As filed with the Securities and Exchange
Commission on July 21, 2022
1933 Act File No. 333-265058
1940 Act File No. 811-21583
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
|
[X]
|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|
|
|
[X]
|
Pre-Effective Amendment No. 1
|
|
|
[ ]
|
Post-Effective Amendment No.
|
and
|
[X]
|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|
|
|
[X]
|
Amendment No. 15
|
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
|
Clifford J. Alexander, Esq.
|
Nicholas Adams
|
|
K&L Gates LLP
|
ALPS Fund Services, Inc.
|
|
1601 K Street, NW
|
1290 Broadway, Suite 1000
|
|
Washington, DC 20006
|
Denver, CO 80203
|
|
(202) 778-9068
|
(303) 623-2577
|
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.
[ ]
|
Check box if the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans.
|
[X]
|
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.
|
[X]
|
Check box if this Form is a registration statement pursuant to General Instruction A.2 or a post-effective amendment thereto.
|
[ ]
|
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.
|
[ ]
|
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.
|
It is proposed that this filing will become effective (check appropriate box)
[X]
|
when declared effective pursuant to Section 8(c) of the Securities Act
|
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.
[ ]
|
immediately upon filing pursuant to paragraph (b)
|
[ ]
|
on (date) pursuant to paragraph (b)
|
[ ]
|
60 days after filing pursuant to paragraph (a)
|
[ ]
|
on (date) pursuant to paragraph (a)
|
If appropriate, check the following box:
[ ]
|
This [post-effective] amendment designates a new effective date for a previously filed [post-effective amendment] [registration statement].
|
|
|
[ ]
|
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:
|
|
|
[ ]
|
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:
|
|
|
[ ]
|
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:___._
|
Check each box that appropriately characterizes the Registrant:
[X]
|
Registered Closed-End Fund (closed-end company that is registered under the Investment Company Act of 1940 (“Investment Company Act”)).
|
[ ]
|
Business Development Company (closed-end company that intends or has elected to be regulated as a business development company under the Investment Company Act).
|
[ ]
|
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).
|
[X]
|
A.2 Qualified (qualified to register securities pursuant to General Instruction A.2 of this Form).
|
|
|
[ ]
|
Well-Known Seasoned Issuer (as defined by Rule 405 under the Securities Act).
|
|
|
[ ]
|
Emerging Growth Company (as defined by Rule 12b-2 under the Securities Exchange Act of 1934 (“Exchange Act”).
|
|
|
[ ]
|
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.
|
|
|
[ ]
|
New Registrant (registered or regulated under the Investment Company Act for less than 12 calendar months preceding this filing).
|
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered
|
Proposed Maximum Aggregate Offering Price (1)
|
Amount of Registration Fee (3)
|
Common Shares, no par value(2)
|
$55,000,000
|
$5,098.50
|
Preferred Shares, no par value(2)
|
[ ]
|
[ ]
|
Subscription Rights for Common Shares(2)
|
[ ]
|
[ ]
|
Subscription Rights for Preferred Shares(2)
|
[ ]
|
[ ]
|
Subscription Rights for Common Shares and Preferred Shares(2)
|
[ ]
|
[ ]
|
Total
|
$55,000,000
|
$5,098.50
|
(1) |
Estimated pursuant to Rule 457(o) solely for
the purpose of determining the registration fee. In accordance with Rue 457(c) under the Securities Act of 1933 based on the average
of the high and low sales prices of the common shares on July 18, 2022 as reported on the New York Stock Exchange American. 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. |
|
|
(2) |
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 $55,000,000. |
|
|
(3) |
$92.70 of which has been previously paid. |
PROSPECTUS
DATED JULY 21, 2022
Clough
Global Dividend and Income Fund
$55,000,000
Common
Shares
Preferred
Shares
Subscription
Rights to Purchase Common Shares
Subscription
Rights to Purchase Preferred Shares
Subscription
Rights to Purchase Common and Preferred Shares
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 July 18, 2022, the last reported sale price of the Fund common shares was $8.09. The net asset value of the Fund's common shares
at the close of business on July 18, 2022, was $8.02 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,”
“Risk Factors and Special Considerations—Special Risks to Holders of Common Shares,” and
“Risk Factors and Special Considerations—Special Risks to Holders of Preferred Shares,”
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 July 21, 2022, 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 |
5 |
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS |
18 |
SUMMARY OF FUND EXPENSES |
18 |
USE OF PROCEEDS |
21 |
THE FUND |
21 |
INVESTMENT OBJECTIVE AND POLICIES |
21 |
USE OF LEVERAGE |
38 |
RISK FACTORS AND SPECIAL CONSIDERATIONS |
39 |
MANAGEMENT OF THE FUND |
50 |
NET ASSET VALUE |
52 |
DISTRIBUTIONS |
53 |
DIVIDEND REINVESTMENT PLAN |
54 |
FEDERAL INCOME TAX MATTERS |
56 |
DESCRIPTION OF CAPITAL STRUCTURE |
58 |
ANTI-TAKEOVER PROVISIONS IN THE DECLARATION
OF TRUST |
69 |
CONVERSION TO OPEN-END FUND |
70 |
CUSTODIAN AND TRANSFER AGENT |
70 |
LEGAL MATTERS |
71 |
REPORTS TO SHAREHOLDERS |
71 |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
71 |
ADDITIONAL INFORMATION |
71 |
INCORPORATION BY REFERENCE |
71 |
THE FUND’S PRIVACY POLICY |
72 |
