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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21583
Clough Global Allocation Fund
(exact name of registrant as specified in charter)
1290 Broadway, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip code)
Erin E. Douglas, Secretary
Clough Global Allocation Fund
1290 Broadway, Suite 1100
Denver, Colorado 80203
(Name and address of agent for service)
Registrant’s telephone number, including area code: 303-623-2577
Date of fiscal year end: March 31
Date of reporting period: March 31, 2011
Table of Contents
Item 1. Reports to Stockholders.
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| Clough Global Funds |
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Table of Contents
| Clough Global Funds |
Shareholder Letter | |
| March 31, 2011 |
| Annual Report | March 31, 2011 |
1 |
Table of Contents
| Clough Global Funds | ||
| March 31, 2011 |
| 2 |
www.cloughglobal.com |
Table of Contents
| Portfolio Allocation | ||
| March 31, 2011 |
| * | Includes securities sold short. |
| ^ | Includes securities sold short and foreign cash balances. |
| Annual Report | March 31, 2011 |
3 |
Table of Contents
| Portfolio Allocation |
Clough Global Equity Fund | |
| March 31, 2011 (Unaudited) |
| * | Includes securities sold short. |
| ^ | Includes securities sold short and foreign cash balances. |
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Table of Contents
| Portfolio Allocation | ||
| March 31, 2011 (Unaudited) |
| * | Includes securities sold short. |
| ^ | Includes securities sold short and foreign cash balances. |
| Annual Report | March 31, 2011 |
5 |
Table of Contents
| Report of Independent Registered Public Accounting Firm |
||
To the Shareholders and Board of Trustees of
Clough Global Allocation Fund,
Clough Global Equity Fund, and
Clough Global Opportunities Fund:
We have audited the accompanying statements of assets and liabilities of Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund (each a “Fund”, collectively the “Funds”), including the statements of investments, as of March 31, 2011, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2011, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund as of March 31, 2011, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
May 18, 2011
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Table of Contents
| Statement of Investments | ||
| March 31, 2011 |
| Annual Report | March 31, 2011 |
7 |
Table of Contents
| Statement of Investments |
Clough Global Allocation Fund | |
| March 31, 2011 |
| 8 |
www.cloughglobal.com |
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| Clough Global Allocation Fund |
Statement of Investments | |
| March 31, 2011 |
| Annual Report | March 31, 2011 |
9 |
Table of Contents
| Statement of Investments |
Clough Global Allocation Fund | |
| March 31, 2011 |
| 10 |
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| Clough Global Allocation Fund |
Statement of Investments | |
| March 31,2011 |
| See Notes to the Financial Statements.
| ||
| Annual Report | March 31, 2011 |
11 |
Table of Contents
| Statement of Investments |
Clough Global Equity Fund | |
| March 31, 2011 |
| 12 |
www.cloughglobal.com |
Table of Contents
| Clough Global Equity Fund |
Statement of Investments | |
| March 31, 2011 |
| Annual Report | March 31, 2011 |
13 |
Table of Contents
| Statement of Investments |
Clough Global Equity Fund | |
| March 31, 2011 |
| 14 |
www.cloughglobal.com |
Table of Contents
| Clough Global Equity Fund |
Statement of Investments | |
| March 31, 2011 |
| Annual Report | March 31, 2011 |
15 |
Table of Contents
| Statement of Investments |
Clough Global Equity Fund | |
| March 31, 2011 |
| 16 |
www.cloughglobal.com |
Table of Contents
| Statement of Investments | ||
| March 31, 2011 |
| Annual Report | March 31, 2011 |
17 |
Table of Contents
| Statement of Investments |
Clough Global Opportunities Fund | |
| March 31, 2011 |
| 18 |
www.cloughglobal.com |
Table of Contents
| Clough Global Opportunities Fund |
Statement of Investments | |
| March 31, 2011 |
| Annual Report | March 31, 2011 |
19 |
Table of Contents
| Statement of Investments |
Clough Global Opportunities Fund | |
| March 31, 2011 |
| 20 |
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| Clough Global Opportunities Fund |
Statement of Investments | |
| March 31, 2011 |
| Annual Report | March 31, 2011 |
21 |
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| Statement of Investments |
Clough Global Opportunities Fund | |
| March 31, 2011 |
Abbreviations:
ADR - American Depositary Receipt
Bhd - Berhad (in Malaysia, a form of a public company)
ETF - Exchange Traded Fund
GmbH - a form of a limited liability corporation common in German-speaking countries
LLC - Limited Liability Corporation
LP - Limited Partnership
Ltd. - Limited
MSCI - Morgan Stanley Capital International
NV - Naamloze Vennootschap (Dutch: Limited Liability Company)
OAO - Otkrytoe Aktsionernoe Obschestvo (a Russian open joint stock corporation)
PLC - Public Limited Liability
REIT - Real Estate Investment Trust
REMICS - Real Estate Mortgage Investment Conduits
S.A. - Generally designates corporations in various countries, mostly those employing the civil law
SPDR - Standard & Poor’s Depositary Receipt
For Fund compliance purposes, each Fund’s industry classifications refer to any one of the industry sub-classifications used by one or more widely recognized market indexes, and/or as defined by each Fund’s management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited.
See Notes to the Financial Statements.
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| Cough Global Funds |
Statements of Assets and Liabilities | |
| March 31, 2011 (Unaudited) |
| Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
||||||||||
| ASSETS: |
||||||||||||
| Investments, at value (Cost - see below) |
$ | 268,569,277 | $ | 441,085,436 | $ | 1,147,735,570 | ||||||
| Cash |
157,130 | 164,471 | 422,665 | |||||||||
| Foreign Currency, at value (Cost $7,425,396, $12,364,283 and $32,205,640) |
7,661,337 | 12,751,634 | 33,211,286 | |||||||||
| Deposit with broker for securities sold short |
16,019,937 | 26,169,394 | 68,079,433 | |||||||||
| Dividends receivable |
699,334 | 1,195,092 | 2,973,352 | |||||||||
| Interest receivable |
802,581 | 1,129,957 | 3,530,499 | |||||||||
| Receivable for investments sold |
7,582,481 | 12,410,041 | 32,372,051 | |||||||||
| Total Assets |
301,492,077 | 494,906,025 | 1,288,324,856 | |||||||||
| LIABILITIES: |
||||||||||||
| Loan payable |
89,800,000 | 147,000,000 | 388,900,000 | |||||||||
| Interest due on loan payable |
7,003 | 11,464 | 30,329 | |||||||||
| Securities sold short (Proceeds $14,048,235, $22,968,420 and $59,772,835) |
15,734,626 | 25,710,644 | 66,880,409 | |||||||||
| Payable for investments purchased |
4,181,578 | 7,295,216 | 17,843,958 | |||||||||
| Dividends payable - short sales |
818 | 1,336 | 3,495 | |||||||||
| Interest payable - margin account |
11,825 | 19,374 | 50,030 | |||||||||
| Accrued investment advisory fee |
177,974 | 375,686 | 1,087,333 | |||||||||
| Accrued administration fee |
72,461 | 133,577 | 347,947 | |||||||||
| Accrued trustees fee |
3,854 | 3,854 | 3,854 | |||||||||
| Total Liabilities |
109,990,139 | 180,551,151 | 475,147,355 | |||||||||
| Net Assets |
$ | 191,501,938 | $ | 314,354,874 | $ | 813,177,501 | ||||||
| Cost of Investments |
$ | 235,803,049 | $ | 384,866,053 | $ | 1,012,133,952 | ||||||
| COMPOSITION OF NET ASSETS: |
||||||||||||
| Paid-in capital |
$ | 181,095,134 | $ | 298,604,829 | $ | 838,408,606 | ||||||
| Overdistributed net investment income |
(698,881) | (1,146,152) | (2,988,299) | |||||||||
| Accumulated net realized loss on investments, options, securities sold short and foreign currency transactions |
(20,209,804) | (36,971,880) | (151,752,241) | |||||||||
| Net unrealized appreciation in value of investments, options, securities sold short and translation of assets and liabilities denominated in foreign currency |
31,315,489 | 53,868,077 | 129,509,435 | |||||||||
| Net Assets |
$ | 191,501,938 | $ | 314,354,874 | $ | 813,177,501 | ||||||
| Shares of common stock outstanding of no par value, unlimited shares authorized |
10,434,606 | 17,840,705 | 51,736,859 | |||||||||
| Net assets value per share |
$ | 18.35 | $ | 17.62 | $ | 15.72 | ||||||
See Notes to the Financial Statements.
| Annual Report | March 31, 2011 |
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| Clough Global Funds | ||
| For the Six Months Ended March 31, 2011 (Unaudited) |
| Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
||||||||||
| INVESTMENT INCOME: |
||||||||||||
| Dividends (net of foreign withholding taxes of $76,184, $127,903 and $329,183) |
$ | 5,411,401 | $ | 9,599,988 | $ | 22,754,220 | ||||||
| Interest on investment securities |
3,500,991 | 4,883,749 | 15,365,098 | |||||||||
| Hypothecated securities income (See Note 6) |
74,891 | 128,402 | 327,994 | |||||||||
| Total Income |
8,987,283 | 14,612,139 | 38,447,312 | |||||||||
| EXPENSES:
|
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| Investment advisory fee |
2,056,463 | 4,332,518 | 12,604,090 | |||||||||
| Administration fee |
837,274 | 1,540,451 | 4,033,309 | |||||||||
| Interest on loan |
1,325,433 | 2,169,707 | 5,740,149 | |||||||||
| Interest expense - margin account |
243,190 | 404,071 | 1,193,011 | |||||||||
| Trustees fee |
146,211 | 146,211 | 146,211 | |||||||||
| Dividend expense - short sales |
400,355 | 656,235 | 1,694,993 | |||||||||
| Other expenses |
2,125 | 2,125 | 2,276 | |||||||||
| Total Expenses |
5,011,051 | 9,251,318 | 25,414,039 | |||||||||
| Net Investment Income |
3,976,232 | 5,360,821 | 13,033,273 | |||||||||
| NET REALIZED GAIN/(LOSS) ON: |
||||||||||||
| Investment securities |
25,713,336 | 39,676,674 | 109,950,500 | |||||||||
| Securities sold short |
(7,980,536) | (13,094,188) | (33,435,924) | |||||||||
| Written options |
4,495,684 | 7,275,856 | 18,887,512 | |||||||||
| Foreign currency transactions |
(320,679) | (528,398) | (1,387,326) | |||||||||
| NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: |
| |||||||||||
| Investment securities |
1,062,904 | 4,561,217 | (276,427) | |||||||||
| Securities sold short |
3,017,165 | 4,938,473 | 12,513,622 | |||||||||
| Written options |
(2,474,148) | (4,070,800) | (10,726,030) | |||||||||
| Translation of assets and liabilities denominated in foreign currencies |
216,765 | 353,303 | 893,118 | |||||||||
| Net gain on investments, options, securities sold short and foreign currency transactions |
23,730,491 | 39,112,137 | 96,419,045 | |||||||||
| Net Increase in Net Assets Attributable to Common Shares from Operations |
$ | 27,706,723 | $ | 44,472,958 | $ | 109,452,318 | ||||||
See Notes to the Financial Statements.
