that dividends or distributions
on the shares to be redeemed will cease to accumulate on such redemption date, (vii) the provision of the Statement of Preferences under
which the redemption is being made and (viii) in the case of an optional redemption, any conditions precedent to such redemption. No
defect in the notice of redemption or in the mailing thereof will affect the validity of the redemption proceedings, except as required
by applicable law.
The redemption date with respect to preferred shares will not be fewer
than 15 days nor more than 40 days (subject to NYSE American requirements) after the date of the applicable notice of redemption. Preferred
shareholders may receive shorter notice in the event of a mandatory redemption.
The holders of preferred shares will not have the right to redeem any
of their shares at their option except to the extent specified in the Statement of Preferences.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Fund, the holders of preferred shares then outstanding will be entitled to receive a preferential
liquidating distribution, which is expected to equal the original purchase price per preferred share plus accumulated and unpaid dividends,
whether or not declared, before any distribution of assets is made to holders of common shares. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of preferred shares will not be entitled to any further participation
in any distribution of assets by the Fund.
Voting Rights. Except as otherwise stated in this Prospectus,
specified in the Governing Documents or resolved by the Board or as otherwise required by applicable law, holders of preferred shares
shall be entitled to one vote per share held on each matter submitted to a vote of the shareholders of the Fund and will vote together
with holders of common shares and of any other preferred shares then outstanding as a single class.
In connection with the election of the Fund’s Trustees, holders
of the outstanding preferred shares, voting together as a single class, will be entitled at all times to elect two of the Fund’s
Trustees, and the remaining Trustees will be elected by holders of common shares and holders of preferred shares, voting together as
a single class. In addition, if (i) at any time dividends and distributions on outstanding preferred shares are unpaid in an amount equal
to at least two full years’ dividends and distributions thereon and sufficient cash or specified securities have not been deposited
with the applicable paying agent for the payment of such accumulated dividends and distributions or (ii) at any time holders of any other
series of preferred shares are entitled to elect a majority of the Trustees of the Fund under the 1940 Act or the applicable Statement
of Preferences creating such shares, then the number of Trustees constituting the Board automatically will be increased by the smallest
number that, when added to the two Trustees elected exclusively by the holders of preferred shares as described above, would then constitute
a simple majority of the Board as so increased by such smallest number. Such additional Trustees will be elected by the holders of the
outstanding preferred shares, voting together as a single class, at a special meeting of shareholders which will be called as soon as
practicable and will be held not less than ten nor more than twenty days after the mailing date of the meeting notice. If the Fund fails
to send such meeting notice or to call such a special meeting, the meeting may be called by any preferred shareholder on like notice.
The terms of office of the persons who are Trustees at the time of that election will continue. If the Fund thereafter pays, or declares
and sets apart for payment in full, all dividends and distributions payable on all outstanding preferred shares for all past dividend
periods or the holders of other series of preferred shares are no longer entitled to elect such additional Trustees, the additional voting
rights of the holders of the preferred shares as described above will cease, and the terms of office of all of the additional Trustees
elected by the holders of the preferred shares (but not of the Trustees with respect to whose election the holders of common shares were
entitled to vote or the two Trustees the holders of preferred shares have the right to elect as a separate class in any event) will terminate
automatically.
The 1940 Act requires that, in addition to any approval by shareholders
that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares (as defined in the 1940
Act), voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the preferred
shares, and (2) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other things,
changes in the Fund’s classification as a closed-end investment company to an open-end investment company or changes in its fundamental
investment restrictions. As a result of these voting rights, the Fund’s ability to take any such actions may be impeded to the
extent that there are any preferred shares outstanding. Additionally, the affirmative vote of the holders of a majority of the outstanding
preferred shares (as defined in the 1940 Act), voting as a separate class, will be required to amend, alter or repeal any of the provisions
of the Statement of Preferences so as to in the aggregate adversely affect the rights and preferences set forth in the Statement of Preferences.
The class votes of holders of preferred shares described above will in each case be in addition to any other vote required to authorize
the action in question.
The foregoing voting provisions will not apply to any series of preferred
shares if, at or prior to the time when the act with respect to which such vote otherwise would be required will be effected, such shares
will have been redeemed or called for redemption and sufficient cash or cash equivalents provided to the applicable paying agent to effect
such redemption. The holders of preferred shares will have no preemptive rights or rights to cumulative voting.
Limitation on Issuance of Preferred Shares. So long as the Fund
has preferred shares outstanding, subject to receipt of approval from the rating agencies of each series of preferred shares outstanding,
and subject to compliance with the Fund’s investment objectives, policies and restrictions, the Fund may issue and sell shares
of one or more other series of additional preferred shares provided that the Fund will, immediately after giving effect to the issuance
of such additional preferred shares and to its receipt and application of the proceeds thereof (including, without limitation, to the
redemption of preferred shares to be redeemed out of such proceeds), have an “asset coverage” for all senior securities of
the Fund which are stock, as defined in the 1940 Act, of at least 200% of the sum of the liquidation preference of the preferred shares
of the Fund then outstanding and all indebtedness of the Fund constituting senior securities and no such additional preferred shares
will have any preference or priority over any other preferred shares of the Fund upon the distribution of the assets of the Fund or in
respect of the payment of dividends or distributions.
The Fund will consider from time to time whether to offer additional
preferred shares or securities representing indebtedness and may issue such additional securities if the Board concludes that such an
offering would be consistent with the Fund’s Governing Documents and applicable law, and in the best interest of existing common
shareholders.
Tenders and Repurchases. In addition to the redemption provisions
described herein, the Fund may also tender for or purchase preferred shares (whether in private transactions or on the NYSE American)
and the Fund may subsequently resell any shares so tendered for or purchased, subject to the provisions of the Fund’s Governing
Documents and the 1940 Act.
Book Entry. Preferred shares may be held in the name of Cede
& Co. as nominee for DTC. The Fund will treat Cede & Co. as the holder of record of any preferred shares issued for all purposes
in this circumstance. In accordance with the procedures of DTC, however, purchasers of preferred shares whose preferred shares are held
in the name of Cede & Co. as nominee for the DTC will be deemed the beneficial owners of stock purchased for purposes of distributions,
voting and liquidation rights.
Subscription Rights
General. The Fund may issue subscription rights to holders of
our (i) common shares to purchase common and/or preferred shares or (ii) preferred shares to purchase preferred shares (subject to applicable
law). Subscription rights may be issued independently or together with any other offered security and may or may not be transferable
by the person purchasing or receiving the subscription rights. In connection with a subscription rights offering to holders of our common
and/or preferred shares, the Fund would distribute certificates evidencing the subscription rights and a Prospectus Supplement to our
common or preferred shareholders, as applicable, as of the record date that we set for determining the shareholders eligible to receive
subscription rights in such subscription rights offering.
The applicable Prospectus Supplement would describe the following terms
of subscription rights in respect of which this Prospectus is being delivered:
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the period of time the offering
would remain open (which will be open a minimum number of days such that all record holders would be eligible to participate in the
offering and will not be open longer than 120 days);
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the title of such subscription
rights;
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the exercise price for such
subscription rights (or method of calculation thereof);
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the number of such subscription
rights issued in respect of each common share;
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the number of rights required
to purchase a single preferred share;
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the extent to which such
subscription rights are transferable and the market on which they may be traded if they are transferable;
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if applicable, a discussion
of the material U.S. federal income tax considerations applicable to the issuance or exercise of such subscription rights;
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the date on which the right
to exercise such subscription rights will commence, and the date on which such right will expire (subject to any extension);
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the extent to which such
subscription rights include an over-subscription privilege with respect to unsubscribed securities and the terms of such over-subscription
privilege;
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any termination right we
may have in connection with such subscription rights offering; and
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any other terms of such subscription
rights, including exercise, settlement and other procedures and limitations relating to the transfer and exercise of such subscription
rights.
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Exercise of Subscription Rights. Each subscription right would
entitle the holder of the subscription right to purchase for cash such number of shares at such exercise price as in each case is set
forth in, or be determinable as set forth in, the prospectus supplement relating to the subscription rights offered thereby, Subscription
rights would be exercisable at any time up to the close of business on the expiration date for such subscription rights set forth in
the prospectus supplement. After the close of business on the expiration date, all unexercised subscription rights would become void.
Subscription rights would be exercisable as set forth in the prospectus
supplement relating to the subscription rights offered thereby. Upon expiration of the rights offering and the receipt of payment and
the subscription rights certificate properly completed and duly executed at the corporate trust office of the subscription rights agent
or any other office indicated in the prospectus supplement we would issue, as soon as practicable, the shares purchased as a result of
such exercise. To the extent permissible under applicable law, we may determine to offer any unsubscribed offered securities directly
to persons other than shareholders, to or through agents, underwriters or dealers or through a combination of such methods, as set forth
in the applicable prospectus supplement.
Subscription Rights to Purchase Common and Preferred Shares.
The Fund may issue subscription rights which would entitle holders to purchase both common and preferred shares in a ratio to be set
forth in the applicable Prospectus Supplement. In accordance with the 1940 Act, at least three rights would be required to subscribe
for one common share. It is expected that rights to purchase both common and preferred shares would require holders to purchase an equal
number of common and preferred shares, and would not permit holders to purchase an unequal number of common or preferred shares, or purchase
only common shares or only preferred shares. For example, such an offering might be structured such that three rights would entitle an
investor to purchase one common share and one preferred share, and such investor would not be able to choose to purchase only a common
share or only a preferred share upon the exercise of his, her or its rights.
The common shares and preferred shares issued pursuant to the exercise
of any such rights, however, would at all times be separately tradeable securities. Such common and preferred shares would not be issued
as a “unit” or “combination” and would not be listed or traded as a “unit” or “combination”
on a securities exchange at any time. The applicable Prospectus Supplement will set forth additional details regarding an offering of
subscription rights to purchase common and preferred shares.
Outstanding Securities
The following information regarding the Fund’s authorized shares
is as of March 1, 2021.
Title of Class
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Amount Authorized
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Amount Outstanding Amount Held by
Fund or for its Account
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Exclusive of Amount Held by Fund
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Common Shares
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Unlimited
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—
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8,407,724
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Preferred Shares
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Unlimited
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—
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0
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Credit Facility
The Fund uses leverages through borrowings. The Fund may negotiate
with commercial banks to arrange a credit facility pursuant to which the Fund would expect to be entitled to borrow an amount equal to
approximately one-third of the Fund’s total assets (inclusive of the amount borrowed) as of the closing of the offer and sale of
the Common Shares offered hereby. Such borrowings constitute financial leverage.
The credit facility contains covenants
that, among other things, limit the Fund’s ability to incur additional debt, change its fundamental investment policies and engage
in certain transactions, including mergers and consolidations, and may require asset coverage ratios in addition to those required by
the 1940 Act..
The Fund entered into a financing package that includes a Committed
Facility Agreement (the “Agreement”) dated January 16, 2009, as amended, between the Fund and BNP Paribas Prime Brokerage,
Inc. (“BNP”) that allows the Fund to borrow funds from BNP. The Fund is currently borrowing the maximum commitment covered
by the Agreement. The Fund entered into a Special Custody and Pledge Agreement (the “Pledge Agreement”) dated December 9,
2013, as amended, between the Fund, the Fund’s custodian, and BNP. As of October 31, 2016, the Pledge Agreement was assigned from
BNP to BNP Paribas Prime Brokerage International, Ltd. Per the Pledge Agreement, borrowings under the Agreement are secured by assets
of the Fund that are held by the Fund’s custodian in a separate account (the “pledged collateral”). Interest is charged
at the three month LIBOR (London Inter-bank Offered Rate) plus 0.70% on the amount borrowed and 0.65% on the undrawn balance.
As of January 31, 2021, the outstanding borrowings for the Fund were
$50,500,000. The interest rate applicable to the borrowings of the Fund on January 31, 2021 was 0.90%.
The Fund and BNP have also entered into an agreement (the “Lending
Agreement”) 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 Agreement. The Lending Agreement is intended to permit the
Fund to significantly reduce the cost of its borrowings under the Agreement. The Fund receives income from BNP based on the value of
the Lent Securities. 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. BNP has the ability to re-register the Lent Securities in its own name or in another name other than
the Fund to pledge, re-pledge, sell, lend or otherwise transfer or use the collateral with all attendant rights of ownership. However,
if the Fund recalls any of the Lent Securities, BNP is required to return those securities or equivalent security to the Fund’s
custodian, to the extent commercially possible, no later than three Business Days after such request.
Repurchase of Shares and Other Discount Measures
Because shares of closed-end management investment companies frequently
trade at a discount to their net asset values, the Board of Trustees has determined that from time to time it may be in the interest
of Common Shareholders for the Fund to take corrective actions. The Board of Trustees, in consultation with Clough and ALPS, will review
at least annually the possibility of open market repurchases and/or tender offers for the Common Shares and will consider such factors
as the market price of the Common Shares, the net asset value of the Common Shares, the liquidity of the assets of the Fund, effect on
the Fund’s expenses, whether such transactions would impair the Fund’s status as a regulated investment company or result
in a failure to comply with applicable asset coverage requirements, general economic conditions and such other events or conditions,
which may have a material effect on the Fund’s ability to consummate such transactions. There are no assurances that the Board
of Trustees will, in fact, decide to undertake either of these actions or, if undertaken, that such actions will result in the Fund’s
Common Shares trading at a price which is equal to or approximates their net asset value. In recognition of the possibility that the
Common Shares might trade at a discount to net asset value and that any such discount may not be in the interest of Common Shareholders,
the Board of Trustees, in consultation with Clough, from time to time may review possible actions to reduce any such discount.
ANTI-TAKEOVER PROVISIONS IN THE DECLARATION
OF TRUST
The Declaration of Trust includes provisions that could have the effect
of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of the Board of Trustees,
and could have the effect of depriving Common Shareholders of an opportunity to sell their Common Shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of the Fund. These provisions may have the effect of discouraging
attempts to acquire control of the Fund, which attempts could have the effect of increasing the expenses of the Fund and interfering
with the normal operation of the Fund. The Board of Trustees is divided into three classes, with the term of one class expiring at each
annual meeting of Common Shareholders. At each annual meeting, one class of Trustees is elected to a three-year term. This provision
could delay for up to two years the replacement of a majority of the Board of Trustees. A Trustee may be removed from office without
cause only by a written instrument signed or adopted by two-thirds of the remaining Trustees or by a vote of the holders of at least
two-thirds of the class of shares of the Fund that elected such Trustee and are entitled to vote on the matter.
The Fund’s Declaration of Trust provides that the Fund may not
merge with another entity, or sell, lease or exchange all or substantially all of its assets without the approval of at least two-thirds
of the Trustees and 75% of the affected shareholders.
In addition, the Declaration of Trust requires the favorable vote of
the holders of at least 80% of the outstanding shares of each class of the Fund, voting as a class, then entitled to vote to approve,
adopt or authorize certain transactions with 5%-or-greater holders of the Fund’s outstanding shares and their affiliates or associates,
unless two-thirds of the Board of Trustees have approved by resolution a memorandum of understanding with such holders, in which case
normal voting requirements would be in effect. For purposes of these provisions, a 5%-or-greater holder of outstanding shares (a “Principal
Shareholder”) refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates,
beneficially owns 5% or more of the outstanding shares of beneficial interest of the Fund. The transactions subject to these special
approval requirements are: (i) the merger or consolidation of the Fund or any subsidiary of the Fund with or into any Principal Shareholder;
(ii) the issuance of any securities of the Fund to any Principal Shareholder for cash (other than pursuant to any automatic dividend
reinvestment plan or pursuant to any offering in which such Principal Shareholder acquires securities that represent no greater a percentage
of any class or series of securities being offered than the percentage of any class of shares beneficially owned by such Principal Shareholder
immediately prior to such offering or, in the case of securities, offered in respect of another class or series, the percentage of such
other class or series beneficially owned by such Principal Shareholder immediately prior to such offering); (iii) the sale, lease or
exchange of all or any substantial part of the assets of the Fund to any Principal Shareholder (except assets having an aggregate fair
market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series
of similar transactions within a twelve-month period); (iv) the sale, lease or exchange to the Fund or any subsidiary thereof, in exchange
for securities of the Fund, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period) or (v) the purchase by the Fund, or any entity controlled by the Fund, of any Common Shares from any Principal
Shareholder or any person to whom any Principal Shareholder transferred Common Shares.
The Board of Trustees has determined that provisions with respect to
the Board of Trustees and the 80% voting requirements described above, which voting requirements are greater than the minimum requirements
under Delaware law or the 1940 Act, are in the best interest of Common Shareholders generally. Reference should be made to the Declaration
of Trust on file with the Securities and Exchange Commission for the full text of these provisions.
CONVERSION TO OPEN-END FUND
The Fund may be converted to an open-end management investment company
at any time if approved by each of the following: (i) a majority of the Trustees then in office, (ii) the holders of not less than 75%
of the Fund’s outstanding shares entitled to vote thereon and (iii) by such vote or votes of the holders of any class or classes
or series of shares as may be required by the 1940 Act. The composition of the Fund’s portfolio likely would prohibit the Fund
from complying with regulations of the Securities and Exchange Commission applicable to open-end management investment companies, including
the limitation that open-end management investment companies invest no more than 15% in illiquid securities. Accordingly, conversion
likely would require significant changes in the Fund’s investment policies and liquidation of a substantial portion of the relatively
illiquid portion of its portfolio. Conversion of the Fund to an open-end management investment company also would require the redemption
of any outstanding preferred shares and could require the repayment of borrowings, which would eliminate the leveraged capital structure
of the Fund with respect to the Common Shares. In the event of conversion, the Common Shares would cease to be listed on the NYSE American
or other national securities exchange or market system. The Board of Trustees believes, however, that the closed-end structure is desirable,
given the Fund’s investment objective and policies. Investors should assume, therefore, that it is unlikely that the Board of Trustees
would vote to convert the Fund to an open-end management investment company. Shareholders of an open-end management investment company
may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940 Act) at
their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. The Fund expects to pay
all such redemption requests in cash, but intends to reserve the right to pay redemption requests in a combination of cash or securities.
