As filed with the Securities and Exchange Commission on May 21, 2019

 

1933 Act File No.

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 

[  ] Pre-Effective Amendment No.
[  ] Post-Effective Amendment No.

 

and

 

[X]     REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 

[X] Amendment No. 8

 

Clough Global Dividend and Income Fund 

 

(Exact Name of Registrant as Specified in Charter)

 

1290 Broadway, Suite 1100 

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. Sareena Khwaja-Dixon
  K&L Gates LLP ALPS Fund Services, Inc.
  1601 K Street, NW 1290 Broadway, Suite 1100
  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.

 

If any of the securities being registered on this form are offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. [  ]

 

It is proposed that this filing will become effective (check appropriate box)

 

[X] when declared effective pursuant to section 8(c)

 

If appropriate, check the following box:

 

[  ]       This amendment designates a new effective date for a previously filed registration statement.

 

[  ]       The Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration number of the earlier effective registration statement is _____.

 

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

Title of Securities Being

Registered

Amount Being Registered

Proposed

Maximum

Offering Price per

Unit (1)

Proposed

Maximum

Aggregate

Offering Price (1)

Amount of Registration

Fee

Common Shares, no par value 

[   ] $[  ] $1,000,000 $121.20
Rights to Purchase Common Shares (2) None None None

 

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933.

(2) No separate consideration will be received by the Registrant

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

PROSPECTUS

The information in this prospectus is not complete and may be changed. The Fund may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION

 

PRELIMINARY PROSPECTUS DATED ____________, 2019

 

Clough Global Dividend and Income Fund

 

____________ Common Shares of Beneficial Interest Issuable Upon Exercise of Rights to Subscribe for Such Shares

 

____________________ Fund (the “Fund”) is issuing transferable subscription rights (“Rights”) to its common shareholders of record as of ____________, 2019 (the “Record Date” and such shareholders, “Record Date Shareholders”). These Rights will allow Record Date Shareholders to subscribe for new common shares of the Fund in an aggregate amount of approximately ____________ common shares (the “Offer”). Record Date Shareholders will receive one Right for each common share held on Record Date. For every five Rights held, a Record Date Shareholder is entitled to purchase one new common share of the Fund (“Primary Subscription”). Record Date Shareholders who fully exercise their Rights may also, in certain circumstances, purchase additional common shares pursuant to an Over-Subscription Privilege (“Over-Subscription Privilege”). The number of Rights to be issued to a Record Date Shareholder will be rounded up to the nearest number of Rights evenly divisible by five. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, new common shares may be purchased only pursuant to the exercise of Rights in integral multiples of five.

 

The Rights are transferable and will be admitted for trading on the NYSE American stock exchange under the symbol “GLV RT” during the course of the Offer. The Fund’s common shares are currently listed, and the new common shares issued in this Offer will also be listed, on the NYSE American under the symbol “GLV.” On ____________, 2019, the last reported net asset value per common share was $______, and the last reported sales price per common share on the NYSE American was $______.

 

The Offer will expire at 5:00 p.m., Eastern Time, on ____________, 2019, unless the Offer is extended as described in this Prospectus (the “Expiration Date”). The subscription price per common share will be determined based upon a formula equal to 85% of the reported net asset value or 95% of the market price per common share, whichever is higher on the Expiration Date (“Subscription Price”). Market price per common share will be determined based on the average of the last reported sales prices of a common share on the NYSE American for the five trading days preceding the Expiration Date (not including sales price on the Expiration Date).

 

Rights holders may not know the Subscription Price at the time of exercise and will be required initially to pay for both the common shares subscribed for pursuant to the Primary Subscription and, if eligible, any additional common shares subscribed for pursuant to the Over-Subscription Privilege, at an estimated subscription price of $______ per common share (“Estimated Subscription Price”) and, except in limited circumstances, will not be able to rescind their subscription. Rights acquired in the secondary market may not participate in the Over-Subscription Privilege.

 

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Exercising your Rights and investing in the Fund involves a degree of investment risk and may be considered speculative. Before exercising your Rights and investing in the Fund, you should read the discussion of the material risks in “Risk Factors” in the Prospectus.

 

In addition, you should consider the following:

 

Shareholders who do not exercise their Rights will, at the completion of the Offer, own a smaller proportional interest in the Fund than if they exercised their Rights, which will proportionately decrease the relative voting power of those shareholders.

 

Because the Subscription Price per common share will be below the net asset value per common share on the Expiration Date, you will experience an immediate dilution of the aggregate net asset value of your common shares if you do not participate in the Offer and you will experience a reduction in the net asset value per common share of your common shares whether or not you participate in the Offer.

 

You will experience an immediate dilution of the aggregate net asset value of your common shares because you will indirectly bear the expenses of the Offer. This dilution of net asset value will disproportionately affect common shareholders who do not exercise their Rights.

 

The Fund cannot state precisely the extent of this dilution if you do not exercise your Rights because the Fund does not know what the net asset value per common share will be when the Offer expires, or what proportion of the Rights will be exercised.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

  Per common share Total maximum 3
Estimated Subscription Price 1 $______ $______
Estimated sales load 1 None None
Estimated offering expenses 2 $______ $______
Estimated net proceeds to Fund 1 $______ $______

 

(1) Estimated on the basis of 85% of the reported net asset value or 95% of the market price per common share, whichever is higher on _________________, 2019 the (“Expiration Date”). See “The Offer — The Subscription Price.”

 

(2) Offering expenses payable by the Fund (and indirectly by all of the Fund’s common shareholders, including those who do not exercise their Rights) are estimated at approximately $______, which includes fees to the subscription agent and information agent estimated to be approximately $______ in the aggregate inclusive of out of pocket expenses.

 

(3) Assumes all Rights are exercised at the Estimated Subscription Price per common share. All of the Rights offered may not be exercised.

 

Assuming all common shares offered are purchased in the Offer, the proportionate interest held by non-exercising shareholders will decrease upon completion of the Offer. As with any common stock, the price of the Fund’s common shares fluctuate with market conditions and other factors. As of __________, 2019, the common shares were trading at a ____% [discount] to their net asset value. Since the inception of the Fund, the common shares have traded at discounts of as much as (____)%. As described more fully in this Prospectus, Record Date Shareholders who fully exercise all Rights initially issued to them are entitled to buy those common shares referred to as “Over-Subscription Shares,” that were not purchased by other Rights holders. If enough Over-Subscription Shares are available, all such requests will be honored in full. If the requests for Over-Subscription Shares exceed the Over-Subscription Shares available, the available Primary Over-Subscription Shares will be allocated pro rata among those fully exercising Record Date Shareholders who over-subscribe based on the number of Rights originally issued to them by the Fund.

 

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The Fund. The Fund is a diversified, closed-end investment management company registered under the Investments Company Act of 1940, as amended. It 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. Investments in non-U.S. markets will be made primarily through liquid securities, including depositary receipts (which evidence ownership in underlying foreign securities). Investments in corporate debt may include both investment grade and non-investment grade issues. Non-investment grade debt issues are commonly referred to as “high yield” or “junk bonds” and are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. The Fund will not invest more than 20% of its total assets in securities rated, at the time of acquisition, below investment grade. Investments in sovereign debt may also include bonds issued by countries considered emerging markets. The Fund will not invest more than 20% of its total assets, at the time of acquisition, in securities of governments and companies in emerging markets.

 

Investment Adviser. Clough Capital Partners L.P. (“Clough”) serves as the Fund’s investment adviser. See “Management of the Fund.” As of March 31, 2019, Clough had approximately $1.7 billion of assets under management. Clough’s address is 53 State Street, 27th Floor, Boston, Massachusetts 02109.

 

Leverage. The Fund uses leverage through the issuance of preferred shares and/or through borrowings, including the issuance of debt securities (the “leverage program”). The Fund may use leverage initially of up to 33% of its total assets (including the amount obtained from leverage). As of the date of this Prospectus, the Fund’s leverage is ____% of its total assets. See “Effects of Leverage.”

 

This Prospectus sets forth concisely the information about the Fund and the Offer that a prospective investor ought to know before investing in the Fund and participating in the Offer. You should read this Prospectus, which contains important information about the Fund, before deciding whether to invest in the common shares, and retain it for future reference. A Statement of Additional Information dated __________, 2019 (the “Statement of Additional Information”), containing additional information about the Fund, has been filed with the SEC and is incorporated by reference in its entirety into this Prospectus, which means that it is part of this prospectus for legal purposes. You may request a free copy of the Statement of Additional Information (the table of contents of which is on page __ of this Prospectus), the Fund’s Annual and Semi-Annual Reports, request other information about the Fund and make shareholder inquiries by calling (800) __________ (toll-free) or by writing to ALPS Fund Services, Inc., 1290 Broadway, Suite 1100, 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). For additional information all holders of Rights should contact the Information Agent, __________ (“________”) toll free at ______________ or send a written request to the Information Agent at_________________________________.

 

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Table of Contents

 

Page

 

Prospectus Summary  
Cautionary Notice Regarding Forward-Looking Statements  
Summary of Fund Expenses  
Financial Highlights  
The Offer  
Use of Proceeds  
The Fund  
Investment Objective and Policies  
Use of Leverage  
Risk Factors  
Management of Fund  
Net Asset Value  
Distributions  
Dividend Reinvestment Plan  
Federal Income Tax Matters  
Description of Capital Structure  
Anti-Takeover Provisions in the Declaration of Trust  
Conversion to Open-End Fund  
Custodian and Transfer Agent  
Legal Matters  
Reports to Shareholders  
Independent Registered Public Accounting Firm  
Additional Information  
Table of Contents of the Statement of Additional Information  
The Fund’s Privacy Policy  

 

You should rely only on the information contained or incorporated by reference in this prospectus. The Fund has not authorized any other person to provide you with different information. If anyone provides you with different information or inconsistent information, you should not rely on it. The Fund is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained or the representations made herein are accurate only as of the date on the cover page of this prospectus. The Fund’s business, financial condition and prospects may have changed since that date.

 

Page 4 of 103

 

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 exercising your Rights and investing in the Fund. You should review the more detailed information contained in this Prospectus and in the Statement of Additional Information, 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 __________, 2019, the net assets of the Fund were $__________. As of __________, 2019, the Fund had outstanding __________ common shares. The Fund has no other outstanding securities. See “The Fund.”
   
The purpose of the offer

The Board of Trustees of the Fund (the “Board”), in consultation with Clough Capital Partners, L.P. (“Clough” or the “Investment Adviser”), the Fund’s investment adviser, has determined that it would be in the best interest of the Fund and its existing shareholders to increase the assets and liquidity of the Fund so that the Fund may be in a better position to take advantage of investment opportunities that may arise without having to reduce existing Fund holdings. In making this determination, the Board considered a number of factors, including potential benefits and costs. This rights offering seeks to reward existing common shareholders by giving them the opportunity to purchase additional common shares at a price that may be below market and/or net asset value without incurring any commission or charge. The distribution of these rights, which themselves may have intrinsic value, will also give non-participating common shareholders the potential of receiving a cash payment upon the sale of their rights, which may be viewed as partial compensation for the possible dilution of their interests in the Fund as a result of this offer.

 

The Board believes that increasing the size of the Fund may result in certain economies of scale which may lower the Fund’s expenses as a proportion of average net assets because the Fund’s fixed costs can be spread over a larger asset base. There can be no assurance that by increasing the size of the Fund, the Fund’s expense ratio will be lowered. The Board also believes that a larger number of outstanding common shares and a larger number of common shareholders could increase the level of market interest in and visibility of the Fund, and improve the trading liquidity of the Fund’s shares on the NYSE American. There can be no assurance that this rights offering (or the investment of the proceeds of this rights offering) will be successful or that the level of trading on the Fund’s shares on the NYSE American will increase.

 

In addition, the Board considered that, because the Subscription Price per share will be less than the NAV per share on the pricing Date, the Offer will result in dilution of the Fund’s NAV per share. The Board believes that the factors in favor of the Offer outweigh the dilution. See “Special Considerations and Risk Factors — Dilution.”

 

Page 5 of 103

 

  The Investment Adviser will benefit from the Offer because the Investment Adviser’s fee is based on the average daily net assets of the Fund. See “Management of the Fund.” It is not possible to state precisely the amount of additional compensation The Investment Adviser will receive as a result of the Offer because the proceeds of the Offer will be invested in additional portfolio securities, which will fluctuate in value. However, assuming all Rights exercised at the Estimated Purchased Price of $______ and that the Fund receives the maximum proceeds of the Offer, the annual compensation to be received by the Investment Adviser would be increased by approximately $_______ (0.00%). In determining that the Offer was in the best interest of shareholders, the Board was cognizant of this benefit to the Adviser.
   
Important terms of the offer

The Fund is issuing transferable subscription rights (“Rights”) to its common shareholders of record as of __________, 2019 (the “Record Date” and such shareholders, “Record Date Shareholders”). These Rights will allow Record Date Shareholders to subscribe for new common shares of the Fund in an aggregate amount of approximately __________ common shares (the “Offer”). Record Date Shareholders will receive one Right for each common share held on the Record Date. For every five Rights held, you are entitled to purchase one new common share of the Fund. Record Date Shareholders who fully exercise their Rights may also, in certain circumstances, purchase additional common shares pursuant to an Over-Subscription Privilege. The number of Rights to be issued to each Record Date Shareholder will be rounded up to the nearest number of Rights evenly divisible by five. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, new common shares may be purchased only pursuant to the exercise of Rights in integral multiples of five.

 

The Rights are transferable and will be admitted for trading on the NYSE American under the symbol “GLV RT” during the course of the Offer. The Fund’s common shares are currently listed, and the new common shares issued in this Offer will also be listed, on the NYSE American under the symbol “GLV”. On __________, 2019, the last reported net asset value per common share was $______, and the last reported sales price per common share on the NYSE American was $______.

 

The Offer will expire at 5:00 p.m., Eastern Time, on __________, 2019, unless the Offer is extended as described in this Prospectus (the “Expiration Date”).

 

The subscription price (“Subscription Price”) per common share will be determined based upon a formula equal to 85% of the reported net asset value or 95% of the market price per common share, whichever is higher on the Expiration Date. Market price per common share will be determined based on the average of the last reported sales prices of a common share on the NYSE American for the five trading days preceding the Expiration Date (not including sales price on the Expiration Date). Common shares of the Fund, as a closed-end fund, can trade at a discount to net asset value. Upon expiration of the Offer, common shares may be issued at a price below net asset value per share.

 

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Rights holders may not know the Subscription Price at the time of exercise and will be required initially to pay for both the common shares subscribed for pursuant to the Subscription and, if eligible, any additional common shares subscribed for pursuant to the Over-Subscription Privilege at the Estimated Subscription Price of $______ per common share and, except in limited circumstances, will not be able to rescind their subscription.

 

The Fund will not be issuing share certificates for the common shares issued pursuant to this Offer. Issuance of common shares will be made electronically via book entry by DST Systems, Inc. (“DST”), the Fund’s transfer agent.

   
Over-Subscription Privilege Record Date Shareholders who fully exercise all Rights initially issued to them are entitled to buy those common shares, referred to as “Over-Subscription Shares,” that were not purchased by other Rights holders at the same Subscription Price. If enough Over-Subscription Shares are available, all such requests will be honored in full. If the requests for Over-Subscription Shares exceed the Over-Subscription Shares available, the available Over-Subscription Shares will be allocated pro rata among those fully exercising Record Date Shareholders who over-subscribe based on the number of Rights originally issued to them by the Fund.
   
 

Rights acquired in the secondary market may not participate in the Over-Subscription Privilege.

 

If common shareholders do not participate in the secondary Over-Subscription Privilege (if any), their percentage ownership may be diluted.

 

Notwithstanding the above, the Board has the right in its absolute discretion to eliminate the Over-Subscription Privilege if it considers it to be in the best interest of the Fund to do so. The Board may make that determination at any time, without prior notice to Rights holders or others, up to and including the seventh day following the Expiration Date. See “The Offer — Over-Subscription Privilege.”

   
Method for exercising rights Rights may be exercised by completing and signing the reverse side of the subscription certificate evidencing the Rights (the “Subscription Certificate”) and mailing it in the envelope provided, or otherwise delivering the completed and signed Subscription Certificate to [  ] (the “Subscription Agent”), together with payment for the common shares as described below under “Payment for Shares.” Rights may also be exercised through a Rights holder’s broker, who may charge the Rights holder a servicing fee in connection with such exercise. See “The Offer — Method for Exercising Rights” and “The Offer — Payment for Shares.”
   
Sale of Rights The Rights are transferable until the completion of the Subscription Period and will be admitted for trading on the NYSE American. Although no assurance can be given that a market for the Rights will develop, trading in the Rights on the NYSE American will begin three Business Days (defined below) prior to the Record Date and may be conducted until the close of trading on the last NYSE American trading day prior to the completion of the Subscription Period. For purposes of this Prospectus, a “Business Day” means any day on which trading is conducted on the NYSE American.

 

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The value of the Rights, if any, will be reflected by the market price. Rights may be sold by individual holders or may be submitted to the Subscription Agent for sale (please see “The Offer — Method of Transferring Rights”). Any Rights submitted to the Subscription Agent for sale must be received by the Subscription Agent on or before __________, 2019, five Business Days prior to the completion of the Subscription Period, due to normal settlement procedures. Selling shareholders are responsible for all brokerage commissions incurred by the Subscription Agent as well as other fees and expenses associated with a transfer of Rights.

 

Rights that are sold will not confer any right to acquire any Shares in the Over-Subscription, and any Record Date Shareholder who sells any Rights will not be eligible to participate in the Over-Subscription.

 

Trading of the Rights on the NYSE American will be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed to Record Date Shareholders, and thereafter will be conducted on a regular way basis until and including the last NYSE American trading day prior to the completion of the Subscription Period. Common shares issued pursuant to the Offer will begin trading ex-Rights two Business Days prior to the Record Date.

 

If the Subscription Agent receives Rights for sale in a timely manner, it will use its best efforts to sell the Rights on the NYSE American. The Subscription Agent will also attempt to sell any Rights (i) a Rights holder is unable to exercise because the Rights represent the right to subscribe for less than one new common share or (ii) attributable to shareholders whose record addresses are outside the United States or who have an Army Post Office (“APO”) or Fleet Post Office (“FPO”) address. See “Restrictions on Foreign Shareholders” and “The Offer — Foreign Restrictions.”

 

Any commissions will be paid by the selling Rights holders. Neither the Fund nor the Subscription Agent will be responsible if Rights cannot be sold and neither has guaranteed any minimum sales price for the Rights. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day such Rights are sold, less any applicable brokerage commissions, taxes and other expenses.

 

Shareholders are urged to obtain a recent trading price for the Rights on the NYSE American from their broker, bank, financial advisor or the financial press.

 

Banks, broker-dealers and trust companies that hold common shares for the accounts of others are advised to notify those persons who purchase Rights in the secondary market that such Rights will not participate in the Over-Subscription Privilege.

 

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Offering expenses Offering expenses incurred by the Fund (and indirectly by all of the Fund’s common shareholders, including those who do not exercise their Rights) in connection with the Offer are estimated to be $300,000.
   
Restrictions on foreign shareholders Subscription Certificates will only be mailed to Record Date Shareholders whose addresses are within the United States (other than an APO or FPO address). Record Date Shareholders whose addresses are outside the United States or who have an APO or FPO address and who wish to subscribe to the Offer either in part or in full should contact the Subscription Agent in writing or by recorded telephone conversation no later than five Business Days prior to the Expiration Date. The Fund will determine whether the Offer may be made to any such Record Date Shareholder. The Offer will not be made in any jurisdiction where it would be unlawful to do so. If the Subscription Agent has received no instruction by the fifth Business Day prior to the Expiration Date or the Fund has determined that the Offer may not be made to a particular Record Date Shareholder, the Subscription Agent will attempt to sell all of such shareholder’s Rights and remit the net proceeds, if any, to such shareholder. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day the Rights are sold, less any applicable brokerage commissions, taxes and other expenses.
   
Use of proceeds

The Fund estimates the net proceeds of the Offer to be approximately $__________. This figure is based on an estimated Subscription Price per common share of $______ and assumes all new common shares offered are sold and that the expenses related to the Offer estimated at approximately $__________ are paid.

 

The Investment Adviser anticipates that 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 three months. Adverse market conditions could cause certain investments to be made after three months but no later than six months. Pending such investment, the proceeds will be held in high quality short-term debt securities and instruments.

 

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Important dates to remember Please note that the dates in the table below may change if the Offer is extended.

 

  Event Date
     
  Record Date __________, 2019
     
  Subscription Period __________, 2019 to _____, 2019*
     
  Expiration Date __________, 2019*
     
  Pricing Date (Deadline for delivery of Subscription Certificate together with payment of Estimated Subscription Price (see “The - Payment for Shares” on page ___ of this prospectus) or for delivery of a written notice of guaranteed delivery) __________, 2019
     
  Payment for Guarantees of Delivery Due __________, 2019*
     
  Confirmation to Participants __________, 2019*
     
  For Participants (Deadline for payment of unpaid balance if final Subscription Price is higher than Estimated Subscription Price.) __________, 2019*
     
  *  Unless the Offer is extended.  

 

Investment Objective and Policies The Fund’s investment objective is to provide a high level of total return. The Fund seeks to pursue this objective by applying a fundamental research-driven investment process and will invest in equity and equity-related securities, as well as fixed income securities, including both corporate and sovereign debt in both U.S. and non-U.S. markets.
   
  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 at least three countries (in addition to the United States). 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 corporate debt may include both investment grade and non-investment grade issues. There are certain risks associated with investing in these securities, commonly referred to as “junk bonds.” See “Risk Factors—Non-Investment Grade Securities Risk.” Investments in sovereign debt may also include bonds issued by countries considered emerging markets. The Fund will invest no more than 25% 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.”

 

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  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 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.
   
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 March 31, 2019, Clough had approximately $1.7 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 1100, 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 April 30, 2019, the Fund had outstanding $47,000,000 in principal amount of borrowings from the Credit Agreement representing approximately 32% 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 has no present intention of issuing preferred shares, although it has done so in the past and may choose to do so in the future.

 

The Fund also may borrow money as a temporary measure for extraordinary or emergency purposes.

 

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  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 holders of the Common Shares (the “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 Investment Company Act of 1940, as amended, and the rules and regulations thereunder (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%.

 

Page 12 of 103

 

  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 you should consider carefully the following risks that you assume when you invest in the Fund’s common shares:

 

Dilution . Shareholders who do not exercise their Rights will, at the completion of the Offer, own a smaller proportional interest in the Fund than if they exercised their Rights, which will proportionately decrease the relative voting power of those shareholders. Because the Subscription Price per common share will be below the net asset value per common share on the Expiration Date, you will experience an immediate dilution of the aggregate net asset value of your common shares if you do not participate in the Offer and you will experience a reduction in the net asset value per common share of your common shares whether or not you participate in the Offer. In addition, whether or not you exercise your Rights, you will experience a dilution of net asset of the common shares because you will indirectly bear the expenses of this Offer, which include, among other items, SEC registration fees, printing expenses and the fees assessed by service providers (including the cost of the Fund’s counsel and independent registered public accounting firm). This dilution of net asset value will disproportionately affect common shareholders who do not exercise their Rights. The Fund cannot state precisely the extent of this dilution if you do not exercise your Rights because the Fund does not know what the net asset value per common share will be when the Offer expires, or what proportion of the Rights will be exercised.

 

Page 13 of 103

 

 

Assuming, for example, that all Rights are exercised, the Subscription Price is $_____ and the Fund’s net asset value per common share at the expiration of the Offer is $_____, the Fund’s net asset value per common share (after payment of estimated offering expenses) would be reduced by approximately $_____ (______%) per common share. See “Risk Factors — Dilution.”

 

If you do not wish to exercise your Rights, you should consider selling them as set forth in this Prospectus. The Fund cannot give any assurance, however, that a market for the Rights will develop or that the Rights will have any marketable value.

 

The offer may increase the volatility of the market price of the Fund’s common shares. In addition, the Offer could be under-subscribed, in which case Clough will not have as much proceeds to invest on behalf of the Fund (see “Use of proceeds”).

 

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 Fund anticipates using leverage, which will magnify the Fund’s investment, market and certain other risks. 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 common and preferred stocks 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 . 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 price of common stocks are sensitive to general movements in the stock market and a drop in the stock market may depress the price 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. Common stock is subordinated to preferred stock and debt in a company’s capital structure with respect to priority in the right to a share of corporate income, and therefore will be subject to greater dividend risk than preferred stock or debt instruments. In addition, common stock prices may be sensitive to rising interest rates, as the costs of capital rise and borrowing costs increase.

 

Page 14 of 103

 

 

Foreign Securities Risk. Foreign issuers are subject to risks of possible adverse political and economic developments abroad. Investing in foreign issuers also involves risks of change in foreign currency exchange rates. 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. The Fund will not invest more than 25% 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. See “Risk Factors—Foreign Securities Risk.”

 

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.

 

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.

 

Page 15 of 103

 

 

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. 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.

 

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.

   
  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. Because the primary source of income for the Fund is 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.
   
  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.
   

 

Page 16 of 103

 

  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 of the types described above 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 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.
   
  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.
   

 

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  Risk of Leverage. Leverage creates risks for holders of the 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 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. 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.
   

 

Page 18 of 103

 

  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.

 

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.

   
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.”
   

 

Page 19 of 103

 

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 objectives and policies to support a level distribution of income, capital gains and/or return of capital (the "Plan"). In accordance with the Plan, until July 2019, the Fund will pay monthly distributions in an annualized amount of not less than 10% of the Fund's average monthly net asset value ("NAV"). From August 2019 to July 2021, the Fund will pay monthly distributions in an amount not less than the average distribution rate of a peer group of closed-end funds selected by the Board. 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 Internal Revenue Code of 1986, as amended (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. 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). This distribution policy may, under certain circumstances, have certain adverse consequences to the Fund and its shareholders. See “Distributions.”

   

 

Page 20 of 103

 

  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.”

 

Page 21 of 103

 

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 “Offer” 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.

 

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SUMMARY OF FUND EXPENSES

 

The following table is intended to assist investors in understanding the fees and expenses (annualized) that an investor in common shares of the Fund would bear, directly or indirectly, as a result of the Offer being fully subscribed and the receipt of net proceeds from the Offer of approximately $__________. If the Fund issues fewer common shares in the Offer and the net proceeds to the Fund are less, all other things being equal, the expenses shown would increase.

 

The table assumes the use of leverage in the form of amounts borrowed by the Fund under a credit agreement in an amount equal to 33% of the Fund’s total assets as of April 30, 2019 (including the amounts of any additional leverage obtained through the use of borrowed funds), also taking into account the additional assets to be raised in the Offer, as estimated above. The extent of the Fund’s assets attributable to leverage following the Offer, 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 (as a percentage of offering price)  
Sales Load None
Offering Expenses Borne by Common Shareholders 1 0.30%
Dividend Reinvestment Plan Fees 2 None

 

Annual Expenses Percentage of Net Assets Attributable to Common Shares
Investment Advisory Fees 1.17%
Interest Payments on Borrowed Funds 3 1.81%
Other Expenses 4 0.67%
Total Annual Fund Operating Expenses 1 3.65%

 

(1) The fees and expenses of the Offering will be borne by the Fund and indirectly by all of its common shareholders, including those who do not exercise their Rights. The Offering costs to be paid by the Fund are not included in the Annual Expenses table. Offering costs borne by common shareholders will result in a reduction of capital of the Fund. The numbers shown under the Annual Expenses table are projections based on the Fund’s current fiscal half-year expenses as of April 30, 2019 and on its projected net assets and total assets assuming the Offer is fully subscribed for at the Estimated Purchase Price of $_____ per share. See “Financial Highlights” for the Fund’s actual ratio of expenses to average net assets for the year ended [October 31, 2018].

 

(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 the use of leverage in the form of borrowing under the Credit Agreement representing 33% of the Fund’s total assets as of April 30, 2019 (including any additional leverage obtained through the use of borrowed funds), also taking into account the additional assets to be raised in the Offer, as estimated above, at an annual interest rate cost to the Fund of 3.38%.

 

(4) Other Expenses are estimated based on the Fund’s current fiscal half-year ended on April 30, 2019.

 

Page 23 of 103

 

Example

 

The purpose of the following table is to help a holder of common shares understand the fees and expenses that such holder would bear directly or indirectly. The following example illustrates the expenses that you would pay on a $1,000 investment in common shares of the Fund, including the estimated costs of the Offer to be borne by the common shareholders of $300,000, assuming (1) that the Fund’s net assets following (and after giving effect to) the Offer do not increase or decrease, (2) that the Fund incurs total annual expenses of 3.65% of its net assets in years 1 through 10 (assuming borrowing equal to 33% of the Fund’s total assets) and (3) a 5% annual return.

 

1 Year 3 Years 5 Years 10 Years
$37 $112 $189 $390

 

The example should not be considered a representation of future expenses or rate of return. Actual expenses may be higher or lower than those shown. The example assumes that the estimated “Other Expenses” set forth in the Annual Expenses table are accurate and that all dividends and distributions are reinvested at net asset value. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical 5% annual return shown in the example.

 

FINANCIAL HIGHLIGHTS

 

[FINANCIAL TABLES TO BE SUPPLIED]

 

THE OFFER

 

Terms of the Offer

 

The Fund is issuing to Record Date Shareholders Rights to subscribe for additional common shares. Each Record Date Shareholder is being issued one transferable Right for each common share owned on the Record Date. The Offer entitles the holder to acquire at the Subscription Price one common share for each five Rights held, rounded up to the nearest number of Rights evenly divisible by five. Fractional shares will not be issued upon the exercise of the Rights. Accordingly, common shares may be purchased only pursuant to the exercise of Rights in integral multiples of five.

 

In the case of common shares held of record by Cede & Co. (“Cede”), as nominee for the Depository Trust Company (“DTC”), or any other depository or nominee, the number of Rights issued to Cede or such other depository or nominee will be adjusted to permit rounding up (to the nearest number of Rights evenly divisible by five) of the Rights to be received by beneficial owners for whom it is the holder of record only if Cede or such other depository or nominee provides to the Fund on or before the close of business on ____________, 2019, a written representation to the number of Rights required for such rounding.

 

Rights may be exercised at any time during the period (the “Subscription Period”), which commences on ____________, 2019, and ends at 5:00 p.m., Eastern Time, on ____________, 2019, unless extended by the Fund. See “Expiration of the Offer.”

 

If all of the Rights are exercised in the Primary Subscription, the Fund will experience a 20% increase in common shares outstanding.

 

In addition, any Record Date Shareholder who fully exercises all Rights initially issued to him is entitled to subscribe for common shares available for Over-Subscription (the “Over-Subscription Shares”) that were not otherwise subscribed for by other Rights holders on the Primary Subscription.

 

Page 24 of 103

 

The entitlement to subscribe for unsubscribed Primary Subscription Shares is available only to those Record Date Shareholders who fully exercise all Rights initially issued to them and only on the basis of their Record Date holdings and will be referred to in this Prospectus as the “Over-Subscription Privilege.”

 

For purposes of determining the maximum number of Shares a Record Date Shareholder may acquire pursuant to the Offer, broker-dealers whose common shares are held of record by Cede, nominee for DTC, or by any other depository or nominee, will be deemed to be the holders of the Rights that are issued to Cede or such other depository or nominee on their behalf. Common shares acquired pursuant to the Over-Subscription Privilege are subject to allotment, which is more fully discussed below under “Over-Subscription Privilege.” Rights acquired in the secondary market may not participate in the Over-Subscription Privilege.

 

The method by which Rights may be exercised and common shares paid for is set forth below in “Method of Exercising Rights” and “Payment for Shares.” A Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment. See “Payment for Shares” below. Common shares issued pursuant to an exercise of Rights will be listed on the NYSE American. Common shares issued in connection with the Offer will not be evidenced by share certificates.

 

For purposes of determining the maximum number of common shares that may be acquired pursuant to the Offer, broker-dealers, trust companies, banks or others whose shares are held of record by Cede or by any other depository or nominee will be deemed to be the holders of the Rights that are held by Cede or such other depository or nominee on their behalf.

 

The Rights are transferable until the Expiration Date and will be admitted for trading on the NYSE American. Although no assurance can be given that a market for the Rights will develop, trading in the Rights on the NYSE American will begin three Business Days prior to the Record Date and may be conducted until the close of trading on the last NYSE American trading day prior to the Expiration Date due to normal settlement procedures.

 

Rights that are sold will not confer any right to acquire any common shares in the Over-Subscription Privilege, and any Record Date Shareholder who sells any Rights will not be eligible to participate in the secondary Over-Subscription (the “Secondary Over-Subscription”). Trading of the Rights on the NYSE American will be conducted on a when-issued basis until and including the date on which the Subscription Certificates are mailed to Record Date Shareholders and thereafter, will be conducted on a regular way basis until and including the last NYSE American trading day prior to the Expiration Date. The method by which Rights may be transferred is set forth below under “Method of Transferring Rights.” The Shares will begin trading ex-Rights two Business Days prior to the Record Date.

 

Nominees who hold the Fund’s common shares for the account of others, such as banks, broker-dealers, or depositories for securities, should notify the respective beneficial owners of such Shares as soon as possible to ascertain such beneficial owners’ intentions and to obtain instructions with respect to the Rights. Nominees should also notify holders purchasing Rights in the secondary market that such Rights may not participate in the Over-Subscription Privilege. If the beneficial owner so instructs, the nominee will complete the Subscription Certificate and submit it to the Subscription Agent with proper payment. In addition, beneficial owners of the common shares or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions in accordance with such beneficial owner’s instructions.

 

The Fund will not be issuing share certificates for the common shares issued pursuant to this Offer. Issuance of common shares will be made electronically via book entry by DST, the Fund’s transfer agent.

 

ALTHOUGH THE FUND HAS NO PRESENT INTENTION TO DO SO, THE FUND MAY, IN THE FUTURE AND IN ITS DISCRETION, CHOOSE TO MAKE ADDITIONAL OFFERINGS, INCLUDING RIGHTS OFFERINGS, FROM TIME TO TIME FOR A NUMBER OF COMMON SHARES AND ON TERMS WHICH MAY OR MAY NOT BE SIMILAR TO THE OFFER.

 

Page 25 of 103

 

Purpose of the Offer

 

The Board has determined, after consultation with the Investment Adviser, that it would be in the best interests of the Fund and its existing shareholders to increase the assets of the Fund available for investment, thereby permitting the Fund to be in a better position to more fully take advantage of investment opportunities that may arise without having to reduce existing Fund holdings. In making this determination, the Board considered a number of factors, including potential benefits and costs. The Offer seeks to reward existing shareholders by giving them the right to purchase additional common shares at a price that may be below market and/or net asset value without incurring any commission charge. The distribution to common shareholders of transferable Rights, which themselves may have intrinsic value, will also afford non-subscribing shareholders the potential of receiving a cash payment upon sale of such Rights, receipt of which may be viewed as partial compensation for the possible dilution of their interests in the Fund.

 

The Investment Adviser will benefit from the Offer because the Investment Adviser’s fee is based on the average daily total assets of the Fund. See “Management of the Fund.” It is not possible to state precisely the amount of additional compensation the Investment Adviser will receive as a result of the Offer because the proceeds of the Offer will be invested in additional portfolio securities, which will fluctuate in value. However, assuming all Rights are exercised at the estimated Subscription Price of $____ and that the Fund receives the maximum proceeds of the Offer, the annual compensation to be received by the Investment Adviser would be increased by approximately $__________ (____%). In determining that the Offer was in the best interest of shareholders, the Board was cognizant of this benefit.

 

This is the Fund’s first rights offering. Although the Fund has no present intention to do so, the Fund may, in the future and at its discretion, choose to make additional rights offerings from time to time for a number of shares and on terms which may or may not be similar to the Offer. Pursuant to applicable law, the Board is authorized to approve rights offerings without obtaining shareholder approval. The staff of the SEC has interpreted the 1940 Act as not requiring shareholder approval of a rights offering at a price below the then current net asset value so long as certain conditions are met, including a good faith determination by the Board that such offering would result in a net benefit to existing shareholders. There can be no assurance that the Offer (or the investment of the proceeds of the Offer) will be successful or that the level of trading Shares on the NYSE American will increase.

 

Over-Subscription Privilege

 

The Board has the right in its absolute discretion to eliminate the Over-Subscription Privilege if it considers it to be in the best interest of the Fund to do so. The Board may make that determination at any time, without prior notice to Rights holders or others, up to and including the seventh day following the Expiration Date. If the Over-Subscription Privilege is not eliminated, it will operate as set forth below.

 

Rights holders who are Record Date Shareholders are entitled to subscribe for additional common shares at the same Subscription Price pursuant to the Over-Subscription Privilege, subject to certain limitations and subject to allotment.

 

Record Date Shareholders who fully exercise all Rights initially issued to them are entitled to buy those common shares that were not purchased by other Rights holders at the same Subscription Price. If enough Primary Subscription Shares are available, all such requests will be honored in full. If the requests for Primary Subscription Shares exceed the Over-Subscription Shares available, the available Over-Subscription Shares will be allocated pro rata among those fully exercising Record Date Shareholders who over-subscribe based on the number of Rights originally issued to them by the Fund. Shares acquired pursuant to the Over-Subscription Privilege are subject to allotment.

 

Record Date Shareholders who are fully exercising their Rights during the Subscription Period should indicate, on the Subscription Certificate that they submit with respect to the exercise of the Rights issued to them, how many common shares they are willing to acquire pursuant to the Over-Subscription Privilege. Rights acquired in the secondary market may not participate in the Over-Subscription Privilege.

 

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To the extent sufficient common shares are not available to fulfill all Over-Subscription requests, the Excess Shares will be allocated pro-rata among those Record Date Shareholders who over-subscribe based on the number of the common shares owned on the Record Date. The allocation process may involve a series of allocations in order to assure that the total number of common shares available for Over-Subscriptions is distributed on a pro rata basis.

 

The formula to be used in allocating the Excess Shares is as follows: (shareholder’s Record Date share position divided by total record date position of all over-subscribers) multiplied by Excess Shares remaining.

 

Banks, broker-dealers, trustees and other nominee holders of Rights will be required to certify to the Subscription Agent, before any Over-Subscription Privilege may be exercised with respect to any particular beneficial owner, as to the aggregate number of Rights exercised during the Subscription Period and the number of common shares subscribed for pursuant to the Over-Subscription Privilege by such beneficial owner and that such beneficial owner’s subscription was exercised in full. Nominee holder Over-Subscription forms and beneficial owner certification forms will be distributed to banks, broker-dealers, trustees and other nominee holders of rights with the Subscription Certificates. Nominees should also notify holders purchasing Rights in the secondary market that such Rights may not participate in the Over-Subscription Privilege.

 

The Fund will not offer or sell any common shares that are not subscribed for during the Subscription Period and remain unsubscribed for pursuant to the Over-Subscription Privilege.

 

The Subscription Price

 

The Subscription Price will be determined based upon a formula equal to 85% of the reported net asset value or 95% of the market price per common share, whichever is higher on the Expiration Date. Market price per common share will be determined based on the average of the last reported sales prices of a common share on the NYSE American for the five trading days preceding the Expiration Date (not including sales price on the Expiration Date). Based on reported net asset value and market price per common share as of ____________, 2019, the Subscription Price would be $______ (the “estimated Subscription Price”).

 

Because the expiration date of the subscription period will be ____________, 2019 (unless the Fund extends the Subscription Period), rights holders may not know the Subscription Price at the time of exercise and will be required initially to pay for both the common shares subscribed for pursuant to the Primary Subscription (i.e., the Rights to acquire new common shares during the Subscription Period) and, if eligible, any additional common shares subscribed for pursuant to the Over-Subscription Privilege at the estimated Subscription Price of $33.65 per common share (the “estimated Subscription Price”) and, except in limited circumstances, will not be able to rescind their subscription.

 

The Fund announced the Offer on ____________, 2019. The net asset value per common share at the close of business on ____________, 2019 was $______. The last reported sale price of a common share on the NYSE American on that date was $______, representing a ____% premium in relation to the then current net asset value per common share and in relation to the estimated Subscription Price.

 

Common shares of the Fund, as a closed-end fund, can trade at a discount to net asset value. Upon expiration of the Offer, common shares may be issued at a price below net asset value per share.

 

Sales by Subscription Agent

 

Holders of Rights who are unable or do not wish to exercise any or all of their Rights may instruct the Subscription Agent to sell any unexercised Rights. The Subscription Certificates representing the Rights to be sold by the Subscription Agent must be received on or before ______, 2019, the fifth business day before the Expiration Date. Upon the timely receipt of the appropriate instructions to sell Rights, the Subscription Agent will use its best efforts to complete the sale and will remit the proceeds of sale, net of commissions, to the holders. The Subscription Agent will also attempt to sell any Rights (i) a Rights holder is unable to exercise because the Rights represent the right to subscribe for less than one new common share or (ii) attributable to shareholders whose record addresses are outside the United States or who have an APO or FPO address.

 

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If the Rights can be sold, sales of the Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day such Rights are sold, less any applicable brokerage commissions, taxes and other expenses. The selling Rights holder will pay all brokerage commissions incurred by the Subscription Agent.

 

The Subscription Agent will automatically attempt to sell any unexercised Rights that remain unclaimed as a result of Subscription Certificates being returned by the postal authorities as undeliverable as of the fifth Business Day prior to the Expiration Date. These sales will be made net of commissions on behalf of the nonclaiming Rights holders. Proceeds from those sales will be held by the Fund’s transfer agent, for the account of the nonclaiming Rights holder until the proceeds are either claimed or escheated. There can be no assurance that the Subscription Agent will be able to complete the sale of any of these Rights and neither the Fund nor the Subscription Agent has guaranteed any minimum sales price for the Rights. All of these Rights will be sold at the market price, if any, through an exchange or market trading the Rights.

 

Common shareholders are urged to obtain a recent trading price for the Rights on the NYSE American from their broker, bank, financial advisor or the financial press.

 

Method of Transferring Rights

 

The value of the Rights, if any, will be reflected by the market price. Rights may be sold by individual holders or may be submitted to the Subscription Agent for sale. Any Rights submitted to the Subscription Agent for sale must be received by the Subscription Agent on or before ______, 2019, five Business Days prior to the completion of the Subscription Period, due to normal settlement procedures.

 

Rights that are sold will not confer any right to acquire any common shares in the Over-Subscription, and any Record Date Shareholder who sells any Rights will not be eligible to participate in the Over-Subscription.

 

The Rights evidenced by a single Subscription Certificate may be transferred in whole by endorsing the Subscription Certificate for transfer in accordance with the accompanying instructions. A portion of the Rights evidenced by a single Subscription Certificate (but not fractional Rights) may be transferred by delivering to the Subscription Agent a Subscription Certificate properly endorsed for transfer, with instructions to register the portion of the Rights evidenced thereby in the name of the transferee (and to issue a new Subscription Certificate to the transferee evidencing the transferred Rights). In this event, a new Subscription Certificate evidencing the balance of the Rights will be issued to the Rights holder or, if the Rights holder so instructs, to an additional transferee.

 

Holders wishing to transfer all or a portion of their Rights (but not fractional Rights) should allow at least five Business Days prior to the Expiration Date for (i) the transfer instructions to be received and processed by the Subscription Agent, (ii) a new Subscription Certificate to be issued and transmitted to the transferee or transferees with respect to transferred Rights, and to the transferor with respect to retained Rights, if any, and (iii) the Rights evidenced by the new Subscription Certificates to be exercised or sold by the recipients thereof. Neither the Fund nor the Subscription Agent shall have any liability to a transferee or transferor of Rights if Subscription Certificates are not received in time for exercise or sale prior to the Expiration Date.

 

Except for the fees charged by the Subscription Agent (which will be paid by the Fund as described below), all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the purchase, sale or exercise of Rights will be for the account of the transferor of the Rights, and none of these commissions, fees or expenses will be paid by the Fund or the Subscription Agent.

 

The Fund anticipates that the Rights will be eligible for transfer through, and that the exercise of the Offer may be effected through, the facilities of DTC.

 

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Expiration of the Offer

 

The Offer will expire at 5:00 p.m., Eastern Time, on ____________, 2019, unless extended by the Fund (the “Expiration Date”). Rights will expire on the Expiration Date and thereafter may not be exercised.

 

Subscription Agent

 

The Subscription Agent is [ ]. The Subscription Agent will receive from the Fund an amount estimated to be $______, comprised of the fee for its services and the reimbursement for certain expenses related to the Offer.

