DESCRIPTION
OF THE RIGHTS OFFERING
The
Board of Trustees of the Fund (the “Board”), in consultation with Clough Capital Partners, L.P. (“Clough”
or the “Investment Adviser”), the Fund’s investment adviser, has determined that it would be in the best interest
of the Fund and its existing shareholders to increase the assets and liquidity of the Fund so that the Fund may be in a better
position to take advantage of investment opportunities that may arise without having to reduce existing Fund holdings. In making
this determination, the Board considered a number of factors, including potential benefits and costs. This Rights offering seeks
to give existing Common Shareholders the opportunity to purchase additional common shares at a price that may be below market
and/or net asset value without incurring any commission or charge. The distribution of these Rights, which themselves may have
intrinsic value, will also give non-participating Common Shareholders the potential of receiving a cash payment upon the sale
of their Rights, which may be viewed as partial compensation for the possible dilution of their interests in the Fund as a result
of this offer. Rights may be sold by individual holders or may be submitted to the Subscription Agent for sale. Rights evidenced
by the Subscription Certificate may be transferred by delivering to the Subscription Agent a Subscription Certificate properly
endorsed for transfer.
The
Board believes that increasing the size of the Fund may result in certain economies of scale which may lower the Fund’s
expenses as a proportion of average net assets because the Fund’s fixed costs can be spread over a larger asset base. There
can be no assurance that by increasing the size of the Fund, the Fund’s expense ratio will be lowered. To the extent that
shareholders who do not exercise their Rights sell them to investors who are not already shareholders, the Rights offering could
increase the level of market interest and visibility of the Fund. There can be no assurance that this Rights offering (or the
investment of the proceeds of this Rights offering) will be successful or that the level of trading on the Fund’s shares
on the NYSE American will increase.
Because common shares of the Fund currently are trading at a premium to NAV, it is anticipated that the Subscription Price
will be more than NAV. The Board believes that the factors in favor of the Offer outweigh the dilution. See “Special Considerations
and Risk Factors — Dilution” included in the Prospectus.
The
Investment Adviser will benefit from the Offer because the Investment Adviser’s fee is based on the average daily total
assets of the Fund. See “Management of the Fund” included in the Prospectus. It is not possible to state precisely
the amount of additional compensation The Investment Adviser will receive as a result of the Offer because the proceeds of the
Offer will be invested in additional portfolio securities, which will fluctuate in value. However, assuming all Rights exercised
at the Estimated Subscription Price of $11.12 and that the Fund receives the maximum proceeds of the Offer, the annual compensation
to be received by the Investment Adviser would be increased by approximately $271,345 (24%). In determining that the Offer was in
the best interest of shareholders, the Board was cognizant of this benefit to the Adviser.
Terms
of the Offer
The
Fund is issuing to Record Date Shareholders Rights to subscribe for additional common shares. Each Record Date Shareholder is
being issued one transferable Right for each common share owned on the Record Date. The Offer entitles the holder to acquire at
the Subscription Price one common share for each three Rights held, rounded up to the nearest number of Rights evenly divisible
by three. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, common shares may be purchased only
pursuant to the exercise of Rights in integral multiples of three.
In
the case of common shares held of record by Cede & Co. (“Cede”), as nominee for the Depository Trust Company (“DTC”),
or any other depository or nominee, the number of Rights issued to Cede or such other depository or nominee will be adjusted to
permit rounding up (to the nearest number of Rights evenly divisible by three) of the Rights to be received by beneficial owners
for whom it is the holder of record only if Cede or such other depository or nominee provides to the Fund on or before the close
of business on June 4, 2021 a written representation to the number of Rights required for such rounding.
Rights
may be exercised at any time during the period (the “Subscription Period”), which commences on or about May 27, 2021
and ends at 5:00 p.m., Eastern Time, on June 22, 2021, unless extended by the Fund. See “Description of the Rights Offering
-- Expiration of the Offer.”
If
all of the Rights are exercised in the Primary Subscription, the Fund will experience a 33% increase in common shares outstanding.
In
addition, any Record Date Shareholder who fully exercises all Rights initially issued to him is entitled to subscribe for common
shares available for over-subscription (the “Over-Subscription Shares”) that were not otherwise subscribed for by
other Rights holders on the Primary Subscription.
Only
those Record Date Shareholders who fully exercised all Rights initially issued to them and only on the basis of their Record Date
holdings will be permitted to subscribe for any unsubscribed Over-Subscription Shares. This privilege will be referred to in this
Prospectus as the “Over-Subscription Privilege.”