If such partial payment in securities were made, investors may incur brokerage costs in converting such securities to cash. If the Fund
were converted to an open-end fund, it is likely that new Common Shares would be sold at net asset value plus a sales load.
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company is the custodian of the Fund
and maintains custody of the securities and cash of the Fund. ALPS maintains the Fund’s general ledger and computes net asset value
per share daily.
DST serves as the transfer agent of the Fund.
LEGAL MATTERS
Certain legal matters in connection with the Common Shares will be
passed upon for the Fund by K&L Gates LLP.
REPORTS TO SHAREHOLDERS
The Fund sends to Common Shareholders unaudited semi-annual and audited
annual reports, including a list of investments held.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Cohen & Company Ltd., located at 1350 Euclid Ave Suite 800, Cleveland,
Ohio 44115, serves as the independent registered public accounting firm for the current fiscal year. The firm provides services including
(i) audit of annual financial statements, (ii) assistance and consultation in connection with SEC filings, and (iii) other audit related
and tax services.
ADDITIONAL INFORMATION
The Prospectus and the Statement of Additional Information do not contain
all of the information set forth in the Registration Statement that the Fund has filed with the Securities and Exchange Commission. The
complete Registration Statement may be obtained from the Securities and Exchange Commission upon payment of the fee prescribed by its
rules and regulations. The Statement of Additional Information can be obtained without charge by calling (877) 256-8445 (toll-free).
Statements contained in this Prospectus as to the contents of any contract
or other documents referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement of which this Prospectus forms a part, each such statement being qualified
in all respects by such reference.
INCORPORATION BY REFERENCE
This Prospectus is part of a registration statement
that the Fund has filed with the SEC. The Fund is allowed to “incorporate by reference” the information that the Fund files
with the SEC, which means that the Fund can disclose important information to you by referring you to those documents. The Fund incorporates
by reference into this Prospectus the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, including any filings on or after the date of this Prospectus from the date of filing (excluding any
information furnished, rather than filed), until we have sold all of the offered securities to which this Prospectus and any accompanying
prospectus supplement relates or the offering is otherwise terminated. The information incorporated by reference is an important part
of this Prospectus. Any statement in a document incorporated by reference into this Prospectus will be deemed to be automatically modified
or superseded to the extent a statement contained in (1) this Prospectus or (2) any other subsequently filed document that is incorporated
by reference into this Prospectus modifies or supersedes such statement. The documents incorporated by reference herein include:
We will also provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request, a copy of any and all of the documents
that have been or may be incorporated by reference in this Prospectus or the accompanying Prospectus Supplement.
THE FUND’S PRIVACY POLICY
The Fund is committed to ensuring your financial privacy. This notice
is being sent to comply with privacy regulations of the Securities and Exchange Commission. The Fund has in effect the following policy
with respect to nonpublic personal information about its customers:
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Only such information received
from you, through application forms or otherwise, and information about your Fund transactions will be collected.
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None of such information
about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary
to service your account).
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Policies and procedures (including
physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information.
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For more information about the Fund’s privacy policies call (877)
256-8445 (toll-free).
Clough Global Dividend and Income Fund
$40,975,000
Common Shares
Preferred Shares
Subscription Rights to Purchase Common Shares
Subscription Rights to Purchase Preferred Shares
Subscription Rights to Purchase Common and Preferred
Shares
PROSPECTUS
May 19, 2021
STATEMENT OF ADDITIONAL INFORMATION
May
19, 2021
Clough Global
Dividend and Income Fund
1290 Broadway, Suite 1000
Denver, Colorado 80203
(877) 256-8445
TABLE OF CONTENTS
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Page
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Additional Investment Information and Restrictions
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2
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Trustees and Officers
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5
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Code of Ethics
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21
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Proxy Voting Policy
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21
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Investment Advisory and Other Services
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21
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Determination of Net Asset Value
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24
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Portfolio Trading
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25
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Principal Shareholders and Control Persons
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27
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Taxes
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28
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Other Information
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32
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Independent Registered Public Accounting Firm
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33
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Appendix A: Ratings
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33
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Appendix B: Proxy Voting Policy
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39
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This Statement of Additional Information
(“SAI”) is not a prospectus and is authorized for distribution to prospective investors only if preceded or accompanied by
the Prospectus of the Clough Global Dividend and Income Fund (the “Fund”), dated May 19, 2021, as supplemented from time
to time, which is incorporated herein by reference. This SAI should be read in conjunction with such Prospectus, a copy of which may
be obtained without charge by contacting your financial intermediary or calling the Fund at (877) 256-8445.
The information in this Statement of Additional
Information is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities
and Exchange Commission is effective. This Statement of Additional Information, which is not a Prospectus, is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Capitalized terms used in this SAI and not
otherwise defined have the meanings given them in the Fund’s Prospectus.
ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
The Fund was organized as a statutory trust
in Delaware on April 27, 2004 and is a diversified closed-end investment management company registered under the Investment Company Act
of 1940, as amended. It invests in a managed mix of equity and debt securities. The common shares of the Fund are listed on the NYSE
American LLC (“NYSE American”) under the ticker symbol “GLV”. The Fund’s primary investment objective is
to provide a high level of total return and current income. The Fund seeks to pursue this objective by applying a fundamental research-driven
investment process and will invest in equity securities of companies of any market capitalization and equity-related securities, including
equity swaps and call options, as well as fixed income securities, including both corporate and sovereign debt in both U.S. and non-U.S.
markets.
Primary investment strategies are described
in the Prospectus. The following is a description of the various investment policies that may be engaged in, whether as a primary or
secondary strategy, and a summary of certain attendant risks. Clough may, but is not required to, buy any of the following instruments
or use any of the following techniques, and would do so only if it believes that doing so will help to achieve the Fund’s investment
objectives.
Derivative Instruments
Derivative instruments (which are instruments
that derive their value from another instrument, security, index or currency) may be purchased or sold to enhance return (which may be
considered speculative), to hedge against fluctuations in securities prices, market conditions or currency exchange rates, or as a substitute
for the purchase or sale of securities or currencies. Such transactions may be in the U.S. or abroad and may include the purchase or
sale of futures contracts on indices and options on stock index futures, the purchase of put options and the sale of call options on
securities held, equity swaps and the purchase and sale of currency futures and forward foreign currency exchange contracts. Transactions
in derivative instruments involve a risk of loss or depreciation due to: unanticipated adverse changes in securities prices, interest
rates, indices, the other financial instruments’ prices or currency exchange rates; the inability to close out a position; default
by the counterparty; imperfect correlation between a position and the desired hedge; tax constraints on closing out positions; and portfolio
management constraints on securities subject to such transactions. The loss on derivative instruments (other than purchased options)
may substantially exceed an investment in these instruments. In addition, the entire premium paid for purchased options may be lost before
than can be profitably exercised. Transaction costs are incurred in opening and closing positions. Derivative instruments may sometimes
increase or leverage exposure to a particular market risk, thereby increasing price volatility. Over-the-counter (“OTC”)
derivative instruments, equity swaps and forward sales of stocks involve an enhanced risk that the issuer or counterparty will fail to
perform its contractual obligations.
Some derivative instruments are not readily
marketable or may become illiquid under adverse market conditions. In addition, during periods of market volatility, a commodity exchange
may suspend or limit trading in an exchange-traded derivative instrument, which may make the contract temporarily illiquid and difficult
to price. Commodity exchanges may also establish daily limits on the amount that the price of a futures contract or futures option can
vary from the previous day’s settlement price. Once the daily limit is reached, no trades may be made that day at a price beyond
the limit. This may prevent the closing out of positions to limit losses. The staff of the Securities and Exchange Commission takes the
position that certain purchased OTC options, and assets used as cover for written OTC options, are illiquid. The ability to terminate
OTC derivative instruments may depend on the cooperation of the counterparties to such contracts. For thinly traded derivative instruments,
the only source of price quotations may be the selling dealer or counterparty. In addition, certain provisions of the Code limit the
use of derivative instruments. There can be no assurance that the use of derivative instruments will be advantageous.
Foreign exchange traded futures contracts
and options thereon may be used only if Clough determines that trading on such foreign exchange does not entail risks, including credit
and liquidity risks that are materially greater than the risks associated with trading on CFTC-regulated exchanges.
A put option on a security may be written
only if Clough intends to acquire the security. Call options written on securities will be covered by ownership of the securities subject
to the call option or an offsetting option.
Corporate Bonds and Other Debt Securities
The Fund may invest in corporate bonds, including
below investment grade quality bonds, commonly known as “junk bonds” (“Non-Investment Grade Bonds”). Investments
in Non-Investment Grade Bonds generally provide greater income and increased opportunity for capital appreciation than investments in
higher quality securities, but they also typically entail greater price volatility and principal and income risk, including the possibility
of issuer default and bankruptcy. Non-Investment Grade Bonds are regarded as predominantly speculative with respect to the issuer’s
continuing ability to meet principal and interest payments. Debt securities in the lowest investment grade category also may be considered
to possess some speculative characteristics by certain rating agencies. In addition, analysis of the creditworthiness of issuers of Non-Investment
Grade Bonds may be more complex than for issuers of higher quality securities.
Non-Investment Grade Bonds may be more susceptible
to real or perceived adverse economic and competitive industry conditions than investment grade securities. A projection of an economic
downturn or of a period of rising interest rates, for example, could cause a decline in Non-Investment Grade Bond prices because the
advent of recession could lessen the ability of an issuer to make principal and interest payments on its debt obligations. If an issuer
of Non-Investment Grade Bonds defaults, in addition to risking payment of all or a portion of interest and principal, the Fund may incur
additional expenses to seek recovery. In the case of Non-Investment Grade Bonds structured as zero-coupon, step-up or payment-in-kind
securities, their market prices will normally be affected to a greater extent by interest rate changes, and therefore tend to be more
volatile than securities which pay interest currently and in cash. Clough seeks to reduce these risks through diversification, credit
analysis and attention to current developments in both the economy and financial markets.
The secondary market on which Non-Investment
Grade Bonds are traded may be less liquid than the market for investment grade securities. Less liquidity in the secondary trading market
could adversely affect the net asset value of the Shares. Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of Non-Investment Grade Bonds, especially in a thinly traded market. When secondary markets
for Non-Investment Grade Bonds are less liquid than the market for investment grade securities, it may be more difficult to value the
securities because such valuation may require more research, and elements of judgment may play a greater role in the valuation because
there is no reliable, objective data available. During periods of thin trading in these markets, the spread between bid and asked prices
is likely to increase significantly and the Fund may have greater difficulty selling these securities. The Fund will be more dependent
on Clough’s research and analysis when investing in Non-Investment Grade Bonds. Clough seeks to minimize the risks of investing
in all securities through in-depth credit analysis and attention to current developments in interest rate and market conditions.
A general description of the ratings of securities
by Moody’s, S&P and Fitch is set forth in Appendix A to this SAI. Such ratings represent these rating organizations’
opinions as to the quality of the securities they rate. It should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, debt obligations with the same maturity, coupon and rating may have different yields while obligations
with the same maturity and coupon may have the same yield. For these reasons, the use of credit ratings as the sole method of evaluating
Non-Investment Grade Bonds can involve certain risks. For example, credit ratings evaluate the safety or principal and interest payments,
not the market value risk of Non-Investment Grade Bonds. Also, credit rating agencies may fail to change credit ratings in a timely fashion
to reflect events since the security was last rated. Clough does not rely solely on credit ratings when selecting securities for the
Fund, and develops its own independent analysis of issuer credit quality.
In the event that a rating agency or Clough
downgrades its assessment of the credit characteristics of a particular issue, the Fund is not required to dispose of such security.
In determining whether to retain or sell a downgraded security, Clough may consider such factors as Clough’s assessment of the
credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned to such
security by other rating agencies. However, analysis of the creditworthiness of issuers of Non-Investment Grade Bonds may be more complex
than for issuers of high quality debt securities.
Investment Restrictions
Fundamental Restrictions. The following
investment restrictions of the Fund are designated as fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund’s outstanding voting securities, which as used in this SAI means the lesser of (a) 67% of the
shares of the Fund present or represented by proxy at a meeting if the holders of more than 50% of the outstanding shares are present
or represented at the meeting or (b) more than 50% of outstanding shares of the Fund. As a matter of fundamental policy, the Fund may
not:
|
(1)
|
Borrow money, except as permitted by the 1940
Act. The 1940 Act currently requires that any indebtedness incurred by a closed-end investment company have an asset coverage of
at least 300%;
|
|
(2)
|
Issue senior securities, as defined in the 1940
Act, other than (a) preferred shares which immediately after issuance will have asset coverage of at least 200%, (b) indebtedness
which immediately after issuance will have asset coverage of at least 300% or (c) the borrowings permitted by investment restriction
(1) above. The 1940 Act currently defines “senior security” as any bond, debenture, note or similar obligation or instrument
constituting a security and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution
of assets or payment of dividends. Debt and equity securities issued by a closed-end investment company meeting the foregoing asset
coverage provisions are excluded from the general 1940 Act prohibition on the issuance of senior securities;
|
|
(3)
|
Purchase securities on margin (but the Fund may
obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities). The purchase of investment
assets with the proceeds of a permitted borrowing or securities offering will not be deemed to be the purchase of securities on margin;
|
|
(4)
|
Underwrite securities issued by other persons,
except insofar as it may technically be deemed to be an underwriter under the Securities Act in selling or disposing of a portfolio
investment;
|
|
(5)
|
Make loans to other persons, except by (a) the
acquisition of loan interests, debt securities and other obligations in which the Fund is authorized to invest in accordance with
its investment objectives and policies, (b) entering into repurchase agreements and (c) lending its portfolio securities;
|
|
(6)
|
Purchase or sell real estate, although it may
purchase and sell securities which are secured by interests in real estate and securities of issuers which invest or deal in real
estate. The Fund reserves the freedom of action to hold and to sell real estate acquired as a result of the ownership of securities;
|
|
(7)
|
Purchase or sell physical commodities or contracts
for the purchase or sale of physical commodities. Physical commodities do not include futures contracts with respect to securities,
securities indices, currencies, interest or other financial instruments; and
|
|
(8)
|
Invest 25% or more of the value of its total assets
in the securities (other than U.S. Government Securities) of issuers engaged in any single industry or group of related industries.
|
Non-fundamental Restriction. The Fund has adopted the following
non-fundamental investment policy which may be changed by the Board of Trustees without approval of the Fund’s shareholders. The
Fund may invest in the securities of other investment companies to the extent that such an investment would be consistent with the requirements
of the 1940 Act and the rules thereunder. Investments in the securities of other investment companies may involve duplication of advisory
fees and certain other expenses. By investing in another investment company, the Fund becomes a shareholder of that investment company.
As a result, the Fund’s shareholders indirectly bear the Fund’s proportionate share of the fees and expenses paid by the
shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with
the Fund’s own operations.
Whenever an investment policy or investment restriction set forth
in the Prospectus or this SAI states a maximum or minimum percentage of assets that may be invested in any security or other assets or
describes a policy regarding quality standards, such percentage limitation or standard shall be determined immediately after and as a
result of the Fund’s acquisition of such security or asset. Accordingly, any later increase or decrease resulting from a change
in values, assets or other circumstances or any subsequent rating change made by a rating service (or as determined by Clough if the
security is not rated by a rating agency) will not compel the Fund to dispose of such security or other asset. Notwithstanding the foregoing,
the Fund must always be in compliance with the borrowing policies set forth above.
Temporary Borrowings
The Fund may borrow money as a temporary measure for extraordinary
or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require
untimely dispositions of Fund securities. The 1940 Act currently requires that the Fund have 300% asset coverage with respect to all
borrowings other than temporary borrowings.
TRUSTEES AND OFFICERS
The Trustees of the Fund are responsible for the overall management
and supervision of the affairs of the Fund. The Trustees and officers of the Fund are listed below. “GLV” refers to Clough
Global Dividend and Income Fund, “GLQ” refers to Clough Global Equity Fund and “GLO” refers to Clough Global
Opportunities Fund. Except as indicated, each individual has held the office shown or other offices in the same company for the last
five years. The “non-interested Trustees” consist of those Trustees who are not “interested persons” of the Fund,
as that term is defined under the 1940 Act.
Name, Address1 and
Year of Birth
|
Position(s) Held with the
Fund
|
Term of office and length
of service with the Fund2
|
Principal Occupation(s)
During Past Five Years
|
Number of Portfolios in
Fund Complex Overseen by Trustee3
|
Other Directorships Held
by Trustee During Past Five Years
|
Non-Interested Trustees
|
Robert
L. Butler Chairman
1941
|
Chairman of the Board and Trustee
|
Trustee
since:
GLV: 2004
GLQ: 2005
GLO: 2006
Term expires:
GLV: 2021
GLQ: 2022
GLO: 2023
|
Since 2001, Mr. Butler has been an independent consultant for businesses.