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 July 21, 2022, especially the information set forth under the heading “Risk Factors.”
The Fund |
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 July 18, 2022, the net assets of the Fund were $199,885,565. As of July 18, 2022, the Fund had outstanding 12,450,564 common shares. The Fund
has no other outstanding securities. See “The Fund.” |
The Offering |
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. |
|
While the aggregate number
and amount of securities the Fund may issue pursuant to this registration statement is limited to $55,000,000 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. |
Use of Proceeds |
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”. |
Investment Objective and
Policies
|
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. |
|
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. |
Preferred Shares |
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. |
Investment Adviser |
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 April 30, 2022, 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. |
Administrator |
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. |
Use of Leverage
|
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 May 18, 2022,
the Fund had outstanding $63 million in principal amount of borrowings from the Credit Agreement representing
approximately 32.87% 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. |
|
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. |
Risk Factors |
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.
Sector
Risk. From time to time, based on market or economic conditions, the Fund may have larger investment positions in one or
more sectors of the market. To the extent the Fund invests more heavily in particular sectors, its performance may be more sensitive
to developments that significantly affect those sectors. Individual sectors may be more volatile, and may perform differently,
than the broader market. The industries that constitute a sector may or may not all react in the same way to economic, political
or regulatory events.
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.” |
|
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. |
|
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.
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. |
|
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. |
|
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. |
|
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.
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.
|
Anti-Takeover
Provisions |
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.” |
|
Distributions |
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 2022, the Fund
will pay monthly distributions of one twelfth of 10% of the Fund’s adjusted year-ending net asset value (“NAV”), which is the average of the NAV’s of the last five business days
of the prior calendar year.
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 2022.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, 2021, 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.” |
|
|
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.” |
|
|
Dividend Reinvestment Plan |
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.” |
|
|
Stock Purchases and Tenders |
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. |
Custodian and Transfer
Agent |
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.” |
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 |
|
Sales Load (as a
percentage of offering price) |
None |
Offering Expenses
Borne by the Fund (Excluding Preferred Shares Offering Expenses)1 |
0.23% |
Dividend Reinvestment
Plan Fees2 |
None |
Preferred Shares Offering Expenses Borne by the Fund3 |
0.14% |
Annual Expenses |
Percentage
of Net Assets Attributable to Common Shares |
Investment Advisory
Fees4 |
1.18% |
Interest Payments
on Borrowed Funds5 |
0.97% |
Other Expenses6 |
0.67% |
Acquired Fund Fees
and Expenses |
0.27% |
Total Annual Fund
Operating Expenses |
3.09% |
Dividends on Preferred Shares7 |
0.30% |
Total Annual Expenses
and Dividends on Preferred Shares |
3.39% |
| (1) | Estimated
maximum amount based on offering of $45,000,000 in common shares and $10,000,000 in preferred shares. |
| (2) | 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. |
| (3) | Assumes issuance of $10,000,000 in preferred shares, net assets attributable to common shares of approximately $170,319,188. The actual
amounts in connection with any offering will be set forth in the Prospectus Supplement if applicable. |
| (4) | 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. |
| (5) | 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 1.99%. |
| (6) | Other
Expenses are estimated based on the Fund’s fiscal year ended on October 31, 2021,
assuming completion of the proposed issuances. |
| (7) | Dividends on Preferred Shares
assumes that $10,000,000 of additional preferred shares are issued with a dividend rate of 5.09%. There can, of course, be no
guarantee that any preferred shares would be issued or, if issued, the terms thereof. |
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, assuming a 5% annual portfolio total return.* The expenses illustrated in the following example include the estimated
offering expenses of $160,000 from the issuance of $55,000,000 million in common shares. 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 |
$39 |
$104 |
$176 |
$367 |
| * | 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.