 

Information Agent

 

INQUIRIES BY ALL HOLDERS OF RIGHTS SHOULD BE DIRECTED TO: THE INFORMATION AGENT, [ ], TOLL-FREE AT ____________ OR BY WRITTEN REQUEST TO: [ ]. HOLDERS MAY ALSO CONSULT THEIR BROKERS OR NOMINEES.

 

Method of Exercising Rights

 

Rights may be exercised by completing and signing the reverse side of the Subscription Certificate and mailing it in the envelope provided, or otherwise delivering the completed and signed Subscription Certificate to the Subscription Agent, together with payment for the Shares as described below under “Payment for Shares.” Rights may also be exercised through a Rights holder’s broker, who may charge the Rights holder a servicing fee in connection with such exercise.

 

Completed Subscription Certificates must be received by the Subscription Agent prior to 5:00 p.m. Eastern Time, on the Expiration Date (unless payment is effected by means of a notice of guaranteed delivery as described below under “Payment for Shares”). The Subscription Certificate and payment should be delivered to the Subscription Agent at the following addresses:

 

  If By Mail:

 

     
  If By Overnight Courier:

 

 

Payment for Shares

 

Holders of Rights who acquire common shares on Primary Subscription or pursuant to the Over-Subscription Privilege may choose between the following methods of payment:

 

(1) A subscription will be accepted by the Subscription Agent if, prior to 5:00 p.m., Eastern Time, on the Expiration Date, the Subscription Agent has received a written notice of guaranteed delivery from a bank, a trust company, or an NYSE American member, guaranteeing delivery of: (i) payment for the common shares subscribed for in the Primary Subscription and additional common shares subscribed for pursuant to the Over-Subscription Privilege to the Subscription Agent based on the estimated Subscription Price of $______ per common share, and (ii) a properly completed and executed Subscription Certificate.

 

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The Subscription Agent will not honor a notice of guaranteed delivery if a properly completed and executed Subscription Certificate and full payment is not received by the Subscription Agent by the close of business on the second Business Day after the Expiration Date. The notice of guaranteed delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates at the addresses set forth above, or may be transmitted to the Subscription Agent by facsimile transmission to fax number ____________; telephone number to confirm receipt ____________.

 

(2) Alternatively, a holder of Rights can send the Subscription Certificate together with payment in the form of a personal check drawn upon a U.S. bank payable to the Rights Agent. To be accepted, the payment, together with the executed Subscription Certificate, must be received by the Subscription Agent at the addresses noted above prior to 5:00 p.m., Eastern Time, on the Expiration Date. The Subscription Agent will deposit all checks received by it prior to the Expiration Date into a segregated account pending proration and distribution of the common shares issued pursuant to the Offer. The Subscription Agent will not accept cash as a means of payment for common shares issued pursuant to the Offer.

 

EXCEPT AS OTHERWISE SET FORTH BELOW, A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY PERSONAL CHECK DRAWN UPON A U.S. BANK, MUST BE PAYABLE TO THE RIGHTS AGENT, [ ], AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.

 

If the aggregate Subscription Price paid by a Record Date Shareholder is insufficient to purchase the number of common shares that the holder indicates are being subscribed for, or if a Record Date Shareholder does not specify the number of common shares to be purchased, then the Record Date Shareholder will be deemed to have exercised first, the Primary Subscription Rights (if not already fully exercised) and second, the Over-Subscription Privilege to the full extent of the payment tendered. If the aggregate Subscription Price paid by such holder is greater than the common shares he has indicated an intention to subscribe, then the Rights holder will be deemed to have exercised first, the Primary Subscription Rights (if not already fully subscribed) and second, the Over-Subscription Privilege to the full extent of the excess payment tendered.

 

Any payment required from a holder of Rights must be received by the Subscription Agent by the Expiration Date, or if the Rights holder has elected to make payment by means of a notice of guaranteed delivery, on the second Business Day after the Expiration Date. Whichever of the two methods of payment described above is used, issuance and delivery of the common shares purchased are subject to collection of checks and actual payment pursuant to any notice of guaranteed delivery.

 

Within ten Business Days following the Expiration Date (the “Confirmation Date”), a confirmation will be sent by the Subscription Agent to each holder of Rights (or, if the common shares are held by Cede or any other depository or nominee, to Cede or such other depository or nominee), showing (i) the number of common shares acquired pursuant to the Primary Subscription, (ii) the number of Excess Shares, if any, acquired pursuant to the Over-Subscription Privilege, (iii) the per common share and total purchase price for the common shares and (iv) any excess to be refunded by the Fund to such holder as a result of payment for common shares pursuant to the Over-Subscription Privilege which the holder is not acquiring.

 

Any excess payment to be refunded by the Fund to a holder of Rights, or to be paid to a holder of Rights as a result of sales of Rights on his behalf by the Subscription Agent or exercises by Record Date Shareholders of their Over-Subscription Privileges, will be mailed by the Subscription Agent to the holder within ten Business Days after the Expiration Date. If any Rights holder exercises its right to acquire Shares pursuant to the Over-Subscription Privilege, any excess payment which would otherwise be refunded to the Rights holder will be applied by the Fund toward payment for common shares acquired pursuant to exercise of the Over-Subscription Privilege, if any.

 

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A Rights holder will have no right to rescind a purchase after the Subscription Agent has received payment either by means of a notice of guaranteed delivery or a check.

 

If a holder of Rights who acquires common shares pursuant to the Primary Subscription or the Over-Subscription Privilege does not make payment of any amounts due, the Fund reserves the right to take any or all of the following actions: (i) find other purchasers for such subscribed-for and unpaid-for common shares; (ii) apply any payment actually received by it toward the purchase of the greatest whole number of common shares which could be acquired by such holder upon exercise of the Primary Subscription or the Over-Subscription Privilege; (iii) sell all or a portion of the common shares purchased by the holder, in the open market, and apply the proceeds to the amounts owed; and (iv) exercise any and all other rights or remedies to which it may be entitled, including, without limitation, the right to set off against payments actually received by it with respect to such subscribed common shares and to enforce the relevant guaranty of payment.

 

Nominees who hold common shares for the account of others, such as brokers, dealers or depositories for securities, should notify the respective beneficial owners of the common shares as soon as possible to ascertain such beneficial owners’ intentions and to obtain instructions with respect to the Rights. If the beneficial owner so instructs, the record holder of the Rights should complete Subscription Certificates and submit them to the Subscription Agent with the proper payment. In addition, beneficial owners of common shares or Rights held through such a nominee should contact the nominee and request the nominee to effect transactions in accordance with the beneficial owner’s instructions. Banks, broker-dealers and trust companies that hold common shares for the accounts of others are advised to notify those persons that purchase Rights in the secondary market that such Rights may not participate in the Over-Subscription Privilege .

 

THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION CERTIFICATES SHOULD BE READ CAREFULLY AND FOLLOWED IN DETAIL. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE FUND.

 

The method of delivery of Subscription Certificates and payment of the aggregate Subscription Price to the Subscription Agent will be at the election and risk of the Rights holders, but, if sent by mail, it is recommended that the certificates and payments be sent by registered mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the Subscription Agent and clearance of payment prior to 5:00 p.m., Eastern Time, on the Expiration Date. Because uncertified personal checks may take at least five Business Days or more to clear, you are strongly urged to pay, or arrange for payment, by means of a certified bank check drawn off a personal bank account. Payments by cashier’s check or money order will not be accepted.

 

All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Fund, whose determinations will be final and binding. The Fund, in its sole discretion, may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Fund determines in its sole discretion. Neither the Fund nor the Subscription Agent will be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification.

 

Rights holders who have exercised their rights will have no right to rescind their subscription after receipt by the subscription agent of the completed Subscription Certificate together with payment for common shares, except as described under “Notice of net asset value decline.”

 

Foreign Restrictions

 

Subscription Certificates will only be mailed to Record Date Shareholders whose addresses are within the United States (other than an APO or FPO address). Record Date Shareholders whose addresses are outside the United States or who have an APO or FPO address and who wish to subscribe to the Offer either in part or in full should contact the Subscription Agent in writing or by recorded telephone conversation no later than five Business Days prior to the Expiration Date. The Fund will determine whether the Offer may be made to any such Record Date Shareholder. If the Subscription Agent has received no instruction by the fifth Business Day prior to the Expiration Date or the Fund has determined that the Offer may not be made to a particular shareholder, the Subscription Agent will attempt to sell all of such shareholder’s Rights and remit the net proceeds, if any, to such shareholder. If the Rights can be sold, sales of these Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent on the day the Rights are sold, less any applicable brokerage commissions, taxes and other expenses.

 

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Notice of Net Asset Value Decline

 

In accordance with SEC regulatory requirements, the Fund has undertaken to suspend the Offer until the Fund amends this Prospectus if, after the effective date of the Fund’s registration statement relating to this Offer, the Fund’s net asset value declines more than 10% from the Fund’s net asset value as of that date. If this occurs, the Expiration Date will be extended and the Fund will notify Record Date Shareholders of the decline and permit them to cancel their exercise of Rights.

 

Certain United States Federal Income Tax Consequences

 

The following is a general summary of the material U.S. federal income tax consequences of the Offer under the provisions of the Code, Treasury regulations promulgated thereunder (“Treasury regulations”), and other applicable authorities in effect as of the date of this Prospectus that are generally applicable to Record Date Shareholders and other Rights holders who are “United States persons” within the meaning of the Code, and does not address any foreign, state, local or other tax consequences. These authorities may be changed, possibly with retroactive effect, or subject to new legislative, administrative or judicial action. Record Date Shareholders and other rights holders should consult their tax advisors regarding the tax consequences, including U.S. federal, state, local, foreign or other tax consequences, relevant to their particular circumstances.

 

The Fund believes that the value of a Right will not be includible in the income of a Record Date Shareholder at the time the Right is issued, and the Fund will not report to the IRS that a Record Date Shareholder has income as a result of the issuance of the Right; however, there is no guidance directly on point concerning certain aspects of the Offer. The remainder of this discussion assumes that the receipt of the Rights by Record Date Shareholders will not be a taxable event for U.S. federal income tax purposes.

 

The basis of a Right issued to a Record Date Shareholder will be zero, and the basis of the common share with respect to which the Right was issued (the “Old Common Share”) will remain unchanged. The Record Date Shareholder only is required to allocate the basis of the Old Common Share and the Right in proportion to their respective fair market values on the date of distribution if (i) either (a) the fair market value of the Right on the date of distribution is at least 15% of the fair market value of the Old Common Share on that date, or (b) the Record Date Shareholder affirmatively elects (in the manner set out in Treasury regulations) to allocate to the Right a portion of the basis of the Old Common Share and (ii) the Right does not expire unexercised in the hands of the Record Date Shareholder ( i.e. , the Record Date Shareholder either exercises or sells the Right following its issuance).

 

No loss will be recognized by a Record Date Shareholder if a Right distributed to such Record Date Shareholder expires unexercised in the hands of such Record Date Shareholder.

 

The basis of a Right purchased in the market will generally be its purchase price. If a Right that has been purchased in the market expires unexercised, the holder will recognize a loss equal to the basis of the Right.

 

Any gain or loss on the sale of a Right or, in the case of Rights purchased in the market, any loss from a Right that expires unexercised, will be a capital gain or loss if the Right is held as a capital asset (which in the case of Rights issued to Record Date Shareholders will depend on whether the Old Common Share is held as a capital asset), and will be a long-term capital gain or loss if the holding period of the Right exceeds (or is deemed to exceed) one year. The deductibility of capital losses is subject to limitation. The holding period of a Right issued to a Record Date Shareholder will include the holding period of the Old Common Share.

 

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No gain or loss will be recognized by a Rights holder upon the exercise of a Right, and the basis of any share acquired upon exercise of the right (the “New Common Share”) will equal the sum of the basis, if any, of the Right and the subscription price for the New Common Share. When a Rights holder exercises a Right, the Rights holder’s holding period in the New Common Shares does not include the time during which the Rights holder held the unexercised Right; the holding period for the New Common Shares will begin no later than the date following the date of exercise of the Right.

 

You should consult a tax advisor regarding the U.S. federal tax consequences of acquiring, holding, disposing of and exercising Rights, and of allowing Rights to expire, in your particular circumstances, as well as any tax consequences that may arise under the laws of any state, local or foreign taxing jurisdiction.

 

Employee Plan Considerations

 

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Code contain certain fiduciary responsibility and prohibited transaction provisions applicable to rights holders that are employee benefit plans subject to ERISA or Section 4915 of the Code, including corporate savings and 401(k) plans, Keogh Plans of self-employed individuals and Individual Retirement Accounts (“IRA”) (each, a “Benefit Plan” and collectively, “Benefit Plans”). Due to the complexity of these rules and the penalties for noncompliance, fiduciaries of Benefit Plans and other retirement plans should consult with their counsel and advisors regarding the consequences of their exercise or transfer of Rights under ERISA and the Code.

 

As described above, existing shareholders who do not fully exercise their Rights will, at the completion of the Offer, own a smaller proportional interest in the Fund than they owned prior to the Offer. The exercise of Rights will require the future funding of cash. See “The Offer — Subscription Price.” Benefit Plans should be aware that additional contributions of cash to the Benefit Plan necessary in order to fund the exercise of Rights may be treated as Benefit Plan contributions and, particularly when taken together with contributions previously made, may result in issues under the rules governing contributions and reductions, and give rise to possible excise taxes. For example, in the case of Benefit Plans qualified under Section 401(a) of the Code, and certain other retirement plans, additional cash contributions could cause the maximum contribution limitations of Section 415 of the Code and other qualification rules to be violated. Benefit Plans contemplating making additional cash contributions to the Benefit Plan to fund the exercise of Rights should consult with their counsel prior to making such contributions. There may also be reportable distributions, and other adverse tax and ERISA consequences, if Rights are sold or transferred by a Benefit Plan. If any portion of an IRA is used as security for a loan, the portion so used could be treated as distributed to the IRA depositor, and other adverse consequences could arise.

 

Additional special issues may arise in the case of any Benefit Plan sponsored or maintained by the Fund or any affiliate thereof.

 

ERISA contains fiduciary responsibility requirements, and ERISA and the Code contain prohibited transaction rules, that may impact the exercise or transfer of Rights. Due to the complexity of these rules and the penalties for noncompliance, Benefit Plans should consult with their counsel and other advisors regarding the consequences of their exercise or transfer of Rights under ERISA and the Code.

 

USE OF PROCEEDS

 

The Fund estimates the net proceeds of the Offer to be $________, based on the estimated Subscription Price per common share of $________, assuming all Primary Subscription Shares offered are sold and that the expenses related to the Offer estimated at approximately $________ are paid.

 

The Investment Adviser expects that it will initially invest the proceeds of the offering in high-quality short-term debt securities and instruments. The Investment Adviser 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 three months.

 

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Adverse market conditions could cause certain investments to be made after three months 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 1100, 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. The Fund seeks to pursue this objective by applying a fundamental research-driven investment process and will invest in equity and equity-related securities, 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 intends to invest 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 at least three countries (in addition to the United States). 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 and GDRs. Investments in corporate debt may include both investment grade and non-investment grade issues. Investments in sovereign debt may also include bonds issued by countries considered emerging markets.

 

The Fund will place a high priority on capital preservation and should the Fund’s investment adviser believe that extraordinary conditions affecting 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 objectives. The Fund may use a variety of investment techniques 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.

 

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 accordance with a limited 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.

 

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Once attractive themes are identified, Clough will 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, investment positions may be concentrated 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.

 

Generally, securities will be purchased or sold 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 and U.S. Treasury and U.S. agency securities. 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 occurs. In addition, common stock prices may be sensitive to rising interest rates, as the costs of capital rise and borrowing costs increase.

 

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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, 10% 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. The Fund will be eligible to purchase securities in Rule 144A transactions if and when it owns at least $100 million of securities of unaffiliated issuers. 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 may adopt 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.

 

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Corporate Bonds 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 not invest more than 20% of its total assets in securities rated below investment grade ( i.e., securities rated lower than Baa or 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.

 

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).

 

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.

 

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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 25% 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.

 

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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 10% of its total assets (in addition to the 10% limit applicable to options on stock indices described below) to purchase put and call options on securities. 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 support its obligation to purchase the underlying instruments if a put option written by the Fund is exercised, 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.

 

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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 10% of its total assets (in addition to the 10% 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. 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.

 

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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.

 

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Pursuant to the views of the SEC 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.

 

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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.

 

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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 the 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. It 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 imposed in connection with the intended issuance of preferred shares by the Fund, it is expected that the Fund will be authorized to enter into swaptions and to purchase credit default swaps without limitation but will 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.

 

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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 of America that is (a) on a list approved by the Board of Trustees, (b) with capital of at least $100 million, and (c) which 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 10% 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 sold by the Fund will not exceed 33 1 /3% of the Fund’s total assets.

 

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 (1) third-party information services, such as Bloomberg, and (2) comparison with Clough’s valuation models.

 

The use of interest rate swaps, swaptions, and credit derivatives, as the foregoing discussion suggests, are subject to risks and complexities beyond what might be encountered in standardized, exchange traded options and futures contracts. Such risks include operational risks, valuation risks, credit risks, 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.

 

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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.

 

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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.

 

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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 ______2019 to _____, 2019, the average amount borrowed under the Credit Agreement was $______, at an average rate of _____%. As of _____, 2019, the amount of outstanding borrowings was $_______, the interest rate was ____% and the amount of pledged collateral was $______.

 

Assuming the utilization of leverage in the amount of 33% of the Fund’s total assets, and an annual dividend rate on preferred shares of ___% payable on such leverage based on market rates as of the date of this prospectus, the additional income that the Fund must earn (net of expenses) in order to cover such dividend payments is ___%. The Fund’s actual cost of leverage will be based on market rates at the time the Fund undertakes a leveraging strategy, and such actual cost of leverage may be higher or lower than that assumed in the previous example.

 

The following table is designed to illustrate the effect on the return to a holder of the Fund’s Common Shares of leverage in the amount of approximately 33% of the Fund’s total assets, assuming hypothetical annual returns of the Fund’s portfolio of minus 10% to plus 10%. As the table shows, leverage generally increases the return to Common Shareholders when portfolio return is positive and greater than the cost of leverage and decreases the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table.

 

Assumed portfolio return (net of expenses) (10)% (5)% 0% 5% 10%
Corresponding Common Share return (16)% (8)% (1)% 7% 14%

 

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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

 

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.

 

Dilution

 

Shareholders who do not exercise their Rights will, at the completion of the Offer, own a smaller proportional interest in the Fund than if they exercised their Rights, which will proportionately decrease the relative voting power of those shareholders. Because the Subscription Price per common share will be below the net asset value per common share on the Expiration Date, you will experience an immediate dilution of the aggregate net asset value of your common shares if you do not participate in the Offer and you will experience a reduction in the net asset value per common share of your common shares whether or not you participate in the Offer. In addition, whether or not you exercise your Rights, you will experience a dilution of net asset of the common shares because you will indirectly bear the expenses of this Offer, which include, among other items, SEC registration fees, printing expenses and the fees assessed by service providers (including the cost of the Fund’s counsel and independent registered public accounting firm). This dilution of net asset value will disproportionately affect common shareholders who do not exercise their Rights. The Fund cannot state precisely the extent of this dilution if you do not exercise your Rights because the Fund does not know what the net asset value per common share will be when the Offer expires, or what proportion of the Rights will be exercised.

 

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.

 

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Issuer Risk

 

The value of an issuer’s securities may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods and services.

 

Foreign Securities Risk

 

The Fund’s investments in securities of foreign issuers are subject to risks not usually associated with owning securities of U.S. issuers. These risks can include fluctuations in foreign currencies, foreign currency exchange controls, social, political and economic instability, differences in securities regulation and trading, expropriation or nationalization of assets, and foreign taxation issues. In addition, changes in government administrations or economic or monetary policies in the United States or abroad could result in appreciation or depreciation of the Fund’s securities. It may also be more difficult to obtain and enforce a judgment against a foreign issuer. To the extent the Fund focuses its investments in a particular country or in countries within a particular geographic region, economic, political, regulatory and other conditions affecting such country or region may have a greater impact on the Fund than on more geographically diversified funds. Any foreign investments made by the Fund must be made in compliance with U.S. and foreign currency restrictions and tax laws restricting the amounts and types of foreign investments. The Fund will not invest more than 25% 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

 

Any investment by the Fund in REITs will subject it 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. The Fund does not expect to invest a significant portion of its assets in REITs but does not place 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.

 

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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.

 

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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, which could jeopardize the rating agencies’ ratings of the Fund’s preferred shares. 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 the primary source of income for the Fund is 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.

 

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 income.

 

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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.

 

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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 holders of the 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 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. 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.

 

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Market Disruption

 

The terrorist attacks in the United States on September 11, 2001 had a disruptive effect on the securities markets. The Fund cannot predict the effects of similar events in the future on the U.S. economy and securities markets. These terrorist attacks and related events, including the war in Iraq, have led to increased short-term market volatility and may have long-term effects on U.S. and world economies and markets. A similar disruption of the financial markets could impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to the Common Shares.

 

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.

 

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 $1.7 billion under management as of March 31, 2019. 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.

 

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.

 

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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 50 years. His experience covers most analytical functions from research analyst to portfolio management. In January 2000, Mr. Clough founded Clough Capital Partners L.P. From 1987 through January 2000, Mr. Clough was Chief 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 Capital in 2005 and currently serves as a Portfolio Manager of the firm’s closed-end mutual fund products. In addition, Rob is responsible for the trading of all fixed income securities in the Clough portfolios. He has 24 years of industry experience, including significant expertise in mortgage REITs and other income-generating equity sectors. Prior to joining Clough Capital, 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 1100, 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.

 

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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 objectives and policies to support a level distribution of income, capital gains and/or return of capital (the "Plan"). In accordance with the Plan, until July 2019, the Fund will pay monthly distributions in an annualized amount of not less than 10% of the Fund's average monthly net asset value ("NAV"). From August 2019 to July 2021, the Fund will pay monthly distributions in an amount not less than the average distribution rate of a peer group of closed-end funds selected by the Board.

 

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 Internal Revenue Code of 1986, as amended (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.

 

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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.

 

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 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 Dividend Reinvestment Plan (the “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.

 

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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.

 

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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.

 

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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 2019, 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.

 

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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.

 

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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 ____________, 2016 through ____________, 2019 was ______ 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 both premiums to and discounts from net asset value. The following table shows, for each fiscal quarter since the quarter ended January 31, 2016: (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
2019 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%
2017 October 31  $14.24  $13.64  $14.75  $14.64 -3.46% -6.83%
  July 31  $13.89  $13.23  $14.43  $14.43 -3.74% -8.32%
  April 30  $13.84  $12.49  $14.19  $13.73 -2.47% -9.03%
  January 31  $12.56  $11.30  $13.74  $13.64 -8.59% -17.13%
2016 October 31  $12.38  $11.46  $14.75  $13.79 -16.07% -16.90%
  July 31  $12.03  $11.22  $14.34  $13.47 -16.11% -16.70%
  April 30  $11.88  $10.72  $14.11  $13.09 -15.80% -18.11%
  January 31  $13.73  $11.05  $15.12  $13.70 -9.19% -19.34%

 

On ____________, 2019, the net asset value per common share was $______, trading prices ranged between $______ and $______ (representing a discount and premium to net asset value of ____% and ____%, respectively) and the closing price per common share was $______ (representing a premium to net asset value of ____%).

 

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.

 

Under the requirements of the 1940 Act, the Fund must, immediately after the issuance of any preferred shares, have an “asset coverage” of at least 200%. Asset coverage means the ratio which the value of the total assets of the Fund, less all liability and indebtedness not represented by senior securities (as defined in the 1940 Act), bears to the aggregate amount of senior securities representing indebtedness of the Fund, if any, plus the aggregate liquidation preference of the preferred shares. If the Fund seeks a rating of the preferred shares, asset coverage requirements, in addition to those set forth in the 1940 Act, may be imposed. The liquidation value of the preferred shares is expected to equal their aggregate original purchase price plus redemption premium, if any, together with any accrued and unpaid dividends thereon (on a cumulative basis), whether or not earned or declared. The terms of the preferred shares, including their dividend rate, voting rights, liquidation preference and redemption provisions, will be determined by the Board of Trustees (subject to applicable law and the Fund’s Declaration of Trust) if and when it authorizes the preferred shares. The Fund may issue preferred shares that provide for the periodic redetermination of the dividend rate at relatively short intervals through an auction or remarketing procedure, although the terms of the preferred shares may also enable the Fund to lengthen such intervals. At times, the dividend rate as predetermined on the Fund’s preferred shares may approach or exceed the Fund’s return after expenses on the investment of proceeds from the preferred shares and the Fund’s leverage structure would result in a lower rate of return to Common Shareholders than if the Fund were not so structured.

 

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In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the terms of any preferred shares may entitle the holders of preferred shares to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus redemption premium, if any, together with accrued and unpaid dividends, whether or not earned or declared and on a cumulative basis) 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 preferred shareholders would not be entitled to any further participation in any distribution of assets by the Fund.

 

Holders of preferred shares, if and when issued, shall be entitled to elect two of the Fund’s Trustees, voting as a class. Under the 1940 Act, if at any time dividends on the preferred shares are unpaid in an amount equal to two full years’ dividends thereon, the holders of all outstanding preferred shares, voting as a class, will be allowed to elect a majority of the Fund’s Trustees until all dividends in default have been paid or declared and set apart for payment. In addition, if required by the rating agency rating the preferred shares or if the Board of Trustees determines it to be in the best interests of the Common Shareholders, issuance of the preferred shares may result in more restrictive provisions than required by the 1940 Act being imposed. In this regard, holders of the preferred shares may be entitled to elect a majority of the Board of Trustees in other circumstances, for example, if one payment on the preferred shares is in arrears.

 

The Fund may seek a AAA credit rating for any preferred shares from a rating agency. The Fund intends that, as long as preferred shares are outstanding, the composition of its portfolio will reflect guidelines established by such rating agency. Credit Rating Tests for preferred shares might include asset coverage requirements, which are more restrictive than those under the 1940 Act, restrictions on certain portfolio investments and investment practices, requirements that the Fund maintain a portion of its assets in short-term, high-quality, fixed-income securities and certain mandatory redemption requirements relating to preferred shares. No assurance can be given that the guidelines actually imposed with respect to preferred shares by a rating agency will be more or less restrictive than as described in this prospectus.

 

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.

 

A credit facility may contain covenants that, among other things, will limit the Fund’s ability to pay dividends in certain circumstances, 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.

 

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As of October 31, 2018, the outstanding borrowings for the Fund were $55,000,000. The interest rate applicable to the borrowings of the Fund on October 31, 2018 was 3.26%.

 

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.

 

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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.

 

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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

 

____________ is the independent registered public accounting firm for the Fund and will audit the Fund’s financial statements.

 

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 ____________.

 

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.

 

Page 67 of 103

 

TABLE OF CONTENTS OF
THE STATEMENT OF ADDITIONAL INFORMATION

 

Page

 

Additional Investment Information and Restrictions  
Trustees and Officers  
Code of Ethics  
Proxy Voting Policy  
Investment Advisory and Other Services  
Determination of Net Asset Value  
Portfolio Trading  
Principal Shareholders and Control Persons  
Taxes  
Other Information  
Independent Registered Public Accounting Firm  
Financial Statements  
APPENDIX A: Ratings  
APPENDIX B: Proxy Voting Policy  

 

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).

 

Page 68 of 103

 

 

 

 

Until _____________, 2019 (25 days after the date of this prospectus) all dealers that buy, sell or trade the Common Shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

 

Clough Global Dividend and Income Fund

 

Common Shares of Beneficial Interest Issuable Upon Exercise of Rights to Subscribe for Such Shares

 

_______ per share

 

 

 

PROSPECTUS

 

 

 

______________, 2019

 

 

 

Page 69 of 103

 

The information in this statement of additional information is not complete and may be changed. The Fund may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This statement of additional information is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION; DATED ______________, 2019

 

STATEMENT OF ADDITIONAL INFORMATION

____, 2019

 

Clough Global Dividend and Income Fund
1290 Broadway, Suite 1100
Denver, Colorado 80203
(877) 256-8445

 

TABLE OF CONTENTS

Page

 

Additional Investment Information and Restrictions  
Trustees and Officers  
Code of Ethics  
Proxy Voting Policy  
Investment Advisory and Other Services  
Determination of Net Asset Value  
Portfolio Trading  
Principal Shareholders and Control Persons  
Taxes  
Other Information  
Independent Registered Public Accounting Firm  
Financial Statements  
APPENDIX A: Ratings  
APPENDIX B: Proxy Voting Policy  

 

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 _____, 2019, as supplemented from time to time, which is incorporated herein by reference. This SAI should be read in conjunction with such prospectus, a copy of which may be obtained without charge by contacting your financial intermediary or calling the Fund at (877) 256-8445.

 

The information in this Statement of Additional Information is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information, which is not a prospectus, is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Capitalized terms used in this SAI and not otherwise defined have the meanings given them in the Fund’s prospectus.

 

Page 70 of 103

 

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS

 

The Fund 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 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.

 

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.

 

Page 71 of 103

 

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.

 

Page 72 of 103

 

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.

 

Nonfundamental Restriction . The Fund has adopted the following nonfundamental 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.

 

Page 73 of 103

 

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. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. The “noninterested Trustees” consist of those Trustees who are not “interested persons” of the Fund, as that term is defined under the 1940 Act.

 

Name, Address 1 and Year of Birth Position(s) Held with the Fund Term of office and length of service with the Fund 2 Principal Occupation(s) During Past Five Years Number of Portfolios in Fund Complex Overseen by Trustee 3 Other Directorships Held by Trustee During Past Five Years
Non-Interested Trustees

Robert L. Butler Chairman

1941

Chairman of the Board and Trustee

Trustee since:

GLV: 2004

GLQ: 2005

GLO: 2006

 

Term expires:

GLV: 2021

GLQ: 2019

GLO: 2020

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

 

Page 74 of 103

 

Name, Address 1 and Year of Birth Position(s) Held with the Fund Term of office and length of service with the Fund 2 Principal Occupation(s) During Past Five Years Number of Portfolios in Fund Complex Overseen by Trustee 3 Other Directorships Held by Trustee During Past Five Years

Adam D. Crescenzi

1942

Vice-Chairman of the Board and Trustee

Trustee since:

GLV: 2004

GLQ: 2005

GLO: 2006

 

Term expires:

GLV: 2020

GLQ: 2021

GLO: 2019

Mr. Crescenzi has served as the Founding Partner of Simply Tuscan Imports LLC since 2007. He has been a founder and investor of several start-up technology and service firms and has served as a director of both public and private corporations. Currently, he advises businesses and non-profit organizations on issues of strategy, marketing, and governance. He serves as Chairman of the Board of Governors for The Founders Fund, Inc. and is a Trustee and Governor of the Naples Botanical Garden. 3 None
Karen DiGravio 1969

Trustee

 

Trustee since:

GLV: 2017

GLQ: 2017

GLO: 2017

 

Term expires:

GLV: 2021

GLQ: 2019

GLO: 2020

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: 2020

GLQ: 2021

GLO: 2019

Mr. Rutledge is the President and owner of Rutledge’s Inc., a retail clothing business. In addition, Mr. Rutledge served as a Director of the University of Colorado Hospital from 2008-2016. 4 Mr. Rutledge is currently a Trustee of the Financial Investors Trust and the Principal Real Estate Income Fund.

Hon. Vincent W. Versaci

1971

Trustee

 

Trustee since: GLV: 2013

GLQ: 2013

GLO: 2013

 

Term expires: GLV: 2019

GLQ: 2020

GLO: 2021

Judge Versaci has served as a Judge in the New York State Courts since January 2003. Currently, Judge Versaci is assigned as an Acting Supreme Court Justice and also presides over the Surrogate’s Court for Schenectady County, New York. Previously, Judge Versaci has served as an Adjunct Professor at Schenectady County Community College and a practicing attorney with an emphasis on civil and criminal litigation primarily in New York State Courts. 3 None

 

Page 75 of 103

 

Name, Address 1 and Year of Birth Position(s) Held with the Fund Term of office and length of service with the Fund 2 Principal Occupation(s) During Past Five Years Number of Portfolios in Fund Complex Overseen by Trustee 3 Other Directorships Held by Trustee During Past Five Years

Clifford J. Weber

1963

Trustee

 

Trustee since: GLV: 2017

GLQ: 2017

GLO: 2017

 

Term expires: GLV: 2019

GLQ: 2020

GLO: 2021

Mr. Weber is the founder of Financial Products Consulting Group, LLC (a consulting firm). Prior to starting Financial Products Consulting Group, he was the Executive Vice President – Global Index and Exchange Traded Products of the NYSE, a subsidiary of Intercontinental Exchange, from 2013 to 2015. 4 Mr. Weber is currently a Trustee of Clough Funds Trust, Janus Detroit Street Trust, Clayton Street Trust, and Global-X Funds.
Interested Trustees 4

Edmund J. Burke 5

1961

Trustee and President

 

Trustee since:

GLV: 2006

GLQ: 2006

GLO: 2006

 

Term expires:

GLV: 2019

GLQ: 2020

GLO: 2021

 

President:

GLV: 2004

GLQ: 2005

GLO: 2006

Mr. Burke joined ALPS in 1991 and is currently 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. Mr. Burke is also Director of Boston Financial Data Services. Mr. Burke is deemed an affiliate of the Fund as defined under the 1940 Act. 5

Mr. Burke is also Trustee of Financial Investors Trust, Trustee of Clough Funds Trust, a Trustee of the Liberty All-Star Equity Fund, Trustee, Director of the Liberty All-Star Growth Fund, Inc., and Trustee of ALPS ETF

Trust.

Kevin McNally 6 1969

Clough Capital Partners L.P.

53 State Street 27th Floor

Boston, MA 02109

Trustee

 

Trustee since:

GLV: 2017

GLQ: 2017

GLO: 2017

 

Term expires:

GLV: 2021

GLQ: 2019

GLO: 2020

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 Trustee of Clough Funds Trust.

 

Page 76 of 103

 

Name, Address 1 and Year of Birth Position(s) Held with the Fund Term of office and length of service with the Fund 2 Principal Occupation(s) During Past Five Years Number of Portfolios in Fund Complex Overseen by Trustee 3 Other Directorships Held by Trustee During Past Five Years
Officers          

Jeremy O. May

1970

Treasurer

Officer since 7

GLV: 2004

GLQ: 2005

GLO: 2006

Mr. May joined ALPS in 1995 and is currently President and Director of ALPS, ALPS Portfolio Solutions Distributor, Inc. and ALPS Distributors, Inc., and Executive Vice President and Director of ALPS Advisors, Inc. and ALPS Holdings, Inc. Mr. May is also President, and Trustee of ALPS Series Trust, Elevation ETF Trust, the Reaves Utility Income Fund. Mr. May is currently on the Board of Directors of the University of Colorado Foundation. N/A N/A

Lucas Foss

1977

Chief Compliance Officer (“CCO”)

Officer since 7

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

 

Page 77 of 103

 

Name, Address 1 and Year of Birth Position(s) Held with the Fund Term of office and length of service with the Fund 2 Principal Occupation(s) During Past Five Years Number of Portfolios in Fund Complex Overseen by Trustee 3 Other Directorships Held by Trustee During Past Five Years

Jill Kerschen,

1975

Assistant Treasurer

Officer since 7

GLV: 2017

GLQ: 2017

GLO: 2017

Ms. Kerschen joined ALPS in July 2013 and is currently Vice President and Fund Controller. She currently serves as Treasurer of Reaves Utility Income Fund and Clough Funds Trust. N/A N/A

Sareena Khwaja-Dixon

1980

Secretary

Officer since 7

GLV: 2016

GLQ: 2016

GLO: 2016

Ms. Khwaja-Dixon joined ALPS in August 2015 and is currently Senior Counsel and Vice President of ALPS Fund Services, Inc. Prior to joining ALPS, Ms. Khwaja-Dixon served as a Senior Paralegal/Paralegal for Russell Investments (2011 – 2015). Ms. Khwaja-Dixon is also Secretary of Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., Clough Funds Trust and Assistant Secretary of Financial Investors Trust. N/A N/A

Jennifer A. Craig

1973

Assistant Secretary

Officer since 7 GLV: 2016

GLQ: 2016

GLO: 2016

Ms. Craig joined ALPS in 2007 and is currently Assistant Vice President and Paralegal Manager of ALPS. Ms. Craig is also Assistant Secretary of Financial Investors Trust, ALPS Series Trust, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., and Clough Funds Trust. N/A N/A

 

Page 78 of 103

 

1 Address: 1290 Broadway, Suite 1100, Denver, Colorado 80203, unless otherwise noted.

 

2 GLV commenced operations July 28, 2004, GLQ commenced operations April 27, 2005, and GLO commenced operations April 25, 2006.

 

3 The Fund Complex for all Trustees, except Mr. Rutledge, Mr. Weber, Mr. McNally and Mr. Burke, consists of the Clough Global Dividend and Income Fund, Clough Global Equity Fund and Clough Global Opportunities Fund. The Fund Complex for Mr. Rutledge consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough Global Opportunities Fund and Clough China Fund, a series of the Financial Investors Trust. The Fund Complex for Mr. Burke consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough Global Opportunities Fund, Clough China Fund, a series of the Financial Investors Trust, and Clough Global Long-Short Fund, a series of Clough Funds Trust. The Fund Complex for Mr. Weber and Mr. McNally consists of Clough Global Dividend and Income Fund, Clough Global Equity Fund, Clough Global Opportunities Fund, and Clough Global Long-Short Fund, a series of Clough Funds Trust.

 

4 “Interested Trustees” refers to those Trustees who constitute “interested persons” of the Fund as defined in the 1940 Act.

 

5 Mr. Burke is considered to be an “Interested Trustee” because he is President of the Fund.

 

6 Mr. McNally is considered to be an “Interested Trustee” because of his affiliation with Clough, which acts as the Fund’s investment adviser.

 

7 Officers are elected annually and each officer will hold such office until a successor has been elected by the Board.

 

Beneficial Ownership of GLV Common Shares by each Trustee

 

Set forth in the table below is the dollar range of equity securities held in the Fund and on an aggregate basis for the entire Family of Investment Companies overseen by each Trustee.

 

Independent Trustee Dollar Range 1 of Equity Securities Held in GLV: Aggregate Dollar Range of Equity Securities Held in the Family of Investment Companies
Robert L. Butler    
Adam D. Crescenzi    
Jerry G. Rutledge    
Vincent W. Versaci    
Karen DiGravio    
Clifford J. Weber    
Interested Trustee    
Edmund J. Burke    
Kevin McNally    

 

Page 79 of 103

 

(1) This information has been furnished by each Trustee of December 31, 2018. “Beneficial Ownership” is determined in accordance with Section 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (the “1934 Act”).

 

(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 March 31, 2019, 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 LLC’s (“NYSE American”) 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 the Adviser, 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 the Adviser 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 the Adviser or any affiliate of the Adviser 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, 2018. 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, 2018.

 

Name of Trustee Clough Global Dividend and Income Fund Total Compensation Paid From the Fund Complex 1
Robert L. Butler $24,000 $72,000
Adam D. Crescenzi $20,000 $60,000
Jerry G. Rutledge $20,000 $60,314
Vincent W. Versaci $20,000 $60,000
Karen DiGravio $22,000 $66,000
Clifford J. Weber $20,000 $86,000

 

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(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 Independent Trustee who is not affiliated with ALPS or Clough or their affiliates. The Independent 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, 2018, the Board of the Fund met four times. Each Trustee then serving in such capacity attended at least 75% of the meetings of Trustees and of any committee of which he/she is a member.

 

Provided below is a brief summary of the specific experience, qualifications, attributes or skills for each Trustee that warranted his/her consideration as a Trustee to the Board of Trustees of the Fund, which is registered as an individual investment company under the 1940 Act.

 

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. In addition, since being appointed to the Board, Mr. Butler has further enhanced his 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. 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 a Chairman of the Board of Governors for The Founders Fund, Inc., and is a Trustee and Governor of the Naples Botanical Gardens and the Club Pelican Bay Founders Fund. 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. In addition, since being appointed to the Board, Mr. Crescenzi has further enhanced his 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. The Board of Trustees, in its judgment of Mr. Crescenzi’s professional experience with emergent businesses, strategic consulting and as a trustee of closed-end investment companies, believes Mr. Crescenzi contributes a diverse perspective to the Board.

 

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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. Mr. Rutledge has further enhanced his 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. 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 and Supreme Court Justice in the State of New York 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. Judge Versaci has served as a member of the Fund’s Audit Committee, Governance and Nominating Committee and as a Trustee since March 2013. In addition, since being appointed to the Board, Judge Versaci has further enhanced his 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. The Board of Trustees, in its judgment of Judge Versaci’s professional experience as a reputable attorney and judge, believes Judge Versaci contributes a diverse perspective to the Board.

 

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.

 

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 (US) 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 eighteen issued patents, and on three patent applications currently pending – 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.

 

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Edmund J. Burke – Mr. Burke joined ALPS in 1991 and is currently the Chief Executive Officer and President of ALPS Holdings, Inc. (a wholly-owned subsidiary of DST Systems, Inc. (“DST”)), President and Director of ALPS Advisors, Inc., and a Director of ALPS Distributors, Inc., ALPS Fund Services, 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 and President of the Financial Investors Trust, an open-end investment company, Trustee and President of Clough Funds Trust, an open-end investment company, and Trustee and Vice-President of the Liberty All-Star Equity Fund and Director and Vice President of the Liberty All-Star Growth Fund, Inc., each a closed-end investment company. Additionally, Mr. Burke is on the Board of Directors of Boston Financial Data Services, Inc., a financial services solutions provider. Mr. Burke has served as Trustee for the Fund since 2006 and as an interested trustee he does not serve as a member of the Audit and Governance and Nominating Committees. In addition, since being appointed to the Board, Mr. Burke has further enhanced his 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. 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 was elected a Trustee by the Board of Trustees to replace James E. Canty on April 30, 2017. He 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. He has over 25 years of industry experience focusing almost exclusively on closed-end funds. Prior to joining Clough in 2014, he served as the Director of Closed-End Funds at ALPS 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.

 

Leadership Structure of the Board of Trustees

 

The Board, which has overall responsibility for the oversight of the Fund’s investment programs and business affairs, has appointed an Independent Trustee as Chairman of the Board whose role is to preside at all meetings of the Board. The Board has also appointed an Independent Trustee as Vice-Chairman of the Fund. The Chairman is involved, at his discretion, in the preparation of the agendas for the Board meetings. In between meetings of the Board, the Chairman may act as liaison between the Board and the Fund’s officers, attorneys and various other service providers, including but not limited to, the Fund’s investment adviser, administrator and other such third parties servicing the Fund. The Chairman may also perform other functions as may be delegated by the Board from time to time. The Board believes that the use of an Independent Trustee as Chairman is the appropriate leadership structure for mitigating potential conflicts of interest associated with appointing an Interested Trustee as chairman and facilitates the ability to maintain a robust culture of compliance. The Board has three standing committees, each of which enhances the leadership structure of the Board: the Audit Committee; the Governance and Nominating Committee; and the Executive Committee. The Audit Committee and Governance and Nominating Committee are each chaired by, and composed of, members who are Independent Trustees. The Executive Committee consists of two Interested Trustees and one Independent Trustee.

 

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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 vigorous 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 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 21, 2018. The Audit Charter is available at the Fund 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 21, 2018, the Audit Committee reviewed and discussed with management of the Fund and the independent accountant, (“______”), the audited financial statements of the Fund as of and for the fiscal year ended October 31, 2018, 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”) Audit Standard No. 16 Communications with Audit Committees . The Audit Committee also received from the independent accountant the written disclosures and letters required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence , and discussed the relationship between the independent accountant and the Fund and the impact that any such relationships might have on the objectivity and independence of the independent accountant.

 

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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, 2018. The Audit Committee is composed of six Independent Trustees, namely Ms. DiGravio and Messrs. Butler, Crescenzi, Rutledge, Weber and Judge Versaci. None of the members of the Audit Committee are “interested persons” of the Funds.

 

Based on the findings of the Audit Committee, the Audit Committee has determined that Ms. Karen DiGravio is the Fund’s “audit committee financial expert,” as defined in the rules promulgated by the SEC, and as required by NYSE American listing standards. Ms. DiGravio serves as the Chairman of the Audit Committee for the Fund.