Mr. Butler has over 45 years’ experience in the investment business, including 17 years as a senior executive with a global
investment management/natural resources company and 20 years with a securities industry regulation organization.
|
3
|
None
|
Adam
D. Crescenzi
1942
|
Vice-Chairman of the Board and Trustee
|
Trustee
since:
GLV: 2004
GLQ: 2005
GLO: 2006
Term expires:
GLV: 2023
GLQ: 2021
GLO: 2022
|
Mr. Crescenzi has served as the Founding Partner of Simply Tuscan
Imports LLC since 2007. He has been a founder and investor of several start-up technology and service firms and has served as a director
of both public and private corporations. Currently, he advises businesses and non-profit organizations on issues of strategy, marketing,
and governance. He serves as Chairman of the Board of Governors for The Founders Fund, Inc. and is a Trustee and Governor of the
Naples Botanical Garden.
|
3
|
None
|
Name, Address1 and
Year of Birth
|
Position(s) Held with the
Fund
|
Term of office and length
of service with the Fund2
|
Principal Occupation(s)
During Past Five Years
|
Number of Portfolios in
Fund Complex Overseen by Trustee3
|
Other Directorships Held
by Trustee During Past Five Years
|
Karen DiGravio
1969
|
Trustee
|
Trustee
since:
GLV: 2017
GLQ: 2017
GLO: 2017
Term expires:
GLV: 2021
GLQ: 2022
GLO: 2023
|
Ms. DiGravio was a Partner, Chief Financial Officer and Chief Compliance
Officer of Westfield Capital Management. Thereafter, she served as a member of the Westfield Advisory Board until 2015. Ms. DiGravio
is co-chair of Connecticut College’s 1911 Society and is also a member of the college’s President’s Leadership
Council.
|
3
|
None
|
Jerry
G. Rutledge
1944
|
Trustee
|
Trustee
since: GLV: 2004
GLQ: 2005
GLO: 2006
Term expires: GLV: 2023
GLQ: 2021
GLO: 2022
|
Mr. Rutledge is the President and owner of Rutledge’s Inc.,
a retail clothing business. In addition, Mr. Rutledge served as a Director of the University of Colorado Hospital from 2008-2016.
|
4
|
Mr. Rutledge is currently a Trustee of
the Financial Investors Trust and the Principal Real Estate Income Fund.
|
Hon.
Vincent W. Versaci
1971
|
Trustee
|
Trustee
since: GLV: 2013
GLQ: 2013
GLO: 2013
Term expires: GLV: 2022
GLQ: 2023
GLO: 2021
|
Judge Versaci has served as a Judge in the New York State Courts
since January 2003. Currently, Judge Versaci is assigned as an Acting Supreme Court Justice and also presides over the Surrogate’s
Court for Schenectady County, New York. Previously, Judge Versaci has served as an Adjunct Professor at Schenectady County Community
College and a practicing attorney with an emphasis on civil and criminal litigation primarily in New York State Courts.
|
3
|
None
|
Name, Address1 and
Year of Birth
|
Position(s) Held with the
Fund
|
Term of office and length
of service with the Fund2
|
Principal Occupation(s)
During Past Five Years
|
Number of Portfolios in
Fund Complex Overseen by Trustee3
|
Other Directorships Held
by Trustee During Past Five Years
|
Clifford
J. Weber
1963
|
Trustee
|
Trustee
since: GLV: 2017
GLQ: 2017
GLO: 2017
Term expires: GLV: 2022
GLQ: 2023
GLO: 2021
|
Mr. Weber is the founder of Financial Products Consulting Group,
LLC (a consulting firm). Prior to starting Financial Products Consulting Group, he was the Executive Vice President – Global
Index and Exchange Traded Products of the NYSE, a subsidiary of Intercontinental Exchange, from 2013 to 2015.
|
4
|
Mr. Weber is currently a Trustee of Clough
Funds Trust, Janus Detroit Street Trust, Clayton Street Trust, and Global-X Funds.
|
Interested Trustees4
|
Edmund
J. Burke5
1961
|
Trustee
|
Trustee
since:
GLV: 2006
GLQ: 2006
GLO: 2006
Term expires:
GLV: 2022
GLQ: 2023
GLO: 2021
|
Retired. Formerly, Chief Executive Officer and President and Director
of ALPS Holdings, Inc., and ALPS Advisors, Inc. (2001-2019), and Director of ALPS Distributors, Inc. (2000-2019), ALPS Fund Services,
Inc., (2000-2019) and ALPS Portfolio Solutions Distributor, Inc. (2013-2019). Mr. Burke also served as a Director of Boston Financial
Data Services (2013-2019). Mr. Burke is deemed an affiliate of the Funds as defined under the 1940 Act.
|
5
|
Mr.
Burke is also a Trustee of Financial Investors Trust, Clough Funds Trust, Liberty All-Star Equity Fund, and ALPS ETF Trust, and a
Director of the Liberty All-Star Growth Fund, Inc.
|
Name, Address1 and
Year of Birth
|
Position(s) Held with the
Fund
|
Term of office and length
of service with the Fund2
|
Principal Occupation(s)
During Past Five Years
|
Number of Portfolios in
Fund Complex Overseen by Trustee3
|
Other Directorships Held
by Trustee During Past Five Years
|
Kevin
McNally6
1969
Clough Capital
Partners L.P.
53 State Street
27th Floor
Boston, MA 02109
|
Trustee
|
Trustee
since:
GLV: 2017
GLQ: 2017
GLO: 2017
Term expires:
GLV: 2021
GLQ: 2022
GLO: 2023
|
Mr. McNally is currently a Managing Director at Clough and serves
as the portfolio manager for an investment fund advised by Clough that invests primarily in closed-end funds. Prior to joining Clough
Capital Partners L.P. in 2014, he served as the Director of Closed- End Funds at ALPS Fund Services, Inc. from 2003 to 2014. Mr.
McNally received a Bachelor of Arts degree from the University of Massachusetts at Amherst in 1991 and an MBA in Finance from New
York University’s Stern School of Business in 1998.
|
4
|
Mr. McNally is also a Trustee of Clough Funds Trust.
|
Officers
|
|
|
|
|
|
Bradley
Swenson
1972
|
President
|
Officer
since7
GLV: 2019
GLQ: 2019
GLO: 2019
|
Mr. Swenson joined ALPS in 2004 and has served as its President since
June 2019. In this role, he serves as an officer to certain other closed-end and open-end investment companies. He previously served
as the Chief Operating Officer of ALPS (2015-2019). Mr. Swenson also previously served as Chief Compliance Officer to ALPS, its affiliated
entities, and to certain ETF, closed-end and open-end investment companies (2004-2015).
|
N/A
|
N/A
|
Name, Address1 and
Year of Birth
|
Position(s) Held with the
Fund
|
Term of office and length
of service with the Fund2
|
Principal Occupation(s)
During Past Five Years
|
Number of Portfolios in
Fund Complex Overseen by Trustee3
|
Other Directorships Held
by Trustee During Past Five Years
|
Lucas
Foss
1977
|
Chief Compliance Officer (“CCO”)
|
Officer
since7
GLV: 2018
GLQ: 2018
GLO: 2018
|
Mr.
Foss has over 17 years of experience within the fund services industry and currently serves as Vice President and Deputy Chief Compliance
Officer at ALPS Fund Services, Inc. (“ALPS”). Prior to rejoining ALPS in November 2017, Mr. Foss served as the Director
of Compliance at Transamerica Asset Management (“TAM”) beginning in July 2015. Previous to TAM, Mr. Foss was Deputy Chief
Compliance Officer at ALPS. Mr. Foss received a B.A. in Economics from the University of Vermont and holds the Certified Securities
Compliance Professional (CSCP) designation.
|
N/A
|
N/A
|
Kelly McEwen
1984
|
Treasurer
|
Officer since7
GLV: 2020
GLQ: 2020
GLO: 2020
|
Ms. McEwen joined ALPS in August 2019 and is currently Vice President
and Fund Controller at ALPS. Ms. McEwen also serves as Treasurer of Reaves Utility Income Fund, Clough Funds Trust, and Cambria ETF
Trust. Ms. McEwen was formerly Assistant Director of Financial Reporting at Invesco Ltd. in 2019 and Assistant Vice President of
Fund Treasury at OppenheimerFunds, Inc. from 2015-2018.
|
N/A
|
N/A
|
Name, Address1 and
Year of Birth
|
Position(s) Held with the
Fund
|
Term of office and length
of service with the Fund2
|
Principal Occupation(s)
During Past Five Years
|
Number of Portfolios in
Fund Complex Overseen by Trustee3
|
Other Directorships Held
by Trustee During Past Five Years
|
Sareena
Khwaja-Dixon
1980
|
Secretary
|
Officer
since7
GLV: 2016
GLQ: 2016
GLO: 2016
|
Ms. Khwaja-Dixon joined ALPS in August 2015 and is currently Principal
Legal Counsel and Vice President of ALPS. Ms. Khwaja-Dixon is also Secretary of Clough Funds Trust, RiverNorth Opportunities Fund,
Inc., Liberty All-Star Growth Fund, Inc., and Liberty All-Star Equity Fund and Assistant Secretary of RiverNorth Funds, RiverNorth
Specialty Finance Corp, RiverNorth/DoubleLine Strategic Opportunity Fund, Inc., RiverNorth Flexible Municipal Income Fund, Inc.,
RiverNorth Managed Duration Municipal Income Fund, Inc., and RiverNorth Opportunistic Municipal Income Fund, Inc.
|
N/A
|
N/A
|
Jennifer
A. Craig
1973
|
Assistant Secretary
|
Officer
since7
GLV: 2016
GLQ: 2016
GLO: 2016
|
Ms. Craig joined ALPS in 2007 and is currently Assistant Vice President
and Paralegal Manager of ALPS. Ms. Craig is also Assistant Secretary of Financial Investors Trust, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc., and Secretary of Principal Real Estate Income Fund and Clerk of Goehring & Rozencwajg Investment
Funds.
|
N/A
|
N/A
|
|
1
|
Address: 1290 Broadway, Suite 1000, Denver,
Colorado 80203, unless otherwise noted.
|
|
2
|
GLV commenced operations July 28, 2004,
GLQ commenced operations April 27, 2005, and GLO commenced operations April 25, 2006.
|
|
3
|
The Fund Complex for all Trustees, except
Mr. Rutledge, Mr. Weber, Mr. McNally and Mr. Burke, consists of the Clough Global Dividend and Income Fund, Clough Global Equity
Fund and Clough Global Opportunities Fund. The Fund Complex for Mr. Rutledge consists of Clough Global Dividend and Income Fund,
Clough Global Equity Fund, Clough Global Opportunities Fund and Clough China Fund, a series of the Financial Investors Trust. The
Fund Complex for Mr. Burke consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough Global Opportunities
Fund, Clough China Fund, a series of the Financial Investors Trust, and Clough Global Long-Short Fund, a series of Clough Funds Trust.
The Fund Complex for Mr. Weber and Mr. McNally consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough
Global Opportunities Fund, and Clough Global Long-Short Fund, a series of Clough Funds Trust.
|
|
4
|
“Interested Trustees” refers
to those Trustees who constitute “interested persons” of the Fund as defined in the 1940 Act.
|
|
5
|
Mr. Burke is considered to be an “Interested
Trustee” because of his previous positions with ALPS.
|
|
6
|
Mr. McNally is considered to be an “Interested
Trustee” because of his affiliation with Clough, which acts as the Fund’s investment adviser.
|
|
7
|
Officers are elected annually and each
officer will hold such office until a successor has been elected by the Board.
|
Beneficial Ownership of GLV Common Shares by each Trustee
Set forth in the table below is the dollar
range of equity securities held in the Fund and on an aggregate basis for the entire Family of Investment Companies overseen by each
Trustee.
Independent
Trustees
|
Dollar
Range1 of Equity Securities Held in GLV:
|
Aggregate
Dollar Range of Equity Securities Held in the Family of Investment Companies
|
Robert
L. Butler
|
$50,001-$100,000
|
Over
$100,000
|
Adam
D. Crescenzi
|
$1-$10,000
|
$10,001-$50,000
|
Jerry
G. Rutledge
|
$0
|
$0
|
Vincent
W. Versaci
|
$0
|
$10,001-$50,000
|
Karen
DiGravio
|
$10,001-$50,000
|
$50,0001-
$100,000
|
Clifford
J. Weber
|
$0
|
$10,001-$50,000
|
Interested
Trustees
|
|
|
Edmund
J. Burke
|
$0
|
$0
|
Kevin
McNally
|
$50,001-
$100,000
|
Over
$100,000
|
|
(1)
|
This information has been furnished by
each Trustee of December 31, 2020. “Beneficial Ownership” is determined in accordance with Section 16a-1(a)(2) under
the Securities Exchange Act of 1934, as amended.
|
|
(2)
|
Ownership amount constitutes less than
1% of the total shares outstanding.
|
|
(3)
|
The Funds in the family
of investment companies for all Trustees, consists of the Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough
Global Opportunities Fund and Clough Funds Trust.
|
Trustee Transactions with Fund Affiliates
As of December 31, 2020, none of the independent
trustees, meaning those Trustees who are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act and are
independent under the NYSE American’s Listing Standards (each an “Independent Trustee” and collectively the “Independent
Trustees”), nor members of their immediate families owned securities, beneficially or of record, in Clough or an affiliate or person
directly or indirectly controlling, controlled by, or under common control with Clough, other than investments in the Fund and investments
in affiliated investment vehicles that, pursuant to guidance from the SEC Staff, do not affect such Trustee’s independence. Furthermore,
over the past five years, neither the Independent Trustees nor members of their immediate families have had any direct or indirect interest,
the value of which exceeds $120,000, in Clough or any of its affiliates. In addition, since the beginning of the last two fiscal years,
neither the Independent Trustees nor members of their immediate families have conducted any transactions (or series of transactions)
or maintained any direct or indirect relationship in which the amount involved exceeds $120,000 and to which Clough or any affiliate
of Clough was a party.
Trustee Compensation
The following table sets forth certain information
regarding the compensation of the Fund’s Trustees for the fiscal year ended October 31, 2020. Trustees and Officers of the Fund
who are employed by ALPS or Clough receive no compensation or expense reimbursement from the Fund.
Compensation Table for the Fiscal Year Ended
October 31, 2020.
Name
of Trustee
|
Clough
Global Dividend and Income Fund
|
Total
Compensation Paid From the Fund Complex1
|
Edmund
Burke
|
$12,667
|
$38,330
|
Robert
L. Butler
|
$24,000
|
$72,000
|
Adam
D. Crescenzi
|
$20,000
|
$60,000
|
Jerry
G. Rutledge
|
$20,000
|
$60,440
|
Vincent
W. Versaci
|
$20,000
|
$60,000
|
Karen
DiGravio
|
$22,000
|
$66,000
|
Clifford
J. Weber
|
$20,000
|
$86,000
|
|
(1)
|
The Fund Complex for all Trustees, except
Mr. Rutledge, Mr. Weber, Mr. McNally and Mr. Burke, consists of the Clough Global Dividend and Income Fund, Clough Global Equity
Fund and Clough Global Opportunities Fund. The Fund Complex for Mr. Rutledge consists of Clough Global Dividend and Income Fund,
Clough Global Equity Fund, Clough Global Opportunities Fund and Clough China Fund, a series of the Financial Investors Trust. The
Fund Complex for Mr. Burke consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough Global Opportunities
Fund, Clough China Fund, a series of the Financial Investors Trust, and Clough Global Long-Short Fund, a series of Clough Funds Trust.
The Fund Complex for Mr. Weber and Mr. McNally consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough
Global Opportunities Fund, and Clough Global Long-Short Fund, a series of Clough Funds Trust.
|
The Fund pays compensation to the Chairman
of the Board (the “Chairman”) and each Trustee who is not affiliated with ALPS or Clough or their affiliates. The Trustees
receive from the Fund an annual retainer of $14,000 per year plus $1,500 per Board meeting attended. The Chairman receives from the Fund
an annual retainer of $16,800 per year plus $1,800 per Board meeting attended. The Audit Committee Chairman receives from the Fund an
annual retainer of $15,400 per year plus $1,650 per Board meeting attended. For each telephonic Board meeting attended to the following:
(i) $500 for each Independent Trustee; (ii) $600 for the Chairman; and (iii) $550 for the Chairman of the Audit Committee. The Independent
Trustees do not receive any additional fees for in-person or telephonic committee meetings. The Chairman, Audit Committee Chairman and
each Independent Trustee’s actual out-of-pocket expenses relating to their attendance at such meetings are also paid for by the
Fund.
During the fiscal year ended October 31, 2020,
the Board of the Fund met four times. Each Trustee then serving in such capacity attended at least 75% of the meetings of Trustees and
of any committee of which he/she is a member.
Provided below is a brief summary of the specific
experience, qualifications, attributes or skills for each Trustee that warranted his/her consideration as a Trustee to the Board of Trustees
of the Fund, which is registered as an individual investment company under the 1940 Act. In addition, since being appointed to the Board,
each Trustee has further enhanced his or her experience and skills, in conjunction with the other Trustees, through the Board’s
oversight of the Fund’s officers in dealing with a diverse range of topics, to include but not limited to, portfolio management,
legal and regulatory matters, compliance oversight, preparation of financial statements and oversight of the Fund’s multiple service
providers.
Robert L. Butler – Mr. Butler is currently an
independent consultant for businesses. Mr. Butler was President of Pioneer Funds Distributor, Inc. from 1989 to 1998. He was Senior Vice-President
from 1985 to 1988 and Executive Vice-President and Director from 1988 to 1999 of the Pioneer Group, Inc. While at the Pioneer Group,
Inc. until his retirement in 1999, Mr. Butler was a Director or Supervisory Board member of a number of subsidiary and affiliated companies,
including: Pioneer First Polish Investment Fund, JSC, Pioneer Czech Investment Company and Pioneer Global Equity Fund PLC. From 1975
to 1984, Mr. Butler was a Vice-President of the National Association of Securities Dealers (currently Financial Industry Regulatory Authority).