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
Ended |
Principal Amount
Outstanding (000s)1 |
Asset Coverage
Per $1000 2 |
October
31, 2021 |
$61,500 |
$3,023 |
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 |
(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, 2020 to October 31, 2021, the average amount borrowed under the Credit Agreement was $54,056,164, at an average
rate of 0.87%. As of October 31, 2021, the amount of outstanding borrowings was $61,543,788, the interest rate was 0.83% and the amount
of pledged collateral was $109,458,517. Additional information on senior securities of the Fund may be found in the Financial Highlights
section of the Annual Report dated October 31, 2021 and Annual Report dated October 31, 2016, 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 |
-16.73% |
-8.92% |
-1.12% |
6.69% |
14.50% |
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.
Sector
Risk
From time
to time, based on market or economic conditions, the Fund may
have larger investment positions in one or more sectors of the market. To the extent the Fund invests more heavily in particular sectors,
industries, or sub-sectors of the market, its performance may be more sensitive to developments that significantly affect those sectors,
industries, or sub sectors.
An individual sector, industry,
or sub-sector of the market may be more volatile, and
may perform differently, than
the broader market. The industries that constitute a sector may or may not all react in the same way to economic, political or regulatory
events. The Fund's performance could also be affected if the sectors,
industries, or sub-sectors do not perform as expected. Alternatively, the lack of exposure to one
or more sectors or industries may adversely affect performance.
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, 2022, 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.
|
● |
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. |
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.
|
● |
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. |
|
● |
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. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table. The below
table assumes the annual leverage and fee rate of 1.92%. |
Assumed Return on Portfolio
(Net of Expenses) |
-10% |
-5% |
0% |
5% |
10% |
Corresponding Return to Common Shareholder |
-16.73% |
-8.92% |
-1.12% |
6.69% |
14.50% |
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 April 30, 2022. 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, 2022 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 2022, the Fund will pay monthly distributions of one twelfth of 10% of the Fund’s adjusted year-ending net asset
value (“NAV”), which is the average of the NAV’s of the last five business days of the prior calendar year. 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 2022.
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, 2021, 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, 2020 through
October 31, 2021 was 66,236 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, 2006, 2021 and the first
half of calendar year 2022 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 |
2022 |
April 30 |
$10.20 |
$8.30 |
$10.03 |
$8.77 |
1.70% |
-5.36% |
|
January
31 |
$11.56 |
$9.68 |
$11.30 |
$9.90 |
2.30% |
-2.22% |
2021 |
October
31 |
$12.04 |
$10.88 |
$11.39 |
$10.97 |
4.74% |
2.01% |
|
July
31 |
$12.15 |
$10.11 |
$11.54 |
$11.53 |
4.85% |
-11.71% |
|
April
30 |
$12.41 |
$10.54 |
$11.80 |
$11.81 |
3.47% |
-10.67% |
|
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
July 18, 2022, the net asset value per common share was $8.02, trading prices ranged between 8.09 and 8.37 (representing a premium to net asset value of 0.87% and 4.36%, respectively) and the closing price per common share was $8.09 (representing
a premium to net asset value of 0.85%).