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| Clough Global Funds |
Statements of Changes in Net Assets | |
| March 31, 2011 |
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||||||||||||||
| For the Year Ended |
For the Year Ended |
For the Year Ended |
For the Year Ended |
For the Year Ended |
For the Year Ended |
|||||||||||||||||||
| COMMON SHAREHOLDERS OPERATIONS:
|
| |||||||||||||||||||||||
| Net investment income |
$ | 3,976,232 | $ | 3,306,035 | $ | 5,360,821 | $ | 3,946,856 | $ | 13,033,273 | $ | 8,678,959 | ||||||||||||
| Net realized gain/(loss) from: |
||||||||||||||||||||||||
| Investment securities |
25,713,336 | (9,280,504) | 39,676,674 | (11,512,814) | 109,950,500 | (50,138,051) | ||||||||||||||||||
| Securities sold short |
(7,980,536) | (10,892,481) | (13,094,188) | (17,370,998) | (33,435,924) | (45,685,772) | ||||||||||||||||||
| Written options |
4,495,684 | 9,954,687 | 7,275,856 | 16,836,515 | 18,887,512 | 43,669,348 | ||||||||||||||||||
| Foreign currency transactions |
(320,679) | (92,011) | (528,398) | (155,633) | (1,387,326) | (405,192) | ||||||||||||||||||
| Net change in unrealized appreciation/(depreciation) on investments, options, securities sold short and translation of assets and liabilities denominated in foreign currencies |
1,822,686 | 56,613,978 | 5,782,193 | 98,150,460 | 2,404,283 | 256,578,865 | ||||||||||||||||||
| Net Increase in Net Assets From Operations |
27,706,723 | 49,609,704 | 44,472,958 | 89,894,386 | 109,452,318 | 212,698,157 | ||||||||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS: |
|
|||||||||||||||||||||||
| Net investment income |
(12,521,527) | (4,763,937) | (20,695,217) | (6,903,467) | (55,875,807) | (15,069,409) | ||||||||||||||||||
| Tax return of capital |
– | (6,714,129) | – | (11,472,459) | – | (35,632,712) | ||||||||||||||||||
| Net Decrease in Net Assets from Distributions |
(12,521,527) | (11,478,066) | (20,695,217) | (18,375,926) | (55,875,807) | (50,702,121) | ||||||||||||||||||
| Net Increase in Net Assets Attributable to Common Shares |
15,185,196 | 38,131,638 | 23,777,741 | 71,518,460 | 53,576,511 | 161,996,036 | ||||||||||||||||||
| NET ASSETS ATTRIBUTABLE TO COMMON SHARES: |
| |||||||||||||||||||||||
| Beginning of period |
176,316,742 | 138,185,104 | 290,577,133 | 219,058,673 | 759,600,990 | 597,604,954 | ||||||||||||||||||
| End of period* |
$ | 191,501,938 | $ | 176,316,742 | $ | 314,354,874 | $ | 290,577,133 | $ | 813,177,501 | $ | 759,600,990 | ||||||||||||
| *Includes Overdistributed Net Investment Income of: |
$ | (698,881) | $ | (352,131) | $ | (1,146,152) | $ | (585,155) | $ | (2,988,299) | $ | (1,532,363) | ||||||||||||
See Notes to the Financial Statements.
| Annual Report | March 31, 2011 |
25 |
Table of Contents
| Clough Global Funds | ||
| March 31, 2011 |
| Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
| Net increase in net assets from operations |
$ | 27,706,723 | $ | 44,472,958 | $ | 109,452,318 | ||||||
| Adjustments to reconcile net increase/(decrease) in net assets from operations to net cash |
||||||||||||
| provided in operating activities: |
||||||||||||
| Purchase of investment securities |
(440,089,860) | (726,493,837) | (1,912,849,152) | |||||||||
| Proceeds from disposition of investment securities |
462,221,970 | 760,644,540 | 2,053,020,270 | |||||||||
| Proceeds from securities sold short transactions |
106,852,569 | 174,740,129 | 456,837,578 | |||||||||
| Cover securities sold short transactions |
(123,936,338) | (202,647,642) | (529,904,777) | |||||||||
| Premiums received from written options transactions |
13,568,256 | 22,103,274 | 58,102,278 | |||||||||
| Premiums paid on closing written options transactions |
(11,635,030) | (19,043,364) | (50,324,044) | |||||||||
| Purchased options transactions |
(25,705,475) | (41,810,700) | (114,637,955) | |||||||||
| Proceeds from purchased options transactions |
19,622,508 | 32,011,957 | 85,136,023 | |||||||||
| Proceeds from litigation settlements |
23,539 | 59,247 | 86,305 | |||||||||
| Net proceeds from short-term investment securities |
16,848,928 | 32,606,204 | 82,504,022 | |||||||||
| Net realized gain from investment securities |
(25,713,336) | (39,676,674) | (109,950,500) | |||||||||
| Net realized loss on securities sold short |
7,980,536 | 13,094,188 | 33,435,924 | |||||||||
| Net realized gain on written options |
(4,495,684) | (7,275,856) | (18,887,512) | |||||||||
| Net realized loss on foreign currency transactions |
320,679 | 528,398 | 1,387,326 | |||||||||
| Net change in unrealized appreciation on investment securities |
(1,822,686) | (5,782,193) | (2,404,283) | |||||||||
| Premium amortization |
177,844 | 210,467 | 915,626 | |||||||||
| Discount accretion |
(85,127) | (122,683) | (365,567) | |||||||||
| Increase in deposits with brokers for securities sold short and written options |
(2,183,571) | (4,899,963) | (53,333,822) | |||||||||
| Decrease in dividends receivable |
108,918 | 186,216 | 478,223 | |||||||||
| Increase in interest receivable |
(5,415) | (155,374) | (62,545) | |||||||||
| Increase in interest due on loan payable |
63 | 103 | 272 | |||||||||
| Decrease in dividends payable - short sales |
(19,637) | (31,389) | (84,364) | |||||||||
| Decrease in interest payable - margin account |
(11,551) | (19,661) | (74,234) | |||||||||
| Increase/(Decrease) in accrued investment advisory fee |
909 | 1,722 | (3,189) | |||||||||
| Increase/(Decrease) in accrued administration fee |
370 | 612 | (1,020) | |||||||||
| Decrease in accrued trustees fee |
(1,581) | (1,581) | (1,581) | |||||||||
| Net cash provided by operating activities |
19,728,521 | 32,699,098 | 88,471,620 | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
| Cash distributions paid |
(12,521,527) | (20,695,217) | (55,875,807) | |||||||||
| Net cash used in financing activities |
(12,521,527) | (20,695,217) | (55,875,807) | |||||||||
| Net increase in cash |
7,206,994 | 12,003,881 | 32,595,813 | |||||||||
| Cash and foreign currency, beginning of period |
$ | 611,473 | $ | 912,224 | $ | 1,038,138 | ||||||
| Cash and foreign currency, ending of period |
$ | 7,818,467 | $ | 12,916,105 | $ | 33,633,951 | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||||||
| Cash paid during the period for interest from bank borrowing: |
$ | 1,325,370 | $ | 2,169,604 | $ | 5,739,877 | ||||||
See Notes to the Financial Statements.