Mr. Butler has served as Trustee since the Fund’s inception and as Chairman of the Board for the Fund since 2006. Mr. Butler has
also served as a member of the Audit Committee and Governance and Nominating Committee during his tenure as a Trustee for the Fund. The
Board of Trustees, in its judgment of Mr. Butler’s professional experience in the financial services industry, including extensive
involvement with international investing and as a trustee of closed-end investment companies, believes Mr. Butler contributes a diverse
perspective to the Board.
Adam D. Crescenzi – Mr. Crescenzi is currently
founding partner of Simply Tuscan Imports LLC and he advises businesses and non-profit organizations on issues of strategy, marketing,
and governance. He serves as Chairman of the Board of Governors for The Founders Fund Inc., and is a Trustee and Governor of the Naples
Botanical Garden. Mr. Crescenzi graduated from the Greater Naples Leadership program in 2014. He previously served as a Trustee of Dean
College from 2003 to 2015. He has been a founding partner and investor of several start-up technology and service firms, such as Telos
Partners, a strategic business advisory firm, Creative Realties, Inc. a creative arts technology firm, and ICEX, Inc., whose principal
business is web-based corporate exchange forums. Prior to being involved in multiple corporate start-ups, Mr. Crescenzi retired from
CSC Index as Executive Vice-President of Management Consulting Services. During his career, Mr. Crescenzi has also served with various
philanthropic organizations such as the Boston College McMullen Museum of Arts. Mr. Crescenzi has served as Trustee since the Fund’s
inception. Mr. Crescenzi has also served as a member of the Audit Committee and Governance and Nominating Committee during his tenure
as a Trustee for the Fund. Mr. Crescenzi has served as Chairman of the Governance and Nominating Committee for the Fund since 2006. The
Board of Trustees, in its judgement of Mr. Crescenzi’s professional business and consulting experience, including his experience
serving as a trustee of closed-end investment companies, believes Mr. Crescenzi contributes a diverse perspective to the Board.
Jerry G. Rutledge – Mr. Rutledge is the President
and owner of Rutledge’s Inc., a retail clothing business that has operated for over 40 years. As a recognized community leader
in the state of Colorado, Mr. Rutledge was elected as a Regent at the University of Colorado in 1994 and retired in 2007. In addition,
Mr. Rutledge is currently serving as a Director of the University of Colorado Hospital and is a Trustee of Financial Investors Trust,
an open-end investment company, and the Principal Real Estate Income Fund, a closed-end investment company. Mr. Rutledge also served
as a Director of the American National Bank until 2009. Mr. Rutledge has served as Trustee since the Fund’s inception. Mr. Rutledge
has also served as a member of the Audit Committee and Governance and Nominating Committee during his tenure as a Trustee for the Fund.
The Board of Trustees, in its judgment of Mr. Rutledge’s leadership, long-term professional success in operating a business in
a competitive industry and as a trustee of closed-end investment companies, believes Mr. Rutledge contributes a diverse perspective to
the Board.
Hon. Vincent W. Versaci – Judge Versaci has served
as a Judge for the State of New York since January 2003. Currently, Judge Versaci serves as Acting Supreme Court Justice and Surrogate
Court Judge for Schenectady County, New York. In his capacity as Schenectady County’s Surrogate Court Judge since May of 2010,
Judge Versaci has presided over thousands of matters and supervised the activities of tens of thousands of fiduciaries in estates, guardianships
and all types of trust proceedings including testamentary, inter vivos and multi-generational irrevocable trusts. Judge Versaci oversees
the distribution of millions of dollars of assets annually and is charged with monitoring the activities of thousands of corporate and
individual fiduciaries to ensure that they are prudently investing and preserving assets for designated beneficiaries.
In recognition of Judge Versaci’s
experience and expertise in New York Trusts and Estates Law, particularly in the area of fiduciary matters, he has received several accolades
and notable appointments. In 2019, the Presiding Judge of New York’s Appellate Division, Third Department, appointed Judge Versaci
to the Administrative Board for the Offices of Public Administrators (“The Administrative Board”). Public Administrators
are appointed by statute to administer estates of decedents where there is no other person or entity to perform these fiduciary functions.
The Administrative Board oversees their activities and promulgates rules with respect to the oversight of Public Administrators across
New York State, including New York City. Additionally, in 2018, New York’s Chief Administrative Judge selected Judge Versaci to
serve as a member of New York’s Surrogate’s Court Advisory Committee. This standing committee is charged with reviewing current
laws and practices and recommending proposed legislation and changes to the regulations and procedures affecting all aspects of New York
Trusts and Estates Law.
Prior
to becoming Surrogate and Supreme Court Justice, Judge Versaci served as City Court Judge for the City of Schenectady from 2003 to 2010
where he presided over a demanding volume and vast array of criminal and civil matters. At that time, he was noted to be the second youngest
judge in the State of New York. Judge Versaci has also served as an Adjunct Professor and a practicing attorney with an emphasis on civil
and criminal litigation primarily in New York State and Federal Courts. Currently, he sits on the Board of the Schenectady County Bar
Association and is often asked to speak to before a variety of local, State and Federal Bar Associations and other groups on a variety
of topics relating to Trusts and Estates, as well as fiduciary roles and responsibilities.
Judge Versaci has served as a
Trustee of each Fund and as a member of each Fund’s Audit Committee and Governance Committee and Nominating Committee since March
2013. In addition, Judge Versaci has served as Chair of the Qualified Legal Compliance Committee of each Fund since 2017. Since being
appointed to the Board by the Funds’ Trustees, Judge Versaci has contributed significantly to the Board’s oversight of the
Funds’ officers and has successfully managed a diverse range of topics, including portfolio management, legal and regulatory matters,
compliance oversight, preparation of financial statements and oversight of the Funds’ multiple service providers. The Board of
Trustees, in its judgment of Judge Versaci’s professional experience as a reputable attorney and judge, and as a trustee of closed-end
investment companies, believes Judge Versaci offers a unique and diverse perspective to the Board and lends a particular expertise in
ethics and fiduciary matters that is invaluable to our partnership.
Karen DiGravio – Ms. DiGravio has over 21 years
of industry experience focused on finance, accounting, compliance and risk management in the asset management industry. Most recently,
she was a Partner, Chief Financial Officer and Chief Compliance Officer of Westfield Capital Management, a Boston based asset manager
with over $12 Billion in assets under management. She was also a member of the Westfield Advisory Board. While at Westfield, Ms. DiGravio
led the finance, accounting and compliance functions and chaired the firm’s Operating and Risk Management Committee. A 1991 graduate
of Connecticut College, Ms. DiGravio is co-chair of Connecticut College’s 1911 Society and is also a member of the college’s
President’s Leadership Council. She received her MBA in General Management from the Boston University School of Management in 1997.
Ms. DiGravio has served as a member of the Fund’s Audit Committee and Governing and Nominating Committee and as a Trustee since
August 2017. In addition, Ms. DiGravio has served as the Audit Committee Financial Expert and Chair of the Fund’s Audit Committee
during her tenure as a Trustee of the Fund. The Board of Trustees, in its judgement of Ms. DiGravio’s professional business experience,
including her experience serving as chief financial officer and chief compliance officer of an asset management firm and experience serving
as a trustee of closed-end investment companies, believes Ms. DiGravio contributes a diverse perspective to the Board.
Clifford J. Weber – Mr. Weber has more than 25
years of experience in the financial markets where he has successfully led businesses and created products in exchange-traded funds (ETFs)
and listed derivatives. His areas of expertise include trading markets and derivatives regulation. He currently provides consulting services
to the financial industry and serves as an independent trustee of certain mutual funds, ETFs and variable annuity trusts. From 2013 to
2015 he was Executive Vice President of Global Index and Exchange Traded Products at the NYSE, and Executive Vice President, Head of
Strategy and Product Development at NYSE Liffe from 2008 to 2013. Prior to that, Mr. Weber spent 18 years at the American Stock Exchange
U.S. where he was instrumental in the development of the Amex’s dominant ETF business, running that business from 2000-2008, and
the Amex’s Closed-End Fund business. He received a B.A. degree in Biochemistry from Dartmouth College, and an M.S.E. degree in
Systems, with a concentration in Operations Research, from the University of Pennsylvania. He has been featured in numerous media publications
and financial shows, has been published in various financial publications, and is co-author of “Equity Flex Options: The Financial
Engineer’s Most Versatile Tool.” He is a named inventor on twenty-one issued patents, all in the field of financial innovation.
Mr. Weber has served as a member of the Fund’s Audit Committee and Governance and Nominating Committee and as a Trustee since August
2017. The Board of Trustees, in its judgment of Mr. Weber’s professional business experience, including his positions with national
securities exchanges and serving on the boards of registered investment companies, believes Mr. Weber contributes a diverse perspective
to the Board.
Edmund J. Burke – Mr. Burke retired from ALPS
Fund Services, Inc. (“ALPS”) in 2019. He previously served as Director of ALPS, Director and President of ALPS Holdings,
Inc. (a wholly-owned subsidiary of SS&C) and ALPS Advisors, Inc., and a Director of ALPS Distributors, Inc. and ALPS Portfolio Solutions
Distributor, Inc. These organizations specialize in the day-to-day operations associated with both open- and closed-end investment companies,
exchange traded funds and hedge funds. In addition, Mr. Burke is also currently Trustee of the Financial Investors Trust, an open-end
investment company, Trustee of Clough Funds Trust, an open-end investment company, and Trustee of the Liberty All-Star Equity Fund and
Director of the Liberty All-Star Growth Fund, Inc., each a closed-end investment company. Mr. Burke has served as Trustee for the Fund
since 2006 and as an interested trustee he does not serve as a member of the Audit and Governance and Nominating Committees. The Board
of Trustees, in its judgment of Mr. Burke’s long-term professional experience with operational requirements and obligations in
operating closed-end investment companies and as a trustee of closed-end investment companies, believes Mr. Burke contributes a diverse
perspective to the Board.
Kevin McNally – Mr. McNally
is currently a Managing Director at Clough Capital Partners L.P. and serves as the portfolio manager for an investment fund advised by
Clough that invests primarily in closed-end funds, and a separately managed account that invests in substantially the same strategy.
He has over 25 years of industry experience focusing almost exclusively on closed-end funds. Prior to joining Clough in 2014, he served
as the Director of Closed-End Funds at ALPS Fund Services, Inc. from 2003 to 2014, where he was instrumental in launching approximately
$13 billion in total assets of CEFs, including the three Clough CEFs. Prior to that, Mr. McNally was Director of Closed-End Fund and
ETF Research at Smith Barney, a division of Citigroup Global Markets, Inc. from 1998 to 2003, and Director of Closed-End Fund and ETF
Marketing at Morgan Stanley Dean Witter Discover & Co. from 1997 to 1998. Previously, he was an analyst covering closed-end funds
in the Mutual Fund Research Department at Merrill Lynch, Pierce, Fenner, & Smith, Inc. from 1994 to 1997, and also was Manager of
the Closed-End Fund Marketing Department at Prudential Securities from 1992 to 1994. He has been quoted in The Wall Street Journal,
Barrons, and several other publications and has also appeared on TV as a closed-end fund and ETF expert. Mr. McNally received a Bachelor
of Arts degree from the University of Massachusetts at Amherst in 1991 and an MBA in Finance from New York University’s Stern School
of Business in 1998. Mr. McNally has served as Trustee for the Fund since 2017 and as an interested trustee he does not serve as a member
of the Audit and Governance and Nominating Committees. The Board of Trustees, in its judgment of Mr. Weber’s professional business
experience, including his positions with national securities exchanges and serving on the boards of registered investment companies,
believes Mr. Weber contributes a diverse perspective to the Board.
Leadership Structure of the Board of Trustees
The Board, which has overall responsibility
for the oversight of the Fund’s investment programs and business affairs, has appointed an Independent Trustee as Chairman of the
Board whose role is to preside at all meetings of the Board. The Board has also appointed an Independent Trustee as Vice-Chairman of
the Fund. The Chairman is involved, at his discretion, in the preparation of the agendas for the Board meetings. In between meetings
of the Board, the Chairman may act as liaison between the Board and the Fund’s officers, attorneys and various other service providers,
including but not limited to, the Fund’s investment adviser, administrator and other such third parties servicing the Fund. The
Chairman may also perform other functions as may be delegated by the Board from time to time. The Board believes that the use of an Independent
Trustee as Chairman is the appropriate leadership structure for mitigating potential conflicts of interest associated with appointing
an Interested Trustee as chairman and facilitates the ability to maintain a robust culture of compliance. The Board has three standing
committees, each of which enhances the leadership structure of the Board: the Audit Committee; the Governance and Nominating Committee;
and the Executive Committee. The Audit Committee and Governance and Nominating Committee are each chaired by, and composed of, members
who are Independent Trustees. The Executive Committee consists of two Interested Trustees and one Independent Trustee.
Oversight of Risk Management
The Fund, by the nature of its business, is
confronted with various risks such as investment risk, counterparty risk, valuation risk, political risk, risk of operational failures,
business continuity risk, regulatory risk, legal risk and other risks not listed here. The Board recognizes that not all risks that may
affect the Fund can be known, eliminated or mitigated. In addition, there are some risks that may not be cost effective or an efficient
use of the Fund’s limited resources to moderate. As a result of these realities, the Board, through its oversight and leadership,
has and will continue to deem it necessary for shareholders of the Fund to bear certain and undeniable risks, such as investment risk,
in order for the Fund to operate in accordance with its investment strategies.
However, as required under the 1940 Act, the
Board has adopted on the Fund’s behalf a risk program that mandates the Fund various service providers, including the investment
adviser, to adopt a variety of processes, procedures and controls to identify various risks, mitigate the likelihood of such adverse
events from occurring and/or attempt to limit the effects of such adverse events on the Fund. The Board implements its oversight role
by receiving a variety of quarterly written reports prepared by the Fund’s Chief Compliance Officer (“CCO”) that: (i)
evaluate the operation of the Fund service providers; (ii) make known any material changes to the policies and procedures adopted by
the Fund or its service providers since the CCO’s last report and; (iii) disclose any material compliance matter that occurred
since the date of the last CCO report. In addition, the Chairman and the Independent Trustees meet quarterly in executive sessions without
the presence of any Interested Trustees, the investment adviser, the administrator, or any of their affiliates. This configuration permits
the Chairman and the Independent Trustees to effectively receive the information and have private discussions necessary to perform its
risk oversight role, exercise independent judgment, and allocate areas or responsibility between the full Board, its various committees
and certain officers of the Fund. Furthermore the Independent Trustees have engaged independent legal counsel and auditors to assist
the Independent Trustees in performing their responsibilities. As discussed above and in consideration of other factors not referenced
herein, the function of the Board with respect to its leadership role concerning risk management is one of oversight and not active management
or coordination of the Fund day-to-day risk management activities.
The role of the Fund’s Audit Committee
is to assist the Board in its oversight of: (i) the quality and integrity of Fund financial statements, reporting process and the independent
registered public accounting firm (the “independent accountant”) and reviews thereof; (ii) the Fund accounting and financial
reporting policies and practices, its internal controls and, as appropriate, the internal controls of certain service providers; (iii)
the Fund’s compliance with legal and regulatory requirements; and (iv) the independent accountant’s qualifications, independence
and performance. The Audit Committee is also required to prepare an audit committee report pursuant to the rules of the SEC for inclusion
in the Fund’s annual proxy statement. The Audit Committee operates pursuant to an Audit Committee Charter (the “Audit Charter”)
that was most recently reviewed and approved by the Audit Committee on December 22, 2020. As set forth in the Audit Charter, management
is responsible for maintaining appropriate systems for accounting and internal control and the Fund’s independent accountant is
responsible for planning and carrying out proper audits and reviews. The independent accountant is ultimately accountable to the Fund’s
Board and Audit Committee, as representatives of the Fund shareholders. The independent accountant for the Fund reports directly to the
Audit Committee.
In performing its oversight function, at a
meeting held on December 22, 2020, the Audit Committee reviewed and discussed with management of the Fund and the independent registered
public accounting firm, Cohen & Company, Ltd. (“Cohen” or “independent accountant”), the audited financial
statements of the Fund as of and for the fiscal year ended October 31, 2020.
In addition, the Audit Committee discussed
with the independent accountant the accounting principles applied by the Fund and such other matters brought to the attention of the
Audit Committee by the independent accountant required by the Public Company Accounting Oversight Board (“PCAOB”) and the
SEC. The Audit Committee also received from the independent accountant the written disclosures and letters required by applicable requirements
of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed
with the independent accountant the independent accountant’s independence.
As set forth above, and as more fully set
forth in the Audit Charter, the Audit Committee has significant duties and powers in its oversight role with respect to Fund’s
financial reporting procedures, internal control systems and the independent audit process.
The members of the Audit Committees are not,
and do not represent themselves to be, professionally engaged in the practice of auditing or accounting and are not employed by the Fund
for accounting, financial management or internal control purposes. Moreover, the Audit Committee relies on and makes no independent verification
of the facts presented to it or representations made by management or the Fund’s independent accountant. Accordingly, the Audit
Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting
and/or financial reporting principles and policies, or internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions referred to above
do not provide assurance that the audit of the Fund’s financial statements has been carried out in accordance with generally accepted
accounting standards or that the financial statements are presented in accordance with generally accepted accounting principles.