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:
| ● | 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); |
|
● |
the
title of such subscription rights; |
|
● |
the
exercise price for such subscription rights (or method of calculation thereof); |
|
● |
the
number of such subscription rights issued in respect of each common share; |
|
● |
the
number of rights required to purchase a single preferred share; |
|
● |
the
extent to which such subscription rights are transferable and the market on which they may be traded if they are transferable; |
|
● |
if applicable,
a discussion of the material U.S. federal income tax considerations applicable to the issuance or exercise of such subscription
rights; |
|
● |
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); |
|
● |
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; |
|
● |
any
termination right we may have in connection with such subscription rights offering; and |
|
● |
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. |
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 July 18, 2022.
Title of Class |
|
|
Amount
Authorized |
|
Amount Held by Fund or for its Account |
|
|
Amount
Outstanding Exclusive of Amount Held by Fund |
|
Common Shares |
|
|
Unlimited |
|
|
— |
|
|
|
12,450,564 |
|
Preferred Shares |
|
|
Unlimited |
|
|
— |
|
|
|
0 |
|
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 April 30, 2022, the outstanding borrowings for the Fund were $63.3 million. The interest rate applicable to the borrowings of the Fund
on April 30, 2022 was 1.98486%.
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:
|
● |
Only
such information received from you, through application forms or otherwise, and information about your Fund transactions will
be collected. |
|
● |
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). |
|
● |
Policies
and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality
of such information. |
For
more information about the Fund’s privacy policies call (877) 256-8445 (toll-free).
Clough Global Dividend and Income
Fund
$55,000,000
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
July 21, 2022
STATEMENT OF ADDITIONAL INFORMATION
July 21, 2022
Clough
Global Dividend and Income Fund
1290 Broadway, Suite 1000
Denver, Colorado 80203
(877) 256-8445
TABLE OF CONTENTS
|
Page |
Additional Investment Information and Restrictions |
2 |
Trustees and Officers |
5 |
Code of Ethics |
22 |
Proxy Voting Policy |
22 |
Investment Advisory and Other Services |
22 |
Determination of Net Asset Value |
25 |
Portfolio Trading |
26 |
Principal Shareholders and Control Persons |
28 |
Taxes |
28 |
Other Information |
33 |
Independent Registered Public Accounting Firm |
34 |
Appendix A: Ratings |
35 |
Appendix B: Proxy Voting Policy |
42 |
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 July 21, 2022, 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.
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
1941 |
Chairman of the Board and Trustee |
Trustee since:
GLV: 2004
GLQ: 2005
GLO: 2006
Term expires:
GLV: 2024
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: 2024
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 |
No |
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: 2024
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: 2024
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. |
3 |
Mr. Rutledge is currently a Trustee of the Financial Investors Trust and the Principal Real Estate Income Fund. |
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 |
Hon. Vincent W. Versaci
1971 |
Trustee
|
Trustee since:
GLV: 2013
GLQ: 2013
GLO: 2013
Term expires:
GLV: 2022
GLQ: 2023
GLO: 2024
|
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 |
Clifford J. Weber
1963 |
Trustee
|
Trustee since:
GLV: 2017
GLQ: 2017
GLO: 2017
Term expires:
GLV: 2022
GLQ: 2023
GLO: 2024
|
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. |
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 |
Edmund J. Burke
1961 |
Trustee
|
Trustee since: GLV: 2006 GLQ: 2006 GLO: 2006 Term expires: GLV: 2022
GLQ: 2023
GLO: 2024 |
Mr. Burke joined ALPS in 1991 and served as the President and Director of ALPS Holdings, Inc., and ALPS Advisors, Inc., and Director of ALPS Distributors, Inc., ALPS Fund Services, Inc., and ALPS Portfolio Solutions Distributor, Inc. (collectively, the “ALPS Companies”). Mr. Burke retired from the ALPS Companies in June 2019. Mr. Burke is currently a partner at ETF Action, a web-based system that provides data and analytics to registered investment advisers, (since 2020) and a Director of Alliance Bioenergy Plus, Inc., technology company focused on emerging technologies in the renewable energy, biofuels, and bioplastics technology sectors (since 2020). |
4 |
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 |
Interested Trustee4 |
Kevin McNally5
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: 2024
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 |
Dawn Cotten
1977
|
President |
Officer since6
GLV: 2021
GLQ: 2021
GLO: 2021 |