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| Financial Highlights | ||
| For a share outstanding throughout the periods indicated |
| For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended March 31, 2009 |
For the Year Ended March 31, 2008 |
For the Year Ended March 31, 2007 |
||||||||||||||||
| PER COMMON SHARE OPERATING PERFORMANCE: |
|
|||||||||||||||||||
| Net asset value - beginning of period |
$16.90 | $13.24 | $21.60 | $22.61 | $24.42 | |||||||||||||||
| Income from investment operations: |
0.38* | 0.32* | 0.30* | 0.46* | 1.79 | |||||||||||||||
| Net investment income |
||||||||||||||||||||
| Net realized and unrealized gain/(loss) on investments |
2.27 | 4.44 | (7.05) | 1.47 | (0.98) | |||||||||||||||
| Distributions to preferred shareholders from: |
||||||||||||||||||||
| Net investment income |
– | – | (0.05) | (0.49) | (0.47) | |||||||||||||||
| Total from Investment Operations |
2.65 | 4.76 | (6.80) | 1.44 | 0.34 | |||||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: |
|
|||||||||||||||||||
| Net investment income |
(1.20) | (0.46) | (0.81) | (1.72) | (1.44) | |||||||||||||||
| Net realized gains |
– | – | (0.31) | (0.73) | (0.71) | |||||||||||||||
| Tax return of capital |
– | (0.64) | (0.44) | – | – | |||||||||||||||
| Total Distributions to Common Shareholders |
(1.20) | (1.10) | (1.56) | (2.45) | (2.15) | |||||||||||||||
| Net asset value - end of period |
$18.35 | $16.90 | $13.24 | $21.60 | $22.61 | |||||||||||||||
| Market price - end of period |
$16.24 | $15.92 | $10.68 | $18.90 | $20.82 | |||||||||||||||
| Total Investment Return - Net Asset Value:(1) |
17.30% | 38.14% | (32.20)% | 7.10% | 1.59% | |||||||||||||||
| Total Investment Return - Market Price:(1) |
10.20% | 61.32% | (37.50)% | 1.77% | (4.77)% | |||||||||||||||
| RATIOS AND SUPPLEMENTAL DATA: |
|
|||||||||||||||||||
| Net assets attributable to common shares, end of period (000s) |
$191,502 | $176,317 | $138,185 | $225,359 | $235,962 | |||||||||||||||
| Ratios to average net assets attributable to common shareholders: |
||||||||||||||||||||
| Total expenses |
2.87% | 3.22% | 3.35%(2) | 2.10%(2) | 2.02%(2) | |||||||||||||||
| Total expenses excluding interest expense and dividends on short sales expense |
1.74% | 1.88% | 2.76%(2) | 1.73%(2) | 1.75%(2) | |||||||||||||||
| Net investment income |
2.28% | 1.96% | 1.73%(2) | 2.02%(2) | 2.63%(2) | |||||||||||||||
| Preferred share dividends |
N/A | N/A | 0.30% | 2.14% | 2.10% | |||||||||||||||
| Portfolio turnover rate |
172% | 115% | 233% | 136% | 187% | |||||||||||||||
| AUCTION MARKET PREFERRED SHARES (“AMPS”) |
|
|||||||||||||||||||
| Liquidation value, end of period, including dividends on preferred shares (000) |
N/A | N/A | –(3) | $95,052 | $95,042 | |||||||||||||||
| Total shares outstanding (000) |
N/A | N/A | –(3) | 3.8 | 3.8 | |||||||||||||||
| Asset coverage per share(4) |
N/A | N/A | –(3) | $84,319 | $87,106 | |||||||||||||||
| Liquidation preference per share |
N/A | N/A | –(3) | $25,000 | $25,000 | |||||||||||||||
| Average market value per share(5) |
N/A | N/A | –(3) | $25,000 | $25,000 | |||||||||||||||
| Borrowings at End of Period |
|
|||||||||||||||||||
| Aggregate Amount Outstanding (000) |
$89,800 | $89,800 | $60,200 | N/A | N/A | |||||||||||||||
| Asset Coverage Per $1,000 (000) |
$3,133 | $2,963 | $3,295 | N/A | N/A | |||||||||||||||
| * | Based on average shares outstanding. |
| (1) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at the closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at price obtained under the Fund’s dividend reinvestment plan. Total investment returns do not reflect brokerage commissions on the purchase or sale of the Fund’s common shares. Past performance is not a guarantee of future results. |
| (2) | Ratios do not reflect dividend payments to preferred shareholders. |
| (3) | All series of AMPS issued by the Fund were fully redeemed, at par value, on May 22, 2008. |
| (4) | Calculated by subtracting the Fund’s total liabilities (excluding preferred shares) from the Fund’s total assets and dividing by the number of preferred shares outstanding. |
| (5) | Based on monthly prices. |
See Notes to the Financial Statements.
| Annual Report | March 31, 2011 |
27 |
Table of Contents
| Financial Highlights |
Clough Global Equity Fund | |
| For a share outstanding throughout the periods indicated |
| For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended March 31, 2009 |
For the Year Ended March 31, 2008 |
For the Year Ended March 31, 2007 |
||||||||||||||||
| PER COMMON SHARE OPERATING PERFORMANCE: |
|
|||||||||||||||||||
| Net asset value - beginning of period |
$16.29 | $12.28 | $20.88 | $22.17 | $23.74 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income |
0.30* | 0.22* | 0.16* | 0.34* | 1.77 | |||||||||||||||
| Net realized and unrealized gain/(loss) on investments |
2.19 | 4.82 | (7.21) | 1.38 | (0.88) | |||||||||||||||
| Distributions to preferred shareholders from: |
||||||||||||||||||||
| Net investment income |
– | – | (0.03) | (0.53) | (0.51) | |||||||||||||||
| Total from Investment Operations |
2.49 | 5.04 | (7.08) | 1.19 | 0.38 | |||||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: |
|
|||||||||||||||||||
| Net investment income |
(1.16) | (0.39) | (0.24) | (1.67) | (1.70) | |||||||||||||||
| Net realized gains |
– | – | (0.48) | (0.81) | (0.25) | |||||||||||||||
| Tax return of capital |
– | (0.64) | (0.80) | – | – | |||||||||||||||
| Total Distributions to Common Shareholders |
(1.16) | (1.03) | (1.52) | (2.48) | (1.95) | |||||||||||||||
| Net asset value - end of period |
$17.62 | $16.29 | $12.28 | $20.88 | $22.17 | |||||||||||||||
| Market price - end of period |
$15.37 | $14.33 | $9.77 | $18.00 | $20.13 | |||||||||||||||
| Total Investment Return - Net Asset Value:(1) |
17.05% | 43.62% | (34.55)% | 6.24% | 2.03% | |||||||||||||||
| Total Investment Return - Market Price:(1) |
16.07% | 58.80% | (39.60)% | 0.86% | (2.08)% | |||||||||||||||
| RATIOS AND SUPPLEMENTAL DATA: |
|
|||||||||||||||||||
| Net assets attributable to common shares, end of period (000s) |
$314,355 | $290,577 | $219,059 | $372,490 | $395,594 | |||||||||||||||
| Ratios to average net assets attributable to common shareholders: |
||||||||||||||||||||
| Total expenses |
3.23% | 3.57% | 3.81%(2) | 2.50%(2) | 2.43%(2) | |||||||||||||||
| Total expenses excluding interest expense and dividends on short sales expense |
2.10% | 2.25% | 2.26%(2) | 2.14%(2) | 2.16%(2) | |||||||||||||||
| Net investment income |
1.87% | 1.43% | 0.95%(2) | 1.53%(2) | 1.45%(2) | |||||||||||||||
| Preferred share dividends |
N/A | N/A | 0.20% | 2.35% | 2.28% | |||||||||||||||
| Portfolio turnover rate |
173% | 116% | 207% | 155% | 200% | |||||||||||||||
| AUCTION MARKET PREFERRED SHARES (“AMPS”) |
|
|||||||||||||||||||
| Liquidation value, end of period, including dividends on preferred shares (000) |
N/A | N/A | -(3) | $175,346 | $175,444 | |||||||||||||||
| Total shares outstanding (000) |
N/A | N/A | -(3) | 7 | 7 | |||||||||||||||
| Asset coverage per share(4) |
N/A | N/A | -(3) | $78,262 | $81,577 | |||||||||||||||
| Liquidation preference per share |
N/A | N/A | -(3) | $25,000 | $25,000 | |||||||||||||||
| Average market value per |
N/A | N/A | -(3) | $25,000 | $25,000 | |||||||||||||||
| Borrowings at End of Period |
||||||||||||||||||||
| Aggregate Amount Outstanding (000) |
$147,000 | $147,000 | $98,200 | N/A | N/A | |||||||||||||||
| Asset Coverage Per $1,000 (000) |
$3,138 | $2,977 | $3,231 | N/A | N/A | |||||||||||||||
| * | Based on average shares outstanding. |
| (1) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at the closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at price obtained under the Fund’s dividend reinvestment plan. Total investment returns do not reflect brokerage commissions on the purchase or sale of the Fund’s common shares. Past performance is not a guarantee of future results. |
| (2) | Ratios do not reflect dividend payments to preferred shareholders. |
| (3) | All series of AMPS issued by the Fund were fully redeemed, at par value, on May 5, 2008. |
| (4) | Calculated by subtracting the Fund’s total liabilities (excluding preferred shares) from the Fund’s total assets and dividing by the number of preferred shares outstanding. |
| (5) | Based on monthly prices. |
See Notes to the Financial Statements.
| 28 |
www.cloughglobal.com |
Table of Contents
| Financial Highlights | ||
| For a share outstanding throughout the periods indicated |
| For the Year Ended March 31, 2011 |
For the Year Ended |
For the Year Ended |
For the Year Ended |
For the Period April 2006 (inception) to March 31, 2007 |
||||||||||||||||
| PER COMMON SHARE OPERATING PERFORMANCE: |
|
|||||||||||||||||||
| Net asset value - beginning of period |
$14.68 | $11.55 | $19.03 | $19.17 | $19.10 | |||||||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income |
0.25* | 0.17* | 0.12* | 0.35* | 0.90 | |||||||||||||||
| Net realized and unrealized gain/(loss) on investments |
1.87 | 3.94 | (6.20) | 1.50 | 0.40 | |||||||||||||||
| Distributions to preferred shareholders from: |
||||||||||||||||||||
| Net investment income |
– | – | (0.04) | (0.46) | (0.20) | |||||||||||||||
| Total from Investment Operations |
2.12 | 4.11 | (6.12) | 1.39 | 1.10 | |||||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: |
|
|||||||||||||||||||
| Net investment income |
(1.08) | (0.29) | (0.06) | (1.46) | (0.90) | |||||||||||||||
| Net realized gains |
– | – | (0.03) | (0.07) | – | |||||||||||||||
| Tax return of capital |
– | (0.69) | (1.27) | – | – | |||||||||||||||
| Total Distributions to Common Shareholders |
(1.08) | (0.98) | (1.36) | (1.53) | (0.90) | |||||||||||||||
| CAPITAL SHARE TRANSACTIONS: |
|
|||||||||||||||||||
| Common share offering costs charged to paid-in capital |
– | – | – | – | (0.04) | |||||||||||||||
| Preferred share offering costs and sales load charged to paid-in capital |
– | – | –(1) | – | (0.09) | |||||||||||||||
| Total Capital Share Transactions |
– | – | – | – | (0.13) | |||||||||||||||
| Net asset value - end of period |
$15.72 | $14.68 | $11.55 | $19.03 | $19.17 | |||||||||||||||
| Market price - end of period |
$13.85 | $13.04 | $9.20 | $16.32 | $17.44 | |||||||||||||||
| Total Investment Return - Net Asset Value:(2) |
16.21% | 37.93% | (32.68)% | 8.06% | 5.45% | |||||||||||||||
| Total Investment Return - Market Price:(2) |
15.27% | 53.82% | (37.48)% | 1.86% | (8.38)% | |||||||||||||||
| RATIOS AND SUPPLEMENTAL DATA: |
|
|||||||||||||||||||
| Net assets attributable to common shares, end of period (000s) |
$813,178 | $759,601 | $597,605 | $984,608 | $991,948 | |||||||||||||||
| Ratios to average net assets attributable to common shareholders: | ||||||||||||||||||||
| Total expenses |
3.40% | 3.72% | 3.84%(3) | 2.52%(3) | 2.12%(3)(4) | |||||||||||||||
| Total expenses excluding interest expense and dividends on short sales expense |
2.25% | 2.39% | 2.38%(3) | 2.29%(3) | 1.90%(3)(4) | |||||||||||||||
| Net investment income |
1.74% | 1.19% | 0.80%(3) | 1.76%(3) | 1.75%(3)(4) | |||||||||||||||
| Preferred share dividends |
N/A | N/A | 0.23% | 2.34% | 1.13%(4) | |||||||||||||||
| Portfolio turnover rate |
171% | 115% | 224% | 171% | 246% | |||||||||||||||
| AUCTION MARKET PREFERRED SHARES (“AMPS”) |
|
|||||||||||||||||||
| Liquidation value, end of period, including dividends on preferred shares (000) |
N/A | N/A | –(5) | $450,380 | $450,450 | |||||||||||||||
| Total shares outstanding (000) |
N/A | N/A | –(5) | 18 | 18 | |||||||||||||||
| Asset coverage per share(6) |
N/A | N/A | –(5) | $79,722 | $80,133 | |||||||||||||||
| Liquidation preference per share |
N/A | N/A | –(5) | $25,000 | $25,000 | |||||||||||||||
| Average market value per share(7) |
N/A | N/A | –(5) | $25,000 | $25,000 | |||||||||||||||
| Borrowings at End of Period |
|
|||||||||||||||||||
| Aggregate Amount Outstanding (000) |
$388,900 | $388,900 | $239,500 | N/A | N/A | |||||||||||||||
| Asset Coverage Per $1,000 (000) |
$3,091 | $2,953 | $3,495 | N/A | N/A | |||||||||||||||
| * | Based on average shares outstanding. |
| (1) | Less than $0.005. |
| Annual Report | March 31, 2011 |
29 |
Table of Contents
| Financial Highlights |
Clough Global Opportunities Fund | |
| For a share outstanding throughout the periods indicated |
| (2) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at the closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at price obtained under the Fund’s dividend reinvestment plan. Total investment returns do not reflect brokerage commissions on the purchase or sale of the Fund’s common shares. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. |
| (3) | Ratios do not reflect dividend payments to preferred shareholders. |
| (4) | Annualized. |
| (5) | All series of AMPS issued by the Fund were fully redeemed, at par value, on May 23, 2008. |
| (6) | Calculated by subtracting the Fund’s total liabilities (excluding preferred shares) from the Fund’s total assets and dividing by the number of preferred shares outstanding. |
| (7) | Based on monthly prices. |
See Notes to the Financial Statements.