For
purposes of determining the maximum number of Shares a Record Date Shareholder may acquire pursuant to the Offer, broker-dealers
whose common shares are held of record by Cede, nominee for DTC, or by any other depository or nominee, will be deemed to be the
holders of the Rights that are issued to Cede or such other depository or nominee on their behalf. Common shares acquired pursuant
to the Over-Subscription Privilege are subject to allotment, which is more fully discussed below under “Over-Subscription
Privilege.” Rights acquired in the secondary market may not participate in the Over-Subscription Privilege.
The
method by which Rights may be exercised and common shares paid for is set forth below in “Method of Exercising Rights”
and “Payment for Shares.” A Rights holder will have no right to rescind a purchase after the Subscription Agent has
received payment. See “Payment for Shares” below. Common shares issued pursuant to an exercise of Rights will be listed
on the NYSE American. Common shares issued in connection with the Offer will not be evidenced by share certificates.
For
purposes of determining the maximum number of common shares that may be acquired pursuant to the Offer, broker-dealers, trust
companies, banks or others whose shares are held of record by Cede or by any other depository or nominee will be deemed to be
the holders of the Rights that are held by Cede or such other depository or nominee on their behalf.
The
Rights are transferable until the Expiration Date and will be admitted for trading on the NYSE American. Although no assurance
can be given that a market for the Rights will develop, trading in the Rights on the NYSE American will begin three Business Days
prior to the Record Date and may be conducted until the close of trading on the last NYSE American trading day prior to the Expiration
Date due to normal settlement procedures.
Rights
that are sold will not confer any right to acquire any common shares in the Over-Subscription Privilege, and any Record Date Shareholder
who sells any Rights will not be eligible to participate in the Over-Subscription (the “Over-Subscription”). Trading
of the Rights on the NYSE American will be conducted on a when-issued basis until and including the date on which the Subscription
Certificates are mailed to Record Date Shareholders and thereafter, will be conducted on a regular way basis until and including
the last NYSE American trading day prior to the Expiration Date. The method by which Rights may be transferred is set forth below
under “Method of Transferring Rights.” The Shares will begin trading ex-Rights two Business Days prior to the Record
Date.
Nominees
who hold the Fund’s common shares for the account of others, such as banks, broker-dealers, or depositories for securities,
should notify the respective beneficial owners of such Shares as soon as possible to ascertain such beneficial owners’ intentions
and to obtain instructions with respect to the Rights. Nominees should also notify holders purchasing Rights in the secondary
market that such Rights may not participate in the Over-Subscription Privilege. If the beneficial owner so instructs, the nominee
will complete the Subscription Certificate and submit it to the Subscription Agent with proper payment. In addition, beneficial
owners of the common shares or Rights held through such a nominee should contact the nominee and request the nominee to effect
transactions in accordance with such beneficial owner’s instructions.
The
Fund will not be issuing share certificates for the common shares issued pursuant to this Offer. Issuance of common shares will
be made electronically via book entry by DST, the Fund’s transfer agent.
ALTHOUGH
THE FUND HAS NO PRESENT INTENTION TO DO SO, THE FUND MAY, IN THE FUTURE AND IN ITS DISCRETION, CHOOSE TO MAKE ADDITIONAL OFFERINGS,
INCLUDING RIGHTS OFFERINGS, FROM TIME TO TIME FOR A NUMBER OF COMMON SHARES AND ON TERMS WHICH MAY OR MAY NOT BE SIMILAR TO THE
OFFER.
Purpose
of the Offer
The
Board has determined, after consultation with the Investment Adviser, that it would be in the best interests of the Fund and its
existing shareholders to increase the assets of the Fund available for investment, thereby permitting the Fund to be in a better
position to more fully take advantage of investment opportunities that may arise without having to reduce existing Fund holdings.
In making this determination, the Board considered a number of factors, including potential benefits and costs. The Offer seeks
to give existing shareholders the right to purchase additional common shares at a price that may be below market and/or net asset
value without incurring any commission charge. The distribution to Common Shareholders of transferable Rights, which themselves
may have intrinsic value, will also afford non-subscribing shareholders the potential of receiving a cash payment upon sale of
such Rights, receipt of which may be viewed as partial compensation for the possible dilution of their interests in the Fund.