Audit Committee
The Audit Committee met two times during the fiscal year ended
October 31, 2020. The Audit Committee is composed of six Independent Trustees, namely Ms. DiGravio and Messrs. Butler, Crescenzi, Rutledge,
Weber and Judge Versaci. None of the members of the Audit Committee are “interested persons” of the Funds.
Based on the findings of the Audit Committee, the Audit Committee
has determined that Ms. Karen DiGravio is the Fund’s “audit committee financial expert,” as defined in the rules promulgated
by the SEC, and as required by NYSE American listing standards. Ms. DiGravio serves as the Chairman of the Audit Committee for the Fund.
Governance and Nominating Committee
The Fund’s Board has a Governance and Nominating Committee
composed of six Independent Trustees as the term is defined by the NYSE American listing standards, namely Ms. DiGravio and Messrs. Butler,
Crescenzi, Rutledge, Weber and Judge Versaci. None of the members of the Governance and Nominating Committee are “interested persons”
of the Funds. The Governance and Nominating Committee operates pursuant to a Governance and Nominating Committee Charter that was most
recently reviewed and approved by the Governance and Nominating Committee on October 20, 2020. The Governance and Nominating Committee
Charter is available at the Fund website. The Governance and Nominating Committee met three times during the fiscal year ended October
31, 2020. The Governance and Nominating Committee is responsible for identifying and recommending to the Board individuals believed to
be qualified to become Board members and officers of the Funds in the event that a position is vacated or created. Mr. Crescenzi serves
as Chairman of the Governance and Nominating Committee of the Fund.
When such vacancies or creations occur, the Governance and Nominating
Committee will consider Trustee candidates recommended by a variety of sources to include the Fund’s respective shareholders. The
Governance and Nominating Committee has a diversity policy. In considering Trustee candidates, the Governance and Nominating Committee
will take into consideration the interest of shareholders, the needs of the Board and the Trustee candidate’s qualifications, which
include but are not limited to, the diversity of the individual’s professional experience, education, individual qualification
or skills.
Shareholders may submit for the Governance and Nominating Committee’s
consideration recommendations regarding potential independent Board member nominees. The Governance and Nominating Committee Charter
(which is available at www.cloughglobal.com) includes Independent Trustee qualifications and criteria that the Governance and Nominating
Committee will assess in determining whether it will consider a shareholder’s submission. In addition, the By-Laws of the Fund
contain detailed requirements regarding qualifications for Independent Trustees and information that must be included with any nomination
for Independent Trustee or shareholder proposal.
Charter and By-Laws:
The following are some of the requirements
and criteria in the Governance and Nominating Committee Charter and By-Laws:
|
(a)
|
The nominee must satisfy
all qualifications provided under the Governance and Nominating Committee Charter and in the Fund’s organizational documents,
including qualification as a possible independent Board member.
|
|
(b)
|
The nominee may not be the
nominating shareholder, a member of the nominating shareholder group or a member of the immediate family of the nominating shareholder
or any member of the nominating shareholder group.
|
|
(c)
|
Neither the nominee nor any
member of the nominee’s immediate family may be currently employed or employed within the last year by any nominating shareholder
entity or entity in a nominating shareholder group.
|
|
(d)
|
Neither the nominee nor any
immediate family member of the nominee is permitted to have accepted directly or indirectly, during the year of the election for
which the nominee’s name was submitted, during the immediately preceding calendar year, or during the year when the nominee’s
name was submitted, any consulting, advisory, or other compensatory fee from the nominating shareholder or any member of a nominating
shareholder group.
|
|
(e)
|
The nominee may not be an
executive officer, Trustee (or person fulfilling similar functions) of the nominating shareholder or any member of the nominating
shareholder group, or of an affiliate of the nominating shareholder or any such member of the nominating shareholder group.
|
|
(f)
|
The nominee may not control
(as that term is defined under the 1940 Act) the nominating shareholder or any member of the nominating shareholder group (or, in
the case of a holder or member that is a fund, an interested person of such holder or member as defined by Section 2(a)(19) of the
1940 Act).
|
|
(g)
|
A shareholder or shareholder
group may not submit for consideration a nominee who has previously been considered by the Governance and Nominating Committee.
|
The following is a summary of requirements
in the Funds’ By-Laws that must be provided to a Fund regarding the shareholder or shareholder group submitting a proposed nominee
and that will be considered by the Governance and Nominating Committee:
|
(a)
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Information on the proposed
nominee, including name, address, age and occupation.
|
|
(b)
|
Information on shares owned
beneficially and of record.
|
|
(c)
|
Descriptions of any agreements,
arrangements, or understandings (including profit interest or options) involving the Proposed Nominee and any other shareholder of
record or beneficially.
|
|
(d)
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A description of all commercial
and business relationships and all transactions the Proposed Nominee has had with any other shareholder of record or beneficially.
|
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(e)
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A representation that the
Proposed Nominee will qualify as a non-interested Trustee under Section 2(a)(19) of the Investment Company Act of 1940 and rules
thereunder.
|
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(f)
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A representation that the
Proposed Nominee meets the Trustee Qualifications set forth on Article III of the Fund’s By-laws.
|
|
(g)
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Such other information requested
by the Governance and Nominating Committee required to be disclosed in a proxy statement.
|
|
(h)
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Written consent of the Proposed
Nominee to being named a nominee and to serving as a Trustee.
|
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(i)
|
A certificate that the Proposed
Nominee will not become a party to any agreement, arrangement or understanding not disclosed to the Trust.
|
|
|
|
The nominee must provide to the Governance
and Nominating Committee all information requested by the Governance and Nominating Committee that is related to the requirements and
criteria in the Governance and Nominating Charter and By- Laws.
Executive Committee
The Executive Committee meets periodically
to take action, as authorized by the Board, if the Board cannot meet. Members of the Executive Committee are currently Messrs. Burke,
Butler and McNally. During the fiscal year ended October 31, 2020, the Fund’s Executive Committee did not meet.
Compensation Committee
The Fund does not have a compensation committee.
Other Board Related Matters
The Fund does not require Trustees to attend
the Annual Meeting of Shareholders. No Trustees attended the Funds’ Annual Meeting of Shareholders held on July 9, 2020.
CODE OF ETHICS
Clough and the Fund have each adopted a code of ethics governing
personal securities transactions under Rule 17j-1 of the 1940 Act. Under Clough’s code of ethics, Clough employees may purchase
and sell securities (including securities held or eligible for purchase by the Fund), subject to certain pre-clearance and reporting
requirements and other procedures. The Fund’s code of ethics permits personnel subject thereto to invest in securities, including
securities that may be purchased or held by the Fund. However, the Fund’s code of ethics generally prohibits, among other things,
persons subject thereto from purchasing or selling securities if they know at the time of such purchase or sale that the security is
being considered for purchase or sale by the Fund or is being purchased or sold by the Fund.
The codes of ethics can be reviewed on the EDGAR Database on the
SEC’s internet site at http://www.sec.gov, and copies of the codes of ethics may be obtained, after paying a duplicating fee, by
electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section,
Washington, D.C. 20549-0102.
PROXY VOTING POLICY
The Fund has delegated to Clough the responsibility to vote proxies
relating to portfolio securities held by the Fund. In deciding to delegate this responsibility, the Board of Trustees reviewed and approved
the policies and procedures adopted by Clough. These include the procedures that Clough follows when a vote presents a conflict between
the interests of the Fund and its shareholders and Clough, its affiliates, its other clients, or other persons. Clough’s proxy
voting guidelines and procedures applicable to the Fund are included in this Statement of Additional Information as Appendix A-1. Information
regarding vote proxies relating to the portfolio securities during the most recent 12-month period ended June 30 is available on the
SEC’s website at http://www.sec.gov.
INVESTMENT ADVISORY AND OTHER SERVICES
Clough has been managing assets of private investment vehicles
since 2000. Clough maintains a staff of experienced investment professionals to service the needs of its clients.
Except as provided in the Administration Agreement, the Fund will
be responsible for all of its costs and expenses not expressly stated to be payable by Clough under the Advisory Agreement or ALPS under
the Administration Agreement. Such costs and expenses to be borne by the Fund include, without limitation: advisory fees, administration
fees, trustees’ fees, interest expenses, if any, expenses related to custody of international securities, portfolio transaction
expenses, litigation expenses, taxes, costs of preferred shares, expenses of conducting repurchase offers for the purpose of repurchasing
Fund shares and extraordinary expenses.
The Advisory Agreement with Clough became effective on July 27,
2004 for an initial period of two years and continues in effect from year to year thereafter so long as such continuance is approved
at least annually: (i) by the vote of a majority of the non-interested Trustees of the Fund or of Clough cast in person at a meeting
specifically called for the purpose of voting on such approval and (ii) by the Board of Trustees or by vote of a majority of the outstanding
Shares of the Fund. The agreement may be terminated at any time without penalty on sixty (60) days’ written notice by the Trustees
of the Fund or Clough, as applicable, or by vote of the majority of the outstanding shares of the Fund. The Advisory Agreement was most
recently approved by a majority of the Board, including a majority of the Trustees who are not interested persons as that term is defined
in the 1940 Act, at a meeting of the Board held on April 29, 2020 pursuant to the exemptive order issued by the SEC for conditional relief
from the in-person voting requirements. A discussion regarding the basis for the most recent approval of the Investment Advisory Agreement
by the Board is available in the Fund’s semi-annual report to shareholders for the fiscal year ending April 30, 2020. The agreement
will terminate automatically in the event of its assignment. The agreement provides that, in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties to the Fund under such agreements on the part of Clough, or
a loss resulting from a breach of fiduciary duty by Clough with respect to the receipt of compensation for services (in which case damages
shall be limited by the 1940 Act), Clough shall not be liable to the Fund or any shareholder for any loss incurred, to the extent not
covered by insurance.
Pursuant to the Advisory Agreement, for the fiscal years ended
October 31, 2018, October 31, 2019 and October 31, 2020, Clough earned $1,169,021, $1,057,105 and $1,129,563 respectively. Clough is
a limited partnership organized under the laws of Delaware. It is registered with the Securities and Exchange Commission as an investment
adviser under the Investment Advisers Act of 1940, as amended. As of January 31, 2021, Clough had approximately $2.1 billion in assets
under management.
Portfolio Managers
Set forth below is certain additional information with respect
Charles I. Clough, and Robert Zdunczyk, the Fund’s portfolio managers (collectively, the “Portfolio Managers”), who
together are the principal investment professionals of Clough. Unless noted otherwise, all information is provided as of January 31,
2021.
Other Accounts Managed by Portfolio Managers
In addition to his responsibilities with regard to the Fund, Mr.
Clough, either as the principal investment professional of Clough, or as a member of Clough’s affiliate, Clough Associates, LLC,
also has day-to-day management responsibilities for the assets of (i) four other registered investment companies with approximately $1,162.9
million in assets under management; (ii) three other pooled investment vehicles with a total of approximately $329.5 million in assets
under management, with respect to which a portion of the investment advisory fees are based on the performance of the assets thereof;
and (iii) one other account with a total of approximately $337.8 million in assets under management, with respect to which a portion
of the investment advisory fees are based on the performance of the assets thereof. In addition to his responsibilities with regard to
the Fund, Mr. Zdunczyk has day-to-day management responsibilities for the assets of (i) three other registered investment companies with
approximately $1,114 million in assets under management; and (ii) one other account with a total of approximately $337.8 million in assets
under management, with respect to which a portion of the investment advisory fees are based on the performance of the assets thereof.
Compensation of Portfolio Managers
The Portfolio Managers each receive a fixed base salary from Clough.
The base salary for each Portfolio Manager is typically determined based on market factors and the skill and experience of each Portfolio
Manager. Additionally, Clough distributes its annual net profits to the two Portfolio Managers and other partners of Clough, with Mr.
Clough receiving a majority share and Mr. Zdunczyk receiving a portion of the remainder.
Material Conflicts of Interest
Material conflicts of interest may arise as a result of the fact
that the Portfolio Managers also have day-to-day management responsibilities with respect to both the Fund and the various accounts listed
above (collectively with the Fund, the “Accounts”). These potential conflicts include:
Limited Resources. The Portfolio Managers cannot devote
their full time and attention to the management of each of the Accounts. Accordingly, the Portfolio Managers may be limited in their
ability to identify investment opportunities for each of the Accounts that are as attractive as might be the case if the Portfolio Managers
were to devote substantially more attention to the management of a single Account. The effects of this potential conflict may be more
pronounced where the Accounts have different investment strategies.
Limited Investment Opportunities. If the Portfolio
Managers identify a limited investment opportunity that may be appropriate for more than one Account, the investment opportunity may
be allocated among several Accounts. This could limit any single Account’s ability to take full advantage of an investment opportunity
that might not be limited if the Portfolio Managers did not provide investment advice to other Accounts.
Different Investment Strategies. The Accounts managed
by the Portfolio Managers have differing investment strategies. If the Portfolio Managers determine that an investment opportunity may
be appropriate for only some of the Accounts or decide that certain of the Accounts should take different positions with respect to a
particular security, the Portfolio Managers may effect transactions for one or more Accounts which may affect the market price of the
security or the execution of the transaction, or both, to the detriment or benefit of one or more other Accounts.
Variation in Compensation. A conflict of interest may arise
where Clough is compensated differently by the Accounts that are managed by the Portfolio Managers. If certain Accounts pay higher management
fees or performance-based incentive fees, the Portfolio Managers might be motivated to prefer certain Accounts over others. The Portfolio
Managers might also be motivated to favor Accounts in which they have a greater ownership interest or Accounts that are more likely to
enhance the Portfolio Managers’ performance record or to otherwise benefit the Portfolio Managers.
Selection of Brokers. The Portfolio Managers select
the brokers that execute securities transactions for the Accounts that they supervise. In addition to executing trades, some brokers
provide the Portfolio Managers with research and other services which may require the payment of higher brokerage fees than might otherwise
be available. The Portfolio Managers’ decision as to the selection of brokers could yield disproportionate costs and benefits among
the Accounts that they manage, since the research and other services provided by brokers may be more beneficial to some Accounts than
to others.
Investment Advisory Services
Under the general supervision of the Board of Trustees, Clough
carries out the investment and reinvestment of the assets of the Fund, furnishes continuously an investment program with respect to the
Fund, determines which securities should be purchased, sold or exchanged, and implements such determinations. Clough furnishes to the
Fund investment advice and provide related office facilities and personnel for servicing the investments of the Fund. Clough compensates
all Trustees and officers of the Fund who are members of the Clough organization and who render investment services to the Fund, and
also compensates all other Clough personnel who provide research and investment services to the Fund.
Administrative Services
Under the Administration Agreement, ALPS is responsible for calculating
the net asset value of the Common Shares, and generally managing the business affairs of the Fund, subject to the supervision of the
Board of Trustees. ALPS furnishes to the Fund all office facilities, equipment and personnel for administering the affairs of the Fund.
ALPS compensates all Trustees and officers of the Fund who are members of the ALPS organization and who render executive and administrative
services to the Fund, and compensates all other ALPS personnel who perform management and administrative services for the Fund. ALPS’
administrative services include, preparation and filing of documents required to comply with federal and state securities laws, supervising
the activities of the Fund’s custodian and transfer agent, providing assistance in connection with the Trustees and shareholders’
meetings, providing services in connection with repurchase offers, if any, and other administrative services necessary to conduct the
Fund’s business. Under the Administration Agreement, ALPS is also obligated to pay all expenses incurred by the Fund, with the
exception of advisory fees, portfolio transaction expenses, trustees’ fees, litigation expenses, taxes, costs of preferred shares,
expenses of conducting repurchase offers for the purpose of repurchasing Fund shares and extraordinary expenses.
DETERMINATION OF NET ASSET VALUE
The net asset value per Share of the Fund is determined no less
frequently than daily, on each day that the New York Stock Exchange (the “Exchange”) is open for trading, as of the close
of regular trading on the exchange (normally 4:00 p.m. New York time). The Fund’s net asset value per Share is determined by ALPS,
in the manner authorized by the Trustees of the Fund. Net asset value is computed by dividing the value of the Fund’s total assets,
less its liabilities by the number of shares outstanding.
The Trustees of the Fund have established the following procedures
for fair valuation of the Fund’s assets under normal market conditions. Marketable securities listed on foreign or U.S. securities
exchanges generally are valued at closing sale prices or, if there were no sales, at the mean between the closing bid and asked prices
therefor on the exchange where such securities are principally traded (such prices may not be used, however, where an active over-the-counter
market in an exchange listed security better reflects current market value). Marketable securities listed in the NASDAQ National Market
System are valued at the NASDAQ closing price. Unlisted or listed securities for which closing sale prices are not available are valued
at the mean between the latest bid and asked prices. An option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of a sale, at the mean between the last bid and asked prices.
The Fair Valuation Committee may implement new pricing methodologies
or expand mark-to-market valuation of debt securities whose market prices are not readily available in the future, which may result in
a change in the Fund’s net asset value per share. The Fund’s net asset value per share will also be affected by fair value
pricing decisions and by changes in the market for such debt securities. The Fund has adopted Fair Valuation Procedures to determine
the fair value of a debt security. These Fair Valuation Procedures consider relevant factors, data, and information, including: (i) the
characteristics of and fundamental analytical data relating to the debt security, including the cost, size, current interest rate, period
until next interest rate reset, maturity and base lending rate of the debt security, the terms and conditions of the debt security and
any related agreements, and the position of the debt security in the borrower’s debt structure; (ii) the nature, adequacy and value
of the collateral, including the Fund’s rights, remedies and interests with respect to the collateral; (iii) the creditworthiness
of the borrower, based on an evaluation of its financial condition, financial statements and information about the borrower’s business,
cash flows, capital structure and future prospects; (iv) information relating to the market for the debt security, including price quotations
for and trading in the debt security and interests in similar debt security and the market environment and investor attitudes towards
the debt security and interests in similar debt securities; (v) the experience, reputation, stability and financial condition of the
Agent and any intermediate participants in the debt security and (vi) general economic and market conditions affecting the fair value
of the debt security. The fair value of each debt security is reviewed and approved by the Fair Valuation Committee and the Fund’s
Trustees.