| 30 |
www.cloughglobal.com |
Table of Contents
| Clough Global Funds | ||
| March 31, 2011 |
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING AND OPERATING POLICIES
Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund,(each, a “Fund” and collectively, the “Funds”) are closed-end management investment companies that were organized under the laws of the state of Delaware by an Amended Agreement and Declaration of Trust dated April 27, 2004 and January 25, 2005, respectively for Clough Global Allocation Fund and Clough Global Equity Fund and an Agreement and Declaration of Trust dated January 12, 2006 for Clough Global Opportunities Fund. Each Fund is a non-diversified series with an investment objective to provide a high level of total return. Each Declaration of Trust provides that the Trustees may authorize separate classes of shares of beneficial interest.
The net asset value per share of each 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 a Fund is not open for business. As a result, each Fund’s net asset value may change at times when it is not possible to purchase or sell shares of a Fund.
Investment Valuation: Securities held by each Fund for which exchange quotations are readily available are valued at the last sale price, or if no sale price or if traded on the over-the-counter market, at the mean of the bid and asked prices on such day. Most securities listed on a foreign exchange are valued at the last sale price at the close of the exchange on which the security is primarily traded. In certain countries market maker prices are used since they are the most representative of the daily trading activity. Market maker prices are usually the mean between the bid and ask prices. Certain markets are not closed at the time that the Funds prices its portfolio securities. In these situations, snapshot prices are provided by the individual pricing services or other alternate sources at the close of the NYSE as appropriate. Securities not traded on a particular day are valued at the mean between the last reported bid and the asked quotes, or the last sale price when appropriate; otherwise fair value will be determined by the board-appointed fair valuation committee. 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 or dealers at the mean between the latest available bid and asked prices. 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 securities or a matrix method which considers yield or price of comparable bonds provided by a pricing service. Short-term obligations maturing within 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. Over-the-counter options are valued at the mean between bid and asked prices provided by dealers. Financial futures contracts listed on commodity exchanges and exchange-traded options are valued at closing settlement prices.
If the price of a security is unavailable in accordance with the aforementioned pricing procedures, or the price of a security is unreliable, e.g., due to the occurrence of a significant event, the security may be valued at its fair value determined by management pursuant to procedures adopted by the Board of Trustees. For this purpose, fair value is the price that a Fund reasonably expects to receive on a current sale of the security. Due to the number of variables affecting the price of a security, however; it is possible that the fair value of a security may not accurately reflect the price that a Fund could actually receive on a sale of the security. As of March 31, 2011, securities which have been fair valued represented 0.04%, 0.04% and 0.03% of net assets of Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Opportunities Equity Fund, respectively.
A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Various inputs are used in determining the value of each Fund’s investments as of the reporting period end. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – Unadjusted quoted prices in active markets for identical investments
Level 2 – Significant observable inputs (including quoted prices for similar investments, interest rates, prepayments speeds, credit risk, etc.)
Level 3 – Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
| Annual Report | March 31, 2011 |
31 |
Table of Contents
| Notes to Financial Statements (continued) |
Clough Global Funds | |
| March 31, 2011 |
The following is a summary of the inputs used as of March 31, 2011 in valuing each Fund’s investments carried at value. The Funds recognize transfers between the levels as of the beginning of the annual period in which the transfer occurred. There were no significant transfers between Levels 1 and 2 during the year ended March 31, 2011:
Clough Global Allocation Fund
| Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Basic Materials |
$ | 1,737,782 | $ | – | $ | – | $ | 1,737,782 | ||||||||
| Communications |
19,898,960 | – | – | 19,898,960 | ||||||||||||
| Consumer Cyclical |
15,569,492 | – | – | 15,569,492 | ||||||||||||
| Consumer Non-cyclical |
7,375,992 | – | – | 7,375,992 | ||||||||||||
| Energy |
49,664,382 | – | – | 49,664,382 | ||||||||||||
| Financial |
58,164,147 | 18,324 | 57,389 | 58,239,860 | ||||||||||||
| Industrial |
16,524,237 | – | – | 16,524,237 | ||||||||||||
| Technology |
22,830,172 | – | – | 22,830,172 | ||||||||||||
| Utilities |
10,277,362 | – | – | 10,277,362 | ||||||||||||
| Exchange Traded Funds |
11,045,164 | – | – | 11,045,164 | ||||||||||||
| Preferred Stocks |
812,172 | – | – | 812,172 | ||||||||||||
| Corporate Bonds |
– | 23,304,124 | – | 23,304,124 | ||||||||||||
| Asset/Mortgage Backed Securities |
– | 759,758 | – | 759,758 | ||||||||||||
| Foreign Government Bonds |
– | 3,768,381 | – | 3,768,381 | ||||||||||||
| Government & Agency Obligations |
22,520,424 | – | – | 22,520,424 | ||||||||||||
| Short-Term Investments |
4,241,015 | – | – | 4,241,015 | ||||||||||||
| TOTAL |
$ | 240,661,301 | $ | 27,850,587 | $ | 57,389 | $ | 268,569,277 | ||||||||
| Other Financial Instruments* | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Securities Sold Short |
$ | (15,734,626) | $ | – | $ | – | $ | (15,734,626) | ||||||||
| TOTAL |
$ | (15,734,626) | $ | – | $ | – | $ | (15,734,626) | ||||||||
| Clough Global Equity Fund | ||||||||||||||||
| Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Basic Materials |
$ | 2,866,897 | $ | – | $ | – | $ | 2,866,897 | ||||||||
| Communications |
33,662,365 | – | – | 33,662,365 | ||||||||||||
| Consumer Cyclical |
25,964,577 | – | – | 25,964,577 | ||||||||||||
| Consumer Non-cyclical |
12,083,417 | – | – | 12,083,417 | ||||||||||||
| Energy |
86,179,210 | – | – | 86,179,210 | ||||||||||||
| Financial |
95,762,142 | 30,224 | 86,086 | 95,878,452 | ||||||||||||
| Industrial |
27,040,779 | – | – | 27,040,779 | ||||||||||||
| Technology |
37,894,900 | – | – | 37,894,900 | ||||||||||||
| Utilities |
33,051,178 | – | – | 33,051,178 | ||||||||||||
| Exchange Traded Funds |
17,081,618 | – | – | 17,081,618 | ||||||||||||
| Preferred Stocks |
1,328,080 | 1,328,080 | ||||||||||||||
| Corporate Bonds |
– | 36,338,864 | – | 36,338,864 | ||||||||||||
| Asset/Mortgage Backed Securities |
– | 1,114,333 | – | 1,114,333 | ||||||||||||
| Foreign Government Bonds |
– | 5,762,065 | – | 5,762,065 | ||||||||||||
| Government & Agency Obligations |
19,808,560 | – | – | 19,808,560 | ||||||||||||
| Short-Term Investments |
5,030,141 | – | – | 5,030,141 | ||||||||||||
| TOTAL |
$ | 397,753,864 | $ | 43,245,486 | $ | 86,086 | $ | 441,085,436 | ||||||||
| Other Financial Instruments* | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Securities Sold Short |
$ | (25,710,644) | $ | – | $ | – | $ | (25,710,644) | ||||||||
| TOTAL |
$ | (25,710,644) | $ | – | $ | – | $ | (25,710,644) | ||||||||
| 32 |
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Table of Contents
| Clough Global Funds | Notes to Financial Statements (continued) | |
| March 31, 2011 |
| Clough Global Opportunities Fund | ||||||||||||||||
| Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Basic Materials |
$ | 7,456,983 | $ | – | $ | – | $ | 7,456,983 | ||||||||
| Communications |
84,883,814 | – | – | 84,883,814 | ||||||||||||
| Consumer Cyclical |
66,191,966 | – | _ | 66,191,966 | ||||||||||||
| Consumer Non-cyclical |
31,536,871 | – | – | 31,536,871 | ||||||||||||
| Energy |
212,165,578 | – | – | 212,165,578 | ||||||||||||
| Financial |
246,623,170 | 78,938 | 200,869 | 246,902,977 | ||||||||||||
| Industrial |
70,558,614 | – | – | 70,558,614 | ||||||||||||
| Technology |
97,613,804 | – | – | 97,613,804 | ||||||||||||
| Utilities |
42,126,689 | – | – | 42,126,689 | ||||||||||||
| Exchange Traded Funds |
40,567,634 | – | – | 40,567,634 | ||||||||||||
| Preferred Stocks |
3,463,224 | – | 3,463,224 | |||||||||||||
| Corporate Bonds |
– | 99,787,224 | – | 99,787,224 | ||||||||||||
| Asset/Mortgage Backed Securities |
– | 728,169 | – | 728,169 | ||||||||||||
| Foreign Government Bonds |
– | 15,918,195 | _ | 15,918,195 | ||||||||||||
| Government & Agency Obligations |
112,110,595 | – | – | 112,110,595 | ||||||||||||
| Call Options Purchased |
1,984,010 | – | – | 1,984,010 | ||||||||||||
| Short-Term Investments |
13,739,223 | – | – | 13,739,223 | ||||||||||||
| TOTAL |
$ | 1,031,022,175 | $ | 116,512,526 | $ | 200,869 | $ | 1,147,735,570 | ||||||||
| Other Financial Instruments* |
||||||||||||||||
| Liabilities |
||||||||||||||||
| Securities Sold Short |
$ | (66,880,409 | ) | $ | – | $ | – | $ | (66,880,409 | ) | ||||||
| TOTAL |
$ | (66,880,409 | ) | $ | – | $ | – | $ | (66,880,409 | ) | ||||||