The
Investment Adviser will benefit from the Offer because the Investment Adviser’s fee is based on the average daily total
assets of the Fund. See “Management of the Fund” in the Prospectus. It is not possible to state precisely the amount
of additional compensation the Investment Adviser will receive as a result of the Offer because the proceeds of the Offer will
be invested in additional portfolio securities, which will fluctuate in value. However, assuming all Rights are exercised at the
Estimated Subscription Price of $11.12 and that the Fund receives the maximum proceeds of the Offer, the annual compensation to
be received by the Investment Adviser would be increased by approximately $271,345. In determining that the Offer was in the best
interest of shareholders, the Board was cognizant of this benefit.
This
is the Fund’s second rights offering. Although the Fund has no present intention to do so, the Fund may, in the future and
at its discretion, choose to make additional rights offerings from time to time for a number of shares and on terms which may
or may not be similar to the Offer. Pursuant to applicable law, the Board is authorized to approve rights offerings without obtaining
shareholder approval. The staff of the SEC has interpreted the 1940 Act as not requiring shareholder approval of a rights offering
at a price below the then current net asset value so long as certain conditions are met, including a good faith determination
by the Board that such offering would result in a net benefit to existing shareholders. There can be no assurance that the Offer
(or the investment of the proceeds of the Offer) will be successful or that the level of trading Shares on the NYSE American will
increase.
Over-Subscription
Privilege
The
Board has the right in its absolute discretion to eliminate the Over-Subscription Privilege if it considers it to be in the best
interest of the Fund to do so. The Board may make that determination at any time, without prior notice to Rights holders or others,
up to and including the seventh day following the Expiration Date. If the Over-Subscription Privilege is not eliminated, it will
operate as set forth below.
Rights
holders who are Record Date Shareholders are entitled to subscribe for additional common shares at the same Subscription Price
pursuant to the Over-Subscription Privilege, subject to certain limitations and subject to allotment.
Record
Date Shareholders who fully exercise all Rights initially issued to them are entitled to buy those common shares that were not
purchased by other Rights holders at the same Subscription Price. If enough Primary Subscription Shares are available, all such
requests will be honored in full. If the requests for Primary Subscription Shares exceed the Over-Subscription Shares available,
the available Over-Subscription Shares will be allocated pro rata among those fully exercising Record Date Shareholders
who over-subscribe based on the number of Rights originally issued to them by the Fund. Shares acquired pursuant to the Over-Subscription
Privilege are subject to allotment.
Record
Date Shareholders who are fully exercising their Rights during the Subscription Period should indicate, on the Subscription Certificate
that they submit with respect to the exercise of the Rights issued to them, how many common shares they are willing to acquire
pursuant to the Over-Subscription Privilege. Rights acquired in the secondary market may not participate in the Over-Subscription
Privilege.
To
the extent sufficient common shares are not available to fulfill all Over-Subscription requests, the Excess Shares will be allocated pro-rata among
those Record Date Shareholders who over-subscribe based on the number of the common shares owned on the Record Date. The allocation
process may involve a series of allocations in order to assure that the total number of common shares available for Over-Subscriptions
is distributed on a pro rata basis.
The
formula to be used in allocating the Excess Shares is as follows: (shareholder’s Record Date share position divided by total
Record Date position of all over-subscribers) multiplied by Excess Shares remaining.
Banks,
broker-dealers, trustees and other nominee holders of Rights will be required to certify to the Subscription Agent, before any
Over-Subscription Privilege may be exercised with respect to any particular beneficial owner, as to the aggregate number of Rights
exercised during the Subscription Period and the number of common shares subscribed for pursuant to the Over-Subscription Privilege
by such beneficial owner and that such beneficial owner’s subscription was exercised in full. Nominees should also notify holders purchasing Rights in the secondary market that
such Rights may not participate in the Over-Subscription Privilege.
The
Fund will not offer or sell any common shares that are not subscribed for during the Subscription Period and remain unsubscribed
for pursuant to the Over-Subscription Privilege.
The
Subscription Price
The
Subscription Price will be determined based upon a formula equal to 85% of the reported net asset value or 95% of the market price
per common share, whichever is higher on the Expiration Date. Market price per common share will be determined based on the average
of the last reported sales prices of a common share on the NYSE American for the five trading days preceding the Expiration Date
(not including sales price on the Expiration Date). Based on reported net asset value and last reported closing market prices
per common share as of May 14, 2021, the Subscription Price would be $11.12.