Ms. Cotten joined ALPS in 2009 and is currently Senior Vice President of Fund Administration and Relationship Management of ALPS. She has served in that role since January 2020. Prior to that, Ms. Cotten served as Senior Vice President of Relationship Management (2017-2020). Ms. Cotten served as a VP in Relationship Management from 2013-2017. Ms. Cotten also serves as President of ALPS Series Trust, Clough Funds Trust, Clough Global Equity Fund, Clough Global Opportunities Fund, and Financial Investors Trust. |
N/A |
N/A |
Lucas Foss
1977 |
Chief Compliance Officer (“CCO”) |
Officer since6
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 |
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 |
Ryan Johanson
1982
|
Treasurer |
Officer since6
GLV: 2021
GLQ: 2021
GLO: 2021
|
Mr. Johanson joined ALPS in 2014 is currently a Fund Controller of ALPS. He has served in that role since 2016. Prior to that, Mr. Johanson has served as a Financial Reporting Manager at ALPS (Jul. 2014 – Jul. 2016). |
N/A |
N/A |
Nicholas Adams
1983 |
Secretary |
Officer since6
GLV: 2022
GLQ: 2022
GLO: 2022 |
Mr. Adams joined ALPS in January 2022 and is currently Principal Legal Counsel of ALPS. Mr. Adams is also Secretary of Clough Funds Trust. |
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 |
Alex Marks
1974
|
Assistant Secretary |
Officer since6
GLV: 2021
GLQ: 2021
GLO: 2021 |
Mr. Marks joined ALPS in 2006 and is currently Senior Paralegal Manager of ALPS. Mr. Marks is also Assistant Secretary of the Alpha Alternative Assets Fund. |
N/A |
N/A |
Dylan Mikel
1984 |
Assistant Treasurer |
Officer since6
GLV: 2022
GLQ: 2022
GLO: 2022 |
Mr. Mikel joined ALPS in 2010 and is a Fund Controller of ALPS. He has served in that role since 2021. Prior to that, Mr. Mikel has severed
as an Assistant Fund Controller at ALPS (Dec. 2016 – June 2021). |
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. 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. Burke, 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. McNally is considered to be an “Interested Trustee” because of his affiliation with Clough, which acts as the Fund’s investment adviser. |
6 |
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 |
Edmund J. Burke |
$0 |
$0 |
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 Trustee |
|
|
Kevin McNally |
$10,001-$50,000 |
$10,001-$50,000 |
(1) |
This information has been furnished by each Trustee of March 31, 2022. “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, 2021, 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, 2021. 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, 2021.
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,
2021, the Board of the Fund met six 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 served an Interested Trustee for the Fund since 2006 and became an Independent Trustee effective
November 1, 2021. He has served as a member of the Fund’s Audit and Governance and Nominating Committees since January 27,
2022. 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 and
a separately managed account advised by Clough that invest primarily in closed-end funds. He has over 28 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. McNally’s
professional experience in the investment management and investment banking businesses, including his serving on the boards of
closed-end funds, believes Mr. McNally 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 one Interested
Trustee and two Independent Trustees.
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
16, 2021. The Audit Charter is available at the Fund’s website. 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 16, 2021, 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, 2021, and discussed the audit of such
financial statements with the independent accountant..
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, 2021. The Audit Committee is composed of seven Independent Trustees, namely Ms. DiGravio and
Messrs. Burke, 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 seven Independent Trustees as the term is defined by the NYSE American listing standards,
namely Ms. DiGravio and Messrs. Burke, 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 14, 2021. The Governance and Nominating Committee Charter is available at the Fund website. The Governance
and Nominating Committee met two times during the fiscal year ended October 31, 2021. 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) |
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) |
A description of all commercial and business relationships and all transactions the Proposed Nominee has had with any other shareholder of record or beneficially. |
|
(e) |
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. |
|
(f) |
A representation that the Proposed Nominee meets the Trustee Qualifications set forth on Article III of the Fund’s By-laws. |
|
(g) |
Such other information requested by the Governance and Nominating Committee required to be disclosed in a proxy statement. |
|
(h) |
Written consent of the Proposed Nominee to being named a nominee and to serving as a Trustee. |
|
(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, 2021, 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 8, 2021.