 

Governance and Nominating Committee

 

The Fund’s Board has a Governance and Nominating Committee composed of six Independent Trustees as the term is defined by the NYSE American listing standards, namely Ms. DiGravio and Messrs. Butler, Crescenzi, Rutledge, Weber and Judge Versaci. None of the members of the Governance and Nominating Committee are “interested persons” of the Funds. The Governance and Nominating Committee operates pursuant to a Governance and Nominating Committee Charter that was most recently reviewed and approved by the Governance and Nominating Committee on October 10, 2018. 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, 2018. 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.

 

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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.

 

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(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, 2018, the Fund’s Executive Committee met one time.

 

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 in 2018.

 

CODE OF ETHICS

 

Clough and the Fund have each adopted a code of ethics governing personal securities transactions. 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 and copied at the SEC’s public reference room in Washington, DC (call 1-202-942-8090 for information on the operation of the public reference room); on the EDGAR Database on the SEC’s Internet site (http://www.sec.gov); or, upon payment of copying fees, by writing the SEC’s Public Reference Section, Washington, DC 20549-0102, or by electronic mail at info@sec.gov .

 

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.

 

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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 noninterested 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 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.

 

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 March 31, 2019, Clough had approximately $1.7 billion in assets under management.

 

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.

 

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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.

 

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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.

 

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It is a common practice of the investment advisory industry and of the advisers of investment companies, institutions and other investors to receive research, analytical, statistical and quotation services, data, information and other services, products and materials which assist such advisers in the performance of their investment responsibilities (“Research Services”) from broker-dealer firms which execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Clough receives Research Services from many broker-dealer firms with which Clough places the Fund’s transactions and from third parties with which these broker-dealers have arrangements. These Research Services may include such matters as general economic, political, business and market information, industry and company reviews, evaluations of securities and portfolio strategies and transactions, proxy voting data and analysis services, technical analysis of various aspects of the securities market, recommendations as to the purchase and sale of securities and other portfolio transactions, financial, industry and trade publications, news and information services, pricing and quotation equipment and services, and research oriented computer hardware, software, data bases and services. Any particular Research Service obtained through a broker-dealer may be used by Clough in connection with client accounts other than those accounts which pay commissions to such broker-dealer. Any such Research Service may be broadly useful and of value to Clough in rendering investment advisory services to all or a significant portion of its clients, or may be relevant and useful for the management of only one client’s account or of a few clients’ accounts, or may be useful for the management of merely a segment of certain clients’ accounts, regardless of whether any such account or accounts paid commissions to the broker-dealer through which such Research Service was obtained. The advisory fee paid by the Fund is not reduced because Clough receives such Research Services. Clough evaluates the nature and quality of the various Research Services obtained through broker-dealer firms and attempts to allocate sufficient portfolio security transactions to such firms to ensure the continued receipt of Research Services which Clough believes are useful or of value to it in rendering investment advisory services to its clients. If only part of the Research Services provided are used to assist in the investment decision-making process, the percentage of permitted use must be determined and the remainder paid for with hard dollars.

 

The Fund and Clough may also receive Research Services from underwriters and dealers in fixed-price offerings, which Research Services are reviewed and evaluated by Clough in connection with its investment responsibilities.

 

Securities considered as investments for the Fund may also be appropriate for other investment accounts managed by Clough or its affiliates. Whenever decisions are made to buy or sell securities by the Fund and one or more of such other accounts simultaneously, Clough will allocate the security transactions (including initial public offerings and other new issues) in a manner which it believes to be fair and equitable under the circumstances and in accordance with applicable laws and regulations. As a result of such allocations, there may be instances where the Fund will not participate in a transaction that is allocated among other accounts. Generally, participating accounts will receive the weighted average execution price per broker for the day and will pay the commissions, fees and other charges on a pro rata basis. However there may be instances where a smaller account receives its entire allocation before a larger account in order to minimize transaction costs, an account that specializes or concentrates holdings in a particular industry is given priority in allocation over other accounts, or allocations are not exactly pro rata due to Clough’s practice of trading in 100 share lots. While these aggregation and allocation policies could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Trustees of the Fund that the benefits received from Clough’s organization outweigh any disadvantage that may arise from exposure to simultaneous transactions.

 

PRINCIPAL SHAREHOLDERS AND CONTROL PERSONS

 

[As of July 1, 2019, [no] persons beneficially owned five percent or more of the Fund’s outstanding common shares.

 

As of July 1, 2019, the officers and Trustees of the Fund, as a group, owned less than 1% of the Fund’s outstanding voting securities.]

 

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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 (“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.

 

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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.

 

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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. Recently issued 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.

 

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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 2019, 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 Internal Revenue Service 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.

 

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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

 

___________ (“______”) is the independent registered public accounting firm for the Fund, providing audit services, tax return preparation, and assistance and consultation with respect to the preparation of filings with the Securities and Exchange Commission.

 

FINANCIAL STATEMENTS

 

_______ served as the Fund’s independent registered public accounting firm for the fiscal year ending October 31, 2018. The annual audited financial statements incorporated by reference in this Statement of Additional Information have been so incorporated, and the financial highlights in the Prospectus have been so included, in reliance upon the report of _______ given on authority of said firm as experts in accounting. The audited financial statements contained in the Fund’s Annual Report for the fiscal year ended October 31, 2018 and the unaudited financial statements contained in the Fund’s unaudited Semi-Annual Report for the fiscal period ended April 30, 2019, are incorporated by reference in this Statement of Additional Information. A copy of the Fund’s Annual Report and unaudited Semi-Annual Report are available on the SEC’s website at www.sec.gov . Copies may also be obtained free of charge by writing to the Fund at its address at 1290 Broadway, Suite 1100, Denver, Colorado 80203 or by calling the Fund toll free at (877) 256-8445.

 

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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.

 

Page 97 of 103

 

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.

 

Page 98 of 103

 

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.

 

Page 99 of 103

 

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.

 

Page 100 of 103

 

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.

 

Page 101 of 103

 

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 the Adviser’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.

 

Page 102 of 103

 

APPENDIX B

 

PROXY VOTING POLICY

 

[to be added]

 

Page 103 of 103

 

PART C - Other Information

 

Item 25. Financial Statements and Exhibits

 

(1)  

Financial Statements:

 

Included in Part A:

 

Financial Highlights for the fiscal years ended October 31, 2008 through October 31, 2018 (audited). [Financial Highlights for the fiscal period ended April 30, 2019 (unaudited).]

 

Included in Part B:

 

Incorporated by reference in the Statement of Additional Information included herein are the Registrant’s audited financial statements for the fiscal year ended October 31, 2018, notes to such financial statements and the report of independent registered public accounting firm thereon, as contained in the Fund’s Form N-CSR filed with the Securities and Exchange Commission on January 7, 2019. [The unaudited Semi-Annual Report for the fiscal period ending April 30, 2019, will be incorporated by reference.]

 

(2)  

Exhibits:

 

  (a)(1)

Agreement and Declaration of Trust (1)

 

  (a)(2)

Certificate of Amendment to Certificate of Trust (2)

 

  (a)(3)

Certificate of Amendment to Certificate of Trust (3)

 

  (b)

By-Laws (4)

 

  (c)

Not Applicable

 

  (d)(1)

Certificate for Common Shares of Beneficial Interest (5)

 

  (d)(2) Form of Subscription Certificate for Rights Offering*
     
  (d)(3) Form of Notice of Guaranteed Delivery for Rights Offering*
     
  (e)

Automatic Dividend Reinvestment Plan dated July 27, 2004 *

 

  (f)

Not Applicable

 

  (g)

Investment Advisory and Management Agreement dated July 27, 2004 **

 

  (h)

Marketing Agreement *

 

  (i)

Not Applicable 

1

 

  (j) Custody Agreement with State Street Bank and Trust Company dated December 9, 2013 **
     
  (k)(1)

Stock Transfer Agency and Service Agreement dated June 13, 2013 **

 

  (k)(2)

Administration, Bookkeeping and Pricing Services Agreement dated July 27, 2004 **

 

  (k)(3) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated September 1, 2006. **
     
  (k)(4) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated August 10, 2007. **
     
  (k)(5) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated June 12, 2014. **
     
  (k)(6) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated April 10, 2018. **
     
  (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 —               *

 

  (o)

Not Applicable

 

  (p)

Form of Initial Subscription Agreement (6)

 

  (q)

Not Applicable

 

  (r)(1) Code of Ethics of the Fund dated July 13, 2017  **
     
  (r)(2) Code of Ethics of the Adviser dated April 17, 2019.  **
     
  (r)(3) Code of Ethics of the Principal Executive and Financial Officers of the Fund **
     
  (s)

Power of Attorney for: Robert L. Butler, Adam D. Crescenzi, Karen DiGravio, Kevin McNally, Jerry G. Rutledge, Vincent Versaci and Clifford J. Weber, dated April 18, 2019. **

 

 

 

(1) Incorporated by reference to Exhibit (a)(ii) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
(2) Incorporated by reference to Exhibit (a)(i) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
(3) Incorporated by reference to NSAR-B filed with the Commission via EDGAR on December 30, 2016.
(4) Incorporated by reference to N-CEN filed with the Commission via EDGAR on January 11, 2019.
(5) Incorporated by reference to Exhibit (d) the Registration Statement filed with the Commission via EDGAR on July 26, 2004.
(6) Incorporated by reference to Exhibit (p) of the Registration Statement filed with the Commission via EDGAR on July 26, 2004.

2

 

(3) Incorporated by reference to the Registration Statement filed with the Commission via EDGAR on July 26, 2004.

 

* To be filed by amendment.
** Filed herewith.

 

Item 26. Marketing Arrangements

 

See Marketing Agreement filed _______.

 

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 $[  ]
NYSE American listing fee $[  ]
Printing $[  ]
Accounting fees and expenses $[  ]
Legal fees and expenses $[  ]
Information Agent fees and expenses $[  ]
Subscription Agent fees and expenses $[  ]
Miscellaneous $[  ]
Total $[  ]

 

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 [ /  /2019]

Shares of common stock _______

 

Item 30. Indemnification

 

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.

3

 

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.

4

 

(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.

5

 

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 1100, Denver, Colorado 80202.

 

Item 33. Management Services

 

None

 

Item 34. Undertakings

 

(1)         The Registrant undertakes to suspend the offering of shares until the prospectus is amended, if subsequent to the effective date of this Registration Statement, its net asset value declines more than ten percent from its net asset value as of the effective date of the Registration Statement, or its net asset value increases to an amount greater than its net proceeds as stated in the prospectus.

 

(2) Not applicable.

 

(3) Not applicable.

 

(4) Not applicable.

 

(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

 

(6) 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.

7

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement on Form N-2 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Boston, and Commonwealth of Massachusetts, on the 21 st day of May, 2019.

 

  Clough Global Dividend and Income Fund  
       
  By: /s/Edmund J. Burke  
    Name: Edmund J. Burke  
    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/ Edmund J. Burke   Trustee and President   May 21, 2019
Edmund J. Burke        
         
/s/ Robert L. Butler   Trustee   May 21, 2019
Robert L. Butler*        
         
/s/ Adam D. Crescenzi   Trustee   May 21, 2019
Adam D. Crescenzi*        
         
/s/ Karen DiGravio   Trustee   May 21, 2019
Karen DiGravio*        
         
/s/ Kevin McNally   Trustee   May 21, 2019
Kevin McNally*        
         
/s/ Jerry G. Rutledge   Trustee   May 21, 2019
Jerry G. Rutledge*        
         
/s/ Vincent W. Versaci   Trustee   May 21, 2019
Vincent W. Versaci*        
         
/s/ Clifford J. Weber   Trustee   May 21, 2019
Clifford J. Weber*        
         
/s/ Jeremy O. May   Treasurer   May 21, 2019
Jeremy O. May        
         
* By: /s/ Jeremy O. May        
  Jeremy O. May (Attorney-in-Fact)        

8

 

EXHIBIT INDEX

 

Exhibit Description
(g) Investment Advisory and Management Agreement dated July 27, 2004
(j) Custody Agreement with State Street Bank and Trust Company dated December 9, 2013
(k)(1) Stock Transfer Agency and Service Agreement dated June 13, 2013
(k)(2) Administration, Bookkeeping and Pricing Services Agreement dated July 27, 2004
(k)(3) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated September 1, 2006
(k)(4) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated August 10, 2007
(k)(5) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated June 12, 2014.
(k)(6) Amendment to Administration, Bookkeeping and Pricing Services Agreement dated April 10, 2018
(r)(1) Code of Ethics of the Fund dated July 13, 2017
(r)(2) Code of Ethics of the Adviser dated April 17, 2019
(r)(3) Code of Ethics of the Principal Executive and Financial Officers of the Fund
(s) Power of Attorney for: Robert L. Butler, Adam D. Crescenzi, Karen DiGravio, Kevin McNally, Jerry G. Rutledge, Vincent Versaci and Clifford J. Weber, dated April 18, 2019

 

9

 

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

 

THIS AGREEMENT is made and entered into as of July 27 2004, by and between Clough Global Allocation Fund (the “Fund”), a Delaware statutory trust registered as a closed-end investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and Clough Capital Partners LP (the “Adviser”), a Delaware limited partnership registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

 

WHEREAS, the Fund desires to retain the Adviser, and the Adviser is willing to serve, as the Fund’s investment adviser with full discretion to manage the investments of the Fund, subject to and upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and undertakings herein contained, the parties hereto hereby agree as follows:

 

1. Investment Management by Adviser

 

1.1. The Adviser shall serve as the Fund’s investment adviser with full discretion to manage the investments of the Fund, subject to and in accordance with this Agreement and the investment objectives, policies and restrictions set forth in the prospectus and statement of additional information contained in the Fund’s Registration Statement on Form N-2 under the Securities Act of 1933, as amended, (the “Securities Act”) and the Investment Company Act, in each case as currently in effect and as supplemented and/or amended from time to time (respectively, as amended and in effect from time to time, the “Registration Statement”, the “Prospectus” and the “Statement of Additional Information”). The Adviser acknowledges it has received and reviewed the Prospectus and Statement of Additional Information, each in the form included in the Registration Statement when it first became effective under the Securities Act at the effective date of this Agreement. The Fund agrees to deliver immediately to the Adviser copies of all supplements or amendments to the Prospectus and/or the Statement of Additional Information filed by the Fund, from time to time, under the Securities Act.

 

1.2.   The securities and cash constituting assets of the Fund shall be held by the Custodian designated by the Fund. Delivery and receipt of securities, collection of interest, dividends and other distributions thereon, will be arranged by the Fund.

 

1.3.  The Adviser’s responsibilities hereunder are limited to those of an investment manager and shall not include any responsibilities relating to the day-to-day administration of the Fund or the supervision of third-party service providers retained by the Fund.

 

1.4.   Allocation of Brokerage

 

The Adviser is authorized, subject to the supervision of the Board of Trustees of the Fund, to place orders for the purchase and sale of the Fund's investments with or through such persons, brokers or dealers and to negotiate commissions to be paid on such transactions in accordance with the Fund's policies with respect to brokerage set forth in the Prospectus and Statement of Additional Information. The Adviser may, on behalf of the Fund, pay brokerage commissions to a broker which provides brokerage and research services to the Adviser in excess of the amount another broker would have charged for effecting the transaction, provided (i) the Adviser determines in good faith that the amount is reasonable in relation to the value of the brokerage and research services provided by the executing broker in terms of the particular transaction or in terms of the Adviser's overall responsibilities with respect to the Fund and the accounts as to which the Adviser exercises investment discretion, (ii) such payment is made in compliance with Section 28(e) of the Securities Exchange Act of 1934, as amended, and any other applicable laws and regulations, and (iii) in the opinion of the Adviser, the total commissions paid by the Fund will be reasonable in relation to the benefits to the Fund over the long term. It is recognized that the services provided by such brokers may be useful to the Adviser in connection with the Adviser's services to other clients. On occasions when the Adviser deems the purchase or sale of a security to be in the best interests of the Fund as well as other clients of the Adviser, the Adviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities to be sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of securities sold or purchased, as well as the expenses incurred in the transaction, will be made by the Adviser in the manner the Adviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients.

 

 

1.5.   Code of Ethics. The Adviser agrees to observe and comply with Rule 17j-l under the Investment Company Act (“Rule 17j-l”). Without limiting the generality of the foregoing, the Adviser shall submit to the Fund’s Board of Trustees for approval a Code of Ethics of the Adviser which complies with Rule 17j-l and which is consistent with the Code of Ethics adopted by the Fund pursuant to Rule 17j-1. The Adviser will make available to the Fund, at any time upon request, including facsimile, without delay, during any business day, any reports required to be made by the Adviser pursuant to Rule 17j-l.

 

1.6.   Books and Records

 

The Adviser will maintain all books and records required to be maintained pursuant to the Investment Company Act and the rules and regulations promulgated thereunder with respect to transactions made by it on behalf of the Fund including, without limitation, the books and records required by Subsections (b)(1), (5), (6), (8), (9) and (10) and Subsection (f) of Rule 31a-l under the Investment Company Act and shall timely furnish to the Fund all information relating to the Adviser's services hereunder needed by the Fund to keep such other books and records of the Fund required by Rule 31a-l under the Investment Company Act. The Adviser will also preserve all such books and records for the periods prescribed in Rule 31a-2 under the Investment Company Act. The Adviser further agrees that all books and records maintained hereunder shall be made available to the Fund at any time upon request, including facsimile without delay, during any business day. However, the Adviser shall not be required to maintain books and records that are required to be maintained by the Fund’s administrator other than as required of it by applicable laws and regulations.

 

1.7.   Information Concerning Investments and the Adviser. The Adviser will furnish to the Fund, from time to time and as the Fund may reasonably request, reports on portfolio transactions and reports on investments held in the portfolio, all in such detail as may be reasonably requested. The Adviser will also provide the Fund, on a regular basis, with economic and investment analysis and reports or other investment services normally available to institutional or other clients of the Adviser.

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The Adviser will make available its officers and employees to meet with the Fund's Board of Trustees at the Fund's principal place of business, to review the investments of the Fund, quarterly, or upon due notice, at a time reasonably requested by the Fund’s Board of Trustees. The Adviser further agrees to inform the Fund of any material changes in investment strategy, tactics or key personnel.

 

1.8.   Compliance with Applicable Laws and Regulations. The Adviser agrees that in all matters relating to its performance under this Agreement, the Adviser and its directors, officers and employees, will act in accordance with all applicable laws, including, without limitation, the Investment Company Act and the Advisers Act.

 

1.9.   Voting of Proxies

 

The Adviser will vote the Fund’s proxies pursuant to its policies and procedures as set forth in the Statement of Additional Information.

 

2.   Representations of the Fund . The Fund makes the following representations to the Adviser:

 

2.1. The Fund is a Delaware statutory trust duly registered as a closed-end investment company under the Investment Company Act.

 

2.2.   The execution, delivery and performance by the Fund of this Agreement are within the Fund's powers and have been duly authorized by all necessary action on the part of its Board of Trustees and its shareholders, and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Fund for the execution, delivery and performance by the Fund of this Agreement

 

2.3.   The execution, delivery and performance by the Fund of this Agreement do not contravene or constitute a default under (i) any provision of applicable law, rule or regulation, (ii) the Fund’s agreement and declaration of trust or by-laws, or (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon the Fund.

 

2.4.   This Agreement is a valid and binding agreement of the Fund, enforceable against it in accordance with the terms hereof, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

3.   Representations of the Adviser. The Adviser makes the following representations to the Fund:

3

 

3.1. The Adviser is a Delaware limited partnership duly registered as an investment adviser under the Advisers Act.

 

3.2. The execution, delivery and performance by the Adviser of this Agreement are within the Adviser's powers and have been duly authorized by all necessary action on the part of its general partners and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Adviser for the execution, delivery and performance by the Adviser of this Agreement.

 

3.3.   The execution, delivery and performance by the Adviser of this Agreement do not contravene or constitute a default under (i) any provision of applicable law, rule or regulation, (ii) the Adviser’s limited partnership agreement, or (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon the Adviser.

 

3.4.   This Agreement is a valid and binding agreement of the Adviser, enforceable against it in accordance with the terms hereof, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

 

3.5.   The Adviser hereby agrees to follow and comply with the policies and procedures of the Fund that are provided to the Adviser in writing, including the Order Aggregation and Allocation Procedures, Proxy Voting Guidelines, Rule 10f-3 Procedures, Rule 17a-7 Procedures, Rule 17e-l Procedures, Soft Dollar Policies and Procedures, Pricing Procedures, Fair Value Procedures, and Repurchase Agreement Guidelines, which have been adopted by the Board of Trustees on July 20, 2004, and which may be amended or revoked from time to time (it being understood that the Fund shall notify the Adviser in writing of any such amendment or revocation, and the Adviser shall not be expected to comply therewith prior to receipt of such notice).

 

3.6.   The Adviser and its affiliates perform investment advisory services on a fully discretionary basis for various clients, including clients whose investment objectives and policies are generally similar to those of the Fund. The Fund acknowledges and agrees that the nature and timing of the strategies employed and actions taken by the Adviser or any of its affiliates for any of its other clients may be the same as or different from those employed and taken by the Adviser for the Fund, provided that it continues to be the policy and practice of the Adviser and its affiliates not to favor or disfavor any client or class of clients in the allocation of investment opportunities that the Adviser believes would be suitable for such client or class of clients, so that, to the extent practicable, such opportunities will be allocated among clients over time on a fair and equitable basis.

 

4 Valuation and Fees

 

4.1 Advisory Fee Schedule. The Fund shall pay the Adviser, in arrears, a monthly investment advisory fee (hereinafter referred to as "Advisory Fee") based on the average daily total assets of the Fund (including any assets attributable to any preferred shares that may be outstanding or otherwise attributable to the use of leverage) as of the close of business of the last business day of each calendar month, in accordance with the schedule below:

 

0.700% (70.0 basis points) annually

4

 

The Adviser has also agreed to pay from its own assets additional compensation to Merrill Lynch, Pierce, Fenner & Smith Incorporated. This additional compensation will be payable quarterly at the annual rate of 0.15% (15 basis points) (0.0375% quarterly) of the Fund’s average weekly total assets (including any assets attributable to any preferred shares that may be outstanding or otherwise attributable to the use of leverage) during the continuance of the Investment Advisory and Management Agreement between the Adviser and the Fund or other subsequent advisory agreements between these parties.

 

4.2. Partial Periods. If the Adviser serves the Fund for a period of less than a full calendar month the Advisory Fee will be proportionately reduced to reflect only the number of days during the month the Fund was under the Adviser’s management, and will be based on the average daily total assets of the Fund as of the close of business on the last business day of such lesser period.

 

5.   Survival of Representations and Warranties; Duty to Update Information

 

All representations and warranties made by the Fund pursuant to Section 2 and by the Adviser pursuant to Section 3 hereof shall survive for the duration of this Agreement, and each party hereto, upon becoming aware that any of its representations and warranties are no longer true, shall immediately, but in any event within five (5) business days, notify the other party in writing. The Adviser shall provide to the Fund on an annual basis the written report described in Rule 17j-1(c)(2)(ii) under the Investment Company Act.

 

6.   Liability

 

The Adviser shall not be subject to any liability to the Fund or its shareholders for any act or omission of the Adviser in performing its obligations hereunder as investment adviser to the Fund, or for any losses that may be sustained by the Fund in the purchase, holding or sale of investments; provided, however, that nothing contained herein shall protect the Adviser against any liability to the Fund and its shareholders to which the Adviser would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the Adviser’s reckless disregard of its obligations and duties under this Agreement.

 

7.   Duration and Termination

 

7.1. Duration

 

This Agreement shall continue in effect for a period of two years from the date hereof, subject thereafter to being continued in force and effect from year to year if specifically approved each year by either (i) the Board of Trustees of the Fund, or (ii) by the affirmative vote of a majority of the Fund’s outstanding voting securities. In addition to the foregoing, each renewal of this Agreement must be approved by the vote of a majority of the Fund’s trustees who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. Prior to voting on the renewal of this Agreement, the Board of Trustees of the Fund may request and evaluate, and the Adviser shall furnish, such information as may reasonably be necessary to enable the Fund’s Board of Trustees to evaluate the terms of this Agreement.

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7.2. Termination

 

Notwithstanding whatever may be provided herein to the contrary, this Agreement may be terminated at any time, without payment of any penalty:

 

a)     By vote of a majority of the Board of Trustees of the Fund, or by vote of a majority of the outstanding voting securities of the Fund, upon at least sixty (60) days’ written notice to the Adviser; and

 

b)     By the Adviser, upon at least sixty (60) days notice to the Fund.

 

This Agreement shall terminate automatically in the event of its assignment (as such term as defined in the Investment Company Act).

 

8. Amendment

 

This agreement may be amended by mutual consent in writing of the parties, provided that the terms of each such amendment shall be approved by the Board of Trustees of the Fund or by a vote of the majority of the outstanding voting securities of the Fund, as required under the Investment Company Act.

 

9.   Notice

 

Any notice that is required to be given by the parties to each other under the terms of this Agreement shall be in writing, delivered, or mailed postpaid to the other party, or transmitted by facsimile with acknowledgment of receipt, to the parties at the following addresses or facsimile numbers, which may from time to time be changed by the parties by notice to the other party;

 

(a)         If to the Adviser:

           Clough Capital Partners LP

           260 Franklin Street, Suite 1920

           Boston, MA 02110

           Attention: Chief Compliance Officer

           Facsimile: (617) 204-3434

 

(b)         If to the Fund:

           Clough Global Allocation Fund

           1625 Broadway, Suite 2200

           Denver, CO 80202

           Attention: Secretary

           Facsimile: 303-623-7850

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10. Governing Law; Jurisdiction

 

This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware with respect to any dispute arising under or in connection with this Agreement.

 

11.   Use of Name

 

The Fund hereby acknowledges that any and all rights in or to the name “Clough” which exist on the date of this Agreement or which may arise hereafter are, and under any and all circumstances shall continue to be, the sole property of the Adviser; that the Adviser may assign any or all of such rights to another party or parties without the consent of the Fund; and that the Adviser may permit other parties, including other investment companies, to use the word “Clough” in their names. The Fund agrees not to create or establish or permit to be created or established any affiliated fund or other entity or any class or series thereof using the name “Clough” or any variant thereof without the written consent of the Adviser. The Fund acknowledges that, other than as may otherwise be agreed by the Adviser in writing, the Fund shall use the name “Clough” only as included in the Fund name “Clough Global Allocation Fund.” So long as the name of the Fund includes the name “Clough,” the Fund shall not change the name of the Fund without the prior written consent of the Adviser. If the Adviser ceases to serve as the sole investment adviser of the Fund, the Fund hereby agrees to take promptly any and all actions which are necessary or desirable to change its name and those of each of its series or classes so as to delete the word “Clough,” unless the Adviser agrees otherwise in writing.

 

12.   Counterparts

 

This agreement may be executed in one or more counterparts, all of which shall together constitute one and the same document.

 

13.   Captions

 

The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

 

14.   Severability

 

If any provision of this agreement shall be held or made invalid by a court decision or applicable law, the remainder of the agreement shall not be affected adversely and shall remain in full force and effect.

 

15.   Certain Definitions

 

(a) Business Day. As used herein, “Business Day” means any customary business day in the United States on which the New York Stock Exchange is open.

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(b) Miscellaneous. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the Investment Company Act shall be resolved by reference to such term or provision of the Investment Company Act and to interpretations thereof, if any, by the US. courts or, in the absence of any controlling decisions of any such court, by rules, regulation or order of the Commission validly issued pursuant to the Investment Company Act. Specifically, as used herein,” investment company,” “affiliated person,” “interested person,” “assignment,” “broker,” “dealer” and “affirmative vote of the majority of the Fund’s outstanding voting securities” shall all have such meaning as such terms have in the Investment Company Act. The term “investment adviser” shall have such meaning as such term has in the Advisers Act and the Investment Company Act, and in the event of a conflict between such Acts, the most expansive definition shall control.

 

In addition, where the effect of a requirement of the Investment Company Act reflected in any provision of this Agreement is relaxed by a rule, regulation or order of the Commission, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above.

 

  CLOUGH GLOBAL ALLOCATION FUND
(the “FUND”)
 
       
  By:  
  Name: Erin E. Dauglas  
  Title: Secretary  
       
  CLOUGH CAPITAL PARTNERS LP
(the “ADVISER”)
 
       
  By:    
  Name: James E. Canty  
  Title: CFO  

 

8

 

Execution Version

 

Custodian Agreement

 

This Agreement is made as of June 13, 2013 and effective as of December 9, 2013 by and between Clough Global Allocation Fund, a Delaware statutory trust (the Fund ), and S tate S treet B ank and T rust C ompany , a Massachusetts trust company (the Custodian ).

 

Witnesseth:

 

Whereas , the Fund is authorized to issue an unlimited number of shares of beneficial interest (“Shares”);

 

Now, Therefore , in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

 

Section 1. Employment of Custodian and Property to be Held by It .

 

The Fund hereby employs the Custodian as a custodian of assets of the Fund, including securities which the Fund desires to be held in places within the United States ( “domestic securities” ) and securities it desires to be held outside the United States ( ‘‘foreign securities” ). With respect to Fund assets it wishes to custody with Custodian, the Fund agrees to deliver to the Custodian all securities and cash of the Fund, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund from time to time, and the cash consideration received by it for such Shares as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund which is not received by it or which is delivered out in accordance with Proper Instructions (as such term is defined in Section 8 hereof) including, without limitation, Fund property (i) held by brokers, private bankers or other entities on behalf of the Fund (each a “Local Agent” ), (ii) held by Special Sub-Custodians (as such term is defined in Section 6 hereof), (iii) held by entities which have advanced monies to or on behalf of the Fund and which have received Fund property as security for such advance(s) (each a “Pledgee” ), or (iv) delivered or otherwise removed from the custody of the Custodian (a) in connection with any Free Trade (as such term is defined in Sections 2.2(14) and 2.6(7) hereof) or (b) pursuant to Special Instructions (as such term is defined in Section 8 hereof). With respect to uncertificated shares (the “Underlying Shares” ) of registered “investment companies” (as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended from time to time (the “1940 Act” )) held by the Fund, whether in the same “group of investment companies” (as defined in Section 12(d)(l)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the “Underlying Portfolios” ) the holding of confirmation statements that identify the shares as being recorded in the Custodian’s name on behalf of the Fund will be deemed custody for purposes hereof.

 

Upon receipt of Proper Instructions, the Custodian shall on behalf of the Fund from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees of the Fund (the Board ), and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may place and maintain the Fund’s foreign securities with foreign banking institution sub-custodians employed by the Custodian and/or foreign securities depositories, all as designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4 hereof.

 

 

 

Section 2. Duties of the Custodian with Respect to Property of the fund to be Held in the United States .

 

Section 2.1     Holding Securities . The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, to be held by it in the United States, including all domestic securities owned by the Fund other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a “U.S. Securities System ) and (b) Underlying Shares owned by the Fund which are maintained pursuant to Section 2.10 hereof in an account with Custodian or such other entity which may from time to time act as a transfer agent for the Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the Underlying Transfer Agent” ).

 

Section 2.2    Delivery of Securities . The Custodian shall release and deliver domestic securities owned by the Fund held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the Fund, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:

 

1) Upon sale of such securities for the account of the Fund in accordance with customary or established market practices and procedures, including, without limitation, delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment;

 

2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund;

 

3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;

 

4) To the depository agent in connection with tender or other similar offers for securities of the Fund;

 

5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;

 

6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;

 

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7) Upon the sale of such securities for the account of the Fund to the broker or its clearing agent, against a receipt, for examination in accordance with “street delivery” custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian’s own negligence or willful misconduct;

 

8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;

 

9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;

 

10) For delivery in connection with any loans of securities made by the Fund (a) against receipt of collateral as agreed from time to time by the Fund, except that in connection with any loans for which collateral is to be credited to the Custodian’s account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral or (b) to the lending agent, or the lending agent’s custodian, in accordance with written Proper Instructions (which may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;

 

11) For delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund;

 

12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the Exchange Act ) and a member of the Financial Industry Regulatory Authority, Inc. ( FINRA, formerly known as The National Association of Securities Dealers, Inc.), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund;

 

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13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (the CFTC ) and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund;

 

14) Upon the sale or other delivery of such investments (including, without limitation, to one or more (a) Special Sub-Custodians or (b) additional custodians appointed by the Fund, and communicated to the Custodian from time to time via a writing duly executed by an authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s), each a “Repo Custodian ), and prior to receipt of payment therefor, as set forth in written Proper Instructions (such delivery in advance of payment, along with payment in advance of delivery made in accordance with Section 2.6(7), as applicable, shall each be referred to herein as a “Free Trade” ), provided that such Proper Instructions shall set forth (a) the securities of the Fund to be delivered and (b) the person(s) to whom delivery of such securities shall be made;

 

15) Upon receipt of instructions from the Fund’s transfer agent (the Transfer Agent” ) for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund (the Prospectus ) or other Fund document, in satisfaction of requests by holders of Shares for repurchase or redemption;

 

16) In the case of a sale processed through the Underlying Transfer Agent of Underlying Shares, in accordance with Section 2.10 hereof;

 

17) For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund; and

 

18) For any other purpose, but only upon receipt of Proper Instructions from the Fund specifying (a) the securities of the Fund to be delivered and (b) the person or persons to whom delivery of such securities shall be made.

 

Section 2.3    Registration of Securities . Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered management investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Agreement shall be in “street name” or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in “street name”, the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.

 

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Section 2.4     Bank Accounts . The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.

 

Section 2.5      Collection of Income . Except with respect to Fund property released and delivered pursuant to Section 2.2(14) or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. The Custodian shall credit income to the Fund as such income is received or in accordance with the Custodian’s then current payable date income schedule. Any credit to the Fund in advance of receipt may be reversed when the Custodian determines that payment will not occur in due course and the Fund may be charged at the Custodian’s applicable rate for time credited. Income due the Fund on securities loaned pursuant to the provisions of Section 2.2(10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. Income on securities loaned other than from the Custodian’s securities lending program shall be credited as received.

 

Section 2.6     Payment of Fund Monies . The Custodian shall pay out monies of the Fund as provided in Section 5 and otherwise upon receipt of Proper Instructions on behalf of the Fund, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of the Fund in the following cases only:

 

1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) in accordance with customary or established market practices and procedures, including, without limitation, delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of FINRA, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian’s account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;

 

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2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof;

 

3) For the redemption or repurchase of Shares issued as set forth in Section 7 hereof;

 

4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;

 

5) For the payment of any dividends on Shares declared pursuant to the Fund’s agreement and declaration of trust and Prospectus (collectively, Governing Documents );

 

6) For payment of the amount of dividends received in respect of securities sold short;

 

7) Upon the purchase of domestic investments including, without limitation, repurchase agreement transactions involving delivery of Fund monies to Repo Custodian(s), and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred to herein as a Free Trade ), provided that such Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made;

 

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8) For payment as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund; and

 

9) For any other purpose, but only upon receipt of Proper Instructions from the Fund specifying (a) the amount of such payment and (b) the person or persons to whom such payment is to be made.

 

Section 2.7      Appointment of Agents . The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. The Underlying Transfer Agent shall not be deemed an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.

 

Section 2.8     Deposit of Fund Assets in U.S. Securities Systems . The Custodian may deposit and/or maintain the Fund’s “financial assets” corresponding with the Fund’s “securities entitlements” in a U.S. Securities System that is a “securities depository” in compliance with the conditions of Rule 17f-4 under the 1940 Act, as amended from time to time.

 

Section 2.9        Segregated Accounts . The Custodian shall upon receipt of Proper Instructions on behalf of the Fund, establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of FINRA (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (b) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (c) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the “ SEC ), or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered management investment companies, and (d) for any other purpose in accordance with Proper Instructions.

 

Section 2.10   Deposit of Fund Assets with the Underlying Transfer Agent . Underlying Shares beneficially owned by the Fund shall be deposited and/or maintained in an account or accounts maintained with an Underlying Transfer Agent and the Custodian’s only responsibilities with respect thereto shall be limited to the following:

 

1) Upon receipt of a confirmation or statement from an Underlying Transfer Agent that such Underlying Transfer Agent is holding or maintaining Underlying Shares in the name of the Custodian (or a nominee of the Custodian) for the benefit of the Fund, the Custodian shall identify by book-entry that such Underlying Shares are being held by it as custodian for the benefit of the Fund.

 

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2) In respect of the purchase of Underlying Shares for the account of the Fund, upon receipt of Proper Instructions, the Custodian shall pay out monies of the Fund as so directed, and record such payment from the account of the Fund on the Custodian’s books and records.

 

3) In respect of the sale or redemption of Underlying Shares for the account of the Fund, upon receipt of Proper Instructions, the Custodian shall transfer such Underlying Shares as so directed, record such transfer from the account of the Fund on the Custodian’s books and records and, upon the Custodian’s receipt of the proceeds therefor, record such payment for the account of the Fund on the Custodian’s books and records.

 

The Custodian shall not be liable to the Fund for any loss or damage to the Fund resulting from the maintenance of Underlying Shares with an Underlying Transfer Agent except for losses resulting directly from the fraud, negligence or willful misconduct of the Custodian or any of its agents or of any of its or their employees.

 

S ection 2.11      Ownership Certificates for Tax Purposes . The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of the Fund held by it and in connection with transfers of securities.

 

S ection 2.12      Proxies . Except with respect to Fund property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), the Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.

 

S ection 2.13      Communications Relating to fund Securities . Except with respect to Fund property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written and electronic information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written and electronic information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with domestic securities or other property of the Fund at any time held by it unless (i) the Custodian is in actual possession of such domestic securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian shall also transmit promptly to the Fund all written and electronic information received by the Custodian regarding any class action or other litigation in connection with Fund securities or other assets issued in the United States and then held, or previously held, during the term of this Agreement by the Custodian for the account of the Fund, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, the Custodian shall have no responsibility to so transmit any information under this Section 2.13.

 

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Section 3 . Provisions Relating to Rules 17f-5 and 17f-7 .

 

Section 3.1.     Definitions . As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:

 

Country Risk means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country’s political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.

 

Eligible Foreign Custodian has the meaning set forth in section (a)(1) of Rule 17f-5.

 

Eligible Securities Depository has the meaning set forth in section (b)(1) of Rule 17f-7.

 

Foreign Assets means any of the Fund’s investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Fund’s transactions in such investments.

 

Foreign Custody Manager has the meaning set forth in section (a)(3) of Rule 17f-5.

 

Rule 17f-5 means Rule 17f-5 promulgated under the 1940 Act.

 

Rule 17f-7 means Rule 17f-7 promulgated under the 1940 Act.

 

Section 3.2.      The Custodian as Foreign Custody Manager .

 

3.2.1      Delegation to the Custodian as Foreign Custody Manager . The Fund, by resolution adopted by the Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Fund.

 

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3.2.2      Countries Covered . The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Fund, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager, provided that the Foreign Custody Manager otherwise complies with this Section 3. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.

 

Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by the Fund of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of such Fund to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager with respect to Fund with respect to that country.

 

The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian’s acceptance of delegation is withdrawn.

 

3.2.3      Scope of Delegated Responsibilities :

 

(a)          Selection of Eligible Foreign Custodians . Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).

 

(b)          Contracts With Eligible Foreign Custodians . The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).

 

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(c)          Monitoring . In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish and maintain a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall promptly notify the Fund and the Board in accordance with Section 3.2.5 hereunder.

 

3.2.4      Guidelines for the Exercise of Delegated Authority . For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Fund.

 

3.2.5      Reporting Requirements . The Foreign Custody Manager shall report the placement and withdrawal of the Foreign Assets with and from an Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Fund described in this Section 3.2 after the occurrence of the material change.

 

3.2.6      Standard of Care as Foreign Custody Manager of the fund . In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.

 

3.2.7      Representations with Respect to Rule 17f-5 . The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board has determined that it is reasonable for such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Fund.

 

3.2.8      Effective Date and Termination of the Custodian as Foreign Custody Manager . The Board’s delegation to the Custodian as Foreign Custody Manager of the Fund shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Fund with respect to designated countries.

 

Section 3.3       Eligible Securities Depositories .

 

3.3.1     Analysis and Monitoring . The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining Foreign Assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.

 

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3.3.2     Standard of Care . The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.

 

Section 4. Duties of the Custodian with Respect to Property of the fund to be Held Outside the United States .

 

Section 4.1       Definitions and scope . As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:

 

“Foreign Securities System” means an Eligible Securities Depository listed on Schedule B hereto.

 

“Foreign Sub-Custodian” means an Eligible Foreign Custodian.

 

No term or condition in this Section 4 shall limit the Custodian’s responsibilities under Section 3 hereof. The terms and conditions of Section 3 hereof shall prevail in the event of any conflict with the terms and conditions of Section 4 hereof.

 

Section 4.2.     Holding Securities . The Custodian shall identify on its books as belonging to the Fund the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Fund, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Fund which are maintained in such account shall identify those securities as belonging to the Fund and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.

 

Section 4.3.     Foreign Securities Systems . Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.

 

Section 4.4.      Transactions in Foreign Custody Account .

 

4.4.1.     Delivery of Foreign Assets . The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Fund held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:

 

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(i) Upon the sale of such foreign securities for the Fund in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;

 

(ii) In connection with any repurchase agreement related to foreign securities entered into by the Fund;

 

(iii) To the depository agent in connection with tender or other similar offers for foreign securities of the Fund;

 

(iv) To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;

 

(v) To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;

 

(vi) To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Foreign Sub-Custodian’s own negligence or willful misconduct;

 

(vii) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;

 

(viii) In the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;

 

(ix) For delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund;

 

(x) In connection with trading in options and futures contracts, including delivery as original margin and variation margin;

 

(xi) Upon the sale or other delivery of such foreign securities (including, without limitation, to one or more Special Sub-Custodians or Repo Custodians) as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and (B) the person or persons to whom delivery shall be made;

 

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(xii) In connection with any loans of foreign securities; and

 

(xiii) For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to whom delivery of such securities shall be made.

 

4.4.2.    Payment of Fund Monies . Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of the Fund in the following cases only:

 

(i) Upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, by (A) in accordance with customary or established market practices and procedures, including, without limitation, delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;

 

(ii) In connection with the conversion, exchange or surrender of foreign securities of the Fund as set forth in Section 4.4.1 hereof;

 

(iii) For the payment of any expense or liability of the Fund, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses;

 

(iv) For the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians subject to terms as agreed upon by the parties from time to time;

 

(v) In connection with trading in options and futures contracts, including delivery as original margin and variation margin;

 

(vi) Upon the purchase of foreign investments including, without limitation, repurchase agreement transactions involving delivery of Fund monies to Repo Custodian(s), as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made;

 

(vii) For payment of part or all of the dividends received in respect of securities sold short;

 

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(viii) In connection with the borrowing or lending of foreign securities; and

 

(ix) For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such payment is to be made.

 

4.4.3.     Market Conditions . Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Fund and delivery of Foreign Assets maintained for the account of the Fund may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.

 

The Custodian shall provide to the Fund the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Fund being provided with substantively less information than had been previously provided hereunder.

 

Section 4.5.      Registration of Foreign Securities . The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of the Fund under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.

 

Section 4.6      Bank Accounts . The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of the Fund with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Fund. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.

 

Section 4.7.       Collection of Income . The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Fund shall be entitled. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. The Custodian shall credit income to the Fund as such income is received or in accordance with Custodian’s then current payable date income schedule. Any credit to the Fund in advance of receipt may be reversed when the Custodian determines that payment will not occur in due course and the Fund may be charged at the Custodian’s applicable rate for time credited. Income on securities loaned other than from the Custodian’s securities lending program shall be credited as received.

 

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Section 4.8        Shareholder Rights . With respect to the foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities, but only to the extent that the Custodian offers proxy services in the particular country, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights.

 

Section 4.9.      Communications Relating to Foreign Securities . The Custodian shall transmit promptly to the Fund written and electronic information with respect to materials received by the Custodian via the Foreign Sub-Custodians or otherwise from issuers of the foreign securities being held for the account of the Fund (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written and electronic information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Fund at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian shall also transmit promptly to the Fund all written and electronic information received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Fund regarding any class action or other litigation in connection with Fund foreign securities or other assets issued outside the United States and then held, or previously held, during the term of this Agreement by the Custodian via a Foreign Sub-Custodian for the account of the Fund, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, the Custodian shall have no responsibility to so transmit any information under this Section 4.9.