Because
the expiration date of the subscription period will be June 22, 2021 (unless the Fund extends the Subscription Period), Rights
holders may not know the Subscription Price at the time of exercise and will be required initially to pay for both the common
shares subscribed for pursuant to the Primary Subscription (i.e., the Rights to acquire new common shares during the Subscription
Period) and, if eligible, any additional common shares subscribed for pursuant to the Over-Subscription Privilege at the Estimated
Subscription Price of $11.12 per common share and, except in limited circumstances, will not be able to rescind their subscription.
The
Fund announced the Offer on May 10, 2021. The net asset value per common share at the close of business on May 14, 2021 was $11.61. The last reported sale price of a common share on the NYSE American on that date was $11.77, representing an 1.38% premium in
relation to the then current net asset value per common share and in relation to the Estimated Subscription Price.
Common
shares of the Fund, as a closed-end fund, can trade at a discount to net asset value. Upon expiration of the Offer, common shares
may be issued at a price below net asset value per share.
Sales
by Subscription Agent
Holders
of Rights who are unable or do not wish to exercise any or all of their Rights may instruct the Subscription Agent to sell any
unexercised Rights. The Subscription Certificates representing the Rights to be sold by the Subscription Agent must be received
on or before June 15, 2021, the fifth Business Day before the Expiration Date. Upon the timely receipt of the appropriate instructions
to sell Rights, the Subscription Agent will use its best efforts to complete the sale and will remit the proceeds of sale, net
of commissions, to the holders. The Subscription Agent will also attempt to sell any Rights (i) a Rights holder is unable to exercise
because the Rights represent the right to subscribe for less than one new common share or (ii) attributable to shareholders whose
record addresses are outside the United States or who have an APO or FPO address.
If
the Rights can be sold, sales of the Rights will be deemed to have been effected at the weighted average price received by the
Subscription Agent on the day such Rights are sold, less any applicable brokerage commissions, taxes and other expenses. The selling
Rights holder will pay all brokerage commissions incurred by the Subscription Agent.
The
Subscription Agent will automatically attempt to sell any unexercised Rights that remain unclaimed as a result of Subscription
Certificates being returned by the postal authorities as undeliverable as of the fifth Business Day prior to the Expiration Date.
These sales will be made net of commissions on behalf of the nonclaiming Rights holders. Proceeds from those sales will be held
by the Fund’s transfer agent, for the account of the nonclaiming Rights holder until the proceeds are either claimed or
escheated. There can be no assurance that the Subscription Agent will be able to complete the sale of any of these Rights and
neither the Fund nor the Subscription Agent has guaranteed any minimum sales price for the Rights. All of these Rights will be
sold at the market price, if any, through an exchange or market trading the Rights.
Common
Shareholders are urged to obtain a recent trading price for the Rights on the NYSE American from their broker, bank, financial
advisor or the financial press.
Method
of Transferring Rights
The
value of the Rights, if any, will be reflected by the market price. Rights may be sold by individual holders or may be submitted
to the Subscription Agent for sale. Any Rights submitted to the Subscription Agent for sale must be received by the Subscription
Agent on or before June 15, 2021, five Business Days prior to the completion of the Subscription Period, due to normal settlement
procedures.
Rights
that are sold will not confer any right to acquire any common shares in the Over-Subscription, and any Record Date Shareholder
who sells any Rights will not be eligible to participate in the Over-Subscription.
The
Rights evidenced by a single Subscription Certificate may be transferred in whole by endorsing the Subscription Certificate for
transfer in accordance with the accompanying instructions. A portion of the Rights evidenced by a single Subscription Certificate
(but not fractional Rights) may be transferred by delivering to the Subscription Agent a Subscription Certificate properly endorsed
for transfer, with instructions to register the portion of the Rights evidenced thereby in the name of the transferee (and to
issue a new Subscription Certificate to the transferee evidencing the transferred Rights). In this event, a new Subscription Certificate
evidencing the balance of the Rights will be issued to the Rights holder or, if the Rights holder so instructs, to an additional
transferee.
Holders
wishing to transfer all or a portion of their Rights (but not fractional Rights) should allow at least five Business Days prior
to the Expiration Date for (i) the transfer instructions to be received and processed by the Subscription Agent, (ii) a new Subscription
Certificate to be issued and transmitted to the transferee or transferees with respect to transferred Rights, and to the transferor
with respect to retained Rights, if any, and (iii) the Rights evidenced by the new Subscription Certificates to be exercised or
sold by the recipients thereof. Neither the Fund nor the Subscription Agent shall have any liability to a transferee or transferor
of Rights if Subscription Certificates are not received in time for exercise or sale prior to the Expiration Date.