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 14, 2022 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, 2022. 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, 2019, October 31, 2020 and October 31, 2021, Clough earned $1,057,105, $1,129,563 and $1,240,741, 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 April 30,
2022, Clough had approximately $2.2 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, 2022
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 $1,281.9 million in assets under management; (ii) three other pooled investment vehicles with a total
of approximately $284.5 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 $334.9 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) 3 other registered investment companies with approximately $1,266.6 million in assets under management; and (ii) one other
account with a total of approximately $334.9 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
Based on Schedule 13G filings made on or before May 12, 2022,
there were no person(s) who beneficially owned 5% or more of the Fund’s outstanding common shares.
As of May 12, 2022, 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 |
46
PART C - Other Information
Item 25. |
Financial Statements and Exhibits |
|
(h)(2) |
Form of ATM Sales Agreement(27) |
|
|
|
|
(i) |
Not Applicable |
|
|
|
|
(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) |
Filing Fees Table.* |
|
|
|
|
(t)(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 July 14, 2022. * |
|
|
|
|
(t)(ii) |
Form of Prospectus Supplement Relating to Common Shares(21) |
|
|
|
|
(t)(iii) |
Form of Prospectus Supplement Relating to Preferred Shares(22) |
|
|
|
(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) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004. |
(6) |
Incorporated by reference to Exhibit (d)(5) of 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. |
(26) |
Incorporated by reference to Exhibit (h)(1) of the Registration Statement filed with the Commission via EDGAR on May 21, 2021. |
(27) |
Incorporated by reference to Exhibit (h)(2) of the Registration Statement filed with the Commission via EDGAR on October 20, 2021. |
** |
To be filed by subsequent amendment. |
Item 26. |
Marketing Arrangements |
See Form of Marketing Agreement incorporated by reference to Exhibit (h)(1)
of the Registration Statement filed with the Commission via EDGAR on May 21, 2021.
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 |
$ |
5,098.50 |
Accounting fees and expenses |
$ |
750 |
Legal fees and expenses |
$ |
45,000 |
Total |
$ |
50,848.50 |
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 June 30, 2022 |
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 Denver, Colorado, on the 21st day of July, 2022.
|
Clough Global Dividend and Income Fund |
|
|
|
|
|
|
By: |
/s/Dawn Cotten |
|
|
|
Name: Dawn Cotten |
|
|
|
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/ Dawn Cotten |
|
President (Principal Executive Officer) |
|
July 21, 2022 |
Dawn Cotten |
|
|
|
|
|
|
|
|
|
/s/ Edmund J. Burke |
|
Trustee |
|
July 21, 2022 |
Edmund J. Burke* |
|
|
|
|
|
|
|
|
|
/s/ Robert L. Butler |
|
Trustee |
|
July 21, 2022 |
Robert L. Butler* |
|
|
|
|
|
|
|
|
|
/s/ Adam D. Crescenzi |
|
Trustee |
|
July 21, 2022 |
Adam D. Crescenzi* |
|
|
|
|
|
|
|
|
|
/s/ Karen DiGravio |
|
Trustee |
|
July 21, 2022 |
Karen DiGravio* |
|
|
|
|
|
|
|
|
|
/s/ Kevin McNally |
|
Trustee |
|
July 21, 2022 |
Kevin McNally* |
|
|
|
|
|
|
|
|
|
/s/ Jerry G. Rutledge |
|
Trustee |
|
July 21, 2022 |
Jerry G. Rutledge* |
|
|
|
|
|
|
|
|
|
/s/ Vincent W. Versaci |
|
Trustee |
|
July 21, 2022 |
Vincent W. Versaci* |
|
|
|
|
|
|
|
|
|
/s/ Clifford J. Weber |
|
Trustee |
|
July 21, 2022 |
Clifford J. Weber* |
|
|
|
|
|
|
|
|
|
/s/ Ryan Johanson |
|
Treasurer
(Principal Financial and Accounting Officer) |
|
July 21, 2022 |
Ryan Johanson |
|
|
|
|
|
|
|
|
|
* By: |
/s/ Clifford J. Alexander |
|
|
|
|
|
Clifford J. Alexander |
|
|
|
|
EXHIBIT INDEX
Clough Global Dividend a... (AMEX:GLV)
Historical Stock Chart
From Feb 2024 to Mar 2024
Clough Global Dividend a... (AMEX:GLV)
Historical Stock Chart
From Mar 2023 to Mar 2024