Debt securities for which the over-the-counter market is the primary
market are normally valued on the basis of prices furnished by one or more pricing services at the mean between the latest available
bid and asked prices. OTC options are valued at the mean between the bid and asked prices provided by dealers. Financial futures contracts
listed on commodity exchanges and exchange-traded options are valued at closing settlement prices. Short-term obligations having remaining
maturities of less than 60 days are valued at amortized cost, which approximates value, unless the Trustees determine that under particular
circumstances such method does not result in fair value. As authorized by the Trustees, debt securities (other than short-term obligations)
may be valued on the basis of valuations furnished by a pricing service which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. Securities for which there is no such quotation or valuation and all other
assets are valued at fair value as determined in good faith by or at the direction of the Fund’s Trustees.
All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Fund
is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining
the net asset value of the Fund generally are computed as of such times. Occasionally, events affecting the value of foreign securities
may occur between such times and the close of the Exchange which will not be reflected in the computation of the Fund’s net asset
value (unless the Fund deems that such events would materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the Fund will be valued in U.S. dollars; such values will
be computed by the custodian based on foreign currency exchange rate quotations supplied by an independent quotation service.
PORTFOLIO TRADING
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by Clough. Clough is also responsible for the execution of transactions
for all other accounts managed by it. Clough generally aggregates the portfolio security transactions of the Fund and of all other accounts
managed by it for execution with many firms and allocates the orders across all participating accounts on a pro rata basis (based on
factors such as client objectives and asset size) prior to execution. Clough uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Fund and at reasonably competitive spreads or (when a disclosed commission is being
charged) at reasonably competitive commission rates. In seeking such execution, Clough will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors, including without limitation the full range and quality of
the executing firm’s services, the value of the brokerage and research services provided, the responsiveness of the firm to Clough,
the actual price of the security, the commission rates charged, the nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction, the general execution and operational capabilities of the executing
firm, the reputation, reliability, integrity, experience and financial condition of the firm, the value and quality of the services rendered
by the firm in this and other transactions, and the reasonableness of the spread or commission, if any.
Transactions on stock exchanges and other agency transactions involve
the payment of negotiated brokerage commissions. Such commissions vary among different broker-dealer firms, and a particular broker-dealer
may charge different commissions according to such factors as the difficulty and size of the transaction and the volume of business done
with such broker-dealer. Transactions in foreign securities often involve the payment of brokerage commissions, which may be higher than
those in the United States. There is generally no stated commission in the case of securities traded in the over-the-counter markets,
but the price paid or received usually includes an undisclosed dealer markup or markdown. In an underwritten offering the price paid
often includes a disclosed fixed commission or discount retained by the underwriter or dealer.
Fixed income obligations which may be purchased and sold by the
Fund are generally traded in the over-the-counter market on a net basis (i.e., without commission) through broker-dealers or banks
acting for their own account rather than as brokers, or otherwise involve transactions directly with the issuers of such obligations.
The Fund may also purchase fixed income and other securities from underwriters, the cost of which may include undisclosed fees and concessions
to the underwriters.
Although spreads or commissions paid on portfolio security transactions
will, in the judgment of Clough, be reasonable in relation to the value of the services provided, commissions exceeding those which another
firm might charge may be paid to broker-dealers who were selected to execute transactions on behalf of Clough’s clients in part
for providing brokerage and research services to Clough.
As authorized in Section 28(e) of the Securities Exchange Act of
1934, as amended, a broker or dealer who executes a portfolio transaction on behalf of the Fund may receive a commission which is in
excess of the amount of commission another broker or dealer would have charged for effecting that transaction. Clough may use brokers
or dealers who provide additional brokerage or research services and charge commissions in excess of other brokers or dealers (soft dollar
arrangements) if it determines in good faith that such compensation was reasonable in relation to the value of the brokerage and research
services provided. This determination may be made on the basis of that particular transaction or on the basis of overall responsibilities
which Clough and its affiliates have for accounts over which they exercise investment discretion. In making any such determination, Clough
will not attempt to place a specific dollar value on the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions incidental thereto (such as clearance and settlement); and the
“Research Services” referred to in the next paragraph.
It is a common practice of the investment advisory industry and
of the advisers of investment companies, institutions and other investors to receive research, analytical, statistical and quotation
services, data, information and other services, products and materials which assist such advisers in the performance of their investment
responsibilities (“Research Services”) from broker-dealer firms which execute portfolio transactions for the clients of such
advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Clough receives Research
Services from many broker-dealer firms with which Clough places the Fund’s transactions and from third parties with which these
broker-dealers have arrangements. These Research Services may include such matters as general economic, political, business and market
information, industry and company reviews, evaluations of securities and portfolio strategies and transactions, proxy voting data and
analysis services, technical analysis of various aspects of the securities market, recommendations as to the purchase and sale of securities
and other portfolio transactions, financial, industry and trade publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases and services. Any particular Research Service obtained through
a broker-dealer may be used by Clough in connection with client accounts other than those accounts which pay commissions to such broker-dealer.
Any such Research Service may be broadly useful and of value to Clough in rendering investment advisory services to all or a significant
portion of its clients, or may be relevant and useful for the management of only one client’s account or of a few clients’
accounts, or may be useful for the management of merely a segment of certain clients’ accounts, regardless of whether any such
account or accounts paid commissions to the broker-dealer through which such Research Service was obtained. The advisory fee paid by
the Fund is not reduced because Clough receives such Research Services. Clough evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate sufficient portfolio security transactions to such firms to ensure
the continued receipt of Research Services which Clough believes are useful or of value to it in rendering investment advisory services
to its clients. If only part of the Research Services provided are used to assist in the investment decision-making process, the percentage
of permitted use must be determined and the remainder paid for with hard dollars.
The Fund and Clough may also receive Research Services from underwriters
and dealers in fixed-price offerings, which Research Services are reviewed and evaluated by Clough in connection with its investment
responsibilities.
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Clough or its affiliates. Whenever decisions are made to buy or sell securities by the Fund
and one or more of such other accounts simultaneously, Clough will allocate the security transactions (including initial public offerings
and other new issues) in a manner which it believes to be fair and equitable under the circumstances and in accordance with applicable
laws and regulations. As a result of such allocations, there may be instances where the Fund will not participate in a transaction that
is allocated among other accounts. Generally, participating accounts will receive the weighted average execution price per broker for
the day and will pay the commissions, fees and other charges on a pro rata basis. However there may be instances where a smaller account
receives its entire allocation before a larger account in order to minimize transaction costs, an account that specializes or concentrates
holdings in a particular industry is given priority in allocation over other accounts, or allocations are not exactly pro rata due to
Clough’s practice of trading in 100 share lots. While these aggregation and allocation policies could have a detrimental effect
on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Trustees of the Fund that
the benefits received from Clough’s organization outweigh any disadvantage that may arise from exposure to simultaneous transactions.
PRINCIPAL SHAREHOLDERS AND CONTROL PERSONS
As of February 22, 2021, the following person(s) beneficially owned
5% or more of the Fund’s outstanding common shares.
GLV
Common Shares(a)
|
Bank
of America Corporation
Bank of America Corporate Center
100 N Tryon Street
Charlotte, NC 28255
|
7.2%
|
606,534
|
|
(a)
|
The table above shows 5% or greater shareholders’ ownership
of Shares as of February 22, 2021. The information contained in this table is based on Schedule
13G filings made on or before February 22, 2021.
|
As of February 22, 2021, the officers and Trustees of the Fund,
as a group, owned less than 1% of the Fund’s outstanding voting securities.
TAXES
The Fund intends to elect to be treated and to qualify each year
as a regulated investment company (a “RIC”) under the Code. Accordingly, the Fund must, among other things, (i) derive in
each taxable year at least 90% of its gross income (including tax-exempt interest) from dividends, interest, payments with respect to
certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including
but not limited to gain from options, futures and forward contracts) derived with respect to its business of investing in such stock,
securities or currencies and net income from interest in qualified publicly traded partnerships; (ii) diversify its holdings so that,
at the end of each quarter of each taxable year (a) at least 50% of the market value of the Fund’s total assets is represented
by cash and cash items, U.S. government securities, the securities of other regulated investment companies and other securities, with
such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund’s total
assets and not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the market value of the
Fund’s total assets is invested in the securities of any issuer (other than U.S. government securities and the securities of other
regulated investment companies) or of any two or more issuers that the Fund controls and that are determined to be engaged in the same
business or similar or related trades or businesses or the securities of one or more qualified publicly traded partnerships and (iii)
distribute substantially all of its net income and net short-term and long-term capital gains (after reduction by any available capital
loss carryforwards) in accordance with the timing requirements imposed by the Code, so as to maintain its RIC status and to avoid paying
any U.S. federal income or excise tax. To the extent it qualifies for treatment as a RIC and satisfies the above-mentioned distribution
requirements, the Fund will not be subject to U.S. federal income tax on income paid to its shareholders in the form of dividends or
capital gain distributions.
In order to avoid incurring a U.S. federal excise tax obligation,
the Code requires that the Fund distribute (or be deemed to have distributed) by December 31 of each calendar year an amount at least
equal to the sum of (i) 98% of its ordinary income for such year and (ii) 98.2% of its capital gain net income (which is the excess of
its realized net long-term capital gain over its realized net short-term capital loss), generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by any available capital loss carryforwards, plus (iii) 100% of any ordinary
income and capital gain net income from the prior year (as previously computed) that were not paid out during such year and on which
the Fund paid no U.S. federal income tax. Under current law, provided that the Fund qualifies as a RIC for U.S. federal income tax purposes,
the Fund should not be liable for any income, corporate excise or franchise tax in the state of Delaware.
If the Fund fails to meet the annual gross income test described
above, the Fund will nevertheless be considered to have satisfied the test if: (i) (a) such failure is due to reasonable cause and not
due to willful neglect; and (b) the Fund reports the failure; and (ii) the Fund pays an excise tax equal to the excess non-qualifying
income. If the Fund fails to meet the asset diversification test described above with respect to any quarter, the Fund will nevertheless
be considered to have satisfied the requirements for such quarter if the Fund cures such failure within six months and either: (i) such
failure is de minimis; or (ii) (a) such failure is due to reasonable cause and not due to willful neglect; and (b) the Fund reports the
failure and pays an excise tax.
If the Fund does not qualify as a RIC for any taxable year, the
Fund’s taxable income will be subject to corporate income taxes, and all distributions from earnings and profits, including distributions
of net capital gain (if any), will be taxable to the shareholder as ordinary income. Such distributions generally will be eligible (i)
for the dividends received deduction in the case of corporate shareholders and (ii) for treatment as “qualified dividends”
in the case of individual shareholders provided certain holding period and other requirements are met, as described below. In addition,
in order to requalify for taxation as a RIC, the Fund may be required to recognize unrealized gains, pay substantial taxes and interest,
and make certain distributions.
Distributions from the Fund generally will be taxable to Common
Shareholders as dividend income to the extent derived from investment income and net short-term capital gains, as described below. Distributions
of net capital gains (that is, the excess of net gains from the sale of capital assets held more than one year over net losses from the
sale of capital assets held for not more than one year) properly designated as capital gain dividends will be taxable to Common Shareholders
as long-term capital gain, regardless of how long a Common Shareholder has held the shares in the Fund.
If a Common Shareholder’s distributions are automatically
reinvested pursuant to the Plan and the Plan Administrator invests the distribution in shares acquired on behalf of the shareholder in
open-market purchases, for U.S. federal income tax purposes, the Common Shareholder will generally be treated as having received a taxable
distribution in the amount of the cash dividend that the Common Shareholder would have received if the shareholder had elected to receive
cash. If a Common Shareholder’s distributions are automatically reinvested pursuant to the Plan and the Plan Administrator invests
the distribution in newly issued shares of the Fund, the Common Shareholder will generally be treated as receiving a taxable distribution
equal to the fair market value of the stock the Common Shareholder receives.
Certain income distributions paid by the Fund to individual taxpayers
are taxed at rates equal to those applicable to net long-term capital gains (20%, or 0% or 15% for individuals at certain annual income
levels). This tax treatment applies only if certain holding period requirements and other requirements are satisfied by the Common Shareholder
and the dividends are attributable to qualified dividends received by the Fund itself. For this purpose, “qualified dividends”
means dividends received by the Fund from United States corporations and qualifying foreign corporations, provided that the Fund satisfies
certain holding period and other requirements in respect of the stock of such corporations. In the case of securities lending transactions,
payments in lieu of dividends are not qualified dividends. Dividends received by the Fund from REITs are qualified dividends eligible
for this lower tax rate only in limited circumstances.
A dividend will not be treated as qualified dividend income (whether
received by the Fund or paid by the Fund to a shareholder) if (1) the dividend is received with respect to any share held for fewer than
61 days during the 120-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with
respect to such dividend, (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise)
to make related payments with respect to positions in substantially similar or related property or (3) if the recipient elects to have
the dividend treated as investment income for purposes of the limitation on deductibility of investment interest. Distributions of income
by the Fund other than qualified dividend income and distributions of net realized short-term gains (on stocks held for one year or less)
are taxed as ordinary income, at rates currently up to 37%.
The benefits of the reduced tax rates applicable to long-term capital
gains and qualified dividend income may be impacted by the application of the alternative minimum tax to individual shareholders.
The Fund’s investment in zero coupon and certain other securities
will cause it to realize income prior to the receipt of cash payments with respect to these securities. Such income will be accrued daily
by the Fund and, in order to avoid a tax payable by the Fund, the Fund may be required to liquidate securities that it might otherwise
have continued to hold in order to generate cash so that the Fund may make required distributions to its shareholders.
Investments in lower rated or unrated securities may present special
tax issues for the Fund to the extent that the issuers of these securities default on their obligations pertaining thereto. The Code
is not entirely clear regarding the federal income tax consequences of the Fund’s taking certain positions in connection with ownership
of such distressed securities.
Any recognized gain or income attributable to market discount on
long-term debt obligations (i.e., obligations with a term of more than one year except to the extent of a portion of the discount
attributable to original issue discount) purchased by the Fund is taxable as ordinary income. A long-term debt obligation is generally
treated as acquired at a market discount if purchased after its original issue at a price less than (i) the stated principal amount payable
at maturity, in the case of an obligation that does not have original issue discount or (ii) in the case of an obligation that does have
original issue discount, the sum of the issue price and any original issue discount that accrued before the obligation was purchased,
subject to a de minimis exclusion.
The Fund’s investments in options, futures contracts, hedging
transactions, forward contracts (to the extent permitted) and certain other transactions will be subject to special tax rules (including
mark-to-market, constructive sale, straddle, wash sale, short sale and other rules), the effect of which may be to accelerate income
to the Fund, defer Fund losses, cause adjustments in the holding periods of securities held by the Fund, convert capital gain into ordinary
income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and
character of distributions to shareholders. The Fund may be required to limit its activities in options and futures contracts in order
to enable it to maintain its RIC status.
Effective for taxable years beginning after December 31, 2017 and
before January 1, 2026, the Code generally allows individuals and certain non-corporate entities a deduction for 20% of qualified REIT
dividends. Proposed regulations (which are currently effective) permit a RIC to pass the character of its qualified REIT dividends through
to its shareholders provided certain holding period requirements are met. As a result, Fund shareholders will be eligible to receive
the benefit of such deductions with respect to Fund dividends that distribute such qualified REIT dividend income.
The Fund’s transactions in foreign currencies, foreign currency-denominated
debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
Income received by the Fund from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the U.S. may reduce
or eliminate such taxes. Common Shareholders generally will not be entitled to claim a credit or deduction with respect to foreign taxes.
If the Fund acquires any equity interest in certain foreign corporations
that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties,
or capital gains) or that hold at least 50% of their assets in investments producing such passive income (“passive foreign investment
companies”), the Fund could be subject to U.S. federal income tax and additional interest charges on “excess distributions”
received from such companies or on gain from the sale of stock in such companies, even if all income or gain actually received by the
Fund is timely distributed to its shareholders. The Fund would not be able to pass through to its shareholders any credit or deduction
for such a tax. An election may generally be available that would ameliorate these adverse tax consequences, but any such election could
require the Fund to recognize taxable income or gain (subject to tax distribution requirements) without the concurrent receipt of cash.
These investments could also result in the treatment of associated capital gains as ordinary income. The Fund may limit and/or manage
its holdings in passive foreign investment companies to limit its tax liability or maximize its return from these investments. Dividends
paid by passive foreign investment companies will not qualify for the reduced tax rates for qualified dividend income.
The sale, exchange or redemption of Fund shares may give rise to
a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain
or loss if the shares have been held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of Fund shares will
be treated as short-term capital gain or loss. Long-term capital gain rates applicable to individuals have been reduced, in general,
to 20% (or 5% or 0% or 15% for individuals at certain annual income levels). Any loss realized upon the sale or exchange of Fund shares
with a holding period of 6 months or less will be treated as a long-term capital loss to the extent of any capital gain distributions
received with respect to such shares. In addition, all or a portion of a loss realized on a redemption or other disposition of Fund shares
may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other substantially identical
shares (whether through the reinvestment of distributions or otherwise) within a 61-day period beginning 30 days before the redemption
of the loss shares and ending 30 days after such date. Any disallowed loss will result in an adjustment to the shareholder’s tax
basis in some or all of the other shares acquired.