Except
for the fees charged by the Subscription Agent (which will be paid by the Fund as described below), all commissions, fees and
other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise
of Rights will be for the account of the transferor of the Rights, and none of these commissions, fees or expenses will be paid
by the Fund or the Subscription Agent.
The
Fund anticipates that the Rights will be eligible for transfer through, and that the exercise of the Offer may be effected through,
the facilities of DTC.
Expiration
of the Offer
The
Offer will expire at 5:00 p.m., Eastern Time, on June 22, 2021, unless extended by the Fund. Rights will expire on the Expiration
Date and thereafter may not be exercised.
Subscription
Agent
The
Subscription Agent is Computershare Trust Company, N.A. The Subscription Agent will receive from the Fund an amount estimated
to be $15,000, comprised of the fee for its services and the reimbursement for certain expenses related to the Offer.
Information
Agent
INQUIRIES
BY ALL HOLDERS OF RIGHTS SHOULD BE DIRECTED TO: THE INFORMATION AGENT, GEORGESON LLC, TOLL-FREE AT 1-800-279-6913 OR BY WRITTEN
REQUEST TO: GEORGESON LLC, 1290 AVENUE OF THE AMERICAS, 9TH FLOOR, NEW YORK, NY 10104. HOLDERS MAY ALSO CONSULT THEIR BROKERS
OR NOMINEES.
Method
of Exercising Rights
Rights
may be exercised by completing and signing the reverse side of the Subscription Certificate and mailing it in the envelope provided,
or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment for
the Shares as described below under “Payment for Shares.” Rights may also be exercised through a Rights holder’s
broker, who may charge the Rights holder a servicing fee in connection with such exercise.
Completed
Subscription Certificates must be received by the Subscription Agent prior to 5:00 p.m. Eastern Time, on the Expiration Date (unless
payment is effected by means of a notice of guaranteed delivery as described below under “Payment for Shares”). The
Subscription Certificate and payment should be delivered to the Subscription Agent at the following addresses:
If
By Mail:
|
Computershare
Trust Company, N.A.
Attn:
Corporate Actions Voluntary Offer
P.O.
Box 43011
Providence,
RI 02940-3011
|
|
|
If
By Overnight Courier:
|
Computershare
Trust Company, N.A.
Attn:
Corporate Actions Voluntary Offer
150
Royall Street, Suite V
Canton,
MA 02021
|
Payment
for Shares
Holders
of Rights who acquire common shares on Primary Subscription or pursuant to the Over-Subscription Privilege may choose between
the following methods of payment:
(1)
|
A
subscription will be accepted by the Subscription Agent if, prior to 5:00 p.m., Eastern Time, on the Expiration Date, the
Subscription Agent has received a written notice of guaranteed delivery from a bank, a trust company, or an NYSE American
member, guaranteeing delivery of: (i) payment for the common shares subscribed for in the Primary Subscription and additional
common shares subscribed for pursuant to the Over-Subscription Privilege to the Subscription Agent based on the Estimated
Subscription Price of $11.12 per common share, and (ii) a properly completed and executed Subscription Certificate.
|
The
Subscription Agent will not honor a notice of guaranteed delivery if a properly completed and executed Subscription Certificate and
full payment is not received by the Subscription Agent by the close of business on the second Business Day after the Expiration
Date. The notice of guaranteed delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates
at the addresses set forth above, or may be transmitted to the Subscription Agent by email transmission to
canoticeofguarantee@computershare.com. Delivery of this notice of guaranteed delivery to an address or email, other than set forth above does not constitute
a valid delivery. The above email address can only be used for delivery of the notice of guaranteed delivery. Any transmission
of other materials will not be accepted and will not be considered a valid submission for the Rights Offering.
(2)
|
Alternatively,
a holder of Rights can send the Subscription Certificate together with payment in the form of a personal check drawn upon
a U.S. bank payable to the Rights Agent. To be accepted, the payment, together with the executed Subscription Certificate,
must be received by the Subscription Agent at the addresses noted above prior to 5:00 p.m., Eastern Time, on the Expiration
Date. The Subscription Agent will deposit all checks received by it prior to the Expiration Date into a segregated account
pending proration and distribution of the common shares issued pursuant to the Offer. The Subscription Agent will not accept
cash as a means of payment for common shares issued pursuant to the Offer.
|
EXCEPT
AS OTHERWISE SET FORTH BELOW, A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY PERSONAL CHECK DRAWN UPON
A U.S. BANK, MUST BE PAYABLE TO THE RIGHTS AGENT, COMPUTERSHARE TRUST COMPANY N.A., AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION
CERTIFICATE TO BE ACCEPTED.