| *For | detailed Industry descriptions, see the accompanying Statement of Investments. |
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Clough Global Allocation Fund
| Investments in Securities | Balance as of March 31, 2010 |
Realized gain/(|oss) |
Change in unrealized appreciation/ (depreciation) |
Net purchases/ (sales) |
Transfers in and/or (out) of Level 3 |
Balance as of March 31, 2011 |
Net Change in unrealized appreciation/depreciation) included in the statement of operations attributable to level 3 investments still held at March 31, 2011 | |||||||
| Common Stocks |
$– | $(51,282) | $64,656 | $(37,288) | $81,303 | $57,389 | $64,656 | |||||||
| TOTAL |
$– | $(51,282) | $64,656 | $(37,288) | $81,303 | $57,389 | $64,656 | |||||||
Clough Global Equity Fund
| Investments in Securities | Balance as of March 31, 2010 |
Realized gain/(loss) |
Change in unrealized appreciation/ (depreciation) |
Net purchases/ (sales) |
Transfers in and/or (out) of Level 3 |
Balance as of March 31, 2011 |
Net Change in unrealized appreciation/(depreciation) included in the statement of operations attributable to level 3 investments still held at March 31, 2011 | |||||||
| Common Stocks |
$– | $(76,926) | $96,988 | $(55,934) | $121,958 | $86,086 | $96,988 | |||||||
| TOTAL |
$– | $(76,926) | $96,988 | $(55,934) | $121,958 | $86,086 | $96,988 | |||||||
| Annual Report | March 31, 2011 |
33 |
Table of Contents
| Notes to Financial Statements (continued) |
Clough Global Funds | |
| March 31, 2011 |
Clough Global Opportunities Fund
| Investments in Securities | Balance as of |
Realized gain/(loss) |
Change in unrealized appreciation/ (depreciation) |
Net purchases/ (sales) |
Transfers in and/or (out) of Level 3 |
Balance as of March 31, 2011 |
Net Change in unrealized appreciation/(depreciation) included in the statement of operations attributable to level 3 investments still held at March 31, 2011 | |||||||
| Common Stocks |
$– | $(179,490) | $226,302 | $(130,510) | $284,567 | $200,869 | $226,302 | |||||||
| TOTAL |
$– | $(179,490) | $226,302 | $(130,510) | $284,567 | $200,869 | $226,302 | |||||||
Foreign Securities: Each Fund may invest a portion of its assets in foreign securities. In the event that a Fund executes a foreign security transaction, the Fund will generally enter into a forward foreign currency contract to settle the foreign security transaction. Foreign securities may carry more risk than U.S. securities, such as political, market and currency risks.
The accounting records of each Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange at period end. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments is reported with all other foreign currency realized and unrealized gains and losses in the Funds’ Statements of Operations.
A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. Each Fund may enter into foreign currency contracts to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. Risks to a Fund include the potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual commitments held by a Fund and the resulting unrealized appreciation or depreciation are determined using prevailing forward foreign currency exchange rates. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Funds’ Statements of Assets and Liabilities as a receivable or a payable and in the Funds’ Statements of Operations with the change in unrealized appreciation or depreciation on translation of assets and liabilities denominated in foreign currencies. There were no outstanding foreign currency contracts for the Funds as of March 31,2011.
A Fund may realize a gain or loss upon the closing or settlement of the foreign transaction. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statements of Operations.
Options: Each Fund may purchase or write (sell) put and call options. One of the risks associated with purchasing an option among others, is that a Fund pays a premium whether or not the option is exercised. Additionally, a Fund bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. Each Fund is obligated to pay interest to the broker for any debit balance of the margin account relating to options. The interest incurred on the Funds for the fiscal year ended March 31, 2011 is reported on the Statement of Operations as Interest expense – margin account. Interest amounts payable by the Funds as of March 31, 2011 are reported on the Statement of Assets and Liabilities as Interest payable – margin account.
When a Fund writes an option, an amount equal to the premium received by a Fund is recorded as a liability and is subsequently adjusted to the current value of the option written. Premiums received from writing options that expire unexercised are treated by a Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is recorded as a realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether a Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by a Fund. Each Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option.
Written option activity for the year ended March 31, 2011 was as follows:
| CLOUGH GLOBAL ALLOCATION FUND: | ||||||||||||||||||
| Written Call Options | Written Put Options | |||||||||||||||||
| Contracts | Premiums | Contracts | Premiums | |||||||||||||||
| Outstanding, March. 31, 2010 |
930 | $ | 452,200 | 1,070 | $ | 2,110,258 | ||||||||||||
| Positions opened |
235 | 1,021,243 | 13,543 | 12,547,014 | ||||||||||||||
| Exercised |
– | – | – | – | ||||||||||||||
| Expired |
(580) | (403,546) | (2,245) | (4,926,178) | ||||||||||||||
| Closed |
(585) | (1,069,897) | (12,368) | (9,731,094) | ||||||||||||||
| Outstanding, March 31, 2011 |
– | $ | – | – | $ | – | ||||||||||||
| Market Value, March 31, 2011 |
$ | – | $ | – | ||||||||||||||
| 34 |
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Table of Contents
| Clough Global Funds |
Notes to Financial Statements (continued) | |
| March 31, 2011 |
| CLOUGH GLOBAL EQUITY FUND: | ||||||||||||||||||
| Written Call Options | Written Put Options | |||||||||||||||||
| Contracts | Premiums | Contracts | Premiums | |||||||||||||||
| Outstanding, March 31, 2010 |
1,522 | $ | 741,677 | 1,762 | $ | 3,474,257 | ||||||||||||
| Positions opened |
383 | 1,661,609 | 22,060 | 20,441,665 | ||||||||||||||
| Exercised |
_ | _ | _ | _ | ||||||||||||||
| Expired |
(952) | (662,440) | (3,662) | (8,025,009) | ||||||||||||||
| Closed |
(953) | (1,740,846) | (20,160) | (15,890,913) | ||||||||||||||
| Outstanding, March 31, 2011 |
– | $ | – | – | $ | – | ||||||||||||
| Market Value, March 31, 2011 |
$ | – | $ | – | ||||||||||||||
| CLOUGH GLOBAL OPPORTUNITIES FUND: |
|
|||||||||||||||||
| Written Call Options | Written Put Options | |||||||||||||||||
| Contracts | Premiums | Contracts | Premiums | |||||||||||||||
| Outstanding, March 31, 2010 |
4,000 | $ | 1,948,313 | 4,647 | $ | 9,160,965 | ||||||||||||
| Positions opened |
1,019 | 4,450,995 | 57,850 | 53,651,283 | ||||||||||||||
| Exercised |
– | – | – | – | ||||||||||||||
| Expired |
(2,500) | (1,739,789) | (9,547) | (20,877,438) | ||||||||||||||
| Closed |
(2,519) | (4,659,519) | (52,950) | (41,934,810) | ||||||||||||||
| Outstanding, March 31, 2011 |
– | $ | – | – | $ | – | ||||||||||||
| Market Value, March 31, 2011 |
$ | – | $ | – | ||||||||||||||
Short Sales: Each Fund may sell a security it does not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. A gain, limited to the price at which a Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of the short sale.
Each 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. Each 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. The cash amount is reported on the Statement of Assets and Liabilities as Deposit with broker for securities sold short. The market value of securities held as collateral for securities sold short as of March 31, 2011, was $25,563,246, $39,095,595 and $87,902,969 for Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund, respectively. Each Fund is obligated to pay interest to the broker for any debit balance of the margin account relating to short sales. The interest incurred on the Funds for the fiscal year ended March 31, 2011 is reported on the Statement of Operations as Interest expense – margin account. Interest amounts payable by the Funds as of March 31, 2011 are reported on the Statement of Assets and Liabilities as Interest payable – margin account.
Each 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.
Derivatives Instruments: Each Fund may write or purchase option contracts to adjust risk and return of their overall investment positions. Each Fund may purchase or otherwise receive warrants or rights. Warrants and rights generally give the holder the right to receive, upon exercise, a security of the issuer at a set price. Funds typically use warrants and rights in a manner similar to their use of purchased options on securities, as described in options above. Risks associated with the use of warrants and rights are generally similar to risks associated with the use of purchased options. However, warrants and rights often do not have standardized terms, and may have longer maturities and may be less liquid than exchange-traded options. In addition, the terms of warrants or rights may limit each Fund’s ability to exercise the warrants or rights at such times and in such quantities as each Fund would otherwise wish. Each Fund held no rights or warrants at the end of the period. The following tables disclose the amounts related to each Fund’s use of derivative instruments.