Sales charges paid upon a purchase
of shares cannot be taken into account for purposes of determining gain or loss on a sale of the shares before the 91st day after their
purchase to the extent a sales charge is reduced or eliminated in a subsequent acquisition of shares of the Fund (or of another fund),
during the period beginning on the date of such sale and ending on January 31 of the following calendar year, pursuant to the reinvestment
or exchange privilege. Any disregarded amounts will result in an adjustment to the shareholder’s tax basis in some or all of any
other shares acquired.
Certain net investment income received by an individual having
adjusted gross income in excess of $200,000 (or $250,000 for married individuals filing jointly) will be subject to a tax of 3.8%. Undistributed
net investment income of trusts and estates in excess of a specified amount also will be subject to this tax. Dividends and capital gains
distributed by the Fund, and gain realized on the sale of Fund shares, will constituted investment income of the type subject to this
tax.
Special tax rules apply to investments through defined contribution
plans and other tax-qualified plans. Shareholders should consult their tax advisor to determine the suitability of shares of the Fund
as an investment through such plans.
Dividends and distributions on the Fund’s shares are generally
subject to federal income tax as described herein to the extent they do not exceed the Fund’s realized income and gains, even though
such dividends and distributions may economically represent a return of a particular shareholder’s investment. Such distributions
are likely to occur in respect of shares purchased at a time when the Fund’s net asset value reflects gains that are either unrealized,
or realized but not distributed. Such realized gains may be required to be distributed even when the Fund’s net asset value also
reflects unrealized losses. Certain distributions declared in October, November or December and paid in the following January will be
taxed to shareholders as if received on December 31 of the year in which they were declared. In addition, certain other distributions
made after the close of a taxable year of the Fund may be “spilled back” and treated as paid by the Fund (except for purposes
of the 4% excise tax) during such taxable year. In such case, Shareholders will be treated as having received such dividends in the taxable
year in which the distributions were actually made.
Amounts paid by the Fund to individuals and certain other shareholders
who have not provided the Fund with their correct taxpayer identification number (“TIN”) and certain certifications required
by the Internal Revenue Service (the “IRS”) as well as shareholders with respect to whom the Fund has received certain information
from the IRS or a broker may be subject to “backup” withholding of federal income tax arising from the Fund’s taxable
dividends and other distributions as well as the gross proceeds of sales of shares, at a rate equal to the fourth highest rate of tax
applicable to a single individual (in 2021, 24%). An individual’s TIN is generally his or her social security number. Backup withholding
is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a Shareholder may be refunded
or credited against such Shareholder’s U.S. federal income tax liability, if any, provided that the required information is furnished
to the IRS.
If a shareholder recognizes a loss on disposition of the Fund’s
shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file
with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting
requirement, but under current guidance, shareholders of a regulated investment company are not excepted. The fact that a loss is reportable
under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders
should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities, foreign investors, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to special tax rules that may apply in their particular situations, as
well as the state, local, and, where applicable, foreign tax consequences of investing in the Fund.
The Fund will inform Shareholders of the source and tax status
of all distributions promptly after the close of each calendar year. The IRS has taken the position that if a RIC has more than one class
of shares, it may designate distributions made to each class in any year as consisting of no more than that class’s proportionate
share of particular types of income for that year, including ordinary income and net capital gain. A class’s proportionate share
of a particular type of income for a year is determined according to the percentage of total dividends paid by the RIC during that year
to the class. Accordingly, the Fund intends to designate a portion of its distributions in capital gain dividends in accordance with
the IRS position.
State and Local Taxes
Shareholders should consult their own tax advisers as to the state
or local tax consequences of investing in the Fund.
OTHER INFORMATION
The Fund is an organization of the type commonly known as a “Delaware
statutory trust.” Under Delaware law, shareholders of such a trust may, in certain circumstances, be held personally liable as
partners for the obligations of the trust. The Declaration of Trust contains an express disclaimer of shareholder liability in connection
with the Fund property or the acts, obligations or affairs of the Fund. The Declaration of Trust also provides for indemnification out
of the Fund property of any shareholder held personally liable for the claims and liabilities to which a shareholder may become subject
by reason of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Fund itself is unable to meet its obligations. The Fund has been advised by its counsel that
the risk of any shareholder incurring any liability for the obligations of the Fund is remote.
The Declaration of Trust provides that the Trustees will not be
liable for actions taken in good faith in the reasonable belief that such actions were in the best interests of the Fund or, in the case
of any criminal proceeding, as to which a Trustee did not have reasonable cause to believe that such actions were unlawful; but nothing
in the Declaration of Trust protects a Trustee against any liability to the Fund or its shareholders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office.
Voting rights are not cumulative, which means that the holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees and, in such event, the holders of the remaining less than 50% of the shares voting on the matter will not
be able to elect any Trustees.
The Declaration of Trust provides that no person shall serve as
a Trustee if shareholders holding two-thirds of the outstanding shares have removed him from that office either by a written declaration
filed with the Fund’s custodian or by votes cast at a meeting called for that purpose.
The Fund’s Prospectus and this SAI do not contain all of
the information set forth in the Registration Statement that the Fund has filed with the Securities and Exchange Commission. The complete
Registration Statement may be obtained from the Securities and Exchange Commission upon payment of the fee prescribed by its Rules and
Regulations.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Cohen & Company Ltd., located at 1350 Euclid Ave Suite 800,
Cleveland, Ohio 44115, serves as the independent registered public accounting firm for the current fiscal year. The firm provides services
including (i) audit of annual financial statements, (ii) assistance and consultation in connection with SEC filings, and (iii) other
audit related and tax services.
APPENDIX A
RATINGS
MOODY’S INVESTORS SERVICE, INC.
Long-Term Debt Securities and Preferred Stock Ratings
AAA: Bonds and preferred stock which are rated Aaa are judged to
be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edged.”
Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such
issues.
AA: Bonds and preferred stock which are rated Aa are judged to
be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds and preferred stock which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds and preferred stock which are rated Baa are considered
as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds and preferred stock lack outstanding investment characteristics and in fact have speculative characteristics
as well.
BA: Bonds and preferred stock which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds and preferred stock which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long
period of time may be small.
CAA: Bonds and preferred stock which are rated Caa are of poor
standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
CA: Bonds and preferred stock which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated
class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
The ratings indicated herein are believed to be the most recent
ratings available at the date of this SAI for the securities listed. Ratings are generally given to securities at the time of issuance.
While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings indicated
do not necessarily represent ratings which would be given to these securities on the date of the Fund’s fiscal year end.
Absence of Rating: Where no rating has been assigned or where a
rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
|
1.
|
An application for rating was not received or
accepted.
|
|
2.
|
The issue or issuer belongs to a group of securities
or companies that are not rated as a matter of policy.
|
|
3.
|
There is a lack of essential data pertaining to
the issue or issuer.
|
|
4.
|
The issue was privately placed, in which case
the rating is not published in Moody’s publications.
|
Suspension or withdrawal may occur if new
and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date
data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.
Note: Moody’s applies numerical modifiers,
1, 2 and 3 in each generic rating classification from Aa through B in its bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Short-Term Debt Securities Ratings
Moody’s short-term debt ratings are opinions of the ability
of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly
noted.
Moody’s employs the following three designations, all judged
to be investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have
a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative
capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate
liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have
a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions
may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements
and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the
Prime rating categories.
STANDARD & POOR’S RATINGS GROUP
Investment Grade
AAA: Debt and preferred stock rated AAA have the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA have a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.
A: Debt and preferred stock rated A have a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB: Debt and preferred stock rated BBB are regarded as having
an adequate capacity to pay interest and repay principal. Whereas it normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Speculative Grade
Debt and preferred stock rated BB, B, CCC, CC and C are regarded
as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least
degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major exposures to adverse conditions.
BB: Debt and preferred stock rated BB have less near-term vulnerability
to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is
also used for debt subordinated to senior debt that is assigned an actual or implied BBB-rating.
B: Debt and preferred stock rated B have a greater vulnerability
to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB- rating.
CCC: Debt and preferred stock rated CCC have a currently identifiable
vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity
to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual
or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to
senior debt and preferred stock which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior
debt and preferred stock which is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where
a bankruptcy petition has been filed, but debt service payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest
is being paid.
D: Debt and preferred stock rated D is in payment default. The
D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period
has not expired, unless S&P believes that such payments will be made during such grace period.
The D rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified
by the addition of a plus or minus sign to show relative standing within the major rating categories.
P: The letter “p” indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of such completion. The investor should exercise his own judgment with respect to such likelihood and risk.
L: The letter “L” indicates that the rating pertains
to the principal amount of those bonds to the extent that the underlying deposit collateral is insured by the Federal Deposit Insurance
Corp. and interest is adequately collateralized. In the case of certificates of deposit, the letter “L” indicates that the
deposit, combined with other deposits being held in the same right and capacity, will be honored for principal and accrued pre-default
interest up to the federal insurance limits within 30 days after closing of the insured institution or, in the event that the deposit
is assumed by a successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.
Commercial Paper Rating Definitions
A S&P’s commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories,
ranging from A for the highest quality obligations to D for the lowest. These categories are as follows:
A-1: A short-term obligation rated A-1 is rated in the highest
category by S&P. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category,
certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment
on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the
obligor’s capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
B: A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces
major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the
obligation.
D: A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
A commercial paper rating is not a recommendation to purchase,
sell or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are
based on current information furnished to S&P by the issuer or obtained from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such information.
FITCH RATINGS
Investment Grade Ratings
AAA: Bonds and preferred stocks are considered to be investment
grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA: Bonds and preferred stocks are considered to be investment
grade and of very high credit quality. The obligor’s ability to pay interest and repay principal is very strong, although not quite
as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A: Bonds and preferred stocks are considered to be investment grade
and of high credit quality. The obligor’s ability to pay interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds and preferred stocks are considered to be investment
grade and of satisfactory credit quality. The obligor’s ability to pay interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Below Investment Grade Ratings
BB: Bonds and preferred stocks are considered speculative. The
obligor’s ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business
and financial alternatives can be identified that could assist the obligor in satisfying its debt service requirements.
B: Bonds and preferred stocks are considered highly speculative.
While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and
interest reflects the obligor’s limited margin of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC: Bonds and preferred stocks have certain identifiable characteristics
which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC: Bonds and preferred stocks are minimally protected. Default
in payment of interest and/or principal seems probable over time.
C: Bonds and preferred stocks are in imminent default in payment
of interest or principal.
DDD, DD AND D: Bonds and preferred stocks are in default on interest
and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the
lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified
by the addition of a plus or minus sign to indicate the relative position of a credit within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful
completion of a project or the occurrence of a specific event.
Investment Grade Short-Term Ratings
Fitch’s short-term ratings apply to debt obligations that
are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great as the F-1+ and F-1 categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse change could cause these securities
to be rated below investment grade.
* * * * * * * *
Notes: Bonds which are unrated expose the investor to risks with
respect to capacity to pay interest or repay principal which are similar to the risks of lower-rated speculative bonds. The Fund is dependent
on Clough’s judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond
by a rating service may not reflect the effect of recent developments on the issuer’s ability to make interest and principal payments.
APPENDIX B
PROXY VOTING POLICY
CLOUGH
|
|
CAPITAL PARTNERS, LP
|
PROCEDURES
|
Procedure
Name:
|
Proxy
Voting Procedures & Proxy Voting Guidelines
|
Related
Policy:
|
Proxy
Voting
|
Effective
Date
|
June
15, 2004, revised October 12, 2020
|
Responsible
Person:
|
Proxy
Voting Administrator
|
Detailed
Procedures:
|
1.0
Proxy Voting in General
Proxy votes for client accounts
of Clough Capital will be handled by the Proxy Voting Administrator (typically an intern or Co-op), who will coordinate all required
proxy votes through ProxyEdge, a Broadridge Financial Solutions product (“Broadridge”), which will be used to vote
proxies according to the attached guidelines (Appendix A), prepare the information required in order for [ALPS Fund Services,
Inc. (“ALPS”)] to make the required filings for the mutual fund, and then store them in ProxyEdge for the required
period of time. For issues not addressed by the Proxy Voting Guidelines, or for those issues where a determination is made by
one of the persons listed in section 4.0 that a vote according to the established Guidelines would not be in the economic interest
of a client account, the Proxy Voting Administrator will refer the matter to the Compliance Committee for resolution.
1.1 Use of Proxy Edge for Voting
ProxyEdge is an electronic voting
service that helps simplify the management of proxies. The system manages the process of meeting notifications, voting, tracking,
reporting, and record maintenance. ProxyEdge allows Clough Capital to manage, track, reconcile and report proxy voting through
electronic delivery of ballots, online voting, and integrated reporting and recordkeeping to help satisfy SEC requirements. ProxyEdge
provides proxy information through an automated electronic interface based on share positions provided directly to Broadridge
by the client’s custodian, bank or broker-dealer.
2.0 Proxy Voting Administrator
The duties of the Administrator
will include the following:
· For
new client accounts, confirm that Clough Capital will be voting proxies on the client’s behalf, then contact Broadridge
to coordinate an electronic feed of securities holdings from the client’s custodian to ProxyEdge
· Gather
any physical proxies sent to Clough Capital for each of the securities held by a client account or fund and double check that
they have been voted in ProxyEdge
· Log
on to the Proxy Edge system (www.proxyedge.com) to vote the proxies if they have not been voted
· Submit
proxies that are not addressed in the Guidelines to PM’s/Analysts for their opinion
· Run
a proxy voting record for votes cast for the Clough Capital mutual funds on a quarterly basis to send to ALPS Fund Compliance
· Run
a full year report for the mutual funds at end of each proxy year (July 1st to June 30th) and send to ALPS to complete the Form
N-PX for filing with SEC by August 31st (this may also be done by the Director of Compliance and Risk)
|
|
3.0
Proxy Voting Record Required
The following information must
be recorded and saved by ProxyEdge for each proxy vote of each security:
· Name
of the issuer of the portfolio security
· Exchange
ticker symbol of the portfolio security
· CUSIP
for the portfolio security (if available)
· Shareholder
meeting date
· Brief
identification of matter voted on
· Whether
the matter is proposed by issuer or a security holder
· Whether
fund cast its vote on the matter
· How
the fund cast its vote (for/against/abstain)
· Whether
fund cast its vote for or against the management position on the issue
This information is required
to be filed with the SEC electronically via Form N-PX for all registered investment companies (mutual funds) no later than August
31 for the most recent 12 month period ended June 30. This will be done by the fund’s administrator, ALPS, for the mutual
funds sponsored by Clough Capital, but ALPS will need this information from Clough. The information also needs to be sent to
ALPS so it is available upon request by shareholders.
4.0 Contradiction to Proxy Voting
Guidelines
For the proxy issues outlined
in the attached Proxy Voting Guidelines, the Clough Capital voting position will generally be as listed, and these will be the
default votes in ProxyEdge, unless an analyst, trader, or portfolio manager of the firm believes that voting a particular proxy
in accordance with the stated guideline would not be in the best economic interests of a client account, in which case that person
should bring the matter to the attention of the Proxy Voting Administrator. The Administrator will then refer the matter to the
Compliance Committee for resolution, at which time the Administrator can log on to ProxyEdge and over-ride the default voting
option, if necessary. Votes in contradiction to the established Proxy Voting Guidelines will be documented in an appropriate
memo to file.
4.1 Votes on Issues not listed
in the Proxy Voting Guidelines
If a proxy vote is received and
the Proxy Voting Administrator cannot find the particular issue to be voted on the Proxy Voting Guidelines, then the Administrator
must summarize the issue and then bring it to the attention of the analyst covering that industry and the relevant portfolio
manager for consideration. Once there has been a determination made as to how to vote the issue, the analyst should update the
Proxy Voting Guidelines for guidance on future, similar issues.
5.0 Record Keeping Requirements
Clough Capital must keep accurate
books and records, including those relating to proxy voting. The records that must be maintained in accordance with the Record
Keeping Policy are listed under Records Produced below. The Proxy Voting Administrator will be responsible for ensuring that
the records listed are maintained.
|
Records
Produced:
|
· Proxy
statements received regarding client securities
· Records
of votes cast on behalf of clients (Reports from ProxyEdge)
· Information
gathered for the filing of Form N-PX
· Form
N-PX filed by August 31st of each year for preceding year ended June 30th
· Records
of client requests for proxy voting information, if any are sent to Clough Capital
· Any
documents prepared by Clough Capital that were material to making a decision how to vote or that memorialized the basis for the
decision
|
Evidence
of Supervision:
|
On
a quarterly basis, the Chief Compliance Officer (“CCO”) will examine the proxy voting records in ProxyEdge and ensure
that all proxies were voted in accordance with the Policy and documented accordingly, including any votes that presented a potential
or actual conflict of interest. This information will be supplied to the Fund CCO as part of the Quarterly Compliance Certification.
|
Record
Keeping:
|
Records
will be maintained for 2 years on site and 3 years offsite, except for records for registered mutual funds, which will be maintained
for 2 years on site and 4 years offsite.
|
CLOUGH
|
|
CAPITAL PARTNERS, LP
|
PROCEDURES
|
Appendix A
Proxy Voting Guidelines
For the following proxy issues, the Clough Capital voting
position will generally be as listed, unless an analyst, trader, or Partner of the firm believes that voting a particular proxy in accordance
with the stated guideline would not be in the best economic interests of a client account, in which case that person should bring the
matter to the attention of the Proxy Voting Administrator. The Administrator will then refer the matter to the Compliance Committee for
resolution as outlined in the Proxy Voting Procedures.