If
the aggregate Subscription Price paid by a Record Date Shareholder is insufficient to purchase the number of common shares that
the holder indicates are being subscribed for, or if a Record Date Shareholder does not specify the number of common shares to
be purchased, then the Record Date Shareholder will be deemed to have exercised first, the Primary Subscription Rights (if not
already fully exercised) and second, the Over-Subscription Privilege to the full extent of the payment tendered. If the aggregate
Subscription Price paid by such holder is greater than the common shares he has indicated an intention to subscribe, then the
Rights holder will be deemed to have exercised first, the Primary Subscription Rights (if not already fully subscribed) and second,
the Over-Subscription Privilege to the full extent of the excess payment tendered.
Any
payment required from a holder of Rights must be received by the Subscription Agent by the Expiration Date, or if the Rights holder
has elected to make payment by means of a notice of guaranteed delivery, on the second Business Day after the Expiration Date.
Whichever of the two methods of payment described above is used, issuance and delivery of the common shares purchased are subject
to collection of checks and actual payment pursuant to any notice of guaranteed delivery.
Within
ten Business Days following the Expiration Date, a confirmation will be sent by the Subscription Agent to each holder of Rights
(or, if the common shares are held by Cede or any other depository or nominee, to Cede or such other depository or nominee), showing
(i) the number of common shares acquired pursuant to the Primary Subscription, (ii) the number of Excess Shares, if any, acquired
pursuant to the Over-Subscription Privilege, (iii) the per common share and total purchase price for the common shares and (iv)
any excess to be refunded by the Fund to such holder as a result of payment for common shares pursuant to the Over-Subscription
Privilege which the holder is not acquiring.
Any
excess payment to be refunded by the Fund to a holder of Rights, or to be paid to a holder of Rights as a result of sales of Rights
on his behalf by the Subscription Agent or exercises by Record Date Shareholders of their Over-Subscription Privileges, will be
mailed by the Subscription Agent to the holder within ten Business Days after the Expiration Date. If any Rights holder exercises
its right to acquire Shares pursuant to the Over-Subscription Privilege, any excess payment which would otherwise be refunded
to the Rights holder will be applied by the Fund toward payment for common shares acquired pursuant to exercise of the Over-Subscription
Privilege, if any.
A
Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment either by means of a
notice of guaranteed delivery or a check.
If
a holder of Rights who acquires common shares pursuant to the Primary Subscription or the Over-Subscription Privilege does not
make payment of any amounts due, the Fund reserves the right to take any or all of the following actions: (i) find other purchasers
for such subscribed-for and unpaid-for common shares; (ii) apply any payment actually received by it toward the purchase of the
greatest whole number of common shares which could be acquired by such holder upon exercise of the Primary Subscription or the
Over-Subscription Privilege; (iii) sell all or a portion of the common shares purchased by the holder, in the open market, and
apply the proceeds to the amounts owed; and (iv) exercise any and all other rights or remedies to which it may be entitled, including,
without limitation, the right to set off against payments actually received by it with respect to such subscribed common shares
and to enforce the relevant guaranty of payment.
Nominees
who hold common shares for the account of others, such as brokers, dealers or depositories for securities, should notify the respective
beneficial owners of the common shares as soon as possible to ascertain such beneficial owners’ intentions and to obtain
instructions with respect to the Rights. If the beneficial owner so instructs, the record holder of the Rights should complete
Subscription Certificates and submit them to the Subscription Agent with the proper payment. In addition, beneficial owners of
common shares or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions
in accordance with the beneficial owner’s instructions. Banks, broker-dealers and trust companies that hold common
shares for the accounts of others are advised to notify those persons that purchase Rights in the secondary market that such Rights
may not participate in the Over-Subscription Privilege.
THE
INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION CERTIFICATES SHOULD BE READ CAREFULLY AND FOLLOWED IN DETAIL. DO NOT SEND SUBSCRIPTION
CERTIFICATES TO THE FUND.
The
method of delivery of Subscription Certificates and payment of the aggregate Subscription Price to the Subscription Agent will
be at the election and risk of the Rights holders, but, if sent by mail, it is recommended that the certificates and payments
be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the Subscription Agent and clearance of payment prior to 5:00 p.m., Eastern Time, on the Expiration Date. Because
uncertified personal checks may take at least five Business Days or more to clear, you are strongly urged to pay, or arrange for
payment, by means of a certified bank check drawn off a personal bank account. Payments by cashier’s check or money order
will not be accepted.