 

Section 4.10.    Liability of Foreign Sub-Custodians . Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian’s performance of such obligations. At the Fund’s election, the Fund shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim.

 

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Section 4.11     Tax Law . The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations of which it is aware that are imposed on the Fund or the Custodian as custodian of the Fund by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. As the Custodian does not provide tax advice, it is specifically understood and agreed that the Custodian shall not be considered the Fund’s tax advisor or tax counsel. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information.

 

Section 4.12.     Liability of Custodian . The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in this Agreement and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care.

 

Section 5. Contractual Settlement Services (Purchase / Sales) .

 

Section 5.1       The Custodian shall, in accordance with the terms set out in this section, debit or credit the appropriate cash account of the Fund in connection with (i) the purchase of securities for the Fund, and (ii) proceeds of the sale of securities held on behalf of the Fund, on a contractual settlement basis.

 

Section 5.2       The services described above (the Contractual Settlement Services ) shall be provided for such instruments and in such markets as the Custodian may advise from time to time. The Custodian may terminate or suspend any part of the provision of the Contractual Settlement Services under this Agreement at its sole discretion immediately upon notice to the Fund, including, without limitation, in the event of force majeure events affecting settlement, any disorder in markets, or other changed external business circumstances affecting the markets or the Fund.

 

Section 5.3       The consideration payable in connection with a purchase transaction shall be debited from the appropriate cash account of the Fund as of the time and date that monies would ordinarily be required to settle such transaction in the applicable market. The Custodian shall promptly recredit such amount at the time that the Fund notifies the Custodian by Proper Instruction that such transaction has been canceled.

 

Section 5.4       With respect to the settlement of a sale of securities, a provisional credit of an amount equal to the net sale price for the transaction (the “Settlement Amount” ) shall be made to the account of the Fund as if the Settlement Amount had been received as of the close of business on the date that monies would ordinarily be available in good funds in the applicable market. Such provisional credit will be made conditional upon the Custodian having received Proper Instructions with respect to, or reasonable notice of, the transaction, as applicable; and the Custodian or its agents having possession of the asset(s) (which shall exclude assets subject to any third party lending arrangement entered into by the Fund) associated with the transaction in good deliverable form and not being aware of any facts which would lead them to believe that the transaction will not settle in the time period ordinarily applicable to such transactions in the applicable market.

 

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Section 5.5.      Simultaneously with the making of such provisional credit, the Fund agrees that the Custodian shall have, and hereby grants to the Custodian, a security interest in any property at any time held for the account of the Fund to the full extent of the credited amount, and the Fund hereby pledges, assigns and grants to the Custodian a continuing security interest and a lien on any and all such property under the Custodian’s possession, in accordance with the terms of this Agreement. In the event that the Fund fails to promptly repay any provisional credit, the Custodian shall have all of the rights and remedies of a secured party under the Uniform Commercial Code of The Commonwealth of Massachusetts.

 

S ection 5.6        The Custodian shall have the right to reverse any provisional credit or debit given in connection with the Contractual Settlement Services at any time when the Custodian believes, in its reasonable judgment, that such transaction will not settle in accordance with its terms or amounts due pursuant thereto, will not be collectable or where the Custodian has not been provided Proper Instructions with respect thereto, as applicable, and the Fund shall be responsible for any costs or liabilities resulting from such reversal. Upon such reversal, a sum equal to the credited or debited amount shall become immediately payable by the Fund to the Custodian and may be debited from any cash account held for benefit of the Fund.

 

S ection 5.7      In the event that the Custodian is unable to debit an account of the Fund, and the Fund fails to pay any amount due to the Custodian at the time such amount becomes payable in accordance with this Agreement, (i) the Custodian may charge the Fund for costs and expenses associated with providing the provisional credit, including without limitation the cost of funds associated therewith, (ii) the amount of any accrued dividends, interest and other distributions with respect to assets associated with such transaction may be set off against the credited amount, (iii) the provisional credit and any such costs and expenses shall be considered an advance of cash for purposes of the Agreement and (iv) the Custodian shall have the right to setoff against any property and to sell, exchange, convey, transfer or otherwise dispose of any property at any time held for the account of the Fund to the full extent necessary for the Custodian to make itself whole.

 

Section 6. Special Sub-Custodians .

 

Upon receipt of Special Instructions (as such term is defined in Section 8 hereof), the Custodian shall, on behalf of the Fund, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a sub-custodian for the purposes of effecting such transaction(s) as may be designated by the Fund in Special Instructions. Each such designated sub-custodian is referred to herein as a “Special Sub-Custodian.” Each such duly appointed Special Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time to time by the Fund, with the acknowledgment of the Custodian. In connection with the appointment of any Special Sub-Custodian, and in accordance with Special Instructions, the Custodian shall enter into a sub-custodian agreement with the Fund and the Special Sub-Custodian in form and substance approved by such Fund, provided that such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.

 

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Section 7. Payments for Sales or Repurchases or Redemptions of Shares .

 

The Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the Fund such payments as are received for Shares thereof issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund and the Transfer Agent of any receipt by it of payments for Shares of the Fund.

 

From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian.

 

Section 8. Proper Instructions and Special Instructions .

 

Proper Instructions ,” which may also be standing instructions, as such term is used throughout this Agreement shall mean instructions received by the Custodian from the Fund, the Fund’s duly authorized investment manager or investment adviser, or a person or entity duly authorized by either of them. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or in a communication utilizing access codes effected between electromechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be agreed from time to time by the Custodian and the person(s) or entity giving such instruction, provided that the Fund has followed any security procedures agreed to from time to time by the Fund and the Custodian including, but not limited to, the security procedures selected by the Fund via the form of Funds Transfer Addendum hereto, the terms of which are hereby agreed to. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to provide such instructions with respect to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.

 

Special Instructions ,” as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer of the Fund or any other person designated in writing by the Treasurer of the Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper Instructions or on a separate instrument clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing.

 

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Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, the Fund shall deliver to the Custodian, duly certified by the Fund’s Treasurer or Assistant Treasurer, a certificate setting forth: (i) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to the contrary.

 

Section 9. Evidence of Authority .

 

The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.

 

Section 10. Actions Permitted without Express Authority .

 

Unless the Fund has instructed otherwise, the Custodian may in its discretion, without express authority from the Fund:

 

1) Make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement; provided that all such payments shall be accounted for to the Fund;

 

2) Surrender securities in temporary form for securities in definitive form;

 

3) Endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and

 

4) In general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund, except as otherwise directed by the Fund.

 

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Section 11. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income .

 

The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Fund to keep the books of account of the Fund and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per Share. If so directed, the Custodian shall also calculate daily the net income of the Fund as described in the Prospectus and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The Fund acknowledges and agrees that, with respect to investments maintained with the Underlying Transfer Agent, the Underlying Transfer Agent is the sole source of information on the number of shares of a fund held by the Fund and that the Custodian has the right to rely on holdings information furnished by the Underlying Transfer Agent to the Custodian in performing its duties under this Agreement, including without limitation, the duties set forth in this Section 11 and in Section 12 hereof; provided, however, that the Custodian shall be obligated to reconcile information as to purchases and sales of Underlying Shares contained in trade instructions and confirmations received by the Custodian and to report promptly any discrepancies to the Underlying Transfer Agent. The calculations of the net asset value per Share and the daily income of the Fund shall be made at the time or times described from time to time in the Prospectus. The Fund acknowledges that, in keeping the books of account of the Fund and/or making the calculations described herein with respect to Fund property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.

 

Section 12. Records .

 

The Custodian shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of the under the 1940 Act, including but not necessarily limited to section 31 thereof and Rules 31a-l and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the SEC and other regulatory authorities with jurisdiction over the Fund. The Custodian shall, at the Fund’s request, supply the Fund with a tabulation of securities and other assets owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. The Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to Fund property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.

 

Section 13. Opinion of Fund’s Independent Accountant .

 

The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund’s independent accountants with respect to its activities hereunder in connection with the preparation of the Fund’s Form N-1A or Form N-2 and amendments thereto, as applicable, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.

 

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Section 14. Reports to Fund by Independent Public Accountants .

 

The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (either, a “ Securities System ”), relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.

 

Section 15. Compensation of Custodian .

 

The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund and the Custodian.

 

Section 16. Responsibility of Custodian .

 

So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably and in good faith believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely on and may act upon advice of reputable counsel experienced in the pertinent area of law (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything that is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, insolvency of a Foreign Sub-custodian, acts of war, revolution, riots or terrorism. In no event shall either party be liable for indirect, special or consequential damages.

 

Except as may arise from the Custodian’s own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by the Fund or its duly authorized investment manager or investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any act or omission of a Special Sub-Custodian including, without limitation, reliance on reports prepared by a Special Sub-Custodian; (v) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian’s sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, the Fund, the Custodian’s sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (viii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in this Agreement.

 

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If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it in the exercise of good faith.

 

If the Custodian, its affiliates, subsidiaries or agents advances cash or securities to the Fund for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement), or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee’s own negligent action, negligent failure to act, willful misconduct, or if the Fund fails to compensate the Custodian pursuant to Section 15 hereof, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to pay or reimburse the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund’s assets to the extent necessary to obtain payment or reimbursement. The Custodian may at any time decline to follow Proper Instructions to deliver out to the Fund cash or securities if the Custodian determines in its reasonable discretion and in good faith that, after giving effect to the Proper Instructions, the cash or securities remaining will not have sufficient value fully to secure the Fund’s payment or reimbursement obligations, whether contingent or otherwise.

 

Except as may arise from the Custodian’s own negligence or willful misconduct, the Fund shall indemnify and hold the Custodian harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities which may be asserted against the Custodian (a) acting in accordance with any Proper Instruction or Special Instruction including, without limitation, any Proper Instruction with respect to Free Trades including, but not limited to, cost, expense, loss, damage, liability, tax, charge, assessment or claim resulting from (i) the failure of the Fund to receive income with respect to purchased investments, (ii) the failure of the Fund to recover amounts invested on maturity of purchased investments, (iii) the failure of the Custodian to respond to or be aware of notices or other corporate communications with respect to purchased investments, or (iv) the Custodian’s reliance upon information provided by the Fund, the Fund’s counterparty(ies) or agents with respect to Fund property released, delivered or purchased pursuant to either of Section 2.2(14) or Section 2.6(7) hereof; (b) for the acts or omissions of any Special Sub-Custodian; or (c) for the acts or omissions of any Local Agent or Pledgee.

 

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Section 17. Effective Period, Termination and Amendment .

 

This Agreement shall remain in full force and effect for an initial term ending three (3) years from the date hereof (the Initial Term ). After the expiration of the Initial Term, this Agreement shall automatically renew for successive one-year terms (each, a Renewal Term ) unless a written notice of non-renewal is delivered by the non-renewing party no later than ninety (90) days prior to the expiration of the Initial Term or any Renewal Term, as the case may be. During the Initial Term and thereafter, either party may terminate this Agreement: (i) in the event of the other party’s material breach of a material provision of this Agreement that the other party has either (a) failed to cure or (b) failed to establish a remedial plan to cure that is reasonably acceptable, within 60 days’ written notice of such breach, or (ii) in the event of the appointment of a conservator or receiver for the other party or upon the happening of a like event to the other party at the direction of an appropriate agency or court of competent jurisdiction. Upon termination of this Agreement pursuant to this paragraph, the Fund shall pay Custodian its compensation due and shall reimburse Custodian for its costs, expenses and disbursements.

 

In the event of: (i) the Fund’s termination of this Agreement for any reason other than as set forth in the immediately preceding paragraph or (ii) a transaction not in the ordinary course of business pursuant to which the Custodian is not retained to continue providing services hereunder to the Fund (or its respective successor), the Fund shall pay the Custodian its compensation due through the end of the then-current term (based upon the average monthly compensation previously earned by Custodian with respect to the Fund and shall reimburse the Custodian for its costs, expenses and disbursements. Upon receipt of such payment and reimbursement, the Custodian will deliver the Fund’s securities and cash as set forth hereinbelow. For the avoidance of doubt, no payment will be required pursuant to clause (ii) of this paragraph in the event of any transaction such as (a) the liquidation or dissolution of the Fund and distribution of the Fund’s assets as a result of the Board’s determination in its reasonable business judgment that the Fund is no longer viable (b) a merger of the Fund into, or the consolidation of the Fund with, another entity, or (c) the sale by the Fund of all, or substantially all, of its assets to another entity, in each of (b) and (c) where the Custodian is retained to continue providing services to the Fund (or its respective successor) on substantially the same terms as this Agreement.

 

The provisions of Sections 4.11, 15 and 16 of this Agreement shall survive termination of this Agreement for any reason.

 

This Agreement may be amended at any time in writing by mutual agreement of the parties hereto.

 

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Section 18. Successor Custodian .

 

If a successor custodian shall be appointed by the Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities the Fund then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of the Fund held in a Securities System or at the Underlying Transfer Agent.

 

If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution.

 

In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a “bank” as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of the Fund and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of the Fund, and to transfer to an account of such successor custodian all of the securities of the Fund held in any Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.

 

In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to provide Proper Instructions as aforesaid, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.

 

Section 19. General .

 

Section 19.1 Massachusetts Law to Apply . This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.

 

Section 19.2 Prior Agreements . This Agreement supersedes and terminates, as of the date hereof, all prior agreements between the Fund and the Custodian relating to the custody of such Fund’s assets.

 

Section 19.3 Assignment . This Agreement may not be assigned by (a) the Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of the Fund.

 

Section 19.4 Interpretive and Additional Provisions. In connection with the operation of this Agreement, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by the parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Fund’s Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.

 

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Section 19.5 reserved .

 

Section 19.6 reserved .

 

Section 19.7 T he P arties . The Fund hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its Governing Documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it.

 

The Custodian hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its governing documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) it is a U.S. Bank (as defined in Rule 17f-5 under the 1940 Act) with an aggregate capital in excess of $500,000.

 

Section 19.8 Remote Access Services Addendum . The Custodian and the Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.

 

Section 19.9 Notices . Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.

 

To the Fund: Clough Global Allocation Fund
  1290 Broadway Suite 1100
  Denver, Colorado 80203
   
  Attention: Secretary
  Telephone: (303) 623-2577
  Facsimile: (303)623-7850

 

- 26 -

 

To the Custodian: State Street Bank and Trust Company
  2 Avenue de Lafayette
  Boston, MA 02111
   
  Attention: Denis Valdinocci
  Telephone: 617-662-4368
  Telecopy: 617-988-9692

 

Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.

 

Section 19.10 Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.

 

Section 19.11 Severability . If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

 

Section 19.12 Confidentiality . The parties hereto agree that each shall treat confidentially all information provided by each party to the other party regarding its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely for the purpose of rendering or receiving services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party. The foregoing shall not be applicable to any information (i) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, (ii) that is independently derived by any party hereto without the use of any information provided by the other party hereto in connection with this Agreement, (iii) that is required in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of law or regulation, or (iv) where the party seeking to disclose has received the prior written consent of the party providing the information, which consent shall not be unreasonably withheld. Notwithstanding anything herein to the contrary, the Custodian and its affiliates may report and use nonpublic portfolio holdings information of its clients, including the Fund, on an aggregated basis with all or substantially all other client information and without specific reference to the Fund.

 

Section 19.13 Reproduction of Documents . This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

 

- 27 -

 

Section 19.14 Regulation GG . The Fund hereby represents and warrants that it does not engage in an “Internet gambling business,” as such term is defined in Section 233.2 (r) of Federal Reserve Regulation GG (12 CFR 233) ( Regulation GG” ). The Fund hereby covenants and agrees that it shall not engage in an Internet gambling business. In accordance with Regulation GG, the Fund is hereby notified that “restricted transactions,” as such term is defined in Section 233.2 (y) of Regulation GG, are prohibited in any dealings with the Custodian pursuant to this Agreement or otherwise between or among any party hereto.

 

Section 19.15 Data Privacy. The Custodian will implement and maintain a written information security program that contains appropriate security measures to safeguard the personal information of the Fund’s shareholders, employees, trustees and/or officers that the Custodian receives, stores, maintains, processes or otherwise accesses in connection with the provision of services hereunder. For these purposes, “personal information” shall mean (i) an individual’s name (first initial and last name or first name and last name), address or telephone number plus (a) social security number, (b) drivers license number, (c) state identification card number, (d) debit or credit card number, (e) financial account number or (f) personal identification number or password that would permit access to a person’s account or (ii) any combination of the foregoing that would allow a person to log onto or access an individual’s account. Notwithstanding the foregoing “personal information” shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public.

 

Section 19.16 Loan Services Addendum . In the event the Fund directs Custodian in writing to perform loan services, Custodian and the Fund hereby agree to be bound by the terms of the Loan Services Addendum attached hereto and the Fund shall reimburse Custodian for its fees and expenses related thereto as agreed upon from time to time in writing by the Fund and Custodian.

 

Section 19.17 Shareholder Communications Election . SEC Rule 1 4b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether it authorizes the Custodian to provide the Fund’s name, address, and share position to requesting companies whose securities the Fund owns. If the Fund tells the Custodian “no,” the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian “yes” or does not check either “yes” or “no” below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund’s protection, the Rule prohibits the requesting company from using the Fund’s name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.

 

YES [  ] The Custodian is authorized to release the Fund’s name, address, and share positions.

 

- 28 -

 

NO [X] The Custodian is not authorized to release the Fund’s name, address, and share positions.

 

- 29 -

 

Execution Version

 

Signature Page

 

In Witness Whereof , each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative under seal as of the date first above-written.

 

CLOUGH GLOBAL ALLOCATION FUND

 

By:   (GRAPHIC)  
  Name: Edmund J. Burke  
  Title: President  

 

STATE STREET BANK AND TRUST COMPANY

 

By:   (GRAPHIC)  
Name: Michael F. Rogers  
Title: Executive Vice President  

 

Master Custodian Agreement

 

 

 

SCHEDULE D
to
C ustodian A greement

 

Special Sub-Custodians

 

None

 

D- 1

 

LOAN SERVICES ADDENDUM
TO MASTER CUSTODIAN AGREEMENT

 

ADDENDUM to that certain Master Custodian Agreement (the Custodian Agreement ) by and between Clough Global Allocation Fund (the Fund ) and State Street Bank and Trust Company, including its subsidiaries and other affiliates (the Custodian ). As used in this Addendum, the term Fund , in relation to a Loan (as defined below), includes a Portfolio on whose behalf the Fund acts with respect to the Loan.

 

The following provisions will apply with respect to interests in commercial loans, including loan participations, whether the loans are bilateral or syndicated and whether any obligor is located in or outside of the United States (collectively, Loans ), made or acquired by a Fund on behalf of one or more of its Portfolios.

 

Section 1. Payment Custody . If a Fund wishes the Custodian to receive payments directly with respect to a Loan for credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement,

 

(a)       the Fund will cause the Custodian to be named as the Fund’s nominee for payment purposes under the relevant financing documents, e.g., in the case of a syndicated loan, the administrative contact for the agent bank, and otherwise provide for the payment to the Custodian of the payments with respect to the Loan; and

 

(b)       the Custodian will credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement any payment on or in respect of the Loan actually received by the Custodian and identified as relating to the Loan, but with any amount credited being conditional upon clearance and actual receipt by the Custodian of final payment.

 

Section 2. Monitoring . If a Fund wishes the Custodian to monitor payments on and forward notices relating to a Loan,

 

(a)       the Fund will deliver, or cause to be delivered, to the Custodian a schedule identifying the amount and due dates of the scheduled principal payments, the scheduled interest payment dates and related payment amount information, and such other information with respect to the Loan as the Custodian may reasonably require in order to perform its services hereunder (collectively, Loan Information ) and in such form and format as the Custodian may reasonably request; and

 

(b)       the Custodian will (i) if the amount of a principal, interest, fee or other payment with respect to the Loan is not received by the Custodian on the date on which the amount is scheduled to be paid as reflected in the Loan Information, provide a report to the Fund that the payment has not been received and (ii) if the Custodian receives any consent solicitation, notice of default or similar notice from any syndication agent, lead or obligor on the Loan, undertake reasonable efforts to forward the notice to the Fund.

 

i

 

Section 3. Exculpation of the Custodian .

 

(a)        Payment Custody and Monitoring. The Custodian will have no liability for any delay or failure by the Fund or any third party in providing Loan Information to the Custodian or for any inaccuracy or incompleteness of any Loan Information. The Custodian will have no obligation to verify, investigate, recalculate, update or otherwise confirm the accuracy or completeness any Loan Information or other information or notices received by the Custodian in respect of the Loan. The Custodian will be entitled to (i) rely upon the Loan Information provided to it by or on behalf of the Fund or any other information or notices that the Custodian may receive from time to time from any syndication agent, lead or obligor or any similar party with respect to the Loan and (ii) update its records on the basis of such information or notices as may from time to time be received by the Custodian.

 

(b)        Any Service. The Custodian will have no obligation to (i) determine whether any necessary steps have been taken or requirements have been met for the Fund to have acquired good or record title to a Loan, (ii) ensure that the Fund’s acquisition of the Loan has been authorized by the Fund, (iii) collect past due payments on the Loan, preserve any rights against prior parties, exercise any right or perform any obligation in connection with the Loan (including taking any action in connection with any consent solicitation, notice of default or similar notice received from any syndication agent, lead or obligor on the Loan) or otherwise take any other action to enforce the payment obligations of any obligor on the Loan, (iv) become itself the record title holder of the Loan or (v) make any advance of its own funds with respect to the Loan.

 

(c)        Miscellaneous. The Custodian will not be considered to have been or be charged with knowledge of the sale of a Loan by the Fund, unless and except to the extent that the Custodian shall have received written notice of the sale from the Fund and the proceeds of the sale have been received by the Custodian for credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement. If any question arises as to the Custodian’s duties under this Addendum, the Custodian may request instructions from the Fund and will be entitled at all times to refrain from taking any action unless it has received Proper Instructions from the Fund. The Custodian will in all events have no liability, risk or cost for any action taken or omitted with respect to the Loan pursuant to Proper Instructions. The Custodian will have no responsibilities or duties whatsoever with respect to the Loan except as are expressly set forth in this Addendum.

 

ii

 

 

FUNDS TRANSFER ADDENDUM

 

OPERATING GUIDELINES

 

1.                    OBLIGATION OF THE SENDER: State Street is authorized to promptly debit Client's account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client's instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the next business day.

 

2.                    SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it has designated on the Selection Form was selected by the Client from Security Procedures offered by State Street. The Client agrees that the Security Procedures are reasonable and adequate for its wire transfer transactions and agrees to be bound by any payment orders, amendments and cancellations, whether or not authorized, issued in its name and accepted by State Street after being confirmed by any of the selected Security Procedures. The Client also agrees to be bound by any other valid and authorized payment order accepted by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client's authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure.

 

3.                   ACCOUNT NUMBERS: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern. Financial institutions that receive payment orders initiated by State Street at the instruction of the Client may also process payment orders on the basis of account numbers, regardless of any name included in the payment order. State Street will also rely on any financial institution identification numbers included in any payment order, regardless of any financial institution name included in the payment order.

 

4.                   REJECTION: State Street reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street's receipt of such payment order; (b) if initiating such payment order would cause State Street, in State Street's sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to satisfy itself that the transaction has been properly authorized.

 

5.                   CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied.

 

6.                   ERRORS: State Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.

 

7.                   INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty (30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure to execute a payment order.

 

8.                   AUTOMATED CLEARING HOUSE (“ACH”) CREDIT ENTRIES/PROVISIONAL PAYMENTS: When a Client initiates or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, State Street will act as an Originating Depository Financial Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the Client via such entry shall not be deemed to have paid the amount of the entry.

 

9.                   CONFIRMATION STATEMENTS: Confirmation of State Street's execution of payment orders shall ordinarily be provided within 24 hours. Notice may be delivered through State Street's proprietary information systems, such as, but not limited to Horizon and GlobalQuest ® , account statements, advices, or by facsimile or callback. The Client must report any objections to the execution of a payment order within 30 days.

 

 

 

 

FUNDS TRANSFER ADDENDUM

 

10.                  LIABILITY ON FOREIGN ACCOUNTS: State Street shall not be required to repay any deposit made at a non-U.S. branch of State Street, or any deposit made with State Street and denominated in a non-U.S. dollar currency, if repayment of such deposit or the use of assets denominated in the non-U.S. dollar currency is prevented, prohibited or otherwise blocked due to: (a) an act of war, insurrection or civil strife; (b) any action by a non-U.S. government or instrumentality or authority asserting governmental, military or police power of any kind, whether such authority be recognized as a defacto or a dejure government, or by any entity, political or revolutionary movement or otherwise that usurps, supervenes or otherwise materially impairs the normal operation of civil authority; or(c) the closure of a non-U.S. branch of State Street in order to prevent, in the reasonable judgment of State Street, harm to the employees or property of State Street. The obligation to repay any such deposit shall not be transferred to and may not be enforced against any other branch of State Street.

 

The foregoing provisions constitute the disclosure required by Massachusetts General Laws, Chapter 167D, Section 36.

 

While State Street is not obligated to repay any deposit made at a non-U.S. branch or any deposit denominated in a non-U.S. currency during the period in which its repayment has been prevented, prohibited or otherwise blocked, State Street will repay such deposit when and if all circumstances preventing, prohibiting or otherwise blocking repayment cease to exist.

 

11.                 MISCELLANEOUS: State Street and the Client agree to cooperate to attempt to recover any funds erroneously paid to the wrong party or parties, regardless of any fault of State Street or the Client, but the party responsible for the erroneous payment shall bear all costs and expenses incurred in trying to effect such recovery. These Guidelines may not be amended except by a written agreement signed by the parties.

 

 

 

 

 

FUNDS TRANSFER ADDENDUM

 

Security Procedure(s) Selection Form

 

Please select one or more of the funds transfer security procedures indicated below.

 

SWIFT

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a cooperative society owned and operated by member financial institutions that provides telecommunication services for its membership. Participation is limited to securities brokers and dealers, clearing and depository institutions, recognized exchanges for securities, and investment management institutions. SWIFT provides a number of security features through encryption and authentication to protect against unauthorized access, loss or wrong delivery of messages, transmission errors, loss of confidentiality and fraudulent changes to messages. SWIFT is considered to be one of the most secure and efficient networks for the delivery of funds transfer instructions.

Selection of this security procedure would be most appropriate for existing SWIFT members.

 

Standing Instructions

Standing Instructions may be used where funds are transferred to a broker on the Client's established list of brokers with which it engages in foreign exchange transactions. Only the date, the currency and the currency amount are variable. In order to establish this procedure, State Street will send to the Client a list of the brokers that State Street has determined are used by the Client. The Client will confirm the list in writing, and State Street will verify the written confirmation by telephone. Standing Instructions will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the Standing Instruction will be confirmed by telephone prior to execution.

 

Remote Batch Transmission

Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data communications between the Client and State Street. Security procedures include encryption and or the use of a test key by those individuals authorized as Automated Batch Verifiers.

Clients selecting this option should have an existing facility for completing CPU-CPU transmissions. This delivery mechanism is typically used for high-volume business.

 

Global Horizon lnterchange sm Funds Transfer Service

Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire, CHIPS or internal book transfer instructions to State Street.

This delivery mechanism is most appropriate for Clients with a low-to-medium number of transactions (5-75 per day), allowing Clients to enter, batch, and review wire transfer instructions on their PC prior to release to State Street.

 

Telephone Confirmation (Callback)

Telephone confirmation will be used to verify all non-repetitive funds transfer instructions received via untested facsimile or phone. This procedure requires Clients to designate individuals as authorized initiators and authorized verifiers. State Street will verify that the instruction contains the signature of an authorized person and prior to execution, will contact someone other than the originator at the Client's location to authenticate the instruction.

Selection of this alternative is appropriate for Clients who do not have the capability to use other security procedures.

 

Repetitive Wires

For situations where funds are transferred periodically (minimum of one instruction per calendar quarter) from an existing authorized account to the same payee (destination bank and account number) and only the date and currency amount are variable, a repetitive wire may be implemented. Repetitive wires will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the instruction will be confirmed by telephone prior to execution. Telephone confirmation is used to establish this process. Repetitive wire instructions must be reconfirmed annually.

This alternative is recommended whenever funds are frequently transferred between the same two accounts.

 

Transfers initiated by Facsimile

The Client faxes wire transfer instructions directly to State Street Mutual Fund Services. Standard security procedure requires the use of a random number test key for all transfers. Every six months the Client receives test key logs from State Street. The test key contains alpha-numeric characters, which the Client puts on each document faxed to State Street. This procedure ensures all wire instructions received via fax are authorized by the Client.

We provide this option for Clients who wish to batch wire instructions and transmit these as a group to State Street Mutual Fund Services once or several times a day.

 

 

 

 

FUNDS TRANSFER ADDENDUM

 

Instruct

Instruct is a State Street web-based application designed to provide internet-enabled remote access that allows for the capturing, verification and processing of various instruction types, including securities, cash and foreign exchange transactions. Instruct is designed using industry standard formats to facilitate straight-through processing. Instruct provides a number of security features through user entitlements, industry standard encryption protocols, digital security certificates and multiple tiers of user authentication requirements.

 

Secure Transport

Secure Transport is a file transfer application based upon the Secure File Transfer Protocol standard that is designed to enable State Street clients/ investment managers to send file based transfer and transaction instructions over the internet. Secure Transport features multi-factor authenticators such as SecurID and digital certificates, and incorporates industry-standard encryption protocols.

 

Automated Clearing House (ACH)

State Street receives an automated transmission or a magnetic tape from a Client for the initiation of payment (credit) or collection (debit) transactions through the ACH network. The transactions contained on each transmission or tape must be authenticated by the Client. Clients using ACH must select one or more of the following delivery options:

 

Global Horizon Interchange Automated Clearing House Service

Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in standard NACHA formats.

 

☐ Transmission from Client PC to State Street Mainframe with Telephone Callback

 

☐ Transmission from Client Mainframe to State Street Mainframe with Telephone Callback

 

☐ Transmission from DST Systems to State Street Mainframe with Encryption

 

☐ Magnetic Tape Delivered to State Street with Telephone Callback

 

Email with Enforced Transport Layer Security Combined with Telephone Callback

Transport Layer Security is a communication method that allows clients to electronically deliver financial transaction instructions to State Street using an enforced (encrypted) connection. The communication method features use of enforced network connections which include industry-standard transport layer cryptography to effect point-to-point encryption. Please note that such point-to-point encryption is performed at the domain level and not at the individual user level or email gateway within the client's organization. Telephone confirmation will be used to verify transaction instructions received via email with enforced TLS. This procedure requires clients to designate individuals as authorized initiators and authorized verifiers. State Street will contact the client's designees to authenticate instructions received by this method.

 

Email "Send Secure" Feature Available In Outlook with Telephone Callback

"Send Secure" is a communication method that allows clients to electronically deliver financial transaction instructions to State Street using an enforced (encrypted) connection by responding to a secure email received from State Street The communication method features use of enforced network connections which include industry-standard transport layer cryptography to effect point-to-point encryption at the desktop. Telephone confirmation will be used to verify transaction instructions received via email using the "send secure" feature. This procedure requires clients to designate individuals as authorized initiators and authorized verifiers. State Street will contact the clients designees to authenticate instructions received by this method.

 

State Street Cash Manager® Global Funds Transfer (GFT)

State Street's proprietary web-based system that enables clients to originate and electronically transmit authenticated repetitive and non-repetitive Fed wires, CHIPS, internal book transfers, drawdowns, and international payments to State Street. Instructions received by State Street via Cash Manager® constitute funds transfer instructions originated by the Client and can either be in U.S. dollar or other currencies supported by the system. The State Street Cash Manager® GFT is a web-based system utilizing the Internet and employs the use of ID and password security, two factor token authentication and encryption to protect the integrity of transmissions to State Street.

 

State Street is hereby instructed to accept funds transfer instructions only via the delivery methods and security procedures indicated. The selected delivery methods and security procedure(s) will be effective ____________________________ for payment orders initiated by our organization.

 

 

 

 

FUNDS TRANSFER ADDENDUM

 

Key Contact Information

 

Whom shall we contact to implement your selection(s)?

 

CLIENT OPERATIONS CONTACT   ALTERNATE CONTACT
  Name     Name
  Address     Address
  City/State/Zip Code     City/State/Zip Code
  Telephone Number     Telephone Number
  Facsimile Number     Facsimile Number
  SWIFT Number      
  Telex Number      

 

 

 

 

FUNDS TRANSFER ADDENDUM

 

INSTRUCTION(S)

 

TELEPHONE CONFIRMATION

 

Fund  

 

Investment Adviser  

 

Authorized Initiators

Please Type or Print

 

Please provide a listing of Fund officers or other individuals who are currently authorized to INITIATE wire transfer instructions to State Street:

 

NAME

 

 

TITLE (Specify whether position is with Fund or Investment Adviser)

 

 

SPECIMEN SIGNATURE

 

         
         
         
         

 

Authorized Verifiers

Please Type or Print

 

Please provide a listing of Fund officers or other individuals who will be CALLED BACK to verify the initiation of repetitive wires of $10 million or more and all non-repetitive wire instructions:

 

NAME

 

 

CALLBACK PHONE NUMBER

 

 

DOLLAR LIMITATION (IF ANY)

 

         
         
         
         

 

 

 

(GRAPHIC)

 

ADDENDUM to that certain Custodian Agreement between the Fund (the “Customer”) and State Street Bank and Trust Company, including its subsidiaries and affiliates (“State Street”).

 

State Street has developed and/or utilizes proprietary or third-party accounting and other systems in conjunction with the services that State Street provides to the Customer. In this regard, State Street maintains certain information in databases under its ownership and/or control that it makes available to its customers (the “Remote Access Services”).

 

The Services

 

State Street agrees to provide the Customer, and its designated investment advisors, consultants or other third parties who agree to abide by the terms of this Addendum (“Authorized Designees”) with access to State Street proprietary and third-party systems as may be offered by State Street from time to time (each, a “System”) on a remote basis.

 

Security Procedures

 

The Customer agrees to comply, and to cause its Authorized Designees to comply, with remote access operating standards and procedures and with user identification or other password control requirements and other security devices and procedures as may be issued or required from time to time by State Street or its third-party vendors for use of the System and access to the Remote Access Services. The Customer is responsible for any use and/or misuse of the System and Remote Access Services by its Authorized Designees. The Customer agrees to advise State Street immediately in the event that it learns or has reason to believe that any person to whom it has given access to the System or the Remote Access Services has violated or intends to violate the terms of this Addendum and the Customer will cooperate with State Street in seeking injunctive or other equitable relief. The Customer agrees to discontinue use of the System and Remote Access Services, if requested, for any security reasons cited by State Street and State Street may restrict access of the System and Remote Access Services by the Customer or any Authorized Designee for security reasons or noncompliance with the terms of this Addendum at any time.

 

Fees

 

Fees and charges for the use of the System and the Remote Access Services and related payment terms shall be as set forth in the fee schedule in effect from time to time between the parties. The Customer shall be responsible for any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street). Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.

 

Proprietary Information/Injunctive Relief

 

The System and Remote Access Services described herein and the databases, computer programs, screen formats, report formats, interactive design techniques, formulae, processes, systems, software, knowhow, algorithms, programs, training aids, printed materials, methods, books, records, files, documentation and other information made available to the Customer by State Street as part of the Remote Access Services and through the use of the System and all copyrights, patents, trade secrets and other proprietary and intellectual property rights of State Street and third-party vendors related thereto are the exclusive, valuable and confidential proprietary property of State Street and its relevant licensors and third-party vendors (the “Proprietary Information”). The Customer agrees on behalf of itself and its Authorized Designees to keep the Proprietary Information confidential and to limit access to its employees and Authorized Designees (under a similar duty of confidentiality) who require access to the System for the purposes intended. The foregoing shall not apply to Proprietary Information in the public domain or required by law to be made public.

 

 

 

(GRAPHIC)

 

The Customer agrees to use the Remote Access Services only in connection with the proper purposes of this Addendum. The Customer will not, and will cause its employees and Authorized Designees not to, (i) permit any third party to use the System or the Remote Access Services, (ii) sell, rent, license or otherwise use the System or the Remote Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Remote Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, or (iv) allow or cause any information transmitted from State Street’s databases, including data from third-party sources, available through use of the System or the Remote Access Services, to be published, redistributed or retransmitted for other than use for or on behalf of the Customer, as State Street’s customer.

 

The Customer agrees that neither it nor its Authorized Designees will modify the System in any way; enhance, copy or otherwise create derivative works based upon the System; nor will the Customer or Customer’s Authorized Designees reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System.

 

The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street or its third-party licensors and vendors inadequately compensable in damages at law and that State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available.

 

Limited Warranties

 

State Street represents and warrants that it is the owner of and/or has the right to grant access to the System and to provide the Remote Access Services contemplated herein. Because of the nature of computer information technology, including but not limited to the use of the Internet, and the necessity of relying upon third-party sources, and data and pricing information obtained from third parties, the System and Remote Access Services are provided “AS IS” without warranty express or implied including as to availability of the System, and the Customer and its Authorized Designees shall be solely responsible for the use of the System and Remote Access Services and investment decisions, results obtained, regulatory reports and statements produced using the Remote Access Services. State Street and its relevant licensors and third-party vendors will not be liable to the Customer or its Authorized Designees for any direct or indirect, special, incidental, punitive or consequential damages arising out of or in any way connected with the System or the Remote Access Services, nor shall any party be responsible for delays or nonperformance under this Addendum arising out of any cause or event beyond such party’s control.

 

EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS RELEVANT LICENSORS AND THIRD-PARTY VENDORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

 - 2 -

 

(GRAPHIC)

 

Infringement

 

State Street will defend or, at its option, settle any claim or action brought against the Customer to the extent that it is based upon an assertion that access to or use of State Street proprietary systems by the Customer under this Addendum constitutes direct infringement of any United States patent or copyright or misappropriation of a trade secret, provided that the Customer notifies State Street promptly in writing of any such claim or proceeding, cooperates with State Street in the defense of such claim or proceeding and allows State Street sole control over such claim or proceeding. Should the State Street proprietary system or any part thereof become, or in State Street’s opinion be likely to become, the subject of a claim of infringement or the like under any applicable patent, copyright or trade secret laws, State Street shall have the right, at State Street’s sole option, to (i) procure for the Customer the right to continue using the State Street proprietary system (ii) replace or modify the State Street proprietary system so that the State Street proprietary system becomes noninfringing, or (iii) terminate this Addendum without further obligation. This section constitutes the sole remedy available to the Customer for the matters described in this section.

 

Termination

 

Either party to the Custodian Agreement may terminate this Addendum (i) for any reason by giving the other party at least one-hundred and eighty (180) days’ prior written notice in the case of notice of termination by State Street to the Customer or thirty (30) days’ notice in the case of notice from the Customer to State Street of termination, or (ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. This Addendum shall in any event terminate within ninety (90) days after the termination of any service agreement applicable to the Customer. The Customer’s use of any third-party System is contingent upon its compliance with any terms and conditions of use of such System imposed by such third party and State Street’s continued access to, and use of, such third-party System. In the event of termination, the Customer will return to State Street all copies of documentation and other confidential information in its possession or in the possession of its Authorized Designees and immediately cease access to the System and Remote Access Services. The foregoing provisions with respect to confidentiality and infringement will survive termination for a period of three (3) years.

 

Miscellaneous

 

This Addendum constitutes the entire understanding of the parties to the Custodian Agreement with respect to access to the System and the Remote Access Services. This Addendum cannot be modified or altered except in a writing duly executed by each of State Street and the Customer and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.

 

By its execution of the Custodian Agreement, the Customer: (a) confirms to State Street that it informs all Authorized Designees of the terms of this Addendum; (b) accepts responsibility for its and its Authorized Designees’ compliance with the terms of this Addendum; and (c) indemnifies and holds State Street harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities arising from any failure of the Customer or any of its Authorized Designees to abide by the terms of this Addendum.

 

 - 3 -

 

 

 

LIMITED ACCESS

 

 

 

(GRAPHIC)

 

SUBCUSTODIANS - SCHEDULE A

 

MARKET SUBCUSTODIAN
Argentina Citibank, N.A.
Australia

Citigroup Pty. Limited

The Hongkong and Shanghai Banking Corporation Limited

Austria Deutsche Bank AG
UniCredit Bank Austria AG
Bahrain

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Bangladesh Standard Chartered Bank
Belgium Deutsche Bank AG, Netherlands (operating through its Amsterdam branch with support from its Brussels branch)
Benin via Standard Chartered Bank Cote d’lvoire S.A., Abidjan, Ivory Coast
Bermuda HSBC Bank Bermuda Limited
Federation of Bosnia and Herzegovina UniCredit Bank d.d.
Botswana Standard Chartered Bank Botswana Limited
Brazil Citibank, N.A.
Bulgaria ING Bank N.V.
UniCredit Bulbank AD
Burkina Faso via Standard Charted Bank Cote d’lvoire S.A., Abidjan, Ivory Coast
Canada State Street Trust Company Canada
Chile Banco Itaú Chile
People’s Republic of China

HSBC Bank (China) Company Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

China Construction Bank Corporation (for A-share market only)

Colombia Cititrust Colombia S.A. Sociedad Fiduciaria
Costa Rica Banco BCT S.A.
Croatia Privredna Banka Zagreb d.d.
Zagrebacka Banka d.d.
Cyprus BNP Paribas Securities Services, S.C.A., Greece (operating through its Athens branch)
Czech Republic Československá obchodní banka, a.s.
UniCredit Bank Czech Republic a.s.

 

LIMITED ACCESS

 

(GRAPHIC)

 

Denmark Skandinaviska Enskilda Banken AB (publ), Sweden (operating through its Copenhagen branch)
Ecuador Banco de la Producci6n S.A. PRODUBANCO
Egypt

HSBC Bank Egypt S.A.E.

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Estonia AS SEB Pank
Finland Skandinaviska Enskilda Banken AB (publ), Sweden (operating through its Helsinki branch)
France Deutsche Bank AG, Netherlands (operating through its Amsterdam branch with support from its Paris branch)
Republic of Georgia JSC Bank of Georgia
Germany Deutsche Bank AG
Ghana Standard Chartered Bank Ghana Limited
Greece BNP Paribas Securities Services, S.C.A.
Guinea-Bissau via Standard Chartered Bank Côte d’lvoire S.A., Abidjan, Ivory Coast
Hong Kong Standard Chartered Bank (Hong Kong) Limited
Hungary UniCredit Bank Hungary Zrt.
Iceland Landsbankinn hf.
India

Deutsche Bank AG

The Hongkong and Shanghai Banking Corporation Limited

Indonesia Deutsche Bank AG
Ireland State Street Bank and Trust Company, United Kingdom branch
Israel Bank Hapoalim B.M.
Italy Deutsche Bank S.p.A.
Ivory Coast Standard Chartered Bank Côte d’lvoire S.A.
Japan

Mizuho Bank, Limited

The Hongkong and Shanghai Banking Corporation Limited

Jordan HSBC Bank Middle East Limited (as delegate of The Hongkong and Shanghai Banking Corporation Limited)
Kazakhstan

SB HSBC Bank Kazakhstan JSC

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Kenya Standard Chartered Bank Kenya Limited
Republic of Korea

Deutsche Bank AG

The Hongkong and Shanghai Banking Corporation Limited

Kuwait

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

 

2

LIMITED ACCESS

 

(GTAPHIC)

 

Latvia AS SEB banka
Lebanon

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Lithuania AB SEB bankas
Malaysia Deutsche Bank (Malaysia) Berhad
Standard Chartered Bank Malaysia Berhad
Mali via Standard Chartered Bank Côte d’lvoire S.A., Abidjan, Ivory Coast
Mauritius The Hongkong and Shanghai Banking Corporation Limited
Mexico Banco Nacional de México, S.A.
Morocco Citibank Maghreb
Namibia Standard Bank Namibia Limited
Netherlands Deutsche Bank AG
New Zealand The Hongkong and Shanghai Banking Corporation Limited
Niger via Standard Chartered Bank Côte d’lvoire S.A., Abidjan, Ivory Coast
Nigeria Stanbic IBTC Bank Plc.
Norway Skandinaviska Enskilda Banken AB (publ), Sweden (operating through its Oslo branch)
Oman

HSBC Bank Oman S.A.O.G.