The effect of derivatives instruments on each Fund’s Balance Sheet as of March 31, 2011:
| Asset Derivatives | ||||||||||
| Fund | Risk Exposure | Statement of Assets and Liabilities Location |
Contracts | Fair Value | ||||||
| Clough Global Opportunities Fund |
Equity Contracts | Investments, at value | 17,292 | $ | 1,984,010 | |||||
| Annual Report | March 31, 2011 |
35 |
Table of Contents
| Notes to Financial Statements (continued) |
Clough Global Funds | |
| March 31, 2011 |
The average purchased and written option contracts volume and the average purchased and written option contracts notional volume during the year ended March 31, 2011 is noted below for each of the Funds.
| Average Purchased Option Contract Volume |
Average Purchased Option Contract Notional Volume |
Average Written Option Contract Volume |
Average Written Option Contract Notional Volume |
|||||||||
| Clough Global Allocation Fund |
1,841 | $ | 4,006,098 | 1,767 | $ | 2,076,890 | ||||||
| Clough Global Equity Fund |
3,007 | $ | 6,540,245 | 2,885 | $ | 3,401,310 | ||||||
| Clough Global Opportunities Fund |
24,014 | $ | 20,225,521 | 7,556 | $ | 8,930,835 | ||||||
The effect of derivatives instruments on each Fund’s Statement of Operations for the year ended March 31, 2011:
| Fund | Risk Exposure | Statement of Operations Location | Realized Gain/(Loss) on Derivatives Recognized in Income |
Change in Unrealized Gain/(Loss) on Derivatives Recognized in Income | ||||
| Clough Global Allocation Fund |
Equity Contracts | Net realized gain/(loss) on Investment securities and Written options/Net change in unrealized appreciation/(depreciation) on investments, options, securities sold short and translation of assets and liabilities denominated in foreign currencies | $(7,306,354) | $2,783,844 | ||||
| Clough Global Equity Fund |
Equity Contracts | Net realized gain/(loss) on Investment securities and Written options/Net change in unrealized appreciation/(depreciation) on investments, options, securities sold short and translation of assets and liabilities denominated in foreign currencies | $(11,932,336) | $4,582,343 | ||||
| Clough Global Opportunities Fund |
Equity Contracts | Net realized gain/(loss) on Investment securities and Written options/Net change in unrealized appreciation/(depreciation) on investments, options, securities sold short and translation of assets and liabilities denominated in foreign currencies | $(34,730,739) | $9,833,058 |
Income Taxes: Each Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. During the year ended March 31, 2011, none of the Funds recorded a liability of any uncertain tax positions in the accompanying financial statements.
Each Fund files income tax returns in the U.S. federal jurisdiction and Colorado. The statute of limitations on each Fund’s federal and state tax filings remains open for the fiscal years ended March 31, 2011, March 31, 2010, March 31, 2009, and March 31, 2008 as well as for March 31, 2007 for state purposes only.
Under the Regulated Investment Company Modernization Act of 2010 (the Act), net capital losses recognized in tax years beginning after December 22, 2010 may be carried forward indefinitely, and the character of the losses is retained as short-term and/or long-term. Under the law in effect prior to the Act, net capital losses were carried forward for eight years and treated as short-term. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
Distributions to Shareholders: Each Fund intends to make a level dividend distribution each quarter to Common Shareholders after payment of interest on any outstanding borrowings. The level dividend rate may be modified by the Board of Trustees from time to time. Any net capital gains earned by a Fund are distributed at least annually to the extent necessary to avoid federal income and excise taxes. Distributions to shareholders are recorded by each Fund on the ex-dividend date. Each Fund has received approval from the Securities and Exchange Commission (the “Commission”) for exemption from Section 19(b)-1 of the Investment Company Act of 1940, as amended (the “1940 Act”), and Rule 19b-1 thereunder permitting each Fund to make periodic distributions of long-term capital gains, provided that the distribution policy of a fund with respect to its Common Shares calls for periodic (e.g. quarterly/monthly) distributions in an amount equal to a fixed percentage of each Fund’s average net asset value over a specified period of time or market price per common share at or about the time of distributions or pay-out of a level dollar amount. At this time, none of the Funds have implemented a managed distribution plan as permitted under the exemption.
| 36 |
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Table of Contents
| Clough Global Funds |
Notes to Financial Statements (continued) | |
| March 31, 2011 |
Securities Transactions and Investment Income: Investment security transactions are accounted for as of trade date. Dividend income is recorded on the ex-dividend date. Certain dividend income from foreign securities will be recorded as soon as a Fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date and may be subject to withholding taxes in these jurisdictions. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. Realized gains and losses from securities transactions and unrealized appreciation and depreciation of securities are determined using the highest cost basis for both financial reporting and income tax purposes.
Use of Estimates: Each Fund’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Counterparty Risk: Each of the Funds run the risk that the issuer or guarantor of a fixed income security, the counterparty to an over-the-counter derivatives contract, a borrower of each 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 each of the Funds use over-the-counter derivatives, and/or has significant exposure to a single counterparty, this risk will be particularly pronounced for each of the Funds.
Other Risk Factors: Investing in the Funds may involve certain risks including, but not limited to, the following:
Unforeseen developments in market conditions may result in the decline of prices of, and the income generated by, the securities held by the Funds. These events may have adverse effects on the Funds such as a decline in the value and liquidity of many securities held by the Funds, and a decrease in net asset value. Such unforeseen developments may limit or preclude the Funds’ ability to achieve their investment objective.
Investing in stocks may involve larger price fluctuation and greater potential for loss than other types of investments. This may cause the securities held by the Funds to be subject to larger short-term declines in value.
The Funds may have elements of risk due to concentrated investments in foreign issuers located in a specific country. Such concentrations may subject the Funds to additional risks resulting from future political or economic conditions and/or possible impositions of adverse foreign governmental laws or currency exchange restrictions. Investments in securities of non-U.S. issuers have unique risks not present in securities of U.S. issuers, such as greater price volatility and less liquidity. At March 31, 2011, Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund each had a significant concentration of their investment securities in companies based in the United States – 101.55%, 101.92% and 102.34% of net assets, respectively.
Fixed income securities are subject to credit risk, which is the possibility that a security could have its credit rating downgraded or that the issuer of the security could fail to make timely payments or default on payments of interest or principal. Additionally, fixed income securities are subject to interest rate risk, meaning the decline in the price of debt securities that accompanies a rise in interest rates. Bonds with longer maturities are subject to greater price fluctuations than bonds with shorter maturities.
The Funds invest in bonds which are rated below investment grade. These high yield bonds may be more susceptible than higher grade bonds to real or perceived adverse economic or industry conditions. The secondary market, on which high yield bonds are traded, may also be less liquid than the market for higher grade bonds.
Application of Recent Accounting Pronouncement: In January 2010, the FASB issued ASU No. 2010-06 “Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements” (ASU No. 2010-06). ASU No. 2010-06 provides for disclosure of significant transfers in and out of the fair value hierarchy Levels 1 and 2, and the reasons for these transfers. In addition, ASU No. 2010-06 provides for separate disclosure about purchases, sales, issuances and settlements in the Level 3 hierarchy roll forward activity. ASU No. 2010-06 is effective for interim and annual periods beginning after December 31, 2009 except for the provisions relating to purchases, sales, issuances and settlements of Level 3 investments, which are effective for fiscal years beginning after December 15, 2010. Each Fund adopted the disclosure provisions of ASU 2010-06 for its fiscal year beginning April 1, 2010 and will adopt the Level 3 purchase, sales, issuances and settlement provisions for its fiscal year beginning April 1, 2011. To date, the adoption of ASC No. 2010-06 has not had an impact on the Funds’ financial position, the results of its operations, or disclosures.
2. TAXES
Classification of Distributions: Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes.
| Annual Report | March 31, 2011 |
37 |
Table of Contents
|
Notes to Financial Statements (continued) |
Clough Global Funds | |
| March 31, 2011 |
The tax character of the distributions paid by the Funds during the years ended March 31, 2011 and March 31, 2010 were as follows:
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
| Ordinary Income |
$ | 12,521,527 | $ | 4,763,937 | $ | 20,695,217 | $ | 6,903,467 | $ | 55,875,807 | $ | 15,069,409 | ||||||||||||
| Long-Term |
||||||||||||||||||||||||
| Capital Gain |
– | – | – | – | – | – | ||||||||||||||||||
| Return of Capital |
– | 6,714,129 | – | 11,472,459 | – | 35,632,712 | ||||||||||||||||||
| Total |
$ | 12,521,527 | $ | 11,478,066 | $ | 20,695,217 | $ | 18,375,926 | $ | 55,875,807 | $ | 50,702,121 | ||||||||||||
Components of Earnings: Tax components of distributable earnings are determined in accordance with income tax regulations which may differ from composition of net assets reported under accounting principles generally accepted in the United States. Accordingly, for the year ended March 31, 2011, certain differences were reclassified. These differences were primarily due to the differing tax treatment of certain investments.
The reclassifications were as follows:
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||
| Undistributed Ordinary Income |
$ | 8,198,545 | $ | 14,773,399 | $ | 41,386,598 | ||||||
| Accumulated Capital Gain/(Loss) |
2,027 | 614,060 | (218,559) | |||||||||
| Paid-In Capital |
$ | (8,200,572) | $ | (15,387,459) | $ | (41,168,039) | ||||||
As of March 31, 2011 the Funds had capital loss carryforwards which will reduce the Funds’ taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Funds of any liability for federal tax. Pursuant to the Code, such capital loss carryforwards will expire as follows:
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||
| Capital Losses Expiring March 31, 2018 |
$ | 18,347,062 | $ | 33,834,064 | $ | 142,961,798 | ||||||
As of March 31, 2011, the components of distributable earnings on a tax basis were as follows:
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||
| Undistributed net investment income |
$ | – | $ | – | $ | – | ||||||
| Accumulated net realized loss |
(18,347,062) | (33,834,064) | (142,961,798) | |||||||||
| Unrealized appreciation |
28,847,852 | 49,742,735 | 118,167,240 | |||||||||
| Other cumulative effect of timing differences |
(93,986) | (158,626) | (436,547) | |||||||||
| Total |
$ | 10,406,804 | $ | 15,750,045 | $ | (25,231,105) | ||||||
Net unrealized appreciation/(depreciation) of investments based on federal tax cost as of March 31, 2011, were as follows:
| Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
||||||||||
| Gross appreciation on investments (excess of value over tax cost) |
$ | 34,426,549 | $ | 59,189,054 | $ | 141,381,737 | ||||||
| Gross depreciation on investments (excess of tax cost over value) |
(4,127,958) | (7,095,013) | (17,122,314) | |||||||||
| Net depreciation (excess of tax cost over value) of foreign currency and derivatives |
(1,450,739) | (2,351,306) | (6,092,183) | |||||||||
| Net unrealized appreciation |
28,847,852 | 49,742,735 | 118,167,240 | |||||||||
| Cost of investments for income tax purposes |
$ | 238,270,686 | $ | 388,991,395 | $ | 1,023,476,147 | ||||||
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Table of Contents
| Clough Global Funds |
Notes to Financial Statements (continued) | |
| March 31, 2011 |
Post October Loss: Under current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended March 31, 2011, the Funds elected to defer capital losses occurring between November 1, 2010 and March 31, 2011 in the amounts listed below.