All
questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Fund,
whose determinations will be final and binding. The Fund, in its sole discretion, may waive any defect or irregularity, or permit
a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such
time as the Fund determines in its sole discretion. Neither the Fund nor the Subscription Agent will be under any duty to give
notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability
for failure to give such notification.
Rights
holders who have exercised their Rights will have no right to rescind their subscription after receipt by the Subscription Agent
of the completed Subscription Certificate together with payment for common shares, except as described under “Notice of
net asset value decline.”
Foreign
Restrictions
Subscription
Certificates will only be mailed to Record Date Shareholders whose addresses are within the United States (other than an APO or
FPO address). Record Date Shareholders whose addresses are outside the United States or who have an APO or FPO address and who
wish to subscribe to the Offer either in part or in full should contact the Subscription Agent in writing or by recorded telephone
conversation no later than five Business Days prior to the Expiration Date. The Fund will determine whether the Offer may be made
to any such Record Date Shareholder. If the Subscription Agent has received no instruction by the fifth Business Day prior to
the Expiration Date or the Fund has determined that the Offer may not be made to a particular shareholder, the Subscription Agent
will attempt to sell all of such shareholder’s Rights and remit the net proceeds, if any, to such shareholder. If the Rights
can be sold, sales of these Rights will be deemed to have been effected at the weighted average price received by the Subscription
Agent on the day the Rights are sold, less any applicable brokerage commissions, taxes and other expenses.
Notice
of Net Asset Value Decline
In
accordance with SEC regulatory requirements, the Fund may suspend the Offer until the Fund amends after the effective date of
the Fund’s registration statement relating to this Offer, the Fund’s net asset value declines more than 10% from the
Fund’s net asset value as of that date. If this occurs, the Expiration Date may be extended and the Fund will notify Record
Date Shareholders of the decline and permit them to cancel their exercise of Rights.
Certain
United States Federal Income Tax Consequences
The
following is a general summary of the material U.S. federal income tax consequences of the Offer under the provisions of the Code,
Treasury regulations promulgated thereunder (“Treasury regulations”), and other applicable authorities in effect as
of the date of this Prospectus that are generally applicable to Record Date Shareholders and other Rights holders who are “United
States persons” within the meaning of the Code, and does not address any foreign, state, local or other tax consequences.
These authorities may be changed, possibly with retroactive effect, or subject to new legislative, administrative or judicial
action. Record Date Shareholders and other Rights holders should consult their tax advisors regarding the tax consequences, including
U.S. federal, state, local, foreign or other tax consequences, relevant to their particular circumstances.
The
Fund believes that the value of a Right will not be includible in the income of a Record Date Shareholder at the time the Right
is issued, and the Fund will not report to the IRS that a Record Date Shareholder has income as a result of the issuance of the
Right; however, there is no guidance directly on point concerning certain aspects of the Offer. The remainder of this discussion
assumes that the receipt of the Rights by Record Date Shareholders will not be a taxable event for U.S. federal income tax purposes.
The
basis of a Right issued to a Record Date Shareholder will be zero, and the basis of the common share with respect to which the
Right was issued (the “Old Common Share”) will remain unchanged. The Record Date Shareholder only is required to allocate
the basis of the Old Common Share and the Right in proportion to their respective fair market values on the date of distribution
if (i) either (a) the fair market value of the Right on the date of distribution is at least 15% of the fair market value of the
Old Common Share on that date, or (b) the Record Date Shareholder affirmatively elects (in the manner set out in Treasury regulations)
to allocate to the Right a portion of the basis of the Old Common Share and (ii) the Right does not expire unexercised in the
hands of the Record Date Shareholder (i.e., the Record Date Shareholder either exercises or sells the Right following its
issuance).
No
loss will be recognized by a Record Date Shareholder if a Right distributed to such Record Date Shareholder expires unexercised
in the hands of such Record Date Shareholder.
The
basis of a Right purchased in the market will generally be its purchase price. If a Right that has been purchased in the market
expires unexercised, the holder will recognize a loss equal to the basis of the Right.
Any
gain or loss on the sale of a Right or, in the case of Rights purchased in the market, any loss from a Right that expires unexercised,
will be a capital gain or loss if the Right is held as a capital asset (which in the case of Rights issued to Record Date Shareholders
will depend on whether the Old Common Share is held as a capital asset), and will be a long-term capital gain or loss if the holding
period of the Right exceeds (or is deemed to exceed) one year. The deductibility of capital losses is subject to limitation. The
holding period of a Right issued to a Record Date Shareholder will include the holding period of the Old Common Share.