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Pakistan Deutsche Bank AG
Palestine

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Peru Citibank del Perú, S.A.
Philippines Deutsche Bank AG
Poland Bank Handlowy w Warszawie S.A.
Portugal

BNP Paribas Securities Services, S.C.A., Paris (operating through its Lisbon branch with support from its Paris branch)

Deutsche Bank AG, Netherlands (operating through its Amsterdam branch with support from its Lisbon branch)

Puerto Rico Citibank N.A.
Qatar

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

Romania ING Bank N.V.
Russia ING Bank (Eurasia) ZAO
Saudia Arabia HSBC Saudi Arabia Limited
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

 

3

LIMITED ACCESS

 

(GRAPHIC)

 

Senegal via Standard Chartered Bank Côte d’lvoire S.A., Abidjan, Ivory Coast
Serbia UniCredit Bank Serbia JSC
Singapore

Citibank N.A.

United Overseas Bank Limited

Slovak Republic Československá obchodná banka, a.s.
UniCredit Bank Slovakia a.s.
Slovenia UniCredit Banka Slovenija d.d.
South Africa

FirstRand Bank Limited

Standard Bank of South Africa Limited

Spain Deutsche Bank S.A.E.
Sri Lanka The Hongkong and Shanghai Banking Corporation Limited
Republic of Srpska UniCredit Bank d.d.
Swaziland Standard Bank Swaziland Limited
Sweden Skandinaviska Enskilda Banken AB (publ)
Switzerland Credit Suisse AG
UBS AG
Taiwan - R.O.C.

Deutsche Bank AG

Standard Chartered Bank (Taiwan) Limited

Thailand Standard Chartered Bank (Thai) Public Company Limited
Togo via Standard Chartered Bank Côte d’lvoire S.A., Abidjan, Ivory Coast
Trinidad & Tobago Republic Bank Limited
Tunisia Banque Internationale Arabe de Tunisie
Turkey Citibank, A.S.
Deutsche Bank A.S.
Uganda Standard Chartered Bank Uganda Limited
Ukraine ING Bank Ukraine
United Arab Emirates –
Dubai Financial Market

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

United Arab Emirates –
Dubai International Financial Center

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

United Arab Emirates –
Abu Dhabi

HSBC Bank Middle East Limited

(as delegate of The Hongkong and Shanghai Banking Corporation Limited)

United Kingdom State Street Bank and Trust Company, United Kingdom branch
Uruguay Banco Itaú Uruguay S.A

 

4

LIMITED ACCESS

 

(GRAPHIC)

 

Venezuela Citibank, N.A.
Vietnam HSBC Bank (Vietnam) Limited
Zambia Standard Chartered Bank Zambia Pic.
Zimbabwe Stanbic Bank Zimbabwe Limited (as delegate of Standard Bank of South Africa Limited)

 

5

LIMITED ACCESS

 

(GRAPHIC)  

 

DEPOSITORIES OPERATING IN NETWORK MARKETS – SCHEDULE B

 

MARKET DEPOSITORY
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Austria Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division)
Bahrain Clearing, Settlement, Depository and Registry System of the Bahrain Bourse
Bangladesh Bangladesh Bank
Central Depository Bangladesh Limited
Belgium Euroclear Belgium
National Bank of Belgium
Benin Dépositaire Central – Banque de Règlement
Bermuda Bermuda Securities Depository
Federation of
Bosnia and Herzegovina
Registar vrijednosnih papira u Federaciji Bosne i Hercegovine, d.d.
Botswana Bank of Botswana
Central Securities Depository Company of Botswana Ltd.
Brazil Central de Custódia e de Liquidaçáo Financeira de Titulos Privados (CETIP) Companhia Brasileira de Liquidaçáo e Custódia Sistema Especial de Liquidaçáo e de Custódia (SELIC)
Bulgaria Bulgarian National Bank
Central Depository AD
Burkina Faso Dépositaire Central – Banque de Règlement
Canada The Canadian Depository for Securities Limited
Chile Depósito Central de Valores S.A.
People's Republic
of China
China Securities Depository and Clearing Corporation Limited, Shanghai Branch China Securities Depository and Clearing Corporation Limited, Shenzhen Branch China Central Depository and Clearing Co., Ltd.
Colombia Depósito Central de Valores
Depósito Centralizado de Valores de Colombia S.A. (DECEVAL)
Costa Rica Central de Valores S.A.
Croatia Središnje klirinško depozitarno društvo d.d.
Cyprus Central Depository and Central Registry
Czech Republic Centrálnf depozitář cenných papirů, a.s.
Czech National Bank

 

LIMITED ACCESS

 

(GRAPHIC)  

 

Denmark VP Securities A/S
Egypt Central Bank of Egypt
Misr for Central Clearing, Depository and Registry S.A.E.
Estonia AS Eesti Văărtpaberikeskus
Finland Euroclear Finland
France Euroclear France
Republic of Georgia Georgian Central Securities Depository
National Bank of Georgia
Germany Clearstream Banking AG, Frankfurt
Ghana Central Securities Depository (Ghana) Limited
GSE Securities Depository Company Limited
Greece Bank of Greece, System for Monitoring Transactions in Securities in Book-Entry Form Kentriko Apothetirio Aksion, a department of Hellenic Exchanges S.A. Holding
Guinea-Bissau Dépositaire Central – Banque de Règlement
Hong Kong Central Moneymarkets Unit
Hong Kong Securities Clearing Company Limited
Hungary Kŏzponti Elszámolóház és Értéktár (Budapesti) Zrt. (KELER)
Iceland Icelandic Securities Depository Limited
India Central Depository Services (India) Limited
National Securities Depository Limited
Reserve Bank of India
Indonesia Bank Indonesia
PT Kustodian Sentral Efek Indonesia
Ireland

Euroclear UK & Ireland Limited *

Euroclear Bank S.A./N.V.

Israel Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearing House)
Italy Monte Titoli S.p.A.
Ivory Coast Dépositaire Central – Banque de Règlement
Japan Bank of Japan – Financial Network System
Japan Securities Depository Center (JASDEC) Incorporated
Jordan

Central Bank of Jordan

Securities Depository Center

Kazakhstan Central Securities Depository
Kenya Central Bank of Kenya
Central Depository and Settlement Corporation Limited
Republic of Korea Korea Securities Depository

 

7  

LIMITED ACCESS

 

(GRAPHIC)  

 

Kuwait Kuwait Clearing Company
Latvia Lebanon Latvian Central Depository
Banque du Liban
Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (Midclear) S.A.L.
Lithuania Central Securities Depository of Lithuania
Malaysia Bank Negara Malaysia
Bursa Malaysia Depository Sdn. Bhd.
Mali Dépositaire Central – Banque de Réglement
Mauritius Bank of Mauritius
Central Depository and Settlement Co. Limited
Mexico S.D. Indeval, S.A. de C.V.
Morocco Maroclear
Namibia Bank of Namibia
Netherlands Euroclear Nederland
New Zealand New Zealand Central Securities Depository Limited
Niger Dépositaire Central – Banque de Règlement
Nigeria Central Bank of Nigeria
Central Securities Clearing System Limited
Norway Verdipapirsentralen
Oman Muscat Clearing & Depository Company S.A.O.C.
Pakistan Central Depository Company of Pakistan Limited State Bank of Pakistan
Palestine Clearing, Depository and Settlement system, a department of the Palestine Securities Exchange
Peru CAVALI S.A. Institución de Compensación y Liquidación de Valores
Philippines Philippine Depository & Trust Corporation
Registry of Scripless Securities (ROSS) of the Bureau of the Treasury
Poland Rejestr Papierów Wartościowych
Krajowy Depozyt Papierów Wartościowych, S.A.
Portugal INTERBOLSA - Sociedad Gestora de Sistemas
de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A.
Qatar Central Clearing and Registration (CCR), a department of the Qatar Exchange
Romania National Bank of Romania
S.C. Depozitarul Central S.A.
Russia National Settlement Depository

 

8  

LIMITED ACCESS

 

(GRAPHIC)  

 

Saudi Arabia Saudi Arabian Monetary Agency
Tadawul Central Securities Depository
Senegal Dépositaire Central – Banque de Règlement
Serbia Central Registrar, Depository and Clearinghouse
Singapore Monetary Authority of Singapore
The Central Depository (Re.) Limited
Slovak Republic Centrólny depozitár cenných papierov SR, a.s.
Slovenia KDD - Centralna klirinško depotna družba d.d.
South Africa Strate Limited
Spain IBERCLEAR
Sri Lanka Central Bank of Sri Lanka
Central Depository System (Pvt) Limited
Republic of Srpska Central Registry of Securities in the Republic of Srpska JSC
Sweden Euroclear Sweden
Switzerland SIX SIS AG
Taiwan - R.O.C. Central Bank of the Republic of China (Taiwan)
Taiwan Depository and Clearing Corporation
Thailand Thailand Securities Depository Company Limited
Togo Dépositaire Central – Banque de Règlement
Trinidad and Tobago Central Bank of Trinidad and Tobago
Trinidad and Tobago Central Depository Limited
Tunisia Société Tunisienne Interprofessionelle pour la
Compensation et le Dépôt des Valeurs Mobilières (STICODEVAM)
Turkey Central Bank of Turkey
Central Registry Agency
Uganda Bank of Uganda
Securities Central Depository
Ukraine National Depository of Ukraine
Public Joint Stock Company Settlement Center
United Arab Emirates -
Abu Dhabi
Clearing, Settlement, Depository and Registry department
of the Abu Dhabi Securities Exchange
United Arab Emirates -
Dubai Financial Market
Clearing and Depository System, a department of the Dubai Financial Market
United Arab Emirates -
Dubai International
Financial Center
Central Securities Depository, owned and operated by NASDAQ Dubai Limited
United Kingdom Euroclear UK & Ireland Limited *

 

9  

LIMITED ACCESS

 

(GRAPHIC)  

 

Uruguay Banco Central del Uruguay
Venezuela

Banco Central de Venezuela

Caja Venezolana de Valores

Vietnam Vietnam Securities Depository
Zambia Bank of Zambia
LuSE Central Shares Depository Limited

 

TRANSNATIONAL

 

Euroclear Bank S.A./N.V.
Clearstream Banking, S.A.

 

** Euroclear UK & Ireland Limited (EUI) serves as depository for GBP- and EUR-denominated money market Instruments. Also, EUI utilizes its CREST system to facilitate settlement for eligible securities in the UK and Ireland, with securities ownership recorded at the relevant issuer's registrar.

 

10  

LIMITED ACCESS

 

(GRAPHIC)  

 

SCHEDULE C

 

Publication/Type of Information Brief Description
(scheduled frequency)  
The Guide to Custody in World Markets
(hardcopy annually and regular
website updates)
An overview of settlement and safekeeping procedures, custody practices and foreign investor considerations for the markets in which State Street offers custodial services.
Global Custody Network Review
(annually)
Information relating to Foreign Sub-Custodians in State Street's Global Custody Network. The Review stands as an integral part of the materials that State Street provides to its U.S. mutual fund clients to assist them in complying with SEC Rule 17f-5. The Review also gives insight into State Street's market expansion and Foreign Sub-Custodian selection processes, as well as the procedures and controls used to monitor the financial condition and performance of our Foreign Sub-Custodian banks.
Securities Depository Review
(annually)
Custody risk analyses of the Foreign Securities Depositories presently operating in Network markets. This publication is an integral part of the materials that State Street provides to its U.S. mutual fund clients to meet informational obligations created by SEC Rule 17f-7.
Global Legal Survey
(annually)
With respect to each market in which State Street offers custodial services, opinions relating to whether local law restricts (i) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) a fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) a fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars.
Subcustodian Agreements
(annually)
Copies of the contracts that State Street has entered into with each Foreign Sub-Custodian that maintains U.S. mutual fund assets in the markets in which State Street offers custodial services.
Global Market Bulletin
(daily or as necessary)
Information on changing settlement and custody conditions in markets where State Street offers custodial services. Includes changes in market and tax regulations, depository developments, dematerialization information, as well as other market changes that may impact State Street's clients.
Foreign Custody Advisories
(as necessary)
For those markets where State Street offers custodial services that exhibit special risks or infrastructures impacting custody, State Street issues market advisories to highlight those unique market factors which might impact our ability to offer recognized custody service levels.
Material Change Notices
(presently on a quarterly basis or
as otherwise necessary)
Informational letters and accompanying materials confirming State Street's foreign custody arrangements, including a summary of material changes with Foreign Sub-Custodians that have occurred during the previous quarter. The notices also identify any material changes in the custodial risks associated with maintaining assets with Foreign Securities Depositories.

LIMITED ACCESS

 

 

LIMITED ACCESS

 

AGENCY AGREEMENT

 

THIS AGREEMENT made the 13th day of June , 2013, and effective as of December 9, 2013, by and between CLOUGH GLOBAL ALLOCATION FUND a statutory trust existing under the laws of the State of Delaware, having its principal place of business at 1290 Broadway, Suite 1100, Denver, Colorado 80203 (the "Fund"), and DST SYSTEMS, INC., a corporation existing under the laws of the State of Delaware, having its principal place of business at 333 West 11 th Street, 5 th Floor, Kansas City, Missouri 64105 ("DST"):

 

WITNESSETH:

 

WHEREAS, the Fund desires to appoint DST as Transfer Agent and Dividend Disbursing Agent, and DST desires to accept such appointment upon the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

 

1. Documents to be Provided with Appointment .

 

In connection with the appointment of DST as Transfer Agent and Dividend Disbursing Agent for the Fund, the Fund will provide DST the following documents:

 

A. A certified copy of the resolutions of the Board of Trustees, as appropriate, of the Fund appointing DST as Transfer Agent and Dividend Disbursing Agent, approving the form of this Agreement and designating certain persons to give written instructions and requests to DST on behalf of the Fund pursuant to this Agreement;

 

B. A certified copy of the Amended and Restated Agreement and Declaration of Trust of the Fund (the “Declaration of Trust”) and all amendments thereto;

 

C. A certified copy of the Bylaws of the Fund;

 

D. Copies of Registration Statements and amendments thereto, filed with the Securities and Exchange Commission.

 

E. Specimens of all forms of outstanding share certificates, if any, in the forms approved by the Board of Trustees of the Fund with a certificate of the Secretary/Clerk of the Fund, evidencing such approval.

 

F. Specimens of the signatures of the officers of the Fund authorized to sign certificates for shares of beneficial interest of the Fund (“shares”), if any, and individuals authorized to sign written instructions and requests;

 

G. An opinion of counsel for the Fund (who may be the Fund’s General Counsel) with respect to:

 

(1) The Fund's organization and existence under the laws of its state of organization,

 

Copyright 1995 DST Systems, Inc.

AMECURRENT 706474999.3 10-May-13 17:07 AMECURRENT 706531312.2 14-May-13 16:10

1

 

(2) The status of all shares of the Fund covered by the appointment under the Securities Act of 1933, as amended (the “1933 Act”), and any other applicable federal or state statute, and

 

(3) That all issued shares are, and all unissued shares will be, when issued, validly issued, fully paid and non-assessable.

 

H. For this Section 1, a certificate from the Fund’s Secretary or Chief Financial Officer is acceptable.

 

2. Certain Representations and Warranties of DST .

 

DST represents and warrants to the Fund that:

 

A. It is a corporation duly organized and existing and in good standing under the laws of Delaware.

 

B. It is duly qualified to carry on its business in the State of Missouri.

 

C. It is empowered under applicable laws and by its Articles of Incorporation and Bylaws to enter into and perform the services contemplated in this Agreement.

 

D. It is registered as a transfer agent under the Securities Exchange Act of 1934, as amended (the “1934 Act”).

 

E. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.

 

F. It has and will continue to have and maintain the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.

 

G. It is accepted by The Depository Trust Company (“DTC”) as a limited participant in the DTC Direct Registration System (“DRS”). In this regard, DST will participate in DTC's Fast Automated Securities Transfer (“FAST”) program, provide a “direct mail by agent” (or DMA) function as mandated by DTC in connection with DRS participation; will undergo sufficient training regarding DRS and DTC’s Profile Modification System (“Profile”); and will participate in DTC’s Profile Surety Program as a prerequisite to initiating Profile transactions.

 

H. For so long as this Agreement remains in full force and effect DST will maintain an electronic interface with DTC.

 

I. DST will add the Fund to the FAST program and Profile through DTC and will make the Fund’s shares DRS eligible as soon as reasonably practicably, and, except for the Fund’s responsibility to ensure that (i) the Fund’s governing documents permit the issuance of uncertificated shares, (ii) the Fund’s Board of Trustees has authorized the issuance of uncertificated shares, and (iii) all associated tax reporting requirements are complied with, will maintain the Fund’s eligibility to participate therein, in accordance with all applicable DTC requirements and SEC rules and regulations, including, without limitation, by mailing or otherwise making available to a securityholder (i) a securityholder transaction advice or statement within three (3) business days of each DRS account transaction that affects the securityholders’ position or more often as required by SEC regulations; and (ii) DRS book entry statements to registered owners at least annually or more often as required by SEC regulations.

 

AMECURRENT 706474999.3 10-May-13 17:07 AMECURRENT 706531312.2 14-May-13 16:10

2

 

3. Certain Representations and Warranties of the Fund .

 

The Fund represents and warrants to DST that:

A. It is a trust duly organized and existing and in good standing under the laws of the State of Delaware and it is duly qualified, as required, to carry on its business in the jurisdictions in which it is required to so qualify.

 

B. It is registered as a closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”).

 

C. All requisite steps have been and will at all times material hereto continue to be taken to qualify the Fund's shares for sale in all applicable states and such qualification will be effective at all times shares are offered for sale in such state. All shares issued and outstanding as of the date of this Agreement were issued pursuant to an effective registration statement under the 1933 Act or were exempt or were issued in a transaction or transactions exempt from the registration requirements of the 1933 Act. Any shares issued after the date hereof will be issued pursuant to an effective registration statement under the 1933 Act, unless in each case such shares or transaction is exempt from the registration requirements of the 1933 Act.

 

D. Each offer to sell or sale of shares of the Fund by the Fund or its agents in each state in which a share is offered for sale or sold will be made in material compliance with all applicable laws.

 

E. The Fund is empowered under applicable laws and by its Declaration of Trust to enter into and perform this Agreement.

 

F. Under the Declaration of Trust, the Fund is authorized to issue an unlimited amount of shares.

 

4. Scope of Appointment .

 

A. Subject to the terms and conditions set forth in this Agreement, the Fund hereby appoints DST as Transfer Agent and Dividend Disbursing Agent.

 

B. DST hereby accepts such appointment and agrees that it will act as the Fund's Transfer Agent and Dividend Disbursing Agent. DST agrees that it will also act as agent in connection with the Fund's periodic withdrawal payment accounts and other open accounts or similar plans for securityholders, if any.

 

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C. The Fund agrees to use its reasonable efforts to deliver to DST in Kansas City, Missouri, as soon as they are available, all of its securityholder account records.

 

D. DST, utilizing TA2000™, DST's computerized data processing system for securityholder accounting (the "TA2000 System") and in accordance with the terms and conditions of this Agreement, will perform the following services as Transfer Agent and Dividend Disbursing agent for the Fund, and as agent of the Fund for securityholder accounts thereof, in a timely manner: (i) issuing (including countersigning as applicable), repurchasing, redeeming, transferring and canceling shares (as applicable) upon receipt of appropriate documentation; (ii) maintaining and recording on the TA2000 System the appropriate number of shares for the appropriate securityholder accounts; (iii) maintaining and providing transaction journals; (iv) preparing securityholder meeting lists for use in connection with annual and other meetings of securityholders and certifying a copy of such list; (v) transmitting securityholder reports, prospectuses and other Fund documents to securityholders and other parties in accordance with instructions; (vi) withholding, as required by federal law, taxes on securityholder accounts, preparing, filing and mailing U.S. Treasury Department Forms 1099, 1042, and 1042S and performing and paying backup withholding as required for all securityholders; (vii) disbursing income dividends and capital gains and other distributions to securityholders and recording reinvestment of dividends and distributions in shares of the Fund; (viii) providing or making available online daily and monthly reports as provided by the TA2000 System and as requested by the Fund or its management company; (ix) maintaining those records necessary to carry out DST's duties hereunder, including all information reasonably required by the Fund to account for all transactions in the Fund shares; (xi) receiving correspondence pertaining to any former, existing or new securityholder accounts, processing such correspondence for proper recordkeeping, and responding promptly to securityholder correspondence; transmitting to dealers confirmations of wire order trades; transmitting copies of securityholder statements to securityholders and registered representatives of dealers in accordance with the instructions of an Authorized Person; and (xi) providing to the Fund escheatment reports as requested by an Authorized Person with respect to the status of accounts and outstanding payments on TA2000.

 

E. At the request of an Authorized Person, DST shall use reasonable efforts to provide the services set forth in Section 4.D. in connection with transactions (i) involving the provision of information to DST after the commencement of the nightly processing cycle of the TA2000 System or (ii) which require more manual intervention by DST, either in the entry of data or in the modification or amendment of reports generated by the TA2000 System than is usually required (the “Exception Services”).

 

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F. DST shall use reasonable efforts to provide, reasonably promptly under the circumstances, the same services with respect to any new, additional functions or features or any changes or improvements to existing functions or features as provided for in the Fund's instructions or, as applicable, the prospectus or application as amended from time to time, for the Fund provided (i) DST is advised in advance by the Fund of any changes therein and (ii) the TA2000 System and the mode of operations utilized by DST as then constituted supports such additional functions and features. If any addition to, improvement of or change in the features and functions currently provided by the TA2000 System or the operations as requested by the Fund requires an enhancement or modification to the TA2000 System or to operations as presently conducted by DST, DST shall not be liable therefore until such modification or enhancement is installed on the TA2000 System or new mode of operation is instituted. If any new, additional function or feature or change or improvement to existing functions or features or new service or mode of operation measurably increases DST's cost of performing the services required hereunder at the current level of service, DST shall advise the Fund of the amount of such increase and if the Fund elects to utilize such function, feature or service, DST shall be entitled to increase its fees by the amount of the increase in costs. In no event shall DST be responsible for or liable to provide any additional function, feature, improvement or change in method of operation until it has consented thereto in writing.

 

G. The provisions of this Section 4.G that follow this sentence shall take precedence over and shall govern in the event of any inconsistency between such provisions and any other provisions of this Agreement or any provisions of any exhibit or other attachment to this Agreement (or any provisions of any attachment to any such exhibit or attachment). The parties agree that – to the extent that DST provides any services under this Agreement that relate to compliance by the Fund with the Internal Revenue Code of 1986 or any other tax law, including without limitation the services described in Section 4.D(v) – it is the parties’ mutual intent that DST will provide only printing, reproducing, and other mechanical assistance to the Fund and that DST will not make any judgments or exercise any discretion of any kind, and particularly that DST will not make any judgments or exercise any discretion in: (1) determining generally the actions that are required in connection with such compliance or determining generally when such compliance has been achieved; (2) determining the amounts of taxes that should be withheld on securityholder accounts (except to the extent of making mathematical calculations of such amounts based on express instructions provided by the Fund); (3) determining the amounts that should be reported in or on any specific box or line of any tax form (except to the extent of making mathematical calculations of such amounts based on express instructions provided by the Fund which among other things identify the specific boxes and lines into which amounts calculated by DST are to be placed); (4) classifying the status of securityholders and securityholder accounts under applicable tax law (except to the extent of following express instructions regarding such classification provided by the Fund); and (5) paying withholding and other taxes, except pursuant to the express instructions of the Fund. The Fund agrees that it will provide express and comprehensive instructions to DST in connection with all of the services that are to be provided by DST under this Agreement that relate to compliance by the Fund with the Internal Revenue Code of 1986 or any other tax law (including without limitation the services described in Section 4.D(v)), including promptly providing responses to requests for direction that may be made from time to time by DST of the Fund in this regard.

 

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5. Limit of Authority .

 

Unless otherwise expressly limited by the resolution of appointment or by subsequent action by the Fund, the appointment of DST as Transfer Agent for the Fund hereunder will be construed to cover the full amount of the Fund’s issued and unissued shares of the class or classes for which DST is appointed as the same will, from time to time, be constituted, and as reduced or increased from time to time. In case of such reduction or increase the Fund will file with DST:

 

A. If the appointment of DST was theretofore expressly limited, a certified copy of a resolution of the Board of Trustees of the Fund increasing the authority of DST;

 

B. A certified copy of the amendment to the Declaration of Trust or By-Laws of the Fund authorizing the increase of shares (if such amendment is required under such governing documents of the Fund);

 

C. Prior to the issuance of any additional shares after the date hereof, the Fund will deliver to DST:

 

(1)         A certified copy of the order or consent of any and all governmental or regulatory authorities required by law to consent to the issuance of the increased shares, and an opinion of counsel that the order or consent of no other governmental or regulatory authority is required;

 

(2)         An opinion of counsel for the Fund stating:

 

(a) The status of the additional shares of the Fund under the 1933 Act, and any other applicable federal or state statute; and

 

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(b)    That the additional shares are, or when issued will be, validly issued, fully paid and non-assessable.

 

6. Compensation and Expenses .

 

A. In consideration for DST’s services hereunder as Transfer Agent and Dividend Disbursing Agent, the Fund will pay to DST from time to time a reasonable compensation for all services rendered as Agent, and also, all its reasonable billable expenses, charges, counsel fees, and other disbursements ("Compensation and Expenses") incurred in connection with the agency. Such compensation is set forth in a separate schedule to be agreed to by the Fund and DST, a copy of which is attached hereto as Exhibit A. If the Fund has not disputed and has not paid such Compensation and Expenses to DST by the Due Date (or Revised Due Date, if applicable), as those terms are defined below, DST may charge against any monies held under this Agreement, the amount of any Compensation and/or Expenses for which it shall be entitled to reimbursement under this Agreement. The monthly fee for an open account shall be charged in the month during which an account is opened through the month in which such account is closed. The monthly fee for a closed account shall be charged in the month following the month during which such account is closed and shall cease to be charged in the month following the Purge Date, as hereinafter defined in Section 17.

 

B. The Fund also agrees promptly to reimburse DST for all reasonable billable expenses or disbursements incurred by DST in connection with the performance of services under this Agreement including, but not limited to, expenses for postage, express delivery services, freight charges, envelopes, checks, drafts, forms (continuous or otherwise), specially requested reports and statements, telephone calls, telegraphs, stationery supplies, Fund counsel fees, outside printing and mailing firms (including DST Output, LLC), magnetic tapes, reels or cartridges (if sent to the Fund or to a third party at the Fund's request) and magnetic tape handling charges, off-site record storage, media for storage of records (e.g., microfilm, microfiche, optical platters, computer tapes), computer equipment installed at the Fund's request at the Fund's or a third party's premises, telecommunications equipment, telephone/telecommunication lines between the Fund and its agents, on one hand, and DST on the other, proxy soliciting, processing and/or tabulating costs, second-site backup computer facility, and transmission of statement data for remote printing or processing. The Fund agrees to pay postage expenses at least one day in advance if so requested. In addition, any other expenses incurred by DST at the request or with the consent of the Fund will be promptly reimbursed by the Fund.

 

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C. Amounts due hereunder not disputed in good faith shall be due and paid on or before the thirtieth (30 th ) business day after receipt of the statement therefor by the Fund (the "Due Date"). The Fund is aware that its failure to pay all amounts in a timely fashion so that they will be received by DST on or before the Due Date will give rise to costs to DST not contemplated by this Agreement, including but not limited to carrying, processing and accounting charges. Accordingly, subject to Section 6.D. hereof, in the event that any undisputed amounts due hereunder are not received by DST by the Due Date, the Fund shall pay a late charge equal to the lesser of the maximum amount permitted by applicable law or the product of one and one-half percent (1.5%) per month times the amount overdue times the number of months from the Due Date up to and including the day on which payment is received by DST. The parties hereby agree that such late charge represents a fair and reasonable computation of the costs incurred by reason of late payment or payment of amounts not properly due. Acceptance of such late charge shall in no event constitute a waiver of the Fund's or DST's default or prevent the non-defaulting party from exercising any other rights and remedies available to it.

 

D. In the event that any charges are disputed, the Fund shall, on or before the Due Date, pay all undisputed amounts due hereunder and notify DST in writing of any disputed charges for billable expenses which it is disputing in good faith. Payment for such disputed charges shall be due on or before the close of the fifth (5 th ) business day after the day on which the parties agree, in good faith, on the disputed charges (the "Revised Due Date"). Late charges shall not begin to accrue as to charges disputed in good faith until the first business day after the Revised Due Date.

 

E. The fees and charges set forth on Exhibit A shall increase or may be increased as follows:

 

(1) [Reserved];

 

(2) DST may increase the fees and charges set forth on Exhibit A upon at least ninety (90) days prior written notice to the Fund, if changes in existing laws, rules or regulations: (i) require substantial system modifications or (ii) materially increase cost of performance hereunder;

 

(3) DST may charge for additional features of TA2000 that are used by the Fund which features are not consistent with the Fund's current processing requirements; and

 

(4) In the event DST, at the Fund’s request or direction, performs Exception Services, DST shall be entitled to increase the fees and charges for such Exception Services from those set forth on Exhibit A to the extent such Exception Services increase DST’s cost of performance.

 

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If DST notifies the Fund of an increase in fees or charges pursuant to subparagraph (2) of this Section 6.E., the parties shall confer, diligently and in good faith and agree upon a new fee to cover the amount necessary, but not more than such amount, to reimburse DST for the Fund's allocable portion of the cost of developing the new software to comply with regulatory charges and for the increased cost of operation.

 

If DST notifies the Fund of an increase in fees or charges under subparagraphs (3) or (4) of this Section 6.E., the parties shall confer, diligently and in good faith, and agree upon a new fee to cover such new fund feature.

 

7. Operation of DST .

 

In connection with the performance of its services under this Agreement, DST is responsible for such items as:

 

A. That entries in DST's records, and in the Fund's records on the TA2000 System created by DST, reflect the orders, instructions, and other information received by DST from the Fund, the Fund's distributor, manager or principal underwriter, the Fund's investment adviser, the Fund’s sponsor, the Fund’s custodian, or the Fund’s administrator and any other person whom the Fund names on Exhibit F (each an “Authorized Person”), broker-dealers or securityholders;

 

B. That securityholder lists, securityholder account verifications, confirmations and other securityholder account information to be produced from its records or data be available and accurately reflect the data in the Fund’s records on the TA2000 System;

 

C. The accurate and timely issuance of dividend and distribution payments in accordance with instructions received from the Fund and the data in the Fund's records on the TA2000 System;

 

D. That Fund share transactions and payments be effected timely, under normal circumstances on the day of receipt, and accurately in accordance with instructions received by DST from Authorized Persons, broker-dealers or securityholders and the data in the Fund's records on the TA2000 System;

 

E. The requiring of proper forms of instructions, signatures and signature guarantees and any necessary documents supporting the opening of securityholder accounts, transfers, share transactions and securityholder account transactions, all in conformance with DST's present procedures as set forth in its Legal Manual, Third Party Check Procedures, Checkwriting Draft Procedures, Compliance + and Identity Theft Programs and Signature Guarantee Procedures (collectively the "Procedures") with such changes or deviations therefrom as may be from time to time required or approved by the Fund and the rejection of orders or instructions not in good order in accordance with the prospectus (as applicable) or the Procedures; and

 

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F. The maintenance of customary records in connection with its agency, and particularly those records required to be maintained pursuant to subparagraph (2)(iv) of paragraph (b) of Rule 31a-1 under the 1940 Act, for the periods required by Rule 31a-2 under the 1940 Act.

 

8. Indemnification .

 

A. DST shall provide the services set forth in, and fulfill its obligations under, this Agreement in accordance with the terms and conditions set forth in this Agreement, Section 17A of the 1934 Act, and the rules and regulations thereunder, any other federal or state laws applicable to DST’s acting as a transfer agent or any local laws which are the subject of a Memorandum issued by the Investment Company Institute or brought to DST’s attention by an Authorized Person. For those activities or actions delineated in the Procedures, DST shall be presumed to have acted in accordance with the terms and conditions of this Agreement if DST has acted in accordance with the Procedures in effect when DST acted or omitted to act, provided that any change to the Procedures made after the date of this Agreement does not materially reduce or otherwise adversely alter the nature, quantity or quality of services to be provided by DST under this Agreement.

 

B. DST shall not be responsible for, and the Fund shall indemnify and hold DST harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability (“Adverse Consequences”) which may be asserted against DST or for which DST may be held to be liable, arising out of or attributable to (including without limitation any attorney’s fees or court costs incurred by DST in enforcing this right to the Fund’s indemnification):

 

(1) All actions or omissions of DST required to be taken or omitted by DST pursuant to this Agreement, provided that DST has fulfilled all obligations under this Agreement with respect to the matter for which DST is seeking indemnification and provided further that DST has acted or omitted to act in good faith and without negligence;

 

(2) The Fund's refusal or failure to comply with the terms of this Agreement or the material breach of any representation or warranty of the Fund hereunder;

 

(3) The good faith reliance on, or the carrying out of, any written or oral instructions or requests of persons designated by the Fund in writing (see Exhibit B) from time to time as authorized to give instructions on its behalf or representatives of an Authorized Person or DST's good faith reliance on, or use of, information, data, records, transmissions and documents received from, or which have been prepared and/or maintained by the Fund, its investment advisor, its sponsor, its principal underwriter or any other person or entity from whom the Fund instructs DST to accept and utilize information, data, records, transmissions and documents;

 

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(4) The offer or sale of the Fund's shares in violation of any requirement under federal securities laws or regulations or the securities laws or regulations of any state or in violation of any stop order or other determination or ruling by any federal agency or state with respect to the offer or sale of such shares in such state (unless such violation results from DST's failure to comply with written instructions of the Fund or of any officer of the Fund that no offers or sales be permitted to remain in the Fund's securityholder records in or to residents of such state);

 

(5) The Fund's errors and mistakes in its use of the TA2000 System, the data center, computer and related equipment used to access the TA2000 System (the "DST Facilities"), and control procedures relating thereto in the verification of output and in the remote input of data;

 

(6) Errors, inaccuracies, and omissions in, or errors, inaccuracies or omissions of DST arising out of or resulting from such errors, inaccuracies and omissions in, the Fund's records, securityholder and other records, delivered to DST hereunder by the Fund or its prior agent(s);

 

(7) Actions or omissions to act by the Fund or agents designated by the Fund with respect to duties assumed thereby as provided for in Section 21 hereof; and

 

(8) DST’s performance of Exception Services except where DST acted or omitted to act in bad faith, with reckless disregard of its obligations or with gross negligence.

 

C. DST shall indemnify and hold the Fund harmless from and against any and all Adverse Consequences arising out of DST’s refusal or failure to comply with the terms of, or to fulfill its obligations under, this Agreement or arising out of or attributable to DST's breach of any representation or warranty of DST hereunder; provided, however, that DST's cumulative liability during any term of this Agreement with respect to, arising from or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by the Fund to DST as fees and charges, but not including reimbursable expenses, during the six (6) months immediately preceding the event giving rise to DST’s liability.

 

D. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY UNDER THIS AGREEMENT BE LIABLE TO ANY PERSON, INCLUDING, WITHOUT LIMITATION THE OTHER PARTY, FOR PUNITIVE, CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR OTHER SPECIAL DAMAGES UNDER ANY PROVISION OF THIS AGREEMENT OR FOR ANY ACT OR FAILURE TO ACT HEREUNDER, EVEN IF ADVISED OF THE POSSIBILITY THEREOF.

 

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E. Promptly after receipt by an indemnified person of notice of the commencement of any action, such indemnified person will, if a claim in respect thereto is to be made against an indemnifying party hereunder, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party will not relieve an indemnifying party from any liability that it may have to any indemnified person for contribution or otherwise under the indemnity agreement contained herein except to the extent it is prejudiced as a proximate result of such failure to timely notify. In case any such action is brought against any indemnified person and such indemnified person seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, assume the defense thereof (in its own name or in the name and on behalf of any indemnified party or both with counsel reasonably satisfactory to such indemnified person); provided, however, if the defendants in any such action include both the indemnified person and an indemnifying party and the indemnified person shall have reasonably concluded that there may be a conflict between the positions of the indemnified person and an indemnifying party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified persons which are inconsistent with those available to an indemnifying party, the indemnified person or indemnified persons shall have the right to select one separate counsel (in addition to local counsel) to assume such legal defense and to otherwise participate in the defense of such action on behalf of such indemnified person or indemnified persons at such indemnified party's sole expense. Upon receipt of notice from an indemnifying party to such indemnified person of its election so to assume the defense of such action and approval by the indemnified person of counsel, which approval shall not be unreasonably withheld (and any disapproval shall be accompanied by a written statement of the reasons therefor), the indemnifying party will not be liable to such indemnified person hereunder for any legal or other expenses subsequently incurred by such indemnified person in connection with the defense thereof. An indemnifying party will not settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified persons are actual or potential parties to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified person from all liability arising out of such claim, action, suit or proceeding. An indemnified party will not, without the prior written consent of the indemnifying party settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder. If it does so, it waives its right to indemnification therefor.

 

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9. Certain Covenants of DST and the Fund .

 

A. All requisite steps will be taken by the Fund from time to time when and as necessary to qualify the Fund's shares for sale in all states in which the Fund's shares shall at the time be offered for sale and require qualification. If at any time the Fund receives notice or becomes aware of any stop order or other proceeding in any such state affecting such qualification or the sale of the Fund's shares, or of any stop order or other proceeding under the federal securities laws affecting the sale of the Fund's shares, the Fund will give prompt notice thereof to DST.

 

B. DST hereby agrees to perform such services and functions as are set forth herein and establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of paper forms and documentation, and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such documents and devices, and to carry commercially reasonable insurance.

 

C. DST agrees that all records maintained by DST relating to the services to be performed by DST under this Agreement are the property of the Fund and will be preserved at least for the periods required by the 1940 Act and will be surrendered promptly to the Fund on request.

 

D. DST agrees to furnish the Fund annual reports of its financial condition, consisting of a balance sheet, earnings statement and any other public financial information reasonably requested by the Fund. The annual financial statements will be certified by DST's certified public accountants.

 

E. DST represents and agrees that it will use its reasonable efforts to keep current on the trends of the investment company industry relating to securityholder services and will use its reasonable efforts to continue to modernize and improve.

 

F. DST will permit the Fund and its authorized representatives (subject to execution of DST’s standard confidentiality and non-use agreements) to make periodic inspections of its operations as such involves or is utilized by DST to provide services to the Fund at reasonable times during business hours. DST will permit the Internal Revenue Service and any other tax authority to inspect its operations in connection with examinations by any such authority of DST’s or other taxpayer’s compliance with the tax laws, and the costs of each such inspection and examination shall be paid by the Fund to the extent that the examination relates to DST’s performance of services under this Agreement. DST will permit duly authorized federal examiners to make periodic inspections of its operations as such would involve the Fund to obtain, inter alia, information and records relating to DST’s performance of its Compliance + Program or Identity Theft Program obligations and to inspect DST’s operations for purposes of the Program.” Any reasonable costs imposed on DST by such examiners in connection with such examination (other than fines or other penalties) shall be paid by the Fund.

 

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10. Recapitalization or Readjustment .

 

In case of any recapitalization, readjustment or other change in the capital structure of the Fund requiring a change in the form of share certificates (if any), DST will issue or register certificates in the new form, if any, in exchange for, or in transfer of, the outstanding certificates in the old form, upon receiving:

 

A. Written instructions from an officer of the Fund;

 

B. Certified copy of the amendment to the Declaration of Trust or other document effecting the change;

 

C. Certified copy of the order or consent of each governmental or regulatory authority, required by law to the issuance of the shares in the new form, and an opinion of counsel that the order or consent of no other government or regulatory authority is required;

 

D. Specimens of the new certificates in the form approved by the Board of Directors of the Fund, with a certificate of the Secretary of the Fund as to such approval;

 

E. Opinion of counsel for the Fund stating:

 

(1) The status of the shares of the Fund in the new form under the 1933 Act, and any other applicable federal or state statute; and

 

(2) That the issued shares in the new form are, and all unissued shares will be, when issued, validly issued, fully paid and non-assessable.

 

11. Death, Resignation or Removal of Signing Officer .

 

The Fund will promptly provide DST written notice of any change in the officers authorized to written instructions or requests, together with two signature cards bearing the specimen signature of each newly authorized officer.

 

12. Future Amendments of Declaration and Bylaws, as appropriate .

 

The Fund will promptly provide DST copies of all material amendments to its Declaration of Trust or Bylaws made after the date of this Agreement.

 

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13. Instructions, Opinion of Counsel and Signatures .

 

At any time DST may apply to any person authorized by the Fund to give instructions to DST, and may, with the approval of a Fund officer, consult with legal counsel for the Fund or in the event the Fund is unresponsive, to DST’s own legal counsel at the expense of the Fund, with respect to any matter arising in connection with the agency and it will not be liable for any action taken or omitted by it in good faith and without negligence in reliance upon such instructions or upon the opinion of Fund counsel. In connection with services provided by DST under this Agreement that relate to compliance by the Fund with the Internal Revenue Code of 1986 or any other tax law, including without limitation the services described in Section 4.D(v), DST shall have no obligation to continue to provide such services after it has asked the Fund to give it instructions which it reasonably believes are needed by it to so continue to provide such services and before it receives the needed instructions from the Fund, and DST shall have no liability for any damages (including without limitation penalties imposed by any tax authority) caused by or that result from its failure to provide services as contemplated by this sentence. DST will be protected in acting upon any paper or document reasonably believed by it to be genuine and to have been signed by the proper person or persons and will not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. It will also be protected in recognizing share certificates (if any) which it reasonably believes to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former Transfer Agent or Registrar, or of a co-Transfer Agent or co-Registrar.

 

14. Force Majeure and Disaster Recovery Plans.

 

A. Neither party shall be responsible or liable for its failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation: any interruption, loss or malfunction of any utility, transportation, computer (hardware or software) or communication service; inability to obtain labor, material, equipment or transportation, or a delay in mails; governmental or exchange action, statute, ordinance, rulings, regulations or direction; war, strike, riot, emergency, civil disturbance, terrorism, vandalism, explosions, labor disputes, freezes, floods, fires, tornados, acts of God or public enemy, revolutions, or insurrection; or any other cause, contingency, circumstance or delay not subject to such party's reasonable control which prevents or hinders such party's performance hereunder. The foregoing shall not relieve DST of its obligations to establish and maintain the business contingency plan discussed in Sections 14.B and 14.C below.

 

B. Provided the Fund is paying its pro rata portion of the charge therefor, DST shall provide back-up facilities to the data center or centers used by DST to provide the transfer agency services hereunder (collectively, the “Back-Up Facilities”) capable of supplying the transfer agency services specified herein to the Fund in case of damage to the primary facility providing those services. The back-up to the data center operations facility will have no other function that could not be suspended immediately for an indefinite period of time to the extent necessary to allow, or continue to be supported while allowing, the facility to function as a back-up facility and support all functionality scheduled to be supported in DST’s Business Contingency Plan. Transfer to the Back-Up Facility shall commence promptly after the DST’s declaration of a disaster and shall be conducted in accordance with DST’s Business Contingency Plan, which Plan calls for the transfer of TA2000 to the Back-Up Facilities to be completed within 4 hours after DST’s declaration of a disaster. The Fund shall not bear any costs (in addition to the Fees and charges set forth in Exhibit A attached hereto) related to such transfer. At least once annually, DST shall complete a successful test of the Business Contingency Plan.

 

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C. DST also currently maintains and shall continue to maintain, separate from the area in which the operations which provides the services to the Fund hereunder are located, a Crisis Management Center consisting of phones, computers and the other equipment necessary to operate a full service transfer agency business in the event one of its operations areas is rendered inoperable. The transfer of operations to other operating areas or to the Crisis Management Center is and will continue to be also covered in DST's Business Contingency Plan.

 

15. Certification of Documents .

 

The required copy of the Declaration of Trust of the Fund and copies of all amendments thereto will be certified by the Secretary of State (or other appropriate official) of the state of organization, and if such Declaration of Trust and amendments are required by law to be also filed with a county, city or other office or official body, a certificate of such filing will appear on the certified copy submitted to DST. A copy of the order or consent of each governmental or regulatory authority required by law to the issuance of the shares (if any) will be certified by the Secretary or Clerk of such governmental or regulatory authority, under any proper seal of such authority. The copy of the Bylaws and copies of all amendments thereto, and copies of resolutions of the Board of Trustees of the Fund, will be certified by the Secretary or an Assistant Secretary of the Fund.