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||
| Capital losses deferred |
$ | – | $ | – | $ | – | ||||||
| Currency losses deferred |
93,986 | 158,626 | 436,547 | |||||||||
| Total losses deferred |
$ | 93,986 | $ | 158,626 | $ | 436,547 | ||||||
| 3. | CAPITAL TRANSACTIONS |
Common Shares: There are an unlimited number of no par value common shares of beneficial interest authorized for each Fund.
Transactions in common shares were as follows:
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund |
||||||||||||||||||||||
| For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
|||||||||||||||||||
| Common Shares Outstanding - beginning of period |
10,434,606 | 10,434,606 | 17,840,705 | 17,840,705 | 51,736,859 | 51,736,859 | ||||||||||||||||||
| Common shares issued as reinvestment of dividends |
– | – | – | – | – | – | ||||||||||||||||||
| Common shares outstanding - end of period |
10,434,606 | 10,434,606 | 17,840,705 | 17,840,705 | 51,736,859 | 51,736,859 | ||||||||||||||||||
| 4. | PORTFOLIO SECURITIES |
Purchases and sales of investment securities, other than short-term securities, for the year ended March 31, 2011 are listed in the table below.
| Fund | Purchases of Securities | Proceeds from Sales of Securities |
Purchases of Long-Term U.S. Government Obligations |
Proceeds from Sales of Long-Term U.S. Government Obligations |
||||||||||||
| Clough Global Allocation Fund |
$ | 435,507,902 | $ | 462,394,834 | $ | 54,843,346 | $ | 37,704,291 | ||||||||
| Clough Global Equity Fund |
719,395,215 | 760,542,800 | 90,406,994 | 79,004,861 | ||||||||||||
| Clough Global Opportunities Fund |
1,892,595,867 | 2,049,112,154 | 265,998,113 | 228,665,768 | ||||||||||||
| 5. | INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS |
Clough Capital Partners L.P. (“Clough”) serves as each Fund’s investment adviser pursuant to an Investment Advisory Agreement (each an “Advisory Agreement” and collectively, the “Advisory Agreements”) with each Fund. As compensation for its services to the Fund, Clough receives an annual investment advisory fee of 0.70%, 0.90% and 1.00% based on Clough Global Allocation Fund’s, Clough Global Equity Fund’s and Clough Global Opportunities Fund’s, respectively, average daily total assets, computed daily and payable monthly. ALPS Fund Services, Inc. (“ALPS”) serves as each Fund’s administrator pursuant to an Administration, Bookkeeping and Pricing Services Agreement with each Fund. As compensation for its services to the Fund, ALPS receives an annual administration fee of 0.285%, 0.32%, and 0.32% based on Clough Global Allocation Fund’s, Clough Global Equity Fund’s and Clough Global Opportunities Fund’s, respectively, average daily total assets, computed daily and payable monthly. ALPS will pay all expenses incurred by each Fund, with the exception of advisory fees, trustees’ fees, portfolio transaction expenses, litigation expenses, taxes, expenses of conducting repurchase offers for the purpose of repurchasing fund shares, interest on margin accounts, interest on loans, dividends on short sales, and extraordinary expenses.
Both Clough and ALPS are considered to be “affiliates” of the Funds as defined in the 1940 Act.
| 6. | COMMITED FACILITY AGREEMENT AND LENDING AGREEMENT |
In January 2009, each Fund entered into a financing package that includes a Committed Facility Agreement (the “Agreement”) with BNP Paribas Prime Brokerage, Inc. (“BNP”) that allowed Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund to borrow up to an initial limit of $60,200,000, $98,200,000 and $239,500,000, respectively, (the “Initial Limit”) and a Lending Agreement, as defined below. During the year ended March 31, 2010, each Fund and BNP amended the Agreement to increase the borrowing limit on several occasions, subject to the applicable asset coverage requirements of Section 18 of the 1940 Act. In April, June and September of 2009 Clough Global Allocation
| Annual Report | March 31, 2011 |
39 |
Table of Contents
| Notes to Financial Statements (continued) |
Clough Global Funds | |
| March 31, 2011 |
Fund borrowed additional amounts of $11,000,000, $11,000,000 and $7,600,000, respectively. In April, June and September of 2009 Clough Global Equity Fund borrowed additional amounts of $16,000,000, $20,200,000 and $12,600,000 respectively. In April, June and September of 2009 Clough Global Opportunities Fund borrowed additional amounts of $69,000,000, $49,100,000 and $31,300,000. Borrowings under the Agreement are secured by assets of each Fund that are held by a Fund’s custodian in a separate account (the “pledged collateral”) valued at $210,062,854, $350,424,514 and $921,615,093 for Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund, respectively. Each Fund may, with 30 days notice, reduce the Maximum Commitment Financing (Initial Limit amount plus the increased borrowing amount in excess of the Initial Limit) to a lesser amount if drawing on the full amount would result in a violation of the applicable asset coverage requirement of Section 18 of the 1940 Act. Interest is charged at the three month LIBOR (London Inter-bank Offered Rate) plus 1.10% on the amount borrowed and 1.00% on the undrawn balance. Each Fund also pays a one time arrangement fee of 0.25% on (i) the Initial Limit and (ii) any increased borrowing amount in the excess of the Initial Limit, paid in monthly installments for the six months immediately following the date on which borrowings were drawn by the Fund. For the year ended March 31, 2011 the average borrowings outstanding for Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund under the agreement were $89,800,000, $147,000,000 and $388,900,000, respectively, and the average interest rate for the borrowings was 1.46%. As of March 31, 2011, the outstanding borrowings for Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund were $89,800,000, $147,000,000 and $388,900,000, respectively. The interest rate applicable to the borrowings of Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund on March 31, 2011 was 1.40%.
The Lending Agreement is a separate side-agreement between each Fund and BNP 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 a Fund to BNP under the Agreement. The Lending Agreement is intended to permit each Fund to significantly reduce the cost of its borrowings under the Agreement. BNP has the ability to reregister 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. (It is each Fund’s understanding that BNP will perform due diligence to determine the creditworthiness of any party that borrows Lent Securities from BNP.) Each Fund may designate any security within the pledged collateral as ineligible to be a Lent Security, provided there are eligible securities within the pledged collateral in an amount equal to the outstanding borrowing owed by a Fund. During the period in which the Lent Securities are outstanding, BNP must remit payment to each Fund equal to the amount of all dividends, interest or other distributions earned or made by the Lent Securities.
Under the terms of the Lending Agreement, the Lent Securities are marked to market daily, and if the value of the Lent Securities exceeds the value of the then-outstanding borrowings owed by a Fund to BNP under the Agreement (the “Current Borrowings”), BNP must, on that day, either (1) return Lent Securities to each Fund’s custodian in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings; or (2) post cash collateral with each Fund’s custodian equal to the difference between the value of the Lent Securities and the value of the Current Borrowings. If BNP fails to perform either of these actions as required, each Fund will recall securities, as discussed below, in an amount sufficient to cause the value of the outstanding Lent Securities to equal the Current Borrowings. Each Fund can recall any of the Lent Securities and BNP shall, to the extent commercially possible, return such security or equivalent security to each Fund’s custodian no later than three business days after such request. If a Fund recalls a Lent Security pursuant to the Lending Agreement, and BNP fails to return the Lent Securities or equivalent securities in a timely fashion, BNP shall remain liable for the ultimate delivery to each Fund’s custodian of such Lent Securities, or equivalent securities, and for any buy-in costs that the executing broker for the sales transaction may impose with respect to the failure to deliver. Each Fund shall also have the right to apply and set-off an amount equal to one hundred percent (100%) of the then-current fair market value of such Lent Securities against the Current Borrowings.
The Board of Trustees has approved each Agreement and the Lending Agreement. No violations of the Agreement or the Lending Agreement have occurred during the year ended March 31, 2011.
Each Fund receives income from BNP based on the value of the Lent Securities. This income is recorded as Hypothecated Securities income on the Statements of Operations. The interest incurred on borrowed amounts is recorded as Interest on Loan in the Statements of Operations, a part of Total Expenses.
| 7. | OTHER |
The Independent Trustees of each Fund receive from each Fund a quarterly retainer of $3,500 and an additional $1,500 for each board meeting attended. The Chairman of the Board of Trustees of each Fund receives a quarterly retainer from each Fund of $4,200 and an additional $1,800 for each board meeting attended. The Chairman of the Audit Committee of each Fund receives a quarterly retainer from each Fund of $3,850 and an additional $1,650 for each board meeting attended.
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| Clough Global Funds |
Dividend Reinvestment Plan | |
| March 31, 2011 (Unaudited) |
Unless the registered owner of Common Shares elects to receive cash by contacting The Bank of New York Mellon (the “Plan Administrator” or “BNY Mellon”), all dividends declared on Common Shares will be automatically reinvested by the Plan Administrator for shareholders in each 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 BNY Mellon as dividend disbursing agent. You may elect not to participate in the Plan and to receive all dividends in cash by contacting BNY Mellon, as dividend disbursing agent, at the address set forth below. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional Common Shares for you. If you wish for all dividends declared on your Common Shares to be automatically reinvested pursuant to the Plan, please contact your broker.
The Plan Administrator will open an account for each Common Shareholder under the Plan in the same name in which such Common Shareholder’s Common Shares are registered. Whenever a 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 a Fund (“Newly Issued Common Shares”) or (ii) by purchase of outstanding Common Shares on the open market (“Open-Market Purchases”) on the American Stock Exchange 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. If, before the Plan Administrator has completed its Open-Market Purchases, the market price per Common Share exceeds the net asset value per Common Share, the average per Common Share purchase price paid by the Plan Administrator may exceed the net asset value of the Common Shares, resulting in the acquisition of fewer Common Shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Shares at the net asset value per Common Share at the close of business on the Last Purchase Date provided that, if the net asset value is less than or equal to 95% of the then current market price per Common Share; the dollar amount of the Dividend will be divided by 95% of the market price on the payment date.