No
gain or loss will be recognized by a Rights holder upon the exercise of a Right, and the basis of any share acquired upon exercise
of the right (the “New Common Share”) will equal the sum of the basis, if any, of the Right and the Subscription Price
for the New Common Share. When a Rights holder exercises a Right, the Rights holder’s holding period in the New Common Shares
does not include the time during which the Rights holder held the unexercised Right; the holding period for the New Common Shares
will begin no later than the date following the date of exercise of the Right.
You
should consult a tax advisor regarding the U.S. federal tax consequences of acquiring, holding, disposing of and exercising
Rights, and of allowing Rights to expire, in your particular circumstances, as well as any tax consequences that may arise
under the laws of any state, local or foreign taxing jurisdiction.
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Employee
Plan Considerations
The
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Code contain certain fiduciary responsibility
and prohibited transaction provisions applicable to rights holders that are employee benefit plans subject to ERISA or Section
4915 of the Code, including corporate savings and 401(k) plans, Keogh Plans of self-employed individuals and Individual Retirement
Accounts (“IRA”) (each, a “Benefit Plan” and collectively, “Benefit Plans”). Due to the complexity
of these rules and the penalties for noncompliance, fiduciaries of Benefit Plans and other retirement plans should consult with
their counsel and advisors regarding the consequences of their exercise or transfer of Rights under ERISA and the Code.
As
described above, existing shareholders who do not fully exercise their Rights will, at the completion of the Offer, own a smaller
proportional interest in the Fund than they owned prior to the Offer. The exercise of Rights will require the future funding of
cash. See “Description of the Rights Offering --Subscription Price.” Benefit Plans should be aware that additional
contributions of cash to the Benefit Plan necessary in order to fund the exercise of Rights may be treated as Benefit Plan contributions
and, particularly when taken together with contributions previously made, may result in issues under the rules governing contributions
and reductions, and give rise to possible excise taxes. For example, in the case of Benefit Plans qualified under Section 401(a)
of the Code, and certain other retirement plans, additional cash contributions could cause the maximum contribution limitations
of Section 415 of the Code and other qualification rules to be violated. Benefit Plans contemplating making additional cash contributions
to the Benefit Plan to fund the exercise of Rights should consult with their counsel prior to making such contributions. There
may also be reportable distributions, and other adverse tax and ERISA consequences, if Rights are sold or transferred by a Benefit
Plan. If any portion of an IRA is used as security for a loan, the portion so used could be treated as distributed to the IRA
depositor, and other adverse consequences could arise.
Additional
special issues may arise in the case of any Benefit Plan sponsored or maintained by the Fund or any affiliate thereof.
ERISA
contains fiduciary responsibility requirements, and ERISA and the Code contain prohibited transaction rules, that may impact
the exercise or transfer of Rights. Due to the complexity of these rules and the penalties for noncompliance, Benefit Plans
should consult with their counsel and other advisors regarding the consequences of their exercise or transfer of Rights under
ERISA and the Code.
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TABLE
OF FEES AND EXPENSES
The
following table shows the Fund’s expenses, including offering expenses, as a percentage of net assets attributable
to common shares, assuming the offer is fully subscribed. 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 form of amounts borrowed
by the Fund under a credit agreement, 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 Fund1
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0.19%
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Dividend
Reinvestment Plan Fees2
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None
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Annual
Expenses
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Percentage
of
Net Assets
Attributable
to
Common
Shares
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Investment
Advisory Fees3
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1.00%
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Interest
Payments on Borrowed Funds4
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0.43%
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Other
Expenses5
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0.65%
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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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2.55%
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(1)
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Estimated
maximum amount based on offering of $260,000 in common 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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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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(4)
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Assumes
the use of leverage in the form of borrowing under the Credit Agreement representing 33% 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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(5)
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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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Example
The
following example illustrates the expenses (including estimated offering expenses
of $260,000 from the issuance of $39 million in common shares) you would pay on a $1,000 investment in common shares, assuming a
5% annual portfolio total return.*
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1
Year
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3
Year
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5
Year
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10
Year
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Total
Expense Incurred
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$28
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$81
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$137
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$290
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*
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The
example should not be considered a representation of future expenses. The example
assumes that the amounts set forth in the Annual Expenses table are accurate 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.
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