 

16. Records .

 

DST will maintain customary records in connection with its agency, and particularly will maintain those records required to be maintained pursuant to Rule 31a-1 under the 1940 Act for the periods required by Rule 31a-2 under the 1940 Act. Without limiting the foregoing, the records to be maintained and preserved by DST on the TA2000 System under this Agreement shall be maintained and preserved in accordance with the following:

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A. Annual Purges by August 31: DST and the Fund shall mutually agree upon a date (the “Purge Date”) for the annual purge of the appropriate history transactions from the Transaction History (A88) file for accounts (both regular and tax advantaged accounts) that were open as of January 1 of the current year, such purge to be complete no later than August 31. Purges completed after this date will subject Fund to the Aged History Retention fees set forth in the Fee Schedule attached hereto as Exhibit A.

 

B. Purge Criteria: In order to avoid the Closed Account fees, history data for regular or ordinary accounts (that is, non-tax advantaged accounts) must be purged if the confirmation date of the history transaction is prior to January 1 of the current year and history data for tax advantaged accounts (retirement and educational savings accounts), if any, must be purged if the confirmation date of the history transaction is prior to January 1 of the prior year. All purged history information shall be retained on magnetic tape for seven (7) years.

 

C. Purged History Retention Options (entail an additional fee): For the additional fees set forth on the Fee Schedule attached hereto as Exhibit A, Fund may choose (i) to place purged history information on the Purged Transaction History (A19) table or (ii) to retain history information on the Transaction History (A88) file beyond the timeframes defined above. Retaining information on the A19 table allows for viewing of this data through online facilities and E-Commerce applications. This database does not support those histories being printed on statements and reports and is not available for on request job executions.

 

17. Disposition of Books, Records, and Canceled Certificates (if any) .

 

DST may send periodically to the Fund, or to where designated by the Secretary or an Assistant Secretary of the Fund, all books, documents, and all records no longer deemed needed for current purposes, and share certificates (if any) which have been canceled in transfer or otherwise, upon the understanding that such books, documents, records, and any such share certificates will be maintained by the Fund under and in accordance with the requirements of Section 17Ad-7 adopted under the 1934 Act, including by way of example and not limitation Section 17Ad-7(g) thereof. Any such materials will not be destroyed by the Fund without the consent of DST (which consent will not be unreasonably withheld).

 

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18. Provisions Relating to DST as Transfer Agent .

 

A. DST will make original issues of shares or, if shares are certificated, share certificates, upon written request of an officer of the Fund and upon being furnished with a certified copy of a resolution of the Board of Directors authorizing such original issue, an opinion of counsel as outlined in subparagraph 1.F. of this Agreement, any documents required by Sections 5.C. or 10. of this Agreement, and necessary funds for the payment of any original issue tax.

 

B. The Fund will furnish DST such evidence as may be reasonably required by DST to show the actual value of the shares. If no taxes are payable, DST will be furnished with an opinion of outside counsel to that effect.

 

C. Shares will be transferred and, if shares are certificated, new certificates issued in transfer, or shares accepted for repurchase, redemption or liquidation (as applicable) and funds remitted therefor, or book entry transfer be effected, upon surrender of the old certificates in form (if any) or receipt by DST of instructions deemed by DST properly endorsed for transfer or other share transaction accompanied by such documents as DST may deem necessary to evidence the authority of the person making the transfer or other transaction. DST reserves the right to refuse to transfer, sell, repurchase, redeem or liquidate shares (as applicable) until it is satisfied that the endorsement or signature on the certificate (if any) or any other document is valid and genuine, and for that purpose it may require a guaranty of signature in accordance with the Signature Guarantee Procedures. DST also reserves the right to refuse to transfer, sell, redeem, repurchase or liquidate shares (as applicable) until it is satisfied that the requested share transaction is legally authorized, and it will incur no liability for the refusal in good faith to make such transactions which, in its judgment, are improper or unauthorized. DST may, in effecting such share transactions, rely upon the Procedures, Simplification Acts, Uniform Commercial Code or other statutes that protect DST, the Fund or both in not requiring complete fiduciary documentation. In cases in which DST is not directed or otherwise required to maintain the consolidated records of security holder's accounts, DST will not be liable for any loss which may arise by reason of not having such records.

 

D. When mail is used for delivery of share certificates (if any), DST will forward any such share certificates in "nonnegotiable" form by first class or registered mail and share certificates in "negotiable" form by registered mail, all such mail deliveries to be covered while in transit to the addressee by insurance arranged for by DST.

 

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E. DST will issue and mail any subscription warrants, certificates (if any) representing share dividends or split ups, or act as conversion agent upon receiving written instructions from any officer of the Fund and such other documents as DST deems necessary.

 

F. DST will issue, transfer, and split up certificates (if any) and will issue certificates (if any) representing full shares upon surrender of scrip certificates aggregating one full share or more when presented to DST for that purpose upon receiving written instructions from an officer of the Fund and such other documents as DST may deem reasonably necessary.

 

G. If the Fund issues shares in certificated form, DST may issue new certificates in place of certificates represented to have been lost, destroyed, stolen or otherwise wrongfully taken upon receiving instructions from the Fund and indemnity satisfactory to DST and the Fund, and may issue new certificates in exchange for, and upon surrender of, mutilated certificates. Such instructions from the Fund will be in such form as will be approved by the Board of Trustees of the Fund and will be in accordance with the provisions of law and the bylaws of the Fund governing such matter.

 

H. DST will supply a securityholders list to the Fund for its annual meeting upon receiving a request from an officer of the Fund. It will also, at the expense of the Fund, supply lists at such other times as may be requested by an officer of the Fund.

 

I. Upon receipt of written instructions of an officer of the Fund, DST will, at the expense of the Fund, address and mail (or otherwise transmit) notices to securityholders.

 

J. In case of any request or demand for the inspection of the share books of the Fund or any other books in the possession of DST by a securityholder, DST will endeavor to notify the Fund and to secure instructions as to permitting or refusing such inspection. DST reserves the right, however, to exhibit the stock books or other books to any person in case it is advised by its counsel that it may be held responsible for the failure to exhibit the stock books or other books to such person.

 

K. DST agrees to promptly furnish the Fund with (1) annual reports of its financial condition, consisting of a balance sheet, earnings statement and any other financial information as is made public by DST in connection with the foregoing and (2) semi-annually with a copy of the report issued by DST’s certified public accountants pursuant to Rule 17Ad-13 under the 1934 Act as filed with SEC. The annual financial statements will be certified by DST's certified public accountants and the posting of a current copy thereof on DST’s website shall be deemed to be delivery to the Fund.

 

  L. (1) DST shall assist the Fund to fulfill the Fund’s responsibilities under certain provisions of USA PATRIOT Act, U.S. sanctions laws and regulations issued by the Office of Foreign Assets Control (“OFAC”), Sarbanes-Oxley Act, Title V of Gramm Leach Bliley Act, 1933 Act, 1934 Act, and 1940 Act, including, inter alia, Rule 38a-1, each as applicable, by complying with Compliance +™, a compliance program that focuses on certain business processes that represent key activities of the transfer agent/service provider function (the “Compliance + Program”), a copy of which has hitherto been made available to Fund. These business processes are anti-money laundering, certificate processing, correspondence processing, fingerprinting, lost securityholder processing, reconciliation and control, transaction processing, customer identification, transfer agent administration and safeguarding fund assets and securities. DST reserves the right to make changes thereto as experience suggests alternative and better ways to perform the affected function. DST shall provide the Fund with written notice of any such changes.

 

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(2) DST shall perform the procedures set forth in the Compliance + Program, as amended by DST from time to time (subject to Section 9.G hereof), which pertain to DST’s performance of those transfer agency services in accordance with the terms and conditions set forth in this Agreement, (ii) implement and maintain internal controls and procedures reasonably necessary to insure that our employees act in accordance with the Compliance + Program, and (iii) provide the Fund with written notice of any material changes made to the Program as attached hereto.

 

(3) Notwithstanding the foregoing, DST’s obligations shall be solely as are set forth in this Section and in the Compliance + Program, as amended, and any of obligations under the enumerated Acts and Regulations that DST has not agreed to perform on the Fund’s behalf under the Compliance + Program or under this Agreement shall remain the Fund’s sole obligation.

 

(4) DST shall promptly provide the Fund’s Chief Compliance Officer (“CCO”), upon request, copies of its policies and procedures for compliance by DST with the Federal Securities Laws as defined in Rule 38a-1 under the Investment Company Act (as they relate to the activities contemplated by Agreement) and promptly provide the CCO with copies of any material changes to those policies and procedures, including changes to the Compliance + Program. DST shall cooperate with the CCO to facilitate the CCO’s performance of his/her responsibilities under Rule 38a-l to review, evaluate and report to the Fund’s Board of Trustees on the operation of DST’s compliance policies and procedures and shall promptly report to the CCO any “Material Compliance Matter” as defined by Rule 38a-1(e)(2). At least annually, DST shall provide a certification to the CCO to the effect that DST has in place and has implemented policies and procedures that are reasonably designed to ensure compliance by DST with the Federal Securities Laws, as they relate to the activities contemplated by Agreement as well DST’s assistance to the Fund to assist it to comply with certain of its obligations under Federal Securities Laws, as specifically provided in this 18.L above.

 

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M. In connection with the enactment of the Red Flags Regulations (the “Regulations”) promulgated jointly by the Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); National Credit Union Administration (NCUA); and Federal Trade Commission (FTC or Commission) implementing section 114 of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) and final rules implementing section 315 of the FACT Act, to the extent applicable to the Fund:

 

(1) DST shall assist the Fund to fulfill the Fund’s responsibilities under certain provisions of the Regulations that focus on certain business processes that represent key activities of the transfer agent/service provider function, as set forth in the DST identity theft program (the “Identity Theft Program”), a current copy of which has hitherto been made available to Fund. These business processes are set forth in the Identity Theft Program. DST: (a) reserves the right to make changes thereto as experience suggests alternative and better ways to perform the affected function and (b) shall provide Fund with written notice of any such changes thereto.

 

(2) DST shall: (i) perform the procedures set forth in the Identity Theft Program, as amended by DST from time to time, which pertain to DST’s performance of those transfer agency services in accordance with the terms and conditions set forth in this Agreement, (ii) implement and maintain internal controls and procedures reasonably necessary to insure that DST’s employees act in accordance with the Identity Theft Program, and (iii) provide the Fund with written notice of any material changes made to the Identity Theft Program.

 

(3) Notwithstanding the foregoing, DST’s obligations shall be solely as are set forth in this Section 18.M. and in the Identity Theft Program and any obligations under the Regulations that DST has not agreed to perform under such Identity Theft Program or under this Agreement shall remain the sole obligation of the Fund.

 

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(4) With respect to the Identity Theft Program, DST will permit the Fund, its designated representatives and duly authorized governmental and self-regulatory examiners to make periodic inspections of its operations as such would involve Fund, to obtain, inter alia, information and records relating to DST’s performance of its obligations under the Identity Theft Program, and to inspect DST’s operations for purposes of determining DST’s compliance with the Identity Theft Program. Any costs imposed by such examiners in connection with such examination (other than fines or other penalties arising solely out of DST’s failure to fulfill its obligations under the Identity Theft Program) shall be paid by Fund.

 

N. DST shall establish on behalf of the Fund banking relationships for the conduct of the business of the Fund in accordance with the terms set forth in Section 19.D. of this Agreement.

 

19.          Provisions Relating to Dividend Disbursing and Paying Agency (as well as the receipt, deposit and payment of funds by the Transfer Agent in connection with Fund share transactions) .

 

A. DST will, at the request and expense of the Fund, provide a special form of check containing the imprint of any device or other matter desired by the Fund. Said checks must, however, be of a form and size reasonably convenient for use by DST.

 

B. If the Fund desires to include additional printed matter, financial statements, etc., with the dividend checks, the same will be furnished DST within a reasonable time prior to the date of mailing of the dividend checks, at the request and expense of the Fund.

 

C. If the Fund desires its distributions mailed in any special form of envelopes, sufficient supply of the same will be furnished to DST but the size and form of said envelopes will be subject to the approval of DST (which shall not be unreasonably withheld). If stamped envelopes are used, they must be furnished by the Fund; or if postage stamps are to be affixed to the envelopes, the stamps or the cash necessary for such stamps must be furnished by the Fund.

 

D. DST, acting as agent for the Fund, is hereby authorized (1) to establish in the name of, and to maintain on behalf of, the Fund, on the usual terms and conditions prevalent in the industry, including limits or caps based on fees paid over some period of time on the maximum liability of such banks, as hereinafter defined, one or more deposit accounts at a nationally or regionally known banking institution that is qualified under Section 17(f) of the 1940 Act to serve as a custodian of the assets of a registered management investment company (the “Bank”) into which DST shall deposit the funds DST receives for payment of dividends, distributions, purchases of Fund’s shares, transfers of Fund shares, sales of Fund shares, corporate re-organizations (including recapitalizations or liquidations) or any other disbursements made by DST on behalf of the Fund provided for in this Agreement, (2) to draw checks upon such accounts, to issue orders or instructions to the Bank for the payment out of such accounts as necessary or appropriate to accomplish the purposes for which such funds were provided to DST, and (3) to establish, to implement and to transact Fund business through Automated Clearinghouse (“ACH”), Draft Processing, Wire Transfer and any other banking relationships, arrangements and agreements with such Bank as are necessary or appropriate to fulfill DST’s obligations under this Agreement. DST, acting as agent for the Fund, is also hereby authorized to execute on behalf and in the name of the Fund, on the usual terms and conditions prevalent in the industry, including limits or caps based on fees paid over some period of time on the maximum liability of such Banks, agreements with banks for ACH, wire transfer, draft processing services, as well as any other services which are necessary or appropriate for DST to utilize to accomplish the purposes of this Agreement. In each of the foregoing situations the Fund shall be liable on such agreements with the Bank as if it itself had executed the agreement. DST shall not be liable for any Adverse Consequences arising out of or resulting from errors or omissions of the Bank provided, however, that DST shall have acted in good faith, with due diligence and without negligence.

 

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E. DST is authorized and directed to stop payment of checks theretofore issued hereunder, but not presented for payment, when the payees thereof allege either that they have not received the checks or that such checks have been mislaid, lost, stolen, destroyed or through no fault of theirs, are otherwise beyond their control, and cannot be produced by them for presentation and collection, and, to issue and deliver duplicate checks in replacement thereof.

 

20. Assumption of Duties By the Fund or Agents Designated By the Fund .

 

A. The Fund or its designated agents other than DST may assume certain duties and responsibilities of DST or those services of transfer agent and dividend disbursing agent as those terms are referred to in Section 4.D. of this Agreement, including but not limited to answering and responding to telephone inquiries from securityholders and brokers, accepting securityholder and broker instructions (either or both oral and written) and transmitting orders based on such instructions to DST, preparing and mailing confirmations, obtaining certified TIN numbers, classifying the status of securityholders and securityholder accounts under applicable tax law, establishing securityholder accounts on the TA2000 System and assigning social codes and Taxpayer Identification Number codes thereof, and disbursing monies of the Fund, said assumption to be embodied in writing to be signed by both parties.

 

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B. To the extent the Fund or its designated agent assumes such duties and responsibilities, DST shall be relieved from all responsibility and liability therefor and is hereby indemnified and held harmless against any liability therefrom and in the same manner and degree as provided for in Section 8 hereof.

 

21. Termination of Agreement .

 

A. This Agreement shall be in effect for an initial period of three (3) years (the “Initial Term”) and thereafter may be terminated by either party as of the last day of the then current term by the giving to the other party of at least 120 days' prior written notice, provided, however, that the effective date of any termination (other than termination pursuant to B below) shall not occur during the period from December 15 through March 30 of any year to avoid adversely impacting year end. If such notice is not given by either party to the other at least 120 days prior to the end of the then current term, this Agreement shall automatically extend for a new term equivalent to the same number of years as the Initial Term unless a different period is contained in any new Fee Schedule as the period during which such Fee Schedule shall be effective (in which latter event the period for which the Fee Schedule applies shall be the length of the new term), each such successive term or period, as applicable, being a new “term” of this Agreement, upon the expiration of any term hereof unless terminated as hereinafter provided in Section 21.B.

 

B. In addition to the termination rights set out in A above, each party, in addition to any other rights and remedies, shall have the right to terminate this Agreement forthwith upon the occurrence at any time of any of the following events with respect to the other party:

 

(1) The bankruptcy of the other party or its assigns or the appointment of a receiver for the other party or its assigns; or

 

(2) A material breach of this Agreement by the other party, which breach continues for thirty (30) days after receipt of written notice from the first party; or

 

(3) Failure by the Fund to pay Compensation and Expenses as they become due, which failure continues for thirty (30) days after receipt of written notice from DST.

 

C. In the event of termination, the Fund will promptly pay DST all undisputed amounts due to DST hereunder and DST will promptly: transfer the records of the Fund to the designated successor transfer agent, provide reasonable assistance to the Fund and its designated successor transfer agent, and provide other information relating to its services provided hereunder (subject to the recompense of DST for such assistance at its standard rates and fees for personnel then in effect at that time); provided, however, as used herein "reasonable assistance" and "other information" shall not include assisting any new service or system provider to modify, alter, enhance, or improve its system or to improve, enhance, or alter its current system, or to provide any new, functionality or to require DST to disclose any DST Confidential Information, as hereinafter defined, or any information which is otherwise confidential to DST.

 

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22. Confidentiality .

 

A. DST agrees that, except as provided in the last sentence of Section 19.J. hereof, or as otherwise required by law, DST will keep confidential all records of, and information in its possession relating to, the Fund or its securityholders or securityholder accounts (“Fund Confidential Information”) and will not disclose the same to any person not an affiliate of DST, except as required by applicable law, as necessary to fulfill DST’s obligations under this Agreement or at the request or with the consent of the Fund. DST acknowledges that any unauthorized use, misuse, disclosure or taking of Fund Confidential Information may be subject to civil liabilities and criminal penalties under applicable law. DST will advise all of its employees and agents who have access to any Fund Confidential Information or to any computer equipment capable of accessing Fund Confidential Information of the foregoing. DST acknowledges that disclosure of Fund Confidential Information may give rise to an irreparable injury to the Fund and its securityholders inadequately compensable in damages. Accordingly, the Fund may seek (without the posting of any bond or other security) injunctive relief against the breach of the foregoing undertaking of confidentiality and nondisclosure, in addition to any other legal remedies which may be available, and DST consents to the obtaining of such injunctive relief.

 

B. The Fund agrees to keep confidential all financial statements and other financial records received from DST, the terms and provisions of this Agreement, all accountant’s reports relating to DST, and all manuals, systems and other technical information and data, not publicly disclosed, relating to DST's operations and programs furnished to it by DST pursuant to this Agreement and will not disclose the same to any person except at the request or with the consent of DST or as required by law.

 

  C. (1) The Fund acknowledges that DST has proprietary rights in and to the TA2000 System used to perform services hereunder including, but not limited to the maintenance of securityholder accounts and records, processing of related information and generation of output, including, without limitation any changes or modifications of the TA2000 System and any other DST programs, data bases, supporting documentation, or procedures (collectively "DST Confidential Information") which the Fund's access to the TA2000 System or computer hardware or software may permit the Fund or its employees or agents to become aware of or to access and that the DST Confidential Information constitutes confidential material and trade secrets of DST. The Fund agrees to maintain the confidentiality of the DST Confidential Information.

 

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(2) The Fund acknowledges that any unauthorized use, misuse, disclosure or taking of DST Confidential Information which is confidential as provided by law, or which is a trade secret, residing or existing internal or external to a computer, computer system, or computer network, or the knowing and unauthorized accessing or causing to be accessed of any computer, computer system, or computer network, may be subject to civil liabilities and criminal penalties under applicable state law. The Fund will advise all of its employees and agents who have access to any DST Confidential Information or to any computer equipment capable of accessing DST or DST hardware or software of the foregoing..

 

(3) The Fund acknowledges that disclosure of the DST Confidential Information may give rise to an irreparable injury to DST inadequately compensable in damages. Accordingly, DST may seek (without the posting of any bond or other security) injunctive relief against the breach of the foregoing undertaking of confidentiality and nondisclosure, in addition to any other legal remedies which may be available, and the Fund consents to the obtaining of such injunctive relief. All of the undertakings and obligations relating to confidentiality and nondisclosure, whether contained in this Section or elsewhere in this Agreement shall survive the termination or expiration of this Agreement for a period of ten (10) years; provided that, to the extent Fund or DST Confidential Information includes information that is also a Trade Secret as defined by the Uniform Trade Secrets Act, the obligation to protect such Trade Secrets shall survive the termination of this Agreement and shall remain for so long as such Confidential Information constitutes a Trade Secret, as defined by the Uniform Trade Secrets Act.

 

D. Notwithstanding any other provision of this Agreement, nothing herein contained shall be deemed to prevent the disclosure of any Party's Confidential Information if such disclosure is required by court order, or if such disclosure is required by applicable law or the rules and regulations of any administrative or governmental agency (a “Required Disclosure”); provided, however, in the event of any Required Disclosure, the Party required to disclose same shall immediately provide written notice to the other Party for purposes of challenging or disputing such Required Disclosure, all in such other Party’s sole and respective discretion.

 

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23. Changes and Modifications .

 

A. During the term of this Agreement DST will use on behalf of the Fund without additional cost all modifications, enhancements, or changes which DST may make to the TA2000 System in the normal course of its business and which are applicable to functions and features offered by the Fund, unless substantially all DST clients are charged separately for such modifications, enhancements or changes, including, without limitation, substantial system revisions or modifications necessitated by changes in existing laws, rules or regulations. The Fund agrees to pay DST promptly for modifications and improvements that are charged for separately at the rate provided for in DST's standard pricing schedule which shall be identical for substantially all clients, if a standard pricing schedule shall exist. If there is no standard pricing schedule, the parties shall mutually agree upon the rates to be charged.

 

B. DST shall have the right, at any time and from time to time, to alter and modify any systems, programs, procedures or facilities used or employed in performing its duties and obligations hereunder; provided that the Fund will be notified as promptly as possible prior to implementation of such alterations and modifications and that no such alteration or modification or deletion shall materially adversely change or affect the operations and procedures of the Fund in using or employing the TA2000 System or DST Facilities hereunder or the reports to be generated by such system and facilities hereunder, unless the Fund is given thirty (30) days prior notice to allow the Fund to change its procedures and DST provides the Fund with revised operating procedures and controls.

 

C. All enhancements, improvements, changes, modifications or new features added to the TA2000 System however developed or paid for shall be, and shall remain, the confidential and exclusive property of, and proprietary to, DST.

 

24. Third Party Vendors.

 

Nothing herein shall impose any duty upon either party in connection with or make either party liable for the actions or omissions to act of the following types of unaffiliated third parties: (a) courier and mail services including but not limited to Airborne Services, Federal Express, UPS and the U.S. Mails, (b) telecommunications companies including but not limited to AT&T, Sprint, MCI and other delivery, telecommunications and other such companies not under the party’s reasonable control, and (c) third parties not under the party’s reasonable control or subcontract relationship providing services to the financial industry generally, such as, by way of example and not limitation, the National Securities Clearing Corporation (processing and settlement services), Fund custodian banks (custody and fund accounting services) and administrators (blue sky and Fund administration services), and national database providers such as Choice Point, Acxiom, TransUnion or Lexis/Nexis and any replacements thereof or similar entities, provided, if the party selected such company, such party shall have exercised due care in selecting the same. Such third party vendors shall not be deemed, and are not, subcontractors for purposes of this Agreement.

 

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25. Limitations on Liability.

 

Notice is hereby given that a copy of the Fund's Declaration of Trust and all amendments thereto is on file with the Secretary of State of the state of its organization; that this Agreement has been executed on behalf of the Fund by the undersigned duly authorized representative of the Fund in his/her capacity as such and not individually; and that the obligations of this Agreement shall only be binding upon the assets and property of the Fund and shall not be binding upon any trustee, officer or securityholder of the Fund individually.

 

26. Miscellaneous .

 

A. This Agreement shall be construed according to, and the rights and liabilities of the parties hereto shall be governed by, the laws of the State of Missouri, excluding that body of law applicable to choice of law.

 

B. All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.

 

C. [Reserved]

 

D. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by each party hereto.

 

E. The captions in this Agreement are included for convenience of reference only, and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.

 

F. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

G. If any part, term or provision of this Agreement is by the courts held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid.

 

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H. Except as otherwise provided herein, this Agreement may not be assigned by the Fund or DST without the prior written consent of the other. DST may assign this Agreement, in whole or in part, or subcontract certain of its obligations hereunder, to any domestic or foreign wholly-owned subsidiary of DST (“Subcontractor”), provided that such Subcontractor is properly registered under the 1934 Act as a transfer agent (if such registration is required to provide the services subcontracted to it) and is otherwise qualified under all applicable law to perform the obligations assigned or subcontracted to it, and provided further that if such Subcontractor’s compliance policies or procedures or internal controls differ from those of DST, such assignment or subcontract shall not take effect unless and until the Fund approves such policies, procedures and controls as and to the extent contemplated by Rule 38a-1 under the 1940 Act.

 

I. Neither the execution nor performance of this Agreement shall be deemed to create a partnership or joint venture by and between the Fund and DST. It is understood and agreed that all services performed hereunder by DST shall be as an independent contractor and an agent of the Fund for the purposes set forth herein, not as an employee of the Fund. This Agreement is between DST and the Fund and neither this Agreement nor the performance of services under it shall create any rights in any third parties. There are no third party beneficiaries hereto.

 

J. Except as specifically provided herein, this Agreement does not in any way affect any other agreements entered into among the parties hereto and any actions taken or omitted by any party hereunder shall not affect any rights or obligations of any other party hereunder.

 

K. The failure of either party to insist upon the performance of any terms or conditions of this Agreement or to enforce any rights resulting from any breach of any of the terms or conditions of this Agreement, including the payment of damages, shall not be construed as a continuing or permanent waiver of any such terms, conditions, rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred.

 

L. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, draft or agreement or proposal with respect to the subject matter hereof, whether oral or written, and this Agreement may not be modified except by written instrument executed by both parties.

 

AMECURRENT 706474999.3 10-May-13 17:07 AMECURRENT 706531312.2 14-May-13 16:10

29

 

M. All notices to be given hereunder shall be deemed properly given if delivered in person or if sent by U.S. mail, first class, postage prepaid, or if sent by facsimile and thereafter confirmed by mail as follows:

 

If to DST:  
  DST Systems, Inc.
  1055 Broadway, 7 th Floor
  Kansas City, Missouri 64105
Attn: Group Vice President-Full Service
  Facsimile No.: 816-435-3455
   
With a copy of non-operational notices to:
  DST Systems, Inc.
  333 West 11 th Street, 5 th Floor
  Kansas City, Missouri 64105
  Attn: Legal Department
  Facsimile No.: 816-435-8630
   
If to the Fund:
  Clough Global Allocation Fund
  1290 Broadway, Suite 1100
  Denver, Colorado 80203
  Attn: Secretary
  Facsimile No.: 303-623-7850

 

or to such other address as shall have been specified in writing by the party to whom such notice is to be given.

 

N. The representations and warranties contained herein shall survive the execution of this Agreement. The representations and warranties contained in this Agreement, the terms and provisions of this Agreement regarding DST’s maintenance and retention of records, Section 8 hereof, and this sentence shall survive the expiration, cancellation and termination of the Agreement and of the performance of services hereunder until any statute of limitations applicable to the matter at issues shall have expired.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers, to be effective as of the day and year first above written.

       
  DST SYSTEMS, INC.
  By: -S- THOMAS J SCHOUDT  
  Title: VP  
       
  CLOUGH GLOBAL ALLOCATION FUND
       
  By: -S- JEREMY MAY  
  Title: Treasurer  

 

stddst-fsa closed end (Revised 11.16.12)

 

AMECURRENT 706474999.3 10-May-13 17:07 AMECURRENT 706531312.2 14-May-13 16:10

30

 

EXHIBIT A, p.1
FULL SERVICE
FEE SCHEDULE

 

 

 

Summary of Services

 

 

The following services are provided for the Fund on TA2000 in accordance with the fees set forth above.

Distribution Center

Receipt and incoming mail

Remittance/Check Processing

Creation of electronic images for all paper received

Scan all paper source documentation received from incoming mail into AWD

Index such documentation in accordance with written procedures

 

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31

 

Retain all original source documentation, which has been scanned into AWD, and then arrange for such documentation to be shipped to a long term storage facility by DST

Automated distribution of work based on assigned priority

Transaction Processing

New account establishment

Account maintenance

Open Market Share Buy events as part of a Dividend Reinvestment Plan

Open Market Share Buy events as part of a Voluntary Purchase Plan

Open Market Share Sell events as allowed by the Fund

Account Correction/Adjustments

Direct account transfers

Critical Report Monitoring (SEC and Corporate guidelines)

Control Functions

Input of daily prices for either NAV or closing market price

Processing of dividend and capital gain and other distributions

Daily reconciliation of bank accounts

Daily cash and share control and reconciliation

Outgoing wire release

Fund audit confirmations

Manual checks

Conversion/merger balancing

Issuance of liquidation, repurchase, redemption, dividend/distribution, and replacement checks/payments (as applicable)

Nightly audit review

Closed-End Fund Processing/DRS Agent

Daily registrar reconciliation

Daily control balancing between the Fund, the Fund’s custodian and DST

Timely and accurate reporting to Investment Accounting

Distribution processing

Open Market Share Buy event or Creation of Original Issuance shares as part of Dividend Reinvestment Plan

Allocation of Discount Income amounts

Open Market Share Buy events as part of a Voluntary Purchase Plan

Open Market Share Sell events as allowed by the Fund

Transaction processing

Tracking of Fund Treasury Shares

DTC processing for Direct Registration System (DRS)

DTC FAST Agent activities and balancing

Participation in Fund-initiated Rights Offering or Tender Offer events

Participation in proxy solicitation for annual securityholder meeting

 

Shareholder Servicing

Correspondence

Incoming and Outgoing Phone calls

Year-End Processing

IRS reporting

AML/CIP/Compliance

Production Support and Service

Issue resolution

AWD workflow management

DST Systems Management

 

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32

 

Fund set-up and change management

Business continuation and disaster recovery

System enhancement testing

Bank Match Programs

State filings

Abandoned Property

●    Provide escheatment services pursuant to State Law and otherwise report unclaimed property of lost securityholders to each state in compliance with Rule 17Ad-17, other applicable law and the Procedures

Lost Security Holder Searches

Search for lost securityholders in accordance with the Procedures and Rule 17Ad-17

 

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33

 

EXHIBIT B
AUTHORIZED PERSONNEL

 

Pursuant to Section 8.A. of the Agency Agreement between Clough Global Allocation Fund (the "Fund") and DST Systems, Inc. (“DST” and such agreement, the “Agreement”), the Fund authorizes the following personnel to provide instructions to DST, and receive inquiries from DST in connection with the Agreement:

 

Name Title
Ned Burke President
Jeremy May Treasurer
Erin Nelson Secretary
Jill Kerschen Assistant Treasurer

 

This Exhibit may be revised by the Fund by providing DST with a substitute Exhibit B. Any such substitute Exhibit B shall become effective twenty-four (24) hours after DST's receipt of the document and shall be incorporated into the Agreement.

           
ACKNOWLEDGMENT OF RECEIPT:    
DST SYSTEMS, INC.   CLOUGH GLOBAL ALLOCATION FUND  
           
By: -S- THOMAS J SCHOUDT   By: -S- JEREMY MAY  
Name: Thomas J Schoudt   Name: Jeremy May  
Title: Vice President   Title: Treasurer  
Date: 10/1/2013   Date: 6.13.13  

 

AMECURRENT 706474999.3 10-May-13 17:07 AMECURRENT 706531312.2 14-May-13 16:10

 

34

 

ADMINISTRATION, BOOKKEEPING AND
PRICING SERVICES AGREEMENT

 

THIS AGREEMENT is made as of July 27, 2004, between Clough Global Allocation Fund, a Delaware Statutory Trust (the “Fund”), and ALPS Mutual Funds Services, Inc., a Colorado corporation (“ALPS”).

 

WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (“1940 Act”) as a closed-end, non-diversified management investment company.

 

WHEREAS, ALPS provides certain administrative, bookkeeping and pricing services to investment companies; and

 

WHEREAS, the Fund desires to appoint ALPS to perform certain administrative, bookkeeping and pricing services for the Fund, and ALPS has indicated its willingness to so act, subject to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties hereto agree as follows:

 

1. ALPS Appointment and Duties.

 

(a) The Fund hereby appoints ALPS to provide administrative, bookkeeping and pricing services as are set forth in Appendix A , as amended from time to time, upon the terms and conditions hereinafter set forth. ALPS hereby accepts such appointment and agrees to furnish such specified services. ALPS shall for all purposes be deemed to be an independent contractor and shall, except as otherwise expressly authorized in this Agreement, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund.

 

(b) ALPS may employ or associate itself with a person or persons or organizations as ALPS believes to be desirable in the performance of its duties hereunder; provided that, in such event, the compensation of such person or persons or organizations shall be paid by and be the sole responsibility of ALPS and the Fund shall bear no cost or obligation with respect thereto; and provided further that ALPS shall not be relieved of any of its obligations under this Agreement in such event and shall be responsible for all acts of any such person or persons or organizations taken in furtherance of this Agreement to the same extent it would be for its own acts.

 

2. ALPS Compensation; Expenses .

 

(a) In consideration for the services to be performed hereunder by ALPS, the Fund shall pay ALPS the fees listed in Appendix B hereto.

 

(b) ALPS will bear all expenses in connection with the performance of its services under this Agreement and all related agreements, except as otherwise provided herein. ALPS will pay all expenses incurred by the Fund, with the exception of advisory fees, trustees’ fees, 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.

 

 

3. Right to Receive Advice .

 

(a) Advice of the Fund . If ALPS is in doubt as to any action it should or should not take, ALPS shall request directions or advice from the Fund.

 

(b) Advice of Counsel . If ALPS is in doubt as to any question of law pertaining to any action it should or should not take, ALPS shall request advice from counsel of its own choosing and at its own expense.

 

(c) Conflicting Advice. In the event of a conflict between directions, advice or instructions ALPS receives from the Fund and the advice ALPS receives from counsel, ALPS shall inform the Fund and its counsel of the conflict and seek resolution.

 

(d) Nothing in this subsection shall excuse ALPS when an action or omission on the part of ALPS constitutes willful misfeasance, bad faith, negligence or reckless disregard by ALPS of any duties, obligations or responsibilities set forth in this Agreement.

 

4. Liability of ALPS .

 

(a) ALPS may rely upon the written advice of counsel for the Fund and the Fund’s independent accountants, and upon oral or written statements of the Fund’s investment adviser, brokers and other service providers to the Fund, reasonably believed by ALPS in good faith to be an expert in the matters upon which they are consulted and, for any actions reasonably taken in good faith reliance upon such advice or statements and without negligence, ALPS shall not be liable to anyone.

 

(b) Nothing herein contained shall be construed to protect ALPS against any liability to the Fund or its shareholders to which ALPS would otherwise be subject by reason of willful misfeasance, bad faith, negligence, or reckless disregard in the performance of its duties.

 

(c) Except as may otherwise be provided by applicable law, neither ALPS nor its shareholders, officers, Directors, employees or agents shall be subject to, and the Fund shall indemnify and hold such persons harmless from and against, any liability for and any damages, expenses or losses incurred by reason of the inaccuracy of factual information furnished to ALPS by the Fund or its adviser.

 

(d) ALPS shall be obligated to exercise commercially reasonable care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. ALPS shall be liable for actual damages arising out of ALPS’ failure to perform its duties under this Agreement to the extent such damages arise out of ALPS’ willful misfeasance, bad faith, negligence or reckless disregard of such duties.

- 2 -

 

(e) ALPS shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, except for a loss resulting from willful misfeasance, bad faith, negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement.

 

5. Reports . Whenever, in the course of performing its duties under this Agreement, ALPS determines, on the basis of information supplied to ALPS by the Fund or its authorized agents, that a violation of applicable law has occurred or that, to its knowledge, a possible violation of applicable law may have occurred or, with the passage of time, would occur, ALPS shall promptly notify the Fund and its counsel.

 

6. Activities of ALPS . The services of ALPS under this Agreement are not to be deemed exclusive, and ALPS shall be free to render similar services to others. The Fund recognizes that from time to time directors, officers and employees of ALPS may serve as directors, officers and employees of other corporations or businesses (including other investment companies) and that such other corporations and funds may include ALPS as part of their name and that ALPS or its affiliates may enter into administrative, bookkeeping, pricing agreements or other agreements with such other corporations and funds.

 

7. Accounts and Records . The accounts and records maintained by ALPS shall be the property of the Fund. Such accounts and records shall be prepared, maintained and preserved as required by the 1940 Act and other applicable securities laws, rules and regulations. Such accounts and records shall be surrendered to the Fund promptly upon receipt of instructions from the Fund in the form in which such accounts and records have been maintained or preserved. The Fund shall have access to such accounts and records at all times during ALPS’ normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by ALPS to the Fund at the Fund’s expense. ALPS shall assist the Fund, the Fund’s independent auditors, or, upon approval of the Fund, any regulatory body, in any requested review of the Fund’s accounts and records, and reports by ALPS or its independent accountants concerning its accounting system and internal auditing controls will be open to such entities for audit or inspection upon reasonable request.

 

8. Confidential and Proprietary Information . ALPS agrees that it will, on behalf of itself and its officers and employees, treat all transactions contemplated by this Agreement, and all records and information relative to the Fund and its shareholders (past, present and future) and other information germane thereto, as confidential and as proprietary information of the Fund and not to use, sell, transfer or divulge such information or records to any person for any purpose other than performance of its duties hereunder, except after prior notification to and approval in writing from the Fund, which approval shall not be unreasonably withheld. It may not be withheld where ALPS may be exposed to civil, regulatory or criminal proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund. ALPS shall have in place and maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of records and information relating to the Fund and its past, present and future shareholders, consumers and customers.

- 3 -

 

9. Compliance with Rules and Regulations . ALPS shall comply -- and to the extent ALPS takes or is required to take action on behalf of the Fund hereunder shall cause the Fund to comply -- with all applicable requirements of the 1940 Act and other applicable laws, rules, regulations, orders and code of ethics, as well as all investment restrictions, policies and procedures adopted by the Fund of which ALPS has knowledge. Except as specifically set forth herein, ALPS assumes no responsibility for such compliance by the Fund.

 

10. Representations and Warranties of ALPS . ALPS represents and warrants to the Fund that:

 

(a) It is duly organized and existing as a corporation and in good standing under the laws of the State of Colorado.

 

(b) It is empowered under applicable laws and by its Articles of Incorporation and By-laws to enter into and perform this Agreement.

 

(c) All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.

 

(d) It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement in accordance with industry standards.

 

(e) It has and will keep in effect professional liability insurance naming ALPS as insured and providing coverage with respect to ALPS’ activities on behalf of the Fund in the amount of at least $1,000,000, and will provide to the Fund at least annually a certificate of insurance evidencing that such insurance is in full force and effect.

 

Representations and Warranties of the Fund. The Fund represents and warrants to ALPS that:

 

(a) It is a Statutory Trust duly organized and existing and in good standing under the laws of the state of Delaware and is registered with the SEC as a closed-end investment company.

 

(b) It is empowered under applicable laws and by its Agreement and Declaration of Trust and By-laws to enter into and perform this Agreement.

 

(c) The Board of Trustees has duly authorized it to enter into and perform this Agreement.

- 4 -

 

(d) It has provided ALPS with copies of its Prospectus(es) and Statement(s) of Additional Information and will provide ALPS with any amendments or supplements thereto.

 

11. Liaison with Accountants . ALPS shall act as liaison with the Fund’s independent public accountants and shall provide account analysis, fiscal year summaries, and other audit-related schedules with respect to the services provided to the Fund. ALPS shall take all reasonable action in the performance of its duties under this Agreement to assure that the necessary information in ALPS’ control is made available to such accountants for the expression of their opinion, as required by the Fund.

 

12. Business Interruption Plan . ALPS shall maintain in effect a business interruption plan, and enter into any agreements necessary with appropriate parties making reasonable provisions for emergency use of electronic data processing equipment customary in the industry. In the event of equipment failures, ALPS shall, at no additional expense to the Fund, take commercially reasonable steps to minimize service interruptions. ALPS shall have no liability with respect to the loss of data or service interruptions caused by equipment failure provided such loss or interruption is not caused by ALPS’ own willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations under this Agreement.

 

13. Duration and Termination of this Agreement .

 

(a) Initial Term . This Agreement shall become effective as of the date first written above (the “Start Date”) and shall continue thereafter throughout the period which ends 3 years after the Start Date (the “Initial Term”). Until the end of the Initial Term, this Agreement may be terminated without penalty only by agreement of the parties upon not less than 60 days’ written notice or for cause pursuant to Section 13(c) hereof. If the Fund terminates this Agreement unilaterally without cause prior to the end of the Initial Term, it will be in default hereunder, causing substantial damages to ALPS. Because of the difficulty of estimating the damages that will result, the Fund agrees to pay to ALPS, as liquidated damages for such default, an amount equal to twenty-five percent (25%) of the annual fee in effect at the time of termination (the “Default Payment”):

 

The parties agree that the Default Payment is a reasonable forecast of probable actual loss to ALPS and that this sum is agreed to as liquidated damages and not as a penalty.

 

(b) Renewal Term . If not sooner terminated, this Agreement shall renew at the end of the Initial Term and shall thereafter continue for successive annual periods until terminated by the Fund or by ALPS, without penalty, upon not less than 90 days’ written notice to the other party.

 

(c) Cause . Notwithstanding anything to the contrary elsewhere in this Agreement, the Fund may terminate this Agreement for cause immediately at any time, without penalty, without default and without the payment of any Default Payment or other liquidated damages. Termination for “cause” hereunder shall mean:

- 5 -

 

(i) willful misfeasance, bad faith, negligence or reckless disregard on the part of ALPS in the performance of or with respect to its obligations and duties hereunder;

 

(ii) regulatory, administrative, or judicial proceedings against ALPS which result in a determination that, in rendering its services hereunder, ALPS has violated – or has caused the Fund to violate – any applicable law, rule, regulation, order or code of ethics, or any investment restriction, policy or procedure adopted by the Fund of which ALPS had knowledge;

 

(iii) financial difficulties on the part of ALPS which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent, or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time in effect, or any applicable law other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors;

 

(iv) failure by ALPS to keep in effect professional liability insurance satisfactory to the Fund trustees naming ALPS as insured and providing coverage with respect to ALPS’ activities on behalf of the Fund in the amount of at least $1,000,000, and to provide to the Fund at least annually a certificate of insurance evidencing that such insurance is in full force and effect; or

 

(v) any other circumstance which, in the reasonable judgment of the Fund directors, including a majority of the directors who are not interested persons (as defined in the 1940 Act) of any party to this Agreement, materially impairs ALPS’ ability to perform its obligations and duties hereunder.

 

(d) Deliveries Upon Termination . Upon termination of this Agreement, ALPS shall deliver to the Fund or as otherwise directed by the Fund (at the expense of the Fund, unless such termination is for “cause”) all records and other documents made or accumulated in the performance of its duties for the Fund hereunder.

 

14. Assignment . This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and permitted assigns; provided, however, that this Agreement shall not be assignable by the Fund without the prior written consent of ALPS, or by ALPS without the prior written consent of the Fund.

 

15. Governing Law . The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Colorado, and the 1940 Act and the rules thereunder. To the extent that the laws of the State of Colorado conflict with the 1940 Act or such rules, the latter shall control.

- 6 -

 

16. Names . The obligations of the “Fund” entered into in the name or on behalf thereof by any director, representative or agent thereof are made not individually, but in such capacities, and are not binding upon any of the directors, shareholders, representatives or agents of the Fund personally, but bind only the property of the Fund, and all persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund.