Category
of Issue
|
Issue
|
Clough
Position
|
Rationale/Reasoning
|
Board
of Directors
|
Election of Directors
|
Support Management Recommendations
|
Where
no corporate governance issues are implicated
|
|
Changes in Board of Directors
(removals of directors; filling of vacancies; fixing size of board)
|
Support Management Recommendations
|
Management
in best position to know if best for company
|
|
Other Issues (e.g.
Classified Board; Liability of Board; Qualification of Directors)
|
Generally Support
Management Recommendations
|
So
long as in best economic interests of clients
|
Capital
Structure
|
Increase in common stock
|
Support Management Recommendations
|
Management
in best position to know if best for company
|
|
Reclassification of common
stock
|
Support Management Recommendations
|
Management
in best position to know if best for company
|
|
Other Issues (e.g. Additional
Shares; Stock Splits; Repurchases, etc.)
|
Generally Support Management
Recommendations
|
So
long as in best economic interests of clients
|
Corporate
Governance
|
Addition or amendment of indemnification
provisions in company’s charter or by-laws
|
Support Management Recommendations
|
Management
in best position to know if best for company
|
|
Other issues (e.g. Confidential
Voting; Cumulative Voting; Supermajority Requirements)
|
Generally Support Management
Recommendations
|
So
long as in best economic interests of clients
|
Compensation
|
Compensation of Outside Directors
|
Support Management Recommendations
|
Management
in best position to know if best for company
|
CLOUGH
|
|
CAPITAL PARTNERS, LP
|
PROCEDURES
|
|
Other
Issues (e.g. Executive/Director stock option plans; Employee Stock Option Plans; Option Expensing)
|
Generally
Support Management Recommendations
|
So
long as in best economic interests of clients
|
Anti-Takeover
Provisions
|
Shareholder rights plans (“Poison
Pills”) (shareholder approval of or ratification of these types of plans)
|
Generally Support Management
Recommendations
|
So
long as in best economic interests of clients
|
|
Other Issues (e.g. Reincorporation
plans; Fair- Price Proposals, etc.)
|
Generally Support Management
Recommendations
|
So
long as in best economic interests of clients
|
Mergers
& Acquisitions
|
Special corporate transactions
(takeovers; spin-offs; sales of assets; reorganizations; restructurings; recapitalizations)
|
Generally Support Management
Recommendations
|
So
long as in best economic interests of clients
|
Social
& Political Issues
|
Labor & human rights (global
codes of conduct; workplace standards)
|
Generally Support Management
Recommendations
|
Generally
best not to impose these issues from the outside
|
|
Other Issues (e.g. Environmental
issues; Diversity & Equality; Health & Safety; Government/Military)
|
Support Management Recommendation
|
Generally
best not to impose these issues from the outside
|
Miscellaneous
Items
|
Selection of Independent
Auditors
|
Support Management
recommendation
|
Management
in best position to know if best for company
|
|
Other Issues (e.g. Limitation
of non-audit services provided by independent auditors; Audit Firm Rotation; Bundled Proposals, etc.)
|
Generally Support Management
Recommendations
|
So
long as in best economic interests of clients
|
43
PART C - Other Information
Item 25.
|
Financial Statements and Exhibits
|
|
(j)
|
Custody Agreement with State Street Bank and Trust Company dated December 9, 2013 (9)
|
|
|
|
|
(k)(1)
|
Stock
Transfer Agency and Service Agreement dated June 13, 2013 (10)
|
|
(k)(2)
|
Administration,
Bookkeeping and Pricing Services Agreement dated July 27, 2004(11)
|
|
(k)(3)
|
Amendment to Administration, Bookkeeping and Pricing Services Agreement dated September 1, 2006. (12)
|
|
|
|
|
(k)(4)
|
Amendment to Administration, Bookkeeping and Pricing Services Agreement dated August 10, 2007. (13)
|
|
|
|
|
(k)(5)
|
Amendment to Administration, Bookkeeping and Pricing Services Agreement dated June 12, 2014. (14)
|
|
|
|
|
(k)(6)
|
Amendment to Administration, Bookkeeping and Pricing Services Agreement dated April 10, 2018. (15)
|
|
|
|
|
(k)(7)
|
Form of Subscription Agent Agreement*
|
|
(k)(8)
|
Form of Information Agent Agreement*
|
|
|
|
|
(l)
|
Opinion and Consent of Counsel*
|
|
(m)
|
Not Applicable
|
|
(n)
|
Consent of Independent Registered Public Accounting Firm — Cohen & Company, Ltd.*
|
|
(o)
|
Not Applicable
|
|
(p)
|
Form
of Initial Subscription Agreement (16)
|
|
(q)
|
Not Applicable
|
|
(r)(1)
|
Code of Ethics of the Fund dated July 13, 2017 (17)
|
|
|
|
|
(r)(2)
|
Code of Ethics of the Adviser dated January 4, 2021(18)
|
|
|
|
|
(r)(3)
|
Code of Ethics of the Principal Executive and Financial Officers of the Fund (19)
|
|
|
|
|
(s)(i)
|
Power of Attorney for: Edmund J. Burke, Robert L. Butler, Adam D. Crescenzi, Karen DiGravio, Kevin McNally, Jerry G. Rutledge, Vincent Versaci and Clifford J. Weber, dated June 8, 2019. (20)
|
|
|
|
|
(s)(ii)
|
Form of Prospectus Supplement Relating to Common Shares(21)
|
(1)
|
Incorporated by reference to Exhibit (a)(ii) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
|
(2)
|
Incorporated by reference to Exhibit (a)(i) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
|
(3)
|
Incorporated by reference to NSAR-B filed with the Commission via EDGAR on December 30, 2016.
|
(4)
|
Incorporated by reference to N-CEN filed with the Commission via EDGAR on January 11, 2019.
|
(5)
|
Incorporated by reference to Exhibit (d) the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
|
(6)
|
Incorporated by reference to Exhibit (d)(5) the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
(7)
|
Incorporated by reference to Exhibit (e) Pre-Effective Amendment No. 1 of the Registration Statement filed with the Commission via EDGAR on July 3, 2019.
|
(8)
|
Incorporated by reference to Exhibit (g) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(9)
|
Incorporated by reference to Exhibit (j) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(10)
|
Incorporated by reference to Exhibit (k)(1) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(11)
|
Incorporated by reference to Exhibit (k)(2) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(12)
|
Incorporated by reference to Exhibit (k)(3) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(13)
|
Incorporated by reference to Exhibit (k)(4) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(14)
|
Incorporated by reference to Exhibit (k)(5) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(15)
|
Incorporated by reference to Exhibit (k)(6) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(16)
|
Incorporated by reference to Exhibit (p) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
|
(17)
|
Incorporated by reference to Exhibit (r)(1) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(18)
|
Incorporated by reference to Exhibit (r)(2) of the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
(19)
|
Incorporated by reference to Exhibit (r)(3) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(20)
|
Incorporated by reference to Exhibit (s) of the Registration Statement filed with the Commission via EDGAR on May 21, 2019.
|
(21)
|
Incorporated by reference to Exhibit (s)(ii) of the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
(22)
|
Incorporated by reference to Exhibit (s)(iii) of the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
(23)
|
Incorporated by reference to Exhibit (s)(iv) of the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
(24)
|
Incorporated by reference to Exhibit (s)(v) of the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
(25)
|
Incorporated by reference to Exhibit (s)(vi) of the Registration Statement filed with the Commission via EDGAR on March 9, 2021.
|
**
|
To be filed by subsequent amendment.
|
Item 26.
|
Marketing Arrangements
|
See Form of Marketing Agreement filed herewith.
Item 27.
|
Other Expenses of Issuance and Distribution
|
The following table sets forth the expenses to be incurred in connection
with the offering described in this Registration Statement:
Registration Fee
|
|
$
|
9,914
|
|
NYSE American listing fee
|
|
$
|
14,012
|
|
Printing
|
|
$
|
51,000
|
|
Accounting fees and expenses
|
|
$
|
2,250
|
|
Legal fees and expenses
|
|
$
|
202,750
|
|
Information Agent fees and expenses
|
|
$
|
40,000
|
|
Subscription Agent fees and expenses
|
|
$
|
75,000
|
|
Miscellaneous
|
|
$
|
25,000
|
|
Total
|
|
$
|
419,926
|
|
Item 28.
|
Persons Controlled By or Under Common Control with Registrant
|
None.
Item 29.
|
Number of Holders of Securities
|
(1)
Title of Class
|
(2)
Number of Record Holders as of April 27, 2021
|
Shares of common stock
|
10
|
Article IV of the Registrant's Agreement and Declaration of Trust
provides as follows:
4.1
No Personal Liability of Shareholders, Trustees, etc. No Shareholder of
the Trust shall be subject in such capacity to any personal liability whatsoever to any Person in connection with Trust Property or the
acts, obligations or affairs of the Trust. Shareholders shall have the same limitation of personal liability as is extended to stockholders
of a private corporation for profit incorporated under the general corporation law of the State of Delaware. No Trustee or officer of
the Trust shall be subject in such capacity to any personal liability whatsoever to any Person, other than the Trust or its Shareholders,
in connection with Trust Property or the affairs of the Trust, save only liability to the Trust or its Shareholders arising from bad faith,
willful misfeasance, gross negligence or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all
such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee or officer, as such, of the Trust, is made a party to any suit or proceeding to enforce any such
liability, subject to the foregoing exception, he shall not, on account thereof, be held to any personal liability.
4.2
Mandatory Indemnification. (a) The Trust shall indemnify the Trustees
and officers of the Trust (each such person being an "indemnitee") against any liabilities and expenses, including amounts paid
in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably incurred by such indemnitee
in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or may have been involved as a party or otherwise (other than, except as authorized
by the Trustees, as the plaintiff or complainant) or with which he may be or may have been threatened, while acting in any capacity set
forth above in this Section 4.2 by reason of his having acted in any such capacity, except with respect to any matter as to which
he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or, in the case of
any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that
no indemnitee shall be indemnified hereunder against any liability to any person or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence (negligence in the case of Affiliated Indemnitees), or
(iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"). Notwithstanding the foregoing, with respect to any action,
suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution
of such action, suit or other proceeding by such indemnitee was authorized by a majority of the Trustees.
(b) Notwithstanding the foregoing, no indemnification shall be made hereunder
unless there has been a determination (1) by a final decision on the merits by a court or other body of competent jurisdiction before
whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or,
(2) in the absence of such a decision, by (i) a majority vote of a quorum of those Trustees who are neither Interested Persons
of the Trust nor parties to the proceeding ("Disinterested Non-Party Trustees"), that the indemnitee is entitled to indemnification
hereunder, or (ii) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel
in a written opinion conclude that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance
payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding
paragraph (c) below.
(c) The Trust shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought hereunder if the Trust receives a written affirmation by
the indemnitee of the indemnitee's good faith belief that the standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Trust unless it is subsequently determined that he is entitled to such indemnification and if a majority
of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition,
at least one of the following conditions must be met: (1) the indemnitee shall provide adequate security for his undertaking, (2) the
Trust shall be insured against losses arising by reason of any lawful advances, or (3) a majority of a quorum of the Disinterested
Non-Party Trustees, or if a majority vote of such quorum so direct, independent legal counsel in a written opinion, shall conclude, based
on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
(d) The rights accruing to any indemnitee under these provisions shall
not exclude any other right to which he may be lawfully entitled.
(e) Notwithstanding the foregoing, subject to any limitations provided
by the 1940 Act and this Declaration, the Trust shall have the power and authority to indemnify Persons providing services to the Trust
to the full extent provided by law provided that such indemnification has been approved by a majority of the Trustees.
4.3
No Duty of Investigation; Notice in Trust Instruments, etc. No purchaser,
lender, transfer agent or other person dealing with the Trustees or with any officer, employee or agent of the Trust shall be bound to
make any inquiry concerning the validity of any transaction purporting to be made by the Trustees or by said officer, employee or agent
or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer,
employee or agent.
Every obligation, contract, undertaking, instrument, certificate, Share,
other security of the Trust, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively taken
to have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. The Trustees may maintain insurance for the protection of the Trust Property, its Shareholders,
Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable or is required by the 1940 Act.
4.4
Reliance on Experts, etc. Each Trustee and officer or employee of the Trust
shall, in the performance of its duties, be fully and completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports
made to the Trust by any of the Trust's officers or employees or by any adviser, administrator, manager, distributor, selected dealer,
accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust,
regardless of whether such counsel or other person may also be a Trustee.
Item 31.
|
Business and Other Connections of Investment Adviser
|
Clough Capital Partners LP serves as investment adviser to the fund and
also serves as adviser to unregistered funds, institutions and high net worth individuals. A description of any other business, profession,
vocation, or employment of a substantial nature in which the investment adviser, and each partner or executive officer of the investment
adviser, is or has been during the past two fiscal years, engaged in for his or her own account or in the capacity of director, officer,
employee, partner or trustee, is set forth in the prospectus contained in this Registration Statement in the section entitled "Management
of the Fund - Investment Adviser."
Item 32.
|
Location of Accounts and Records
|
All applicable accounts, books and documents required to be maintained
by the Registrant by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are in the possession and custody of the
Registrant, c/o ALPS Fund Services, Inc., 1290 Broadway, Suite 1000, Denver, Colorado 80203.
Item 33.
|
Management Services
|
None
(3)
|
The Registrant undertakes:
|
a. to file, during a period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(1) to include any prospectus required by Section 10(a)(3)
of the Securities Act;
(2) to reflect in the prospectus any facts or events after the
effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(3) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs a(1), a(2), and a(3) of this section
do not apply to the extent the information required to be included in a post-effective amendment by those paragraphs is contained in reports
filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated
by reference into the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement.
b. that for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
c. to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the offering;
d. that, for the purpose of determining liability under the Securities
Act to any purchaser:
(1) if the Registrant is subject to Rule 430B:
(A) Each prospectus filed by the Registrant pursuant to Rule 424(b)(3)
shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration
statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(x), or (xi) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of
and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or
the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in
a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such effective date; or
(2) if the Registrant is subject to Rule 430C: each prospectus
filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately prior to such date of first use.
e. that for the purpose of determining liability of the Registrant under
the Securities Act to any purchaser in the initial distribution of securities:
The undersigned Registrant undertakes that in a primary offering of securities
of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:
(1) any preliminary prospectus or prospectus of the
undersigned Registrant relating to the offering required to be filed pursuant to Rule 424 under the Securities Act;
(2) free writing prospectus relating to the offering
prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;
(3) the portion of any other free writing prospectus
or advertisement pursuant to Rule 482 under the Securities Act relating to the offering containing material information about the undersigned
Registrant or its securities provided by or on behalf of the undersigned Registrant; and
(4) any other communication that is an offer in the
offering made by the undersigned Registrant to the purchaser.
(5) The Registrant undertakes that: (a) for the purpose
of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of the Registration
Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 497(h) under the
1933 Act will be deemed to be a part of the Registration Statement as of the time it was declared effective; and (b) for the purpose of
determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus will be deemed to be a
new Registration Statement relating to such securities offered therein, and the offering of the securities at that time will be deemed
to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of such issue.
(7) Registrant undertakes to send by first class mail
or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement
of Additional Information constituting Part B of this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement on Form N-2 to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston, and Commonwealth of Massachusetts, on the 19th day of May, 2021.
|
Clough Global Dividend and Income Fund
|
|
|
|
|
|
|
By:
|
/s/Bradley J. Swenson
|
|
|
|
Name: Bradley J. Swenson
|
|
|
|
Title: President
|
|
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-2 has been signed by the following persons in the capacities and on the dates indicated.
/s/ Bradley J. Swenson
|
|
President (Principal Executive Officer)
|
|
May 19, 2021
|
Bradley J. Swenson
|
|
|
|
|
|
|
|
|
|
/s/ Edmund J. Burke
|
|
Trustee
|
|
May 19, 2021
|
Edmund J. Burke*
|
|
|
|
|
|
|
|
|
|
/s/ Robert L. Butler
|
|
Trustee
|
|
May 19, 2021
|
Robert L. Butler*
|
|
|
|
|
|
|
|
|
|
/s/ Adam D. Crescenzi
|
|
Trustee
|
|
May 19, 2021
|
Adam D. Crescenzi*
|
|
|
|
|
|
|
|
|
|
/s/ Karen DiGravio
|
|
Trustee
|
|
May 19, 2021
|
Karen DiGravio*
|
|
|
|
|
|
|
|
|
|
/s/ Kevin McNally
|
|
Trustee
|
|
May 19, 2021
|
Kevin McNally*
|
|
|
|
|
|
|
|
|
|
/s/ Jerry G. Rutledge
|
|
Trustee
|
|
May 19, 2021
|
Jerry G. Rutledge*
|
|
|
|
|
|
|
|
|
|
/s/ Vincent W. Versaci
|
|
Trustee
|
|
May 19, 2021
|
Vincent W. Versaci*
|
|
|
|
|
|
|
|
|
|
/s/ Clifford J. Weber
|
|
Trustee
|
|
May 19, 2021
|
Clifford J. Weber*
|
|
|
|
|
|
|
|
|
|
/s/ Kelly McEwen
|
|
Treasurer (Principal Financial
and Accounting Officer)
|
|
May 19, 2021
|
Kelly McEwen
|
|
|
|
|
|
|
|
|
|
* By:
|
/s/ Bradley J. Swenson
|
|
|
|
|
|
Bradley J. Swenson (Attorney-in-Fact)
|
|
|
|
|
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