 

17. Amendments to this Agreement . This Agreement may only be amended by the parties in writing.

 

18. Notices . All notices and other communications hereunder shall be in writing, shall be deemed to have been given when received or when sent by telex or facsimile, and shall be given to the following addresses (or such other addresses as to which notice is given):

 

 

To ALPS:

 

ALPS Mutual Funds Services, Inc.
1625 Broadway, Suite 2200
Denver, Colorado 80202
Attn: General Counsel
Fax: (303)623-7850

 

To the Fund:

 

Clough Global Allocation Fund
1625 Broadway, Suite 2200
Denver, Colorado 80202
Attn: Secretary
Fax: (303)623-7850

  

19. Counterparts . This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

20. Entire Agreement . This Agreement embodies the entire agreement and understanding among the parties and supersedes all prior agreements and understandings relating to the subject matter hereof; provided, however, that ALPS may embody in one or more separate documents its agreement, if any, with respect to delegated duties and oral instructions.

- 7 -

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

  CLOUGH GLOBAL ALLOCATION FUND  
       
  By: (GRAPHIC)  
  Name: Erin E. Dauglas  
  Title: Secretary  

 

  ALPS MUTUAL FUNDS SERVICES, INC.  
       
  By: (GRAPHIC)  
  Name: Jeremy May  
  Title: Managing Director  

- 8 -

 

APPENDIX A

 

SERVICES

 

Administrative

 

On a monthly basis, assist the Fund in monitoring compliance with:

 

(i) the investment restrictions described in the Fund’s registration statement

(ii) SEC diversification requirements, as applicable

(iii) its status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended

 

Coordinate the preparation and filing with the SEC on behalf of the Fund:

 

(i) Form N-SAR

(ii) Form N-CSR

 

ALPS shall not be responsible for the accuracy or adequacy of any information contained in the documents listed in subsections (i) through (iii) above, to the extent such information is provided to ALPS by the Fund, other service providers to the Fund, or any other third party.

 

Provide assistance to the Fund related to quarterly Board of Directors meetings by preparing board reports regarding services provided by ALPS, as requested by the Fund

 

Provide assistance to the Fund related to annual stockholder meetings.

 

Assist the Fund with placement of fidelity bond and errors and omissions insurance policies

 

Prepare the Fund’s annual and semi-annual financial statements including schedules of investments and the related statements of operations, assets and liabilities and, changes in net assets, as well as the financial highlights and footnotes to the financial statements.

 

Provide facilities, information and personnel, as necessary, to accommodate annual audits with the Fund’s independent accountants, or examinations conducted by the Securities and Exchange Commission or other regulatory authorities.

 

Monitor the Fund’s expense accruals by establishing expense budgets and comparing expense accruals on a periodic basis to actual expenses paid.

 

Report performance and other Fund information to outside reporting agencies as directed by the Fund.

 

Calculate monthly total return performance calculations.

- 9 -

 

Prepare the Fund’s federal and state tax returns.

 

Supervise the activities of the Fund’s custodian and transfer agent.

 

Respond to telephonic or in-person inquiries from existing stockholders or their representatives requesting information regarding matters such as stockholder account or transaction status, net asset value of Fund shares, Fund performance, Fund services, plans and options, Fund investment policies, Fund portfolio holdings, and Fund distributions and classifications thereof for tax purposes.

 

Bookkeeping and Pricing

 

Maintain a separate account for the Fund, as directed from time to time by written instructions from the Fund.

 

Compute net asset value for the Fund and, as appropriate, compute yields, expense ratios, and portfolio turnover rate.

 

Obtain security market quotes from independent pricing services, if available, approved by the Fund, or if such quotes are unavailable, then obtain such prices pursuant to the Fund’s valuation policies and procedures, and in either case calculate the market value of the Fund’s investments.

 

Timely calculate and transmit the Fund’s daily net asset value and public offering price (such determinations to be made in accordance with the provisions of the Fund’s then-current Prospectuses and Statements of Additional Information, and any applicable resolutions and policies and procedures of the Board of Directors of the Fund) and promptly communicate such values and prices to the Fund.

 

Maintain and keep current all books and records of the Fund as required by Section 31 of the 1940 Act, and the rules thereunder, in connection with ALPS’ duties hereunder. Without limiting the generality of the foregoing, ALPS will prepare and maintain the following records upon receipt of information in proper form from the Fund:

 

(i) Cash receipts journal
(ii) Cash disbursements journal
(iii) Dividend records
(iv) Security purchases, sales and loans - portfolio securities journals
(v) Subscription and redemption journals
(vi) Security ledgers
(vii) Broker ledger
(viii) General ledger
(ix) Daily expense accruals
(x) Daily income accruals
(xi) Foreign currency journals

- 10 -

 

(xii) Trial balances
(xiii) Historical tax lots for each security

 

Reconcile cash and investment balances with the Custodian.

 

Provide the Fund with daily Portfolio values, net asset values and other statistical data for the Fund as requested from time to time.

 

Compute the net income and capital gains and losses of the Fund and calculate income dividend rates in accordance with relevant prospectus policies and resolutions of the Board of Trustees of the Fund.

- 11 -

 

APPENDIX B

 

FEES

 

- 12 -

 

Addendum to Administration, Bookkeeping and  

Pricing Services Agreement Dated

July 27, 2004

Between

ALPS Mutual Funds Services, Inc.

and

Clough Global Allocation Fund

 

THIS ADDENDUM is made as of September 1, 2006, by and between ALPS Mutual Funds Services, Inc. (“ALPS”), and Clough Global Allocation Fund (“Fund”).

 

WHEREAS, ALPS and the Fund have entered into an Administration, Bookkeeping and Pricing Services Agreement (the “Agreement”) dated July 27, 2004;

 

WHEREAS, effective September 1, 2006, ALPS Mutual Funds Services, Inc. changed its name to ALPS Fund Services, Inc.

 

WHEREAS, in light of the foregoing, ALPS and the Fund wish to modify the provisions of the Agreement to reflect the change in the name of ALPS Mutual Funds Services, Inc., to ALPS Fund Services, Inc.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows:

 

1. ALPS Fund Services, Inc. All references to “ALPS Mutual Funds Services, Inc.” within the Agreement shall be deleted and replaced with references to “ALPS Fund Services, Inc.”

 

2. Remainder of the Agreement. All other provisions of the Agreement shall remain unchanged.

 

IN WITNESS WHEREOF, this Addendum has been executed by a duly authorized representative of each of the parties hereto as of the date of the Addendum first set forth above.

 

ALPS Fund Services, Inc.   Clough Global Allocation Fund  
           
By:   By:    
Name: Jeremy O. May   Name: Erin E. Douglas  
Title: Managing Director   Title: Secretary  

 

First Amendment to Administration, Bookkeeping and Pricing Services Agreement Dated  

July 27, 2004

Between

ALPS Fund Services, Inc.

and

Clough Global Allocation Fund

 

THIS AMENDMENT is made as of August 10, 2007, by and between ALPS Fund Services, Inc. (“ALPS”), and Clough Global Allocation Fund (the “Trust”).

 

WHEREAS, ALPS and the Trust have entered into an Administration, Bookkeeping and Pricing Services Agreement (the “Agreement”) dated July 27, 2004;

 

WHEREAS, ALPS and the Trust wish to modify a provision of the Agreement to reflect a revised renewal term.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree that Section 13(b) of the Agreement should be deleted in its entirety and replaced as follows:

 

13. Duration and Termination of this Agreement.

 

(b) Renewal Term. If not sooner terminated, this Agreement shall renew at the end of the Initial Term and shall thereafter continue for successive three year periods until terminated by the Fund or by ALPS, without penalty, upon not less than 60 days’ written notice to the other party.

 

Other than as amended hereby, all other provisions of the Agreement shall remain unchanged and remain in full force and effect. This Amendment shall be deemed to be an amendment to the Agreement and shall be governed by the laws of the State of Colorado.

 

IN WITNESS WHEREOF, this Amendment has been executed by a duly authorized representative of each of the parties hereto as of the date of the Amendment first set forth above.

 

ALPS Fund Services, Inc.   Clough Global Allocation Fund  
           
By:     By:    
Name: Jeremy O. May   Name: Edmund J. Burke  
Title: Managing Director   Title: President  

 

SECOND AMENDMENT TO THE ADMINISTRATION, BOOKKEEPING AND  

PRICING SERVICES AGREEMENT

 

This Second Amendment (“Amendment”) is made as of June 12, 2014, by and between Clough Global Allocation Fund a registered investment company (the “Trust”), and ALPS Fund Services, Inc. (“ALPS”), the administrator to the Trust.

 

WHEREAS, the Trust and ALPS previously entered into an Administration, Bookkeeping and Pricing Services Agreement, dated July 27, 2004, as subsequently amended (the “Agreement”);

 

WHEREAS, the Trust and ALPS wish to amend Appendix A to the Agreement to reflect additional Services that may be provided by ALPS from time to time; and

 

WHEREAS, all capitalized terms used in the Amendment and not defined herein shall have the meaning ascribed to them in the Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth below, the parties hereto, intending to be legally bound, agree that the following item should be added to the list of services provided by ALPS under the Bookkeeping and Pricing section of Appendix A to the Agreement:

 

1. Payment for collateral management services for the Fund provided by the Fund’s existing custodian.

 

Other than as amended hereby, all other provisions of the Agreement shall remain unchanged and remain in full force and effect. This Amendment shall be deemed to be an amendment to the Agreement and shall be governed by the laws of the State of Colorado.

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

 

Clough Global Allocation Fund   ALPS Fund Services, Inc.  
           
By:   By:      
Name: Erin Nelson   Name: Jeremy O. May  
Title: Secretary   Title: President  

 

REPORT MODERNIZATION ADDENDUM
to Administration, Bookkeeping and Pricing Services Agreement

 

This Report Modernization Addendum (this “Addendum”) dated April 10, 2018 is to the Administration, Bookkeeping and Pricing Services Agreement dated July 27, 2004, as amended (the “Agreement”), by and between ALPS Fund Services, Inc., a Colorado corporation (“ALPS”), and Clough Global Dividend and Income Fund, a Delaware statutory trust (the “Trust”).

 

WHEREAS, ALPS and the Trust wish to supplement the Agreement to provide for additional services to be performed by ALPS and to set forth the fees for those additional services.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter contained, the parties hereto agree as follows:

 

1. Services. ALPS will provide the Trust with the additional services (the “Additional Services”) described in Appendix I , attached hereto. Except as otherwise set forth herein, the provision of the Additional Services and duties of each party in connection therewith will be governed under the terms and conditions of the Agreement.

 

2. Compensation. In consideration of the Additional Services performed under this Addendum, the Trust shall pay ALPS the fees listed in Appendix II , attached hereto. The imposition of such fees will commence beginning July 1, 2018. During each year of the term of the Agreement, unless the parties shall otherwise agree, the fee that would be charged for the Additional Services would be the base rate fee (as reflected in Appendix II hereto) subject to an annual cost of living adjustment based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, for the Denver-Boulder-Greeley area, as published bimonthly by the United States Department of Labor, Bureau of Labor Statistics, or, in the event that publication of such index is terminated, any successor or substitute index, appropriately adjusted, acceptable to all parties.

 

3. Terms Applicable to the Additional Services . As applicable to the Additional Services provided under this Addendum, the parties are further subject to the additional terms and conditions set forth in the Appendix III , attached hereto.

 

4. Term, Termination and Modification . This Addendum shall become effective as of the date first written above and shall continue thereafter until the termination of the Agreement. This Addendum cannot be modified except by a written agreement signed by both parties.

 

5. Survival . The provisions of Section 3 of this Addendum shall survive termination of the Agreement and/or this Addendum.

 

6. Miscellaneous . Except to the extent expressly amended or supplemented hereby, the provisions of the Agreement remain in full force and effect. All capitalized terms used in this Addendum and not defined herein shall have the meaning ascribed to them in the Agreement. This Addendum may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

1  

 

7. Governing Law . The provisions of this Addendum shall be construed and interpreted in accordance with the laws of the State of Colorado and the 1940 Act and the rules thereunder. To the extent that the laws of the State of Colorado conflict with the 1940 Act or such rules, the latter shall control.

 

IN WITNESS WHEREOF , the parties hereto have executed this Addendum as of the day and year first above written.

 

  CLOUGH GLOBAL DIVIDEND AND INCOME FUND  
       
  By: (GRAPHIC)  
  Name: Edmund J. Burke  
  Title: President  

 

  ALPS FUND SERVICES, INC.  
       
  By: (GRAPHIC)  
  Name: Jeremy O. May  
  Title: President  

 

2  

 

Appendix I

 

Additional Services

 

The following Additional Services are to be performed by ALPS for the compensation noted in Appendix II.

 

Fund Administration

 

Coordinate the preparation and filing of Forms N-PORT and N-CEN with the Securities and Exchange Commission

 

Revisions to, or the addition of new services to the services listed above (including but not limited to new or revised services related to regulatory changes or special projects) shall be subject to additional fees as determined by ALPS.

 

 

 

Appendix II

 

Compensation

 

 

4  

 

Appendix III

 

Additional Terms

 

In addition to the terms and conditions of the Agreement, the following terms and conditions apply to the provision of the Additional Services under this Addendum:

 

1. Provision of Services.

 

i. ALPS may engage persons or organizations (referred to as a “supplier”) to assist in the provision of, or to perform any of its duties of providing the Additional Services; provided that, in such event, ALPS shall not be relieved of any of its obligations otherwise applicable under the Agreement and Addendum. All uses of the term “supplier” in Section 2 of this Appendix III shall include any third party otherwise selected by the Trust, if applicable.

 

2. Use of Data; No Warranty; Termination of Rights.

 

ii. As part of the provision of the Additional Services, ALPS may provide valuation information and other data or evaluations to the Trust (collectively, the “Data”) that may be supplied by ALPS or one of its suppliers, or a supplier selected by the Trust. Any Data being provided to the Trust by ALPS or its suppliers pursuant hereto are being supplied to the Trust for the sole purpose of completion of the Additional Services. The Trust may use the Data only for purposes necessary for the Additional Services described in this Addendum. The Trust does not have any license nor right to use the Data for purposes beyond the Additional Services described in this Addendum including, but not limited to, resale to other users or use to create any type of historical database. Data cannot be passed to or shared with any other non-affiliated entity.

 

The Trust acknowledges the proprietary rights that ALPS and its suppliers have in the Data.

 

iii. ALPS and its suppliers shall have no liability to the Trust, or a third party, for errors, omissions or malfunctions in the Data or related services, other than the obligation of ALPS to endeavor, upon receipt of notice from the Trust, to correct a malfunction, error, or omission in any Data or related services.

 

iv. Trust acknowledges that the Data and related services are intended for use as an aid to institutional investors, registered brokers or professionals of similar sophistication in making informed judgments concerning securities, in connection to the Additional Services. Trust accepts responsibility for, and acknowledges it exercises its own independent judgment in, its selection of the Data and related services, its selection of the use or intended use of such, and any results obtained. Nothing contained herein shall be deemed to be a waiver of any rights existing under applicable law for the protection of investors.

 

5  

 

v. Trust shall indemnify ALPS and its suppliers against and hold ALPS harmless from any and all losses, damages, liability, costs, including attorney’s fees, resulting directly or indirectly from any claim or demand against ALPS or its suppliers by a third party arising out of or related to the accuracy or completeness of any Data or related services received by the Trust, or any data, information, service, report, analysis or publication derived therefrom. Neither ALPS nor its suppliers shall be liable for any claim or demand against the Trust by a third party.

 

vi. ALPS and its suppliers, nor the Trust shall be liable for (i) any special, indirect or consequential damages (even if advised of the possibility of such), (ii) any delay by reason of circumstances beyond its control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God, insurrection, war, riots, or failure beyond its control of transportation or power supply, or (iii) any claim that arose more than one year prior to the institution of suit therefor.

 

vii. THE TRUST HEREBY ACCEPTS THE DATA AS IS, WHERE IS, ALPS AND ITS SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS OR ANY OTHER MATTER.

 

6

Clough Global Funds

(Clough Global Equity Fund, Clough Global Dividend and Income Fund, and Clough Global

Opportunities Fund (the “Funds”))

 

17j-1 Code Of Ethics

 

I. Purpose of the Code of Ethics

 

This code is based on the principle that, you as an Access Person of the Funds, will conduct your personal investment activities in accordance with:

 

the duty at all times to place the interests of the Funds’ shareholders first;

 

the requirement that all personal securities transactions be conducted consistent with this Code of Ethics and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility; and

 

the fundamental standard that Funds personnel should not take inappropriate advantage of their positions.

 

In view of the foregoing, the Funds have adopted this Code of Ethics (the "Code") to specify a code of conduct for certain types of personal securities transactions which may involve conflicts of interest or an appearance of impropriety and to establish reporting requirements and enforcement procedures.

 

II. Legal Requirement

 

Pursuant to Rule 17j-1(b) of the Investment Company Act of 1940 (the “Act”), it is unlawful for any Access Person to:

 

employ any device, scheme or artifice to defraud the Funds;

 

make any untrue statement of a material fact to the Funds or fail to state a material fact necessary in order to make the statements made to the Funds, in light of the circumstances under which they were made, not misleading;

 

engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Funds; or

 

engage in any manipulative practice with respect to the Funds, in connection with the purchase or sale (directly or indirectly) by such Access Person of a security "held or to be acquired" by the Funds.

 

 

 

III. Definitions - All definitions shall have the same meaning as explained in Rule 17j-1 or Section 2(a) of the Act and are summarized below.

 

Access Person means- Any director, officer, general partner, or Advisory Person of the Funds or of the Funds’ investment adviser (or of any company in a control relationship to the Funds or investment adviser) who, in connection with his/her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by the Funds, or whose functions relate to the making of any recommendations with respect to such purchases or sales.

 

For purposes of this Code of Ethics, an “Access Person” does not include any person who is subject to the securities transaction pre-clearance requirements and securities transaction reporting requirements of the Code of Ethics adopted by the Funds’ investment adviser in compliance with rule 17j-1 under the 1940 Act and Rule 204A-2 of the Investment Advisers Act of 1940, as applicable.

 

Automatic Investment Plan – A program in which regular purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and equity. An Automatic Investment Plan includes a dividend reinvestment plan.

 

Advisory Person of the Funds or of the Funds’ investment adviser shall have the same meaning as that set forth in Rule 17j-1 of the Act.

 

Beneficial ownership shall have the same meaning as that set forth in Rule 16a-1(a)(2) of the Securities Exchange Act of 1934.

 

Control shall have the same meaning as that set forth in Section 2(a)(9) of the Act.

 

Covered Security – shall have the meaning set forth in Section 2(a)(36) of the Act except that it does not include:

 

(i) Direct obligations of the Government of the United States;

 

(ii) Bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and

 

(iii) Shares issued by open-end Funds excluding open-end exchange traded funds.

 

Exchange Traded Fund means an open-end registered investment company that is not a unit investment trust, and that operates pursuant to an order from the SEC exempting it from certain provisions of the Investment Company Act permitting it to issue securities that trade on the secondary market. Examples of open-end exchange-traded funds include, but are not limited to: Select Sector SPDRS; iShares; PowerShares; etc.

 

Fund means an investment company registered under the Investment Company Act.

 

 

 

An Initial Public Offering means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act.

 

A Limited Offering means an offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 under the Securities Act.

 

Purchase or Sale of a Covered Security includes, among other things, the writing of an option to purchase or sell a Covered Security.

 

Security held or to be Acquired by a Fund means:

 

(i) Any Covered Security which, within the most recent 15 days:
(A) Is or has been held by the Fund; or
(B) Is being or has been considered by the Fund or its investment advisor for purchase by the Fund; and

 

(ii) Any option to purchase or sell, and any security convertible into or exchangeable for, a Covered Security.

 

IV. Policies of the Fund Regarding Personal Securities Transactions

 

General

 

No Access Person of the Funds shall engage in any act, practice or course of business that would violate the provisions of Rule 17j-1 as set forth above, or in connection with any personal investment activity, engage in conduct inconsistent with this Code.

 

Specific Policies

 

No Access Person shall purchase or sell, directly or indirectly, any security in which he/she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which he/she knows or should have known at the time of such purchase or sale:

 

is being considered for purchase or sale by the Funds; or

 

is being purchased or sold by the Funds.

 

Pre-approval of Investments in IPOs and Limited Offerings

 

Access Persons must obtain approval from the Funds or the Funds’ investment adviser before directly or indirectly acquiring beneficial ownership in any securities in an initial public offering or in a private placement or other limited offering.

 

 

 

V. Reporting Procedures

 

The Funds shall notify each person (annually in January of each year) considered to be an Access Person of the Funds that he/she is subject to the reporting requirements detailed in Sections (a), (b) and (c) below and shall deliver a copy of this Code to such Access Person.

 

In order to provide the Funds with information to enable it to determine with reasonable assurance whether the provisions of this Code are being observed, every Access Person of the Funds must report to the Funds the following:

 

a) Initial Holdings Reports . Every Access Person must report on Exhibit A, attached hereto, no later than 10 days after becoming an Access Person, the following information:

 

The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person;

 

The name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and

 

The date that the report is submitted by the Access Person.

 

This information must be current as of a date no more than 45 days prior to the date the person becomes an access person.

 

b) Quarterly Transaction Reports . Every Access Person must report on Exhibit B, attached hereto, no later than 30 days after the end of a calendar quarter, the following information with respect to any transaction during the quarter in a Covered Security in which the Access Person had any direct or indirect beneficial ownership:

 

The date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares, and the principal amount of each Covered Security involved;

 

The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

 

The price of the Covered Security at which the transaction was effected;

 

The name of the broker, dealer or bank with or through whom the transaction was effected; and

 

The date that the report is submitted by the Access Person.

 

 

 

Furthermore, an Access Person need not make a quarterly transaction report under section V.b. of this Code of Ethics with respect to transactions effected pursuant to an Automatic Investment Plan.

 

With respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person, each Access Person must report on Exhibit B, attached hereto, no later than 30 days after the end of a calendar quarter the following information:

 

The name of the broker, dealer or bank with whom the Access Person established the account;

 

The date the account was established; and

 

The date that the report is submitted by the Access Person.

 

c) Annual Holdings Reports . Every Access Person must report on Exhibit C, attached hereto, annually, the following information (which information must be current as of a date no more than 45 days before the report is submitted):

 

The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership;

 

The name of any broker, dealer or bank with whom the Access Person maintains an account in which any securities are held for the direct or indirect benefit of the Access Person; and

 

The date that the report is submitted by the Access Person.

 

d) Exceptions from reporting Requirements. Each trustee who is not an “interested person” of the Trust need not make an initial or annual holdings report but shall submit the same quarterly report as required under paragraphs V.b to theFunds’ Chief Compliance Officer (the “CCO”), but only for a transaction in a Covered Security where he or she knew at the time of the transaction or, in the ordinary course of fulfilling his or her official duties as a trustee or officer, should have known that during the 15-day period immediately preceding or after the date of the transaction, such Covered Security is or was purchased or sold, or considered for purchase or sale, by the Trust.

 

These exemptions do not exclude independent Trustees from filing an Annual Holdings Report.

 

 

 

VI. Review of Reports

 

The Funds’ CCO or designee shall be responsible for reviewing the reports received, maintaining a record of the names of the persons responsible for reviewing these reports, and as appropriate, comparing the reports with this Code, and reporting to the board:

 

any transaction that appears to evidence a possible violation of this Code; and

 

apparent violations of the reporting requirements stated herein.

 

The Funds’ CCO shall review the reports made and shall determine whether the policies established in Sections IV and V of this Code have been violated, and what sanctions, if any, should be imposed on the violator. Sanctions include but are not limited to a letter of censure, suspension or termination of the employment of the violator, or the unwinding of the transaction and the disgorgement of any profits.

 

The Board of Trustees of the Funds shall review the operation of this Code at least annually. All material violations of this Code and any sanctions imposed with respect thereto shall periodically be reported to the Board of Trustees of the Funds with respect to the securities being considered for purchase or sale by, or held or to be acquired by the Funds.

 

VII. Certification

 

Each Access Person will be required to certify annually that he/she has read and understood the provisions of this Code and will abide by them. Each Access Person will further certify that he/she has disclosed or reported all personal securities transactions required to be reported under the Code. A form of such certification is attached hereto as Exhibit D.

 

Before the Board of Trustees of the Funds may approve the code of ethics, the Funds must certify to the Board that the Funds have adopted procedures reasonably necessary to prevent Access Persons from violating its Code of Ethics. Such certification shall be submitted to the Board of Trustees at least annually.

 

Sources:

 

Section 17j-1 (as amended) of the Investment Company Act of 1940 (the “Act”);

 

Section 16 (as amended) of the Securities Exchange Act of 1934 (the “Exchange Act”);

 

The "Report of the Advisory Group on Personal Investing" issued by the Investment Company Institute on May 9, 1994; and,

 

The Securities and Exchange Commission's September 1994 Report on "Personal Investment Activities of Investment Company Personnel.”

 

Adopted: July 20, 2004

Amended: March 15, 2006, July 13, 2017

 

 

 

EXHIBIT A

 

CLOUGH GLOBAL FUNDS (GLO, GLQ, GLV)

INITIAL HOLDINGS REPORT

 

To: The Chief Compliance Officer of the Clough Global Funds (the “Funds”)

 

At the time I became an Access Person, I had a direct or indirect beneficial ownership interest in the securities listed below which are required to be reported pursuant to the Code of Ethics of the Funds:

 

Security Number of Shares Principal Amount

 

The name of any broker, dealer or bank with whom I maintain an account in which my securities are held for my direct or indirect benefit are as follows:

 

This report (i) excludes transactions with respect to which I had no direct or indirect influence or control, (ii) excludes other transactions not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the securities listed above. I understand that this information must be reported no later than ten (10) days after I became an Access Person.

 

       
Date   Print Name  
       
       
    Signature  

 

 

 

EXHIBIT B

 

CLOUGH GLOBAL FUNDS (GLO, GLQ, GLV)

Quarterly Transaction Report

For the Calendar Quarter Ended __________

 

To: The Chief Compliance Officer of the Clough Global Funds (the “Funds”)

 

A. Securities Transactions . During the quarter referred to above, the following transactions were effected in securities of which I had, or by reason of such transactions acquired, direct or indirect beneficial ownership, and which are required to be reported pursuant to the Code of Ethics of the Funds. I understand that this information must be reported no later than                                         .

 

Title of Security Date of Transaction Number of Shares or Principal Amount Dollar Amount of Transaction Interest Rate and Maturity Date (if applicable) Nature of Transaction (Purchase, Sale, Other) Price Broker/Dealer or Bank Through Whom Effected

 

* Transactions that are asterisked indicate transactions in a security where I knew at the time of the transaction or, in the ordinary course of fulfilling my official duties as a trustee or officer, should have known that during the 15-day period immediately preceding or after the date of the transaction, such security was purchased or sold, or such security was being considered for purchase or sale by the Funds.

 

B. New Brokerage Accounts . During the quarter referred to above, I established the following accounts in which securities were held during the quarter for my direct or indirect benefit:

 

Name of Broker, Dealer or Bank Date Account Was Established:

 

C. Other Matters . This report (i) excludes transactions with respect to which I had no direct or indirect influence or control, (ii) excludes other transactions not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the securities listed above.

 

Date:     Signature:    

 

 

 

EXHIBIT C

 

  Print Name:    

 

CLOUGH GLOBAL FUNDS (GLV, GLQ, GLO)

ANNUAL HOLDINGS REPORT

 

For the following period: January 1, 200[ ] – December 31, 200[ ]

 

To: The Chief Compliance Officer of the Clough Global Funds (the “Funds”)

 

As of the period referred to above, I have a direct or indirect beneficial ownership interest in the securities listed below which are required to be reported pursuant to the Code of Ethics of the Fund:

 

Security Number of Shares Principal Amount

 

The name of any broker, dealer or bank with whom I maintain an account in which my securities are held for my direct or indirect benefit are as follows:

 

This report (i) excludes transactions with respect to which I had no direct or indirect influence or control, (ii) excludes other transactions not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the securities listed above.

 

       
Date   Print Name  
       
       
    Signature  

 

 

 

EXHIBIT D

 

CLOUGH GLOBAL FUNDS (GLO, GLQ, GLV)

ANNUAL CERTIFICATE

 

Pursuant to the requirements of the Code of Ethics of the Clough Global Funds, the undersigned hereby certifies as follows:

 

1. I have read the Funds’ Code of Ethics.

 

2. I understand the Code of Ethics and acknowledge that I am subject to it.

 

3. Since the date of the last Annual Certificate (if any) given pursuant to the Code of Ethics, I have reported all personal securities transactions and provided any securities holding reports required to be reported under the requirements of the Code of Ethics.

 

       
Date   Print Name  
       
       
    Signature  

 

 

CLOUGH CAPITAL PARTNERS L.P.

 

CODE OF ETHICS AND PROFESSIONAL CONDUCT

 

Adopted June 4, 2004

(Latest Revision April 17, 2019)

 

Clough Capital Partners L.P. and affiliated companies (herein referred to as “Clough Capital”) have adopted this Code of Ethics and Professional Conduct (the “Code”) based on the principle that each partner, employee, consultant, co-op student, or intern (each an “Employee”) of Clough Capital should conduct his or her affairs, including personal securities transactions, in such a manner as to avoid serving his or her own personal interests ahead of the funds and accounts managed by Clough Capital (the “Fund” or “Funds”) and to avoid conflicts of interest. This Code cannot address every circumstance that may give rise to a conflict, a potential conflict, or an appearance of a conflict of interest. Therefore, each Employee is expected to be alert to such conflicts of interest with the Funds and to conduct him/herself with good judgment. Employees are also reminded that they are responsible for understanding and following all Clough Capital Policies and Procedures, and that failure to act in accordance with those Policies and Procedures may have serious consequences for the Employee and Clough Capital. This Code is subject to change from time to time by Clough Capital. Any questions or comments concerning this Code should be directed to Daniel Gillis, Chief Compliance Officer (“CCO”) or, in his absence, Josh Howland, or Mimi Gross, (the three of which constitute the “Compliance Committee”).

 

Certain terms used herein shall have the definitions ascribed to them in Appendix A attached hereto.

 

A. Governing Standards

 

The standards and procedures embodied in the Code are governed by the following overriding principles, which shall apply to all Employees in their conduct on behalf of Clough Capital, as well as in their personal conduct, to the extent such conduct is addressed in this Code.

 

1. Compliance with Federal Securities Laws

 

All Employees are required to comply with all applicable federal securities laws, whether acting in their official capacity on behalf of Clough Capital or acting in their own interests or those of related persons.

 

2. Employee Personal Securities Transactions

 

No Employee shall, in connection with the purchase or sale, directly or indirectly, by such Employee of a security held or acquired by any Fund:

 

i. Employ any device, scheme or artifice to defraud any Fund;

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ii. Make any untrue statement of a material fact to any Fund or omit to state a material fact necessary in order to make the statements made to any Fund, in light of the circumstances under which they are made, not misleading;

 

iii. Engage in any act, practice or course of business that operates as a fraud or deceit on any Fund; or

 

iv. Engage in any manipulative practice with respect to any Fund.

 

B. Prohibited Transactions

 

1. General Policy

 

a. It is a basic policy that no Employee of Clough Capital should be permitted to profit in his or her personal securities transactions from the securities activities of the Funds managed by Clough Capital. Accordingly, no Employee shall purchase or sell, directly or indirectly, any security in which he or she has, or by reason of such transactions acquires, any direct or indirect beneficial ownership which would be harmful to any of the Funds or which would serve such Employee’s own personal interests ahead of the Funds.

 

b. No Employee shall disclose to other persons the securities activities engaged in or contemplated for any of the Funds, except to the extent required to do so in connection with his or her responsibilities with Clough Capital.

 

c. No Employee shall engage in any transactions which are or could be perceived as “front running” the transactions of the Funds. Front running is an unethical practice which often occurs when an individual trades for his or her own benefit on certain information before the funds he or she manages or for which he or she otherwise is involved is able to engage in (or complete) such trades.

 

2. Specific Prohibitions

 

In addition to the prohibited transactions set forth in Section B.1 above, no Employee shall, for his or her own account, or for an account as to which he or she has direct or indirect beneficial ownership:

 

a. Acquire any Covered Securities in an IPO (“initial public offering”).

 

b. Purchase, sell, cover or short any shares (common or preferred, of any class or series) of any publicly traded company or other issuer, directly or indirectly through the use of an option, swap, or other derivative instrument except as specifically permitted pursuant to this Code. Shares of any publicly traded company held as of the revised date of this Policy, or shares held prior to employment at Clough Capital (the “Prior Shares”), may continue to be held, and the Employee may continue to receive dividends, share splits, and other non-volitional distributions on these Prior Shares. Furthermore, Prior Shares may be sold or covered, subject to the additional requirements of this Code concerning pre-clearance and reporting.

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c. Subject to the restrictions in section B.2.b, purchase, cover, short or sell (long or short) a Covered Security (or any other security of such issuer) within seven (7) calendar days before or after a calendar day on which a Fund or Funds purchases or sells (long or short) that Covered Security (including Covered Securities exchangeable or convertible into such securities) unless, in the case of a purchase or sale within seven calendar days before the day a Fund purchases or sells that Covered Security, the Employee had no actual knowledge that the Covered Security was being considered for purchase or sale for any Funds. Notwithstanding the foregoing and in addition to the exempted transactions set forth in Subsection 3 of this Section B, purchases or sales of the following shall require preclearance pursuant to Section C herein, but shall be excluded from the prohibition set forth in this paragraph c: (i) broad-based securities indices (comprising at least 10 or more securities), (ii) State and local Government and municipal bonds, and (iii) such other securities as the Compliance Committee determines, in its sole discretion, will not be harmful to the Funds and will not otherwise violate the provisions of this Code, including, without limitation, a determination that the purchase or sale will not affect the liquidity of the Covered Security. Any profits improperly realized on trades within the proscribed periods will be subject to disgorgement by the Employee.

 

Employees responsible for making investment recommendations or decisions for the Funds must put the Funds’ interest before his or her own interests and, therefore, promptly make the investment recommendation or decision in the Funds’ interest rather than delay the recommendation or decision for the Funds until after the seventh day of the transaction for his or her own account to avoid conflict with this blackout provision. Clough Capital recognizes that failure to do so may occur in good faith and will not require disgorgement of profits in such instances if it appears that the Employee acted in good faith and in the best interests of the Funds.

 

d. Purchase any Covered Securities in a private placement or Limited Offering, without prior approval of the CCO or in his absence, a member of the Compliance Committee. Such approval must be appropriately documented and the record of such must be maintained in the Code of Ethics files for the applicable holding period. Any person authorized to purchase Covered Securities in a Limited Offering, who so purchases, shall disclose this fact if he or she plays a part in a Fund’s subsequent consideration of an investment in the issuer. In such circumstances, the Fund’s decision to purchase securities of the issuer shall be subject to independent review by a member of the Compliance Committee with no personal interest in the issuer, and documented accordingly.

 

e. Profit in the purchase and sale, or sale and purchase, of the same (or equivalent) Covered Securities within 30 calendar days. Any profits realized on such short-term trades shall be subject to disgorgement by the Employee (see 2.g below). Options on indexes, certain commodity trades, and other instruments typically intended to be held for shorter terms, which are held for less than 30 days are not subject to the prohibition on short-term trading profits, so long as the following conditions are met: (i) the Employee must designate on the Pre-Clearance Request (see section C.7) that the trade is potentially a short term trade; (ii) the Employee must affirm that no such instrument is held in a Fund or, to the best of their knowledge, contemplated for inclusion in a Fund; (iii) the CCO reserves the right to limit or prohibit trading in such short term instruments if such trading is deemed to be excessive or is in any way detrimental to a Fund or Clough Capital. This policy applies to trading in all types of Covered Securities, except in a particular case where the Compliance Committee has made a specific finding of hardship and it can be determined that no potential abuse or conflict is presented (for example, when an Employee’s request to sell a Covered Security purchased within 30 days prior to the request is prompted by a major corporate or market event, such as a tender offer, and the Security was not held in the Funds).

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f. Serve on the board of directors of any publicly traded or private company without prior authorization of the Compliance Committee, which authorization shall be at their sole discretion and may be subject to certain terms and conditions concerning such service, which may include a prohibition on participation in the process of investment decisions on behalf of Funds which involve the subject company.

 

g. Any profits improperly realized on trades that are subject to disgorgement pursuant to this Code will be donated to a charitable or educational organization of Clough Capital’s choosing, for which the violating Employee shall receive no tax benefit. Any such disgorgement of profits shall not limit the rights of Clough Capital under this Code to take other actions.

 

3. Exempted Transactions

 

The prohibitions in Section B of this Code and the preclearance requirements in Section C herein shall not apply to:

 

i. Purchases or sales effected in any Exempt or Third Party Discretionary Account (see Appendix A), provided however, that purchases of IPO securities are not permitted in such accounts, and private placements or Limited Offerings shall require pre-approval from the CCO or member of the Compliance Committee in his absence;

 

ii. Purchases which are part of an automatic dividend reinvestment plan, or securities that are granted or made available for purchase to an Employee’s spouse pursuant to an employee stock ownership plan (ESOP) so long as participation in such plan has been disclosed to the CCO;

 

iii. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired;

 

iv. Purchases and Sales of Covered Securities which have been pre-cleared in accordance with Section C;

 

v. Purchases or sales which are non-volitional on the part of a person, including, but not limited to, receipt of securities pursuant to a stock dividend, share split, or merger;

 

vi. Purchases or sales of open-end, non-ETF mutual funds in Clough Capital’s 401 (k) plan or other Employee accounts;

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vii. Purchases or sales of ETFs or other Covered Securities in model portfolios managed by an independent investment consultant in Clough Capital’s 401 (k) plan;

 

viii. Purchases or sales of ETFs that have a minimum market capitalization at the time of trade of at least $500 million;

 

ix. Commodity contract rolls (the sale or purchase of the currently expiring contract replaced by the purchase or sale of a later expiring month contract in the same commodity and amounts) of a previously pre-approved (under Section C below) commodity contract position. (Note: the initial open and final close must be pre-cleared.)

 

x. Purchases and sale of U.S. government bonds, notes, and bills.

 

xi. Other purchases and sales approved in advance and in writing by the Compliance Committee.

 

C. Prior Approval for Covered Securities

 

Each Employee is required to receive prior approval from the CCO, or his delegate (the “Compliance Reviewer”) before purchasing, selling, or otherwise transferring (including gift donations) Covered Securities (which are, other than Prior Shares as outlined in B.2.b., limited to ETFs, closed-end mutual funds, state and local government bonds, corporate bonds, and options on broad-based securities indices and other derivatives that do not derive from single or less that ten equity securities of publicly traded companies) in which he or she has a beneficial interest. The following procedures will apply:

 

1. The Employee must request approval by creating, in MyComplianceOffice, (the firm’s personal securities trading software) a Pre-Clearance request or sending via e-mail a Pre-Clearance Request, in such form as adopted from time-to-time by the CCO.

 

2. The Employee must not trade in a security if he or she is aware that the Covered Security is being considered for purchase or sale for any Funds within seven (7) calendar days after the date the transaction in the Covered Security is expected to occur. If the Employee’s job responsibilities encompass any part of the investment process (i.e. is a portfolio manager, analyst, trader or portfolio administrator), he or she must not take away an investment opportunity from a Fund or Funds and provide information pertinent to such conclusion if requested by the CCO.

 

3. MyComplianceOffice will alert the Compliance Reviewer via e-mail that an employee has requested a Pre-clearance authorization and will check the firm’s trades executed during the previous 7 days for trading activity in that security.

 

4. The Compliance Reviewer will then log on to MyComplianceOffice and also check against the current day’s blotter and discuss with the portfolio manager for trade activity, then either approve the trade, deny the trade, or ask the employee for additional information, as applicable based on the standards set forth in this Code.

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5. If the Employee receives permission to trade a security or instrument via e-mail from MyComplianceOffice, the trade must be executed before the end of the next business day after permission has been received (unless the trade is designated as a limit order – see below), provided, however, that such permission shall be terminated if prior to executing the trade the Employee knows, or should have known, that the execution thereof at such time would violate this Code. If the trade is not executed within that time frame and the Employee still wishes to effect the transaction, pre-clearance in the manner described above must again be obtained.

 

6. If an Employee wishes to place a trade with a limit order then the appropriate box should be checked in MyComplianceOffice. Limit order trades, once approved, will remain authorized for five trading days, provided, however, that such permission shall be terminated if prior to executing the trade the Employee knows, or should have known, that the execution thereof at such time would violate this Code. If the trade has not been executed within the five trading day period and the Employee still wishes to effect the transaction, pre-clearance in the manner described above must again be obtained.

 

7. If an Employee wishes to request authorization to place a short term trade (see section B.2.d) that may not be held for the normally required 30 calendar days, a notation to that effect must be added to the Comments box on the Pre-Clearance request screen in MyComplianceOffice. This will alert Compliance to the fact that the trade may be closed out prior to 30 days, so that if the trade is closed out early, it does not result in a violation of the 30 day holding period rule.

 

8. If the Employee is absent from the office on the day he or she desires to pre-clear a trade and is unable to access MyComplianceOffice on their home computer or mobile device, preclearance to trade may still be submitted by e-mail as described above. The CCO may limit the frequency of e-mailed out-of-the-office preclearance requests.

 

D. Reporting and Certification

 

Every Employee shall provide reports to the CCO as follows, provided that no holdings or transaction reports are required with respect to Exempt Accounts:

 

1. Initial Holdings Report: Not later than 10 days after a person becomes an Employee, such person shall submit to the CCO an Initial Holdings Report Affirmation in MyComplianceOffice (current within 45 days of hire) executed by such person, including the following information:

 

a. A photocopied or scanned end-of-month holdings statement from all open brokerage accounts over which the Employee has beneficial ownership showing the title, number of shares and principal amount of each Covered Security in which the Employee had any direct or indirect beneficial ownership when the person became an Employee;

 

b. The name of any broker, dealer or bank with whom the Employee maintained an account in which any Covered Securities were held for the direct or indirect benefit of the Employee as of the date the person became an Employee; and

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c. An acknowledgment that such person (i) has read, understands and has had the opportunity to ask questions concerning this Code and (ii) agrees to abide by the Code as amended from time to time.

 

d. Brokerage accounts will be loaded into MyComplianceOffice by the Employee for authorization by the Compliance Reviewer. Employees must follow directions concerning logging into their brokerage accounts through MyComplianceOffice.

 

2. Quarterly Transactions Form: Not later than 30 days after the end of each calendar quarter, whether or not the Employee (for his or her own account or for any other account for which the Employee is considered to have beneficial interest) entered into any personal securities transactions during the quarter, each Employee shall submit to the CCO through MyComplianceOffice a Quarterly Transactions Affirmation executed by such person, including the following information:

 

a. With respect to all transactions during such quarter in a Covered Security (except for transactions that are effected pursuant to an automatic investment plan) each Employee should affirm that all brokerage accounts for which the Employee has a beneficial interest have been reported to Compliance and all trade activity for all accounts that were open during the quarter have been reported. MyComplianceOffice will receive employee transactions electronically and summarize them for review, including the following:

 

i. the date of each transaction, title and number of securities and the principal amount of each Covered Security involved;

 

ii. the nature of the transactions (i.e., purchase, sale or any other type of acquisition or disposition);

 

iii. the price at which the transaction was effected; and

 

iv. the name of the broker, dealer or bank with or through which the transaction was effected.

 

b. With respect to any account established by the Employee (for his or her own account or for any other account for which the Employee is considered to have beneficial interest) during the quarter in which any Covered Securities were held during the quarter for the direct or indirect benefit of the Employee, the Employee should report in MyComplianceOffice the following: the name of the broker, dealer, or bank with whom the Employee established the account and the date the account was established. With respect to any previously reported account that has been closed during the quarter, an indication that such account has closed by deleting it in MyComplianceOffice.

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c. If there has been no change to the broker, dealer, or bank accounts previously reported, the Employee must still confirm in MyComplianceOffice that the account is still valid with an indication of such on the Quarterly Transactions Affirmation.

 

d. If no transactions were effected in Covered Securities during the calendar quarter, a statement to that effect by checking the appropriate box in MyComplianceOffice.

 

e. With respect to any nonpublic security owned by such Employee, a statement indicating whether the issuer has changed its name or publicly issued securities during such calendar quarter.

 

3. Annual Holdings Reports: Within 45 days after the end of each calendar year, each Employee shall submit to the CCO an Annual Holdings Affirmation through MyComplianceOffice executed by such person. MyComplianceOffice will upload electronically the employee’s broker statements, including the following information:

 

a. The title, number of shares and principal amount of each Covered Security in which the Employee had any direct or indirect beneficial ownership;

 

b. The name of any broker, dealer or bank with whom the Employee maintained an account in which any Covered Securities were held for the direct or indirect benefit for the Employee; and

 

c. The employee will also be asked to make an acknowledgment that such Employee (i) has read, understands and has had the opportunity to ask questions concerning this Code and (ii) agrees to abide by the Code as amended from time to time.

 

4. Disciplinary History Questionnaire: Not later than 10 days after a person becomes an Employee, and annually thereafter within 45 days of the end of each calendar year (together with the Initial Holdings Affirmation or Annual Holdings Affirmation, respectively) such person shall submit to the CCO a completed Disciplinary History Questionnaire via MyComplianceOffice executed by such person. The Employee shall document fully and completely any “Yes” answer to any question on the Disciplinary History Questionnaire.

 

5. Outside Business Affiliations and Duties: Due to the potential for conflicts of interest or the appearance of conflicts of interest, all Employees maintaining outside business activities (including, without limitation, other employment, contracted or consulting work, or other officer, director, governor, or trustee appointments etc.) or executorships, trusteeships, custodianships, or powers of attorney for other than family members, must annually report such positions to the CCO through MyComplianceOffice. Any new outside business affiliations or duties that are undertaken by an Employee must be approved in advance by the President and if not already disclosed in the annual disclosure must be reported to the CCO within 30 days by the Employee. These affiliations will be reviewed by the Compliance Committee, and any Employee holding a position that, in the opinion of the Compliance Committee, could conflict with a duty to a Fund or Clough Capital, the Employee may be required, in the sole discretion of the Compliance Committee, to refrain from or curtail activities in connection with such position.

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6. Third Party Discretionary Account Procedures: Employees wanting to establish or to maintain a brokerage account for any account for which they are deemed to have beneficial ownership under a Third Party Discretionary Account arrangement (see Appendix A) must execute and return to the CCO a Certification for Third Party Discretionary Accounts (see Appendix C) detailing the name of the investment adviser or broker-dealer that will manage the account(s) on their behalf, the relationship, if any, with the investment adviser or broker-dealer, and a statement that they will adhere to the requirements as to communication concerning the account. An Employee relying on the Third Party Discretionary Account exemption is prohibited from directly or indirectly suggesting transactions in specific Covered Securities to the investment adviser or broker-dealer, and the Employee’s actual practice must not be to exercise any influence or discretion over transactions. If the Employee engages in discussion of specific investments in Covered Securities the account will no longer qualify as a Third Party Discretionary Account. Employees will be asked to certify on a periodic basis that they have not communicated with the investment adviser or broker-dealer except as permitted under the definition of Third Party Discretionary Accounts in Appendix A. Employees maintaining a Third Party Discretionary Account will still be subject to the Initial, Quarterly, and Annual reporting requirements in this Section D either through MCO or by way of a duplicate electronic or paper statement sent to the attention of the CCO. The CCO shall initially and on an annual basis send a notice to the investment adviser or broker-dealer managing such Third Party Discretionary Account outlining the communication, discretion, and reporting requirements of this Code.

 

E. Review and Enforcement

 

1. Review. The CCO’s review of information submitted under the Code will include the comparison by MyComplianceOffice of the reported personal securities transactions of each Employee with completed portfolio transactions of the Funds to determine whether any transactions subject to the restrictions in Sections B and C (each a “Reviewable Transaction”) have occurred (for example, if a pre-clearance request submitted, holding period requirements, trading ahead of or after Funds have traded, etc.).

 

If the CCO determines that a Reviewable Transaction or other possible violations of this Code may have occurred, he shall then determine whether an actual violation of this Code may have occurred, taking into account any exemptions hereunder. Before making any determination that a violation has occurred, the CCO shall give the person whose transaction is in question an opportunity to supply additional information regarding such transaction, if applicable.

 

2. Enforcement. If the CCO determines that a violation of this Code may have occurred, he shall promptly report the possible violation to the Compliance Committee and they shall consider and may impose such sanctions as they deem appropriate, including, among other things, a letter of censure or suspension or termination of the employment of the violator.

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F. Gifts

 

1. Receiving of Gifts

 

No Employee shall seek or accept anything of value, either directly or indirectly, from broker-dealers or other persons providing services to Clough Capital and/or any Funds in exchange for any action being taken by such person on behalf of Clough Capital or any of the Funds or that might otherwise create a conflict of interest or interfere with the impartial discharge of his or her responsibilities to Clough Capital or the Funds. Cash gifts of any kind are prohibited, including cash equivalents such as gift certificates, bonds, securities or other items that may be readily converted to cash. For the purpose of this provision, unsolicited gifts from broker-dealers or other persons providing services to Clough Capital without regard to any specified transaction or action (or if in connection with a transaction, is a gift also provided to other participants) including, but not limited to, those in the following categories, will not be considered to be in violation of this section:

 

1. an occasional, reasonably priced meal;

 

2. reasonable and conventional business courtesies such as joining a client or vendor in attending conferences, conventions, golf outings, etc.;

 

3. an occasional ticket to a sporting event, the theater or comparable entertainment;

 

4. Reminder advertisements – those items with the broker-dealer’s logo, such as articles of clothing, gym bags, and the like distributed by broker-dealers to the Employee in connection with a conference or seminar sponsored by such broker-dealer and offered to all conference or seminar participants; and

 

5. a holiday gift having a reasonable value or a gift which would be impractical to return or refuse or the refusal of which in the recipient’s judgment adversely affects a relationship beneficial to Clough Capital and its clients.

 

If there are any questions about a proposed gift or activity, each person is urged to err on the side of caution and obtain prior approval from the CCO.

 

2. Giving of Gifts

 

In appropriate circumstances, it may be acceptable for an Employee to extend gifts or entertainment to clients or others who do business with Clough Capital, but Employees should be certain that the gift or entertainment does not give rise to a conflict of interest, or give the appearance of a conflict of interest. In all instances, the giving of cash or cash equivalents is prohibited. The gift or entertainment should be of reasonable value under the circumstances, must be lawful and in accordance with regulatory rules, and be generally accepted under the business practices of the governing jurisdiction.

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If there are any questions about a proposed gift or entertainment, the Employee is urged to contact the CCO.

 

3. Reporting of Gifts and Entertainment

 

Employees who receive or give gifts or entertainment from a broker-dealer, vendor, or service provider to Clough Capital are required to report the details of the gift or entertainment in MyComplianceOffice promptly, and in any event no later than the end of each calendar quarter. The report should include the date, the broker-dealer, vendor, or service provider giving or receiving the gift or entertainment, the individual providing the gift or entertainment, the nature of the gift or entertainment, an estimate of its value, and the reason for the gift or entertainment. This information will be evaluated by Compliance to determine if the broker-dealer, vendor, or service provider is trying to unduly influence the Employee or Employees in selecting that broker-dealer, vendor, or service provider for business of Clough Capital. Employees will be reminded on a monthly basis to report all incidents of gifts or entertainment, and will be required on a quarterly basis to affirm in MyComplianceOffice that they have met their gift and entertainment reporting responsibilities.

 

G. Confidential Information, Proprietary Information and Developments Policy

 

1. Employees should be aware that all information, whether or not in writing, of a private, secret, proprietary or confidential nature that concerns Clough Capital’s business or financial affairs (collectively “Proprietary Information”), including the business and affairs of the Funds, is and shall be the exclusive property of Clough Capital. By way of illustration, but not limitation, Proprietary Information includes (i) information concerning the operations, systems, trading strategies, investment models or other models, developments, inventions, performance, research, actual or proposed investments, assets under management, personnel, marketing plans, financial data developments, plans and vendor lists, (ii) computer software, forms, contracts, agreements, literature or other documents and (iii) the identity of any investors in any of the Funds or other information about such investors or the investments made or to be made by such Funds. Employees shall not disclose any Proprietary Information to others outside of Clough Capital or use the same for any unauthorized purposes without the prior written approval by the CCO, either during or after such period of time as the Employee is performing duties and responsibilities for Clough Capital, unless and until such Proprietary Information has become public knowledge without fault by the Employee or the Employee is required to do so by law or court order, whereupon the Employee (or former Employee) shall promptly inform Clough Capital in writing.

 

2. All written, photographic, electronic or other tangible material containing Proprietary Information which shall come into an Employee’s custody or possession shall be and are the exclusive property of Clough Capital to be used by the Employee only in the course of performing duties and responsibilities for Clough Capital. All such records or copies thereof and all tangible property of Clough Capital in an Employee’s custody or possession shall be delivered to Clough Capital, upon the earlier of (i) a request by Clough Capital or (ii) such Employee no longer performing duties and responsibilities for Clough Capital. After such delivery, the Employee shall not retain any such records or copies thereof or any such tangible property.

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3. All models, inventions and other proprietary information that an Employee creates or develops while performing duties and responsibilities for Clough Capital, is and will remain the sole and exclusive property of Clough Capital, whether or not they are protected or protectible under applicable patent, trademark, service mark, copyright or trade secret laws. Such models, inventions and other proprietary information may take the form, but not be limited to, software products, source code, know-how, processes, designs, algorithms, computer programs and routines, formulae, techniques, developments or experimental work, works-in-progress, or business trade secrets. Any applicable Employee shall execute any documents necessary, as determined by the CCO, to acknowledge the foregoing and/or to assign, if necessary, to Clough Capital all of such Employee’s right, title and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such models, inventions or other proprietary information.

 

The policies regarding non-disclosure, the return of proprietary information and inventions set forth in paragraphs 1, 2 and 3 above also extend to such types of information, records and tangible property of investors of Clough Capital or vendors to Clough Capital or other third parties who may have disclosed or entrusted the same to Clough Capital or to the Employee in the course of his or her employment. Employees shall not disclose or use Proprietary Information and records of the type set forth in paragraphs 1, 2 and 3 above, both during and after the termination of the employment or independent contractor relationship with Clough Capital. Employees shall not accept future employment or enter into any contractual or business relationship with any business or other entity if that employment or relationship will cause the Employee to violate this Proprietary Information and Developments policy. Except as specifically provided herein, any other policies of Clough Capital or any agreement between Clough Capital and an Employee, Clough Capital does not prohibit nor restrict an Employee’s future use of the knowledge or skills he or she may develop while an Employee of Clough Capital.

 

Whistleblower Policy. Employees must acknowledge and agree that as part of their employment, they will have access to information concerning the Firm and its affiliates, their businesses, business relationships and financial affairs, and those of the funds and accounts they may manage, which information is confidential or proprietary in nature (the “Confidential Information”). Employees must agree that the Confidential Information is the exclusive property of the Firm, and that during and after their employment they will protect the Confidential Information and that they will not use it for their own benefit or that of anyone else, or disclose to anyone the Confidential Information in any manner. Notwithstanding the foregoing, nothing in this Code shall prohibit or restrict an Employee from lawfully (i) communicating or initiating communications directly with, or cooperating with, providing relevant information to or otherwise assisting in an investigation by the United States Securities and Exchange Commission (the “SEC”), the Equal Employment Opportunity Commission (the “EEOC”), or any governmental or regulatory body or official(s) or self-regulatory organization (“SRO”) regarding a possible violation of any applicable law, rule or regulation; (ii) responding to any inquiry from any such governmental or regulatory body or official or SRO or governmental authority, including an inquiry about this Code; or (iii) testifying, participating or otherwise assisting in an action, investigation or proceeding relating to a possible violation of any such law, rule or regulation. Nor does this Code require an Employee to notify the Firm of any such communications, cooperation, assistance, inquiries, responses to inquiries, testimony or participation as described in the preceding sentence, except for communications and inquiries seeking information or documents from or on behalf of the Firm, and responses to such communications and inquiries by or on behalf of the Firm. Finally, nothing in this Code shall prohibit or restrict an Employee from responding to any inquiry about this Code by the SEC, the EEOC or any other governmental or regulatory body, or any SRO.

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Equitable Remedies. Clough Capital believes that the restrictions contained in this Section G are necessary for the protection of the business and goodwill of Clough Capital and are reasonable for such purpose. Employees should be aware that any breach of this policy is likely to cause Clough Capital substantial and irrevocable damage and therefore, in the event of any such breach, Clough Capital, in addition to such other remedies which may be available, may pursue, and shall have the right to pursue, specific performance and other injunctive relief without having to prove actual damages.

 

Employees may not sign any confidentiality agreements with other parties, whether in their individual capacities or on behalf of Clough Capital or any fund, without the prior approval of the CCO.

 

H. Insider Trading Policy

 

Employees may from time to time be in possession of material, non-public information concerning the Funds or companies that they invest in as a result of inadvertent or unauthorized disclosure. Employees may also be in possession of material non-public information as a result of Clough Capital entering into a written non-disclosure agreement (“NDA”) or confidentiality agreement with an issuer in the course of research or other activities prior to investment. Under federal securities laws, such persons are prohibited from buying or selling securities of such companies (or securities whose value is determined with reference to the securities of such companies) while in possession of such inside information, and may not otherwise use the information for their own advantage or the advantage of others, except as may be permitted by an NDA. Violations of this rule may subject those involved to disciplinary action, as well as severe civil or criminal penalties. In addition, any such legal proceedings could result in adverse publicity and embarrassment to Clough Capital and the individuals involved. Clough Capital has adopted Policies and Procedures with Respect to Insider Trading to avoid even the appearance of improper conduct on the part of any Employee (not just so-called insiders). These Policies and Procedures are attached hereto as Appendix B and are a part of this Code. Procedures governing the use of NDA’s and other research considerations have also been developed and adopted and are attached as Appendix D, Non-Disclosure Agreements and Research Considerations. It is critical that all Employees read and understand such Policies and Procedures and Employees are encouraged to consult with the CCO if there are any questions or concerns.

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I. Copyright and Software distribution

 

Clough Capital has expended considerable resources on the internal development of its computer software and the acquisition of licenses to third party computer software. Clough Capital views such computer software and licenses to be valuable intellectual property of Clough Capital. Clough Capital also seeks to ensure compliance with copyright and trade secret laws and the various license and subscription agreements binding on Clough Capital. The United States Copyright Act and license agreements from licensors limit the making of copies of computer software and associated documentation. Trade secret law and license and confidentiality agreements from licensors and other third parties limit unauthorized use or disclosure of Clough Capital’s or such third parties’ trade secrets and other confidential information, including computer software, associated documentation and other information. Taking steps to protect the equity that Clough Capital has built up in its own software and its licenses to third party software, and compliance with such laws and agreements is the responsibility of every Employee of Clough Capital. To this end, the following guidelines have been established:

 

1. Employees are not permitted to make unauthorized disclosure or copies of Clough Capital’s or licensed computer software or documentation.

 

2. Employees are not permitted to make unauthorized disclosure or copies of copyrighted publications, including research studies, databases, professional journals or textbooks.

 

3. Employees using Clough Capital’s or licensed software or associated documentation provided by Clough Capital may only use such software as permitted in the applicable license agreement and are not permitted to make copies for use on other machines.

 

4. Employees are not permitted to obscure or obliterate any copyright or confidentiality notice of Clough Capital or any licensor, on any software or printed materials they hold in their possession.

 

5. Only the Chief Technology Officer or his designee is permitted to install computer software, applications, or other computer programs on Clough Capital owned networks, servers, computers, laptops, or other electronic devices.

 

J. Retention of Records

 

This Code, a copy of each report filed by Employees, any written report relating to the interpretation of this Code, or violations thereunder, shall be preserved with records of Clough Capital for the period required by Rule 204A-1 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

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K. Confidentiality under the Code

  

All reports of securities transactions and any other information collected or produced pursuant to this Code shall be treated as confidential, except as otherwise required by law or in connection with appropriate examinations by representatives of the Securities and Exchange Commission or any other authorized governmental body or self-regulatory organization. See section G.

 

L. Other Matters

 

Whenever prior consent or approval by a person is required under this Code, it is understood that such person shall not pass upon a situation in which he or she has a personal interest, except as expressly provided herein.

 

The CCO or the Compliance Committee has the authority to grant written waivers of the provisions of this Code in appropriate instances, provided, that such waivers are granted only in rare instances and are not in violation of applicable rules and regulations.

 

The CCO or the Compliance Committee shall have the authority to request additional information from one or more Employees concerning their compliance with this Code, including, without limitation, duplicate brokerage statements for any account and copies of trade confirmations for certain transactions.

 

Employees are encouraged to promptly report violations of this Code or any other violations of law or regulations to the Chief CCO or another member of the Compliance Committee, subject to the Whistleblower Policy outlined in Section G. Employees are also encouraged to report actual or suspected instances of fraud or other intentional violations of policies or procedures to a member of the Compliance Committee. All efforts will be made to maintain the confidentiality of the Employee making the report, and retaliation against an Employee making such a report will not be tolerated.

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APPENDIX A

 

DEFINITIONS

 

Beneficial ownership ” shall be interpreted in the same manner as it would be under Section 16a-1(a)(2) of the Securities Exchange Act of 1934, as amended (the “1934 Act”) in determining whether a person is the beneficial owner of a security for purposes of Section 16 under the 1934 Act and the rules and regulations thereunder from time to time in effect. In general, a person is deemed to have beneficial ownership of securities owned by the Employee’s spouse, by children residing in the person’s household or by children who are financially dependent on the person, or other securities over which the person has control. Some examples of forms of beneficial ownership include:

 

a. Securities held in a person’s own name, or that are held for the person’s benefit in nominee, custodial, or “street name” accounts.

 

b. Securities owned by or for a partnership in which the person is a general partner (whether the ownership is under the name of that partner, another partner or the partnership or through a nominee, custodial, or “street name” account).

 

c. Securities that are being managed for a person’s benefit on a discretionary basis by an investment adviser, broker, bank, trust company, or other manager other than securities in an Exempt Account.

 

d. Securities in a person’s individual retirement account.

 

e. Securities in a person’s account in a 401(k) or similar retirement plan, even if the person has chosen to give someone else investment discretion over the account.

 

f. Securities owned by a trust of which the person is a beneficiary.

 

g. Securities owned by a corporation, partnership or other entity that the person controls (whether the ownership is under the name of that person, under the name of the entity or through a nominee, custodial or “street name” account).

 

Covered Security ” means a security as defined in Section 202(a)(18) of the Investment Advisers Act of 1940, as amended, except that it does not include direct obligations of the Government of the United States, bankers’ acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments (including repurchase agreements), and shares of money market mutual funds, transactions and holdings in shares issued by registered open-ended investment companies (except those for which Clough Capital or a control affiliate acts as the investment adviser) excluding open-ended Exchange Traded Funds (“ETF’s”), transactions in units of a unit investment trust if the unit investment trust is invested exclusively in unaffiliated mutual funds, or such other securities as may be excepted under the provisions of Rule 204A-1 under the Advisers Act from time to time in effect. Covered Securities include, but are not limited to, stocks, bonds, closed-end funds, ETF’s, options, and warrants.

 

Employee ” means any partner, officer, member or employee of Clough Capital or any independent contractor of Clough Capital performing material services for Clough Capital meeting the definition of “Access Person” as defined under the Investment Advisers Act of 1940, as amended. Temporary employees, including consultants, part-time workers, interns, co-ops, and others may be deemed to be an Employee under this Code by the Compliance Committee, depending on their access to sensitive, non-public, or confidential information, including portfolio holdings of the Funds. If the Compliance Committee finds that a temporary employee should be deemed an Employee for purposes of the Code, then such person will be asked to comply with the provisions of the Code, including the holdings and transactions reporting and pre-clearance requirements.

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Exempt Account ” means (i) a “blind trust” or similar arrangement under which the person is prohibited by contract from communicating with or providing specific instructions to the manager of the Account regarding the purchase or sale of specific securities for the Account, (ii) any private investment partnership or company in which Clough Capital is a general partner or for which Clough Capital provides investment management services (“Clough Capital Funds”), (iii) any partnership interests or shares issued by any Clough Capital Funds, and (iv) any securities issued by any Clough Capital entity. An account shall be deemed an Exempt Account if the CCO makes such determination after reviewing all relevant facts.

 

Limited Offering ” means an offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act.

 

Purchase or sale of a Covered Security ” includes, among other things, the writing of an option to purchase or sell a Covered Security.

 

A security is “ being considered for purchase or sale ” when a recommendation is made (or if no recommendation is made, an order is made) to purchase or sell a security or with respect to the person making the recommendation, when such person seriously considers making such recommendation.

 

“Third Party Discretionary Account ” is an account for which, pursuant to an agreement and in actual practice, an investment adviser or broker (who is not an Employee or affiliate of Clough Capital) has full discretionary authority to purchase and sell Covered Securities without prior notification to, discussion with or consent of the accountholder or his/her representatives; and as to which communications with the adviser or broker are limited to confirmations and account statements, fee discussions, discussion of general investment objectives and investment strategies, and other communications and discussions that do not relate to purchases or sales of specific Covered Securities. Each Employee that maintains a Third Party Discretionary Account must initially upon employment with Clough Capital, and annually thereafter, submit a Certification for Third Party Discretionary Accounts for each such account (see Appendix C) in such form as the CCO shall designate from time to time.

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APPENDIX B

 

POLICY AND PROCEDURES WITH RESPECT TO INSIDER TRADING

 

I. Policy Statement on Insider Trading and Background

 

Clough Capital forbids any Employee from trading, either personally or on behalf of others (including Funds) on material nonpublic information or communicating material nonpublic information to others in violation of the law. This conduct is frequently referred to as “insider trading.” Clough Capital’s policy applies to every Employee and extends to activities within and outside their duties at Clough Capital. Every Employee must read and retain this policy statement. Any questions regarding Clough Capital’s policy and procedures should be referred to the CCO. Capitalized terms not defined herein shall have the meanings ascribed to them in Clough Capital’s Code of Ethics and Professional Conduct.

 

The term “insider trading” is not defined in the federal securities law, but generally is used to refer not only to the use of material nonpublic information to trade in securities (whether or not the user is an “insider”), but also to communications of material nonpublic information to others, commonly referred to as “tipping”. The law concerning insider trading can and does change, but as a general matter the law prohibits, among other things:

 

trading by an insider, while in possession of material nonpublic information;

 

trading by a non-insider, while in possession of material nonpublic information, where the information either was disclosed to the non-insider in violation of an insider’s duty to keep it confidential or was disclosed to the non-insider subject to a duty to maintain its confidentiality;

 

communicating material nonpublic information to others other than a person subject to a duty of confidentiality (“tipping”); or

 

trading in securities of a target of a tender offer by any person, while in possession of material nonpublic information relating to the tender offer acquired directly or indirectly from the offeror, the target, or an officer, director, partner, employee or any other person acting on behalf of the offeror or target.

 

1. Who is an Insider?

 

The concept of “insider” is broad. It includes officers, directors and employees of an issuer. In addition, a person can be a “temporary insider” if he or she enters into a special confidential relationship in the conduct of an issuer’s affairs and as a result is given access to information solely for the issuer’s purposes. A temporary insider can include, among others, an issuer’s attorneys, accountants, consultants, bank lending officers, and the employees of such organizations.

 

2. What is Material Information?

 

Trading on insider information is not a basis for liability unless the information is material. “Material information” generally is defined as information which a reasonable investor would be likely to consider important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of an issuer’s securities. Information that officers, directors and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidity problems, and extraordinary management or business developments. Material information may also be received from participating on creditors’ committees, or in connection with investments in private placements or other pre-lPO offerings.

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Material information does not have to relate to an issuer’s business or come from a source inside the issuer. For example, in a case involving a Wall Street Journal reporter, the Supreme Court considered as material certain information about the contents of a forthcoming column that was expected to affect the market price of a security. In that case, the reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in the column and whether those reports would be favorable or not.

 

3. What is Nonpublic Information?

 

Information is nonpublic until it has been effectively communicated to the marketplace. A person should not trade on material nonpublic information until the investing public has been afforded the time to receive the information and act upon it. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the SEC, or appearing in The Wall Street Journal or other publications of general circulation would generally be considered public.

 

4. Penalties for Insider Trading

 

Penalties for trading on or communicating material nonpublic information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties could include:

 

civil injunctions;

triple damages;

paying back profits;

jail sentences;

fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited; and

fines for an employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided.

 

In addition, any violation of this policy statement can be expected to result in serious sanctions by Clough Capital, including possible dismissal of the persons involved.

 

II. Procedures to Implement Clough Capital’s Policy Against Insider Trading

 

The following procedures have been established to aid the Employees of Clough Capital in avoiding insider trading, and to aid Clough Capital in preventing, detecting and imposing sanctions against insider trading. These Procedures cannot cover all circumstances and Employees are asked to be cautious in all situations involving the potential for insider trading and consult with the CCO if such Employee has any questions.

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Before an Employee trades for himself or herself or others, including Funds managed by Clough Capital, in the securities of an issuer about which such Employee may have potential inside information, the Employee should ask at least the following questions of himself or herself:

 

a. Is the information material? Is this information that an investor would be likely to consider important in making his or her investment decisions? Is this information that would substantially affect the market price of the securities if generally disclosed?

 

b. Is the information nonpublic? To whom has this information been provided? Has the information been effectively communicated to the marketplace by being published in The Wall Street Journal or other publications of general circulation?

 

If, after consideration of the above, the Employee believes that the information is material and nonpublic, or if the Employee has questions as to whether the information is material and nonpublic, he or she should take the following steps.

 

a. Do not purchase or sell the security on behalf of yourself or others, including the Funds.

 

b. Do not communicate the information inside or outside Clough Capital, other than to the CCO.

 

c. Immediately report the information to the CCO or another member of the Compliance Committee, who will consult with Clough Capital’s counsel. Thereafter, the CCO or Compliance Committee will instruct the Employee to continue to refrain from such trading and communication, or the Employee will be allowed to trade and communicate the information.

 

Employees should be aware that these restrictions also apply to “tipping” information to others and apply to each Employee’s family members and others living in your household

 

Please see also the Investment Research and Third Party Consultants Policy concerning the use of certain firms that are described as “expert networks” that can refer paid industry professionals (Third Party Consultants) to provide information, advice, analysis, market expertise, or industry expertise, for a fee. In order to seek to ensure that any use by Clough Capital personnel of these Third Party Consultants does not result in the receipt by Clough Capital of any material non-public information, certain compliance controls have been adopted which are fully described in that Policy. These controls are in addition to and intended to supplement the policies and procedures described in this Code, and these Policies and Procedures with Respect to Insider Trading.

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Appendix C

 

Certification for Third Party Discretionary Accounts

 

Each Employee that maintains a Third Party Discretionary Account must initially upon employment with Clough Capital, and annually thereafter, submit a Certification for Third Party Discretionary Accounts for each such account. Capitalized terms not defined herein shall have the meanings ascribed to them in Clough Capital’s Code of Ethics and Professional Conduct (the “Code”).

 

I hereby certify that I have read and understand the requirements of the Code regarding transactions in Covered Securities. I understand that transactions in Covered Securities within the Third Party Discretionary Account(s) identified below will be exempt from the pre-clearance requirements of the Code only if:

 

pursuant to an agreement and in actual practice, the investment adviser or broker of the Third Party Discretionary Account(s) (who may not be an Employee or affiliate of Clough Capital) has full discretionary authority to purchase and sell Covered Securities without prior notification to, discussion with or consent of myself or the accountholder (for those accounts for which I have been deemed to have beneficial ownership);

 

neither I nor the accountholder, directly or indirectly, suggest or otherwise communicate with the investment adviser or broker in advance concerning transactions in specific Covered Securities; and

 

I or the accountholder will at all times act in accordance with the above agreement with the investment adviser or broker.

 

I understand that the Code does not prohibit receipt of periodic (after the fact) reports or statements of any Third Party Discretionary Account or information for preparation of tax returns or from holding periodic discussions with the investment adviser or broker solely for the purposes of describing investment objectives and risk profiles generally or evaluating the past performance, or for any purpose other than to discuss specific Covered Securities or issuers.

 

Investment Adviser

or Broker-Dealer Firm Name:

 
Name of Adviser or Broker:  
Accountholder Name:  
Account Number(s):  

 

Do you have a personal relationship with this Adviser or Broker? Yes [  ]     No [  ]
If Yes, explain relationship:  
   

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I hereby certify that the conditions set forth above are satisfied with respect to each Third Party Discretionary Account in which I have any Beneficial Ownership, and that neither I nor any other accountholder will have any communications with the investment adviser or broker relating directly or indirectly to any Covered Security currently held or to be held by the account (except for receiving the reporting information specifically permitted by the last sentence of the preceding paragraph).

 

Signature:

Name:    
Date:    

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APPENDIX D

 

Non-Disclosure Agreements and Research Considerations

 

I. Policy Statement on Non-Disclosure Agreements

 

From time to time, Clough Capital may enter into written Non-Disclosure Agreements or Confidentiality Agreements (“NDA(s)”) with issuers or others in the course of its research or other investment activities whereby Clough Capital and its Employees are obligated to maintain the confidentiality of the information so obtained. NDAs are generally executed with private companies prior to the disclosure of information concerning a potential investment. A member of Clough Capital’s research analyst or investment team may also be provided access to a deal site or data permission room (e.g. Intralinks) that contains private information or potentially material non-public information (“MNPI”). Users of these deal sites or data permission rooms are likewise required to maintain the confidentiality of this information for a certain period of time.

 

Employees are prohibiting from disclosing to third parties any information obtained under an NDA or through access to deal sites or data permission rooms. Employees are restricted from sharing this information internally within Clough Capital, unless or as provided within such agreements, and must take all precautions to maintain the confidentiality thereof, including logons and passwords.

 

II. Procedures

 

To seek to ensure compliance with, and to protect the information provided under an NDA (or deal site or data permission room), Clough Capital has established the following procedures:

 

a. NDAs may only be negotiated by the General Counsel or Chief Compliance Officer (“CCO”) and may only be signed by an authorized signer of Clough Capital.

b. A copy of the NDA must be provided to the CCO, who will monitor and maintain a log to track all NDAs (“List of NDAs”) to which Clough Capital is subject.

c. The List of NDAs will be used by Compliance to monitor for the receipt of potential MNPI related to a privately held company that may become public in the future, or for any other potential conflicts of interest. If a company on the List of NDAs should become publicly traded it may need to be added to the Clough Capital Watch/Restricted List.

d. Members of the investment team must report their access to any deal sites or data permission rooms to Compliance so it may be tracked on the List of NDAs.

e. Companies may be removed from the List of NDAs only upon expiration of the NDA or with the approval of Compliance and/or General Counsel after the investment team member has recommended that it be removed.

 

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CLOUGH GLOBAL FUNDS (GLO, GLQ, GLV)

 

(the "Funds")

 

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS

 

I. Purpose of the Code

 

The Clough Global Funds (the “Funds”) code of ethics (this “Code”) is intended to serve as the code of ethics described in Section 406 of the Sarbanes-Oxley Act of 2002 and Item 2 of Form N-CSR. This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies there under. Insofar as other policies or procedures of the Fund, the Fund’s adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers, as defined herein, who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund’s and its investment adviser’s, and principal underwriter’s codes of ethics pursuant to Rule 17j-l under the Investment Company Act of 1940 (the “1940 Act”) are separate requirements applying to the Covered Officers and others, and are not part of this Code.

 

All Covered Officers must become familiar and fully comply with this Code. Because this Code cannot and does not cover every applicable law or provide answers to all questions that might arise, all Covered Officers are expected to use common sense about what is right and wrong, including a sense of when it is proper to seek guidance from others on the appropriate course of conduct.

 

The purpose of this Code is to set standards for the Covered Officers that are reasonably designed to deter wrongdoing and to promote:

 

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in any other public communications by the Fund;

 

compliance with applicable governmental laws, rules and regulations;

 

the prompt internal reporting of violations of the Code to the appropriate persons as set forth in the Code; and

 

accountability for adherence to the Code.

 

II. Covered Persons

 

This Code applies to the Fund’s Principal Executive Officers and Principal Financial Officers, or any persons performing similar functions on behalf of the Fund (the “Covered Officers”). Each Covered Person should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Covered Officers are expected to act in accordance with the standards set forth in this Code.

 

 

 

III. Honest and Ethical Conduct

 

A. Honesty, Diligence and Professional Responsibility

 

Covered Officers are expected to observe both the form and the spirit of the ethical principles contained in this Code. Covered Officers must perform their duties and responsibilities for the Fund:

 

with honesty, diligence, and a commitment to professional and ethical responsibility;

 

carefully, thoroughly and in a timely manner; and

 

in conformity with applicable professional and technical standards.

 

Covered Officers who are certified public accountants are expected to carry out their duties and responsibilities in a manner consistent with the principles governing the accounting profession, including any guidelines or principles issued by the Public Company Accounting Oversight Board or the American Institute of Certified Public Accountants from time to time.

 

B. Objectivity/Avoidance of Undisclosed Conflicts of Interest

 

Covered Officers are expected to maintain objectivity and avoid undisclosed conflicts of interest. In the performance of their duties and responsibilities for the Fund, Covered Officers must not subordinate their judgment to personal gain and advantage, or be unduly influenced by their own interests or by the interests of others. Covered Officers must avoid participation in any activity or relationship that constitutes a conflict of interest unless that conflict has been completely disclosed to affected parties and waived by the Trustees on behalf of the Fund. Further, Covered Officers should avoid participation in any activity or relationship that could create the appearance of a conflict of interest.

 

A conflict of interest would generally arise if, for instance, a Covered Officer directly or indirectly participates in any investment, interest, association, activity or relationship that may impair or appear to impair the Covered Officer’s objectivity or interfere with the interests of, or the Covered Officer’s service to, the Fund.

 

Any Covered Officer who may be involved in a situation or activity that might be a conflict of interest or give the appearance of a conflict of interest must report such situation or activity using the reporting procedures set forth in Section VI of this Code.

 

Each Covered Officer must not:

 

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use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;

 

cause the Fund to take action, or fail to take actions, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or

 

use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.

 

Each Covered Officer is responsible for his or her compliance with this conflict of interest policy.

 

C. Preparation of Financial Statements

 

Covered Officers must not knowingly make any misrepresentations regarding the Fund’s financial statements or any facts in the preparation of the Fund’s financial statements, and must comply with all applicable laws, standards, principles, guidelines, rules and regulations in the preparation of the Fund’s financial statements. This section is intended to prohibit:

 

making, or permitting or directing another to make, materially false or misleading entries in the Fund’s financial statements or records;

 

failing to correct the Fund’s financial statements or records that are materially false or misleading when he or she has the authority to record an entry; and

 

signing, or permitting or directing another to sign, a document containing materially false or misleading financial information.

 

Covered Officers must be scrupulous in their application of generally accepted accounting principles. No Covered Officer may (i) express an opinion or state affirmatively that the financial statements or other financial data of the Fund are presented in conformity with generally accepted accounting principles, or (ii) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from generally accepted accounting principles then in effect in the United States.

 

Covered Officers must follow the laws, standards, principles, guidelines, rules and regulations established by all applicable governmental bodies, commissions or other regulatory agencies in the preparation of financial statements, records and related information. If a Covered Officer prepares financial statements, records or related information for purposes of reporting to such bodies, commissions or regulatory agencies, the Covered Officer must follow the requirements of such organizations in addition to generally accepted accounting principles.

 

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If a Covered Officer and his or her supervisor have a disagreement or dispute relating to the preparation of financial statements or the recording of transactions, the Covered Officer should take the following steps to ensure that the situation does not constitute an impermissible subordination of judgment:

 

The Covered Officer should consider whether (i) the entry or the failure to record a transaction in the records, or (ii) the financial statement presentation or the nature or omission of disclosure in the financial statements, as proposed by the supervisor, represents the use of an acceptable alternative and does not materially misrepresent the facts or result in an omission of a material fact. If, after appropriate research or consultation, the Covered Officer concludes that the matter has authoritative support and/or does not result in a material misrepresentation, the Covered Officer need do nothing further.

 

If the Covered Officer concludes that the financial statements or records could be materially misstated as a result of the supervisor’s determination, the Covered Officer should follow the reporting procedures set forth in Section VI of this Code.

 

D. Obligations to the Independent Auditor of the Fund

 

In dealing with the Fund’s independent auditor, Covered Officers must be candid and not knowingly misrepresent facts or knowingly fail to disclose material facts, and must respond to specific inquiries and requests by the Fund’s independent auditor.

 

Covered Officers must not take any action, or direct any person to take any action, to fraudulently influence, coerce, manipulate or mislead the Fund’s independent auditor in the performance of an audit of the Fund’s financial statements for the purpose of rendering such financial statements materially misleading.

 

IV. Full, Fair, Accurate, Timely and Understandable Disclosure

 

It is the Fund’s policy to provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the SEC and in any other public communications by the Fund. The Fund has designed and implemented Disclosure Controls and Procedures to carry out this policy.

 

Covered Officers are expected to familiarize themselves with the disclosure requirements generally applicable to the Fund, and to use their best efforts to promote, facilitate, and prepare full, fair, accurate, timely, and understandable disclosure in all reports and documents that the Fund files with, or submits to, the SEC and in any other public communications by the Fund.

 

Covered Officers must review the Fund’s Disclosure Controls and Procedures to ensure they are aware of and carry out their duties and responsibilities in accordance with the Disclosure Controls and Procedures and the disclosure obligations of the Fund. Covered Officers are responsible for monitoring the integrity and effectiveness of the Fund’s Disclosure Controls and Procedures.

 

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V. Compliance with Applicable Laws, Rules and Regulations

 

Covered Officers are expected to know, respect and comply with all laws, rules and regulations applicable to the conduct of the Fund’s business. If a Covered Officer is in doubt about the legality or propriety of an action, business practice or policy, the Covered Officer should seek advice from the Covered Officer’s supervisor or the Fund’s legal counsel.

 

In the performance of their work, Covered Officers must not knowingly be a party to any illegal activity or engage in acts that are discreditable to the Fund.

 

Covered Officers are expected to promote the Fund’s compliance with applicable laws, rules and regulations. To promote such compliance, Covered Officers may establish and maintain mechanisms to educate employees carrying out the finance and compliance functions of the Fund about any applicable laws, rules or regulations that affect the operation of the finance and compliance functions and the Fund generally.

 

VI. Reporting and Accountability

 

All Covered Officers will be held accountable for adherence to this Code. Each Covered Officer must, upon the Fund’s adoption of this Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands this Code by signing the Acknowledgement Form attached hereto as Appendix A. Thereafter, each Covered Officer, on an annual basis, must affirm to the Board that he/she has complied with the requirements of this Code.

 

Covered Officers may not retaliate against any other Covered Officer of the Fund or their affiliated persons for reports of potential violations that are made in good faith.

 

The Fund will follow these procedures in investigating and enforcing this Code:

 

A. Any Covered Officer who knows of any violation of this Code or who questions whether a situation, activity or practice is acceptable must immediately report such practice to the Fund’s Audit Committee. The Audit Committee shall take appropriate action to investigate any reported potential violations. If, after such investigation, the Audit Committee believes that no violation has occurred, the Audit Committee is not required to take any further action. Any matter that the Audit Committee believes is a violation will be reported to the Chairman of the Board of Trustees. The Audit Committee shall respond to the Covered Officer within a reasonable period of time.

 

B. If the Covered Officer is not satisfied with the response of the Audit Committee, the Covered Officer shall report the matter to the Chairman of the Board of Trustees. If the Chairman is unavailable, the Covered Officer may report the matter to any other member of the Board of Trustees. The person receiving the report shall consider the matter, refer it to the full Board of Trustees if he or she deems appropriate, and respond to the Covered Officer within a reasonable amount of time. If the Board of Trustees concurs that a violation has occurred, it will consider appropriate action, which may include review of and appropriate modifications to applicable policies and procedures or notification to appropriate personnel of the investment adviser or its board.

 

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C. If the Board of Trustees determines that a Covered Officer violated this Code, failed to report a known or suspected violation of this Code, or provided intentionally false or malicious information in connection with an alleged violation of this Code, the Board of Trustees may take disciplinary action against any such Covered Officer to the extent the Board of Trustees deems appropriate. No Covered Officer will be disciplined for reporting a concern in good faith.

 

To the extent possible and as allowed by law, reports will be treated as confidential. The Fund may report violations of the law to the appropriate authorities.

 

VII. Disclosure of this Code

 

This Code shall be disclosed to the public by at least one of the following methods in the manner prescribed by the SEC, unless otherwise required by law:

 

Filing a copy of this Code as an exhibit to the Fund’s annual report on Form N-CSR;

 

Posting the text of this Code on the Fund’s Internet website and disclosing, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted this Code on its Internet website; or

 

Providing an undertaking in the Fund’s most recent report on Form N-CSR to provide a copy of this Code to any person without charge upon request, and explaining the manner in which such a request may be made.

 

VIII. Waivers

 

Any waiver of this Code, including an implicit waiver, granted to a Covered Officer may be made only by the Board of Trustees or a committee of the Board to which such responsibility has been delegated, and must be disclosed by the Fund in the manner prescribed by law and as set forth above in Section VII (Disclosure of this Code).

 

IX. Amendments

 

This Code may be amended by the affirmative vote of a majority of the Board of Trustees, including a majority of the independent Trustees. Any amendment of this Code must be disclosed by the Fund in the manner prescribed by law and as set forth above in Section VII (Disclosure of this Code), unless such amendment is deemed to be technical, administrative, or otherwise non-substantive. Any amendments to this Code will be provided to the Covered Officers.

 

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X. Confidentiality

 

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board of Trustees of the Fund, the Audit Committee, the legal counsel to the Fund, legal counsel to the independent trustees and such other persons as a majority of the Board of Trustees, including a majority of the independent Trustees, shall determine to be appropriate.

 

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Appendix A

 

CLOUGH GLOBAL EQUITY FUND

 

Certification and Acknowledgment of Receipt of Code of Ethics for Principal Executive Officers and Principal Financial Officers

 

I acknowledge and certify that I have received a copy of the Clough Global Equity Fund’s Code of Ethics for Principal Executive Officers and Principal Financial Officers (the “Code”). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures.

 

I acknowledge and certify that I have read and understand the Code.

 

       

Officer Name (Please Print)

  Officer Signature  
       
       
    Date  

 

 

 

CLOUGH GLOBAL DIVIDEND AND INCOME FUND

 

Certification and Acknowledgment of Receipt of Code of Ethics for Principal Executive Officers and Principal Financial Officers

 

I acknowledge and certify that I have received a copy of the Clough Dividend and Income Fund Fund’s Code of Ethics for Principal Executive Officers and Principal Financial Officers (the “Code”). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures.

 

I acknowledge and certify that I have read and understand the Code.

 

       
Officer Name (Please Print)   Officer Signature  
       
       
    Date  

 

2

 

CLOUGH GLOBAL OPPORTUNITES FUND

 

Certification and Acknowledgment of Receipt of Code of Ethics for Principal Executive Officers and Principal Financial Officers

 

I acknowledge and certify that I have received a copy of the Clough Global Opportunities Fund’s Code of Ethics for Principal Executive Officers and Principal Financial Officers (the “Code”). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures.

 

I acknowledge and certify that I have read and understand the Code.

 

       
Officer Name (Please Print)   Officer Signature  
       
       
    Date  

 

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POWER OF ATTORNEY

 

We, the undersigned trustees and officers of the Clough Global Dividend and Income Fund, a Delaware statutory trust (the “Trust”), do hereby severally constitute and appoint Clifford J. Alexander, Jeremy O. May, and Sareena Khwaja-Dixon with full power of substitution, and with full power to sign for him/her and in his/her name in the appropriate capacities, any registration statements on Form N-2 filed by the Trust, including any and all pre-effective and post-effective amendments to such registration statement and supplements or other instruments in connection therewith, and generally to do all such things in our names and behalf in connection therewith as said attorney-in-fact, either collectively or individually, deems necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission.

 

IN WITNESS WHEREOF we have hereunto set our hands on the dates set opposite our respective signatures.

 

Signature   Title   Date
         
/s/ Edmund J. Burke   Trustee   April 18, 2019
Edmund J. Burke        
         
/s/ Robert L. Butler   Trustee   April 18, 2019
Robert L. Butler        
         
/s/ Adam D. Crescenzi   Trustee   April 18, 2019
Adam D. Crescenzi        
         
/s/ Karen DiGravio   Trustee   April 18, 2019
Karen DiGravio        
         
/s/ Kevin McNally   Trustee   April 18, 2019
Kevin McNally        
         
/s/ Jerry G. Rutledge   Trustee   April 18, 2019
Jerry G. Rutledge        
         
/s/ Vincent W. Versaci   Trustee   April 18, 2019
Vincent W. Versaci        
         
/s/ Clifford J. Weber   Trustee   April 18, 2019
Clifford J. Weber