The Plan Administrator maintains all shareholders’ accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common Shares in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants.
In the case of Common Shareholders such as banks, brokers or nominees which hold shares for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder’s name and held for the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued directly by a 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. Participants that request a sale of Common Shares through the Plan Administrator are subject to brokerage commissions.
Each 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, each 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, The Bank of New York Mellon, 101 Barclay Street, New York, New York 10286, 11E, Transfer Agent Services, 800 433–8191.
| Annual Report | March 31, 2011 |
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| Clough Global Funds | ||
| March 31, 2011 (Unaudited) |
FUND PROXY VOTING POLICIES & PROCEDURES
Each Fund’s policies and procedures used in determining how to vote proxies relating to portfolio securities are available on the Funds’ website at http://www.cloughglobal.com. Information regarding how each Fund voted proxies relating to portfolio securities held by each Fund for the period ended June 30, 2010, are available without charge, upon request, by contacting the Funds at 1-877-256-8445 and on the Commission’s website at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q within 60 days after the end of the period. Copies of the Funds’ Form N-Q are available without a charge, upon request, by contacting the Funds at 1-877-256-8445 and on the Commission’s website at http://www.sec.gov. You may also review and copy Form N-Q at the Commission’s Public Reference Room in Washington, D.C. For more information about the operation of the Public Reference Room, please call the Commission at 1-800-SEC-0330.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that each Fund may purchase at market prices from time to time shares of its common stock in the open market.
The Funds hereby designate the following as a percentage of taxable ordinary income distributions, or up to the maximum amount allowable, for the fiscal year ended March 31, 2011:
| Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||
| Corporate Dividends Received Deduction |
16.16% | 19.67% | 15.39% | |||
| Qualified Dividend Income |
18.26% | 22.25% | 17.43% |
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| Clough Global Funds |
Trustees & Officers | |
| March 31, 2011 (Unaudited) |
| Name, Address1 and Age | Position(s) Held with the Funds |
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years |
Number of Portfolios in Fund Complex Overseen by Trustee5 |
Other Directorships Held by Trustee During the Past Five Years | |||||
| Non-Interested Trustees | ||||||||||
| Andrew C. Boynton Age, 55
Dean, Carroll School of Management Boston College, Fulton Bldg., Room 510, 140 Commonwealth Ave. Chestnut Hill, MA 02467 |
Trustee | Trustee since: GLV: 2005 GLQ: 2005 GLO: 2006
Term expires: GLV: 2011 GLQ: 2012 GLO: 2013 |
Mr. Boynton is currently the Dean of the Carroll School of Management at Boston College. Mr. Boynton served as Professor of Strategy from 1996 to 2005 and Program Director of the Executive MBA Program from 1998 to 2005 at International Institute of Management Development, Lausanne, Switzerland. | 3 | ||||||
| Robert L. Butler Age, 70 |
Chairman of the Board and Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2012 GLQ: 2013 GLO: 2011 |
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, neither of which Mr. Butler has been employed by since 2001. | 3 | ||||||
| Adam D. Crescenzi Age, 68 |
Trustee and Chairman of the Nominating Committee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2011 GLQ: 2012 GLO: 2013 |
Mr. Crescenzi is a Trustee of Dean College. He has been a founder and investor of several start-up technology and service firms. He currently is the Founding Partner of Simply Tuscan Imports LLC since 2007. He also serves as a Director of two non-profit organizations. He retired from CSC Index as Executive Vice-President of Management Consulting Services. | 3 | ||||||
| John F. Mee Age, 67 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2013 GLQ: 2011 GLO: 2012 |
Mr. Mee is an attorney practicing commercial law, family law, product liability and criminal law. Mr. Mee is currently a member of the Bar of the Commonwealth of Massachusetts. He serves on the Board of Directors of The College of the Holy Cross Alumni Association and Concord Carlisle Scholarship Fund, a Charitable Trust. Mr. Mee was from 1990 to 2009 an Advisor at the Harvard Law School Trial Advocacy Workshop. | 3 |
| Annual Report | March 31, 2011 |
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| Trustees & Officers |
Clough Global Funds | |
| March 31, 2011 (Unaudited) |
| Name, Address1 and Age
|
Position(s) Held
|
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years
|
Number of Portfolios in Fund Complex Overseen by Trustee5 |
Other Directorships Held by Trustee During the Past Five Years | |||||
| Non-Interested Trustees | ||||||||||
| Richard C. Rantzow Age, 72 |
Trustee and Chairman of the Audit Committee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2012 GLQ: 2013 GLO: 2011 |
Mr. Rantzow has over 40 years experience in the financial industry. His professional experience includes serving as an audit partner with Ernst & Young which specifically involved auditing financial institutions. Mr. Rantzow has also served in several executive positions in both financial and non-financial industries. Mr. Rantzow’s educational background is in accounting and he is a Certified Public Accountant who has continued to serve on several audit committees of various financial organizations. | 3 | Mr. Rantzow is a Trustee and Chairman of the Audit Committee of the Liberty All-Star Equity Fund and Director and Chairman of the Audit Committee of the Liberty All-Star Growth Fund, Inc. | |||||
| Jerry G. Rutledge Age, 66 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2011 GLQ: 2012 GLO: 2013 |
Mr. Rutledge is the President and owner of Rutledge’s Inc., a retail clothing business. Mr. Rutledge was from 1994 to 2007 a Regent of the University of Colorado. In addition, Mr. Rutledge is currently serving as a Director of the University of Colorado Hospital. Mr. Rutledge also served as a Director of the American National Bank from 1985 to 2009. | 4 | Mr. Rutledge is currently a Trustee of the Financial Investor Trust. | |||||
| Interested Trustees6 | ||||||||||
| Edmund J. Burke7 Age, 50 |
Trustee and President |
Trustee since: GLV: 2006 GLQ: 2006 GLO: 2006
Term expires: GLV: 2013 GLQ: 2011 GLO: 2012
President since: GLV: 2004 GLQ: 2005 GLO: 2006 |
Mr. Burke joined ALPS in 1991 and is currently the Chief Executive Officer and President of ALPS Holdings, Inc., and a Director of ALPS Advisors, Inc., ALPS Distributors, Inc., ALPS Fund Services, Inc., and FTAM Distributors, Inc. Mr. Burke is deemed an affiliate of each Fund as defined under the 1940 Act. | 3 | Mr. Burke is also Trustee, Chairman and President of Financial Investors Trust. Mr. Burke is a Trustee and Vice President of the Liberty All-Star Equity Fund and is a Director and Vice President of the Liberty All-Star Growth Fund, Inc. | |||||
|
James E. Canty8 Age, 48
Clough Capital Partners, LP One Post Office Square 40th Floor Boston, MA 02109 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2012 GLQ: 2013 GLO: 2011 |
Mr. Canty is a founding partner and General Counsel for Clough. Mr. Canty is deemed an affiliate of each Fund as defined under the 1940 Act. Mr. Canty is currently a member of the Board of Directors of Clough Offshore Fund, Ltd. | 3 | ||||||
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| Clough Global Funds |
Trustees & Officers | |
| March 31, 2011 (Unaudited) |
| Name, Address1 and Age
|
Position(s) Held with the Funds
|
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years
|
Number of Complex Overseen |
Other Directorships Held by Trustee During the | |||||
| Officers | ||||||||||
| Jeremy O. May Age, 41 |
Treasurer | Officer since9: GLV: 2004 GLQ: 2005 GLO: 2006 | Mr. May joined ALPS in 1995 and is currently President and Director of ALPS and Director of ALPS Advisors, Inc., ALPS Distributors, Inc., ALPS Holdings, Inc. and FTAM Distributors, Inc. Mr. May is deemed an affiliate of each Fund as defined under the 1940 Act. Mr. May is also the Treasurer of the Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., Financial Investors Trust and Financial Investors Variable Insurance Trust. Mr. May is also Treasurer and Trustee of the Reaves Utility Income Fund. Mr. May is currently on the Board of Directors of the University of Colorado Foundation. | N/A | N/A | |||||
| Monette R. Nickels Age, 39 | Tax Officer | Officer since9: GLV: 2009 GLQ: 2009 GLO: 2009 | Ms. Nickels joined ALPS in 2004 and is currently Senior Vice President and Director of Tax Administration of ALPS. Ms. Nickels is deemed an affiliate of each Fund as defined under the 1940 Act. Ms. Nickels is also Tax Officer of ALPS ETF Trust, Financial Investors Trust, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., Reaves Utility Income Fund and Financial Investors Variable Insurance Trust. | N/A | N/A | |||||
| Erin E. Douglas Age, 34 |
Secretary | Officer since9: GLV: 2004 GLQ: 2005 GLO: 2006 | Ms. Douglas joined ALPS in 2003 and is currently Vice-President and Senior Associate Counsel of ALPS and Vice-President of ALPS Advisors, Inc., ALPS Distributors, Inc., and FTAM Distributors, Inc. Ms. Douglas is deemed an affiliate of each Fund as defined under the 1940 Act. Ms. Douglas was formerly Secretary of Financial Investors Trust from 2004 to 2007 and Caldwell & Orkin Funds Inc. from December 2009 to June 2010. | N/A | N/A |
| Annual Report | March 31, 2011 |
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| Trustees & Officers |
Clough Global Funds | |
| March 31, 2011 (Unaudited) |
|
Name, Address1 and
|
Position(s) Held with the Funds
|
Term of office and length of service with GLV2, GLQ3 & GLO4
|
Principal Occupation(s) During Past Five Years |
Number of Portfolios in Fund Complex Overseen by Trustee5
|
Other Directorships Held by Trustee During the Past Five Years
| |||||
| Officers |
||||||||||
| Theodore J.Uhl Age, 36 |
Chief Compliance Officer |
Officer since9: GLV: 2010 GLQ: 2010 GLO: 2010 |
Mr. Uhl joined ALPS in October 2006, and is currently Deputy Compliance Officer of ALPS. Prior to his current role, Mr. Uhl served as Senior Risk Manager for ALPS from October 2006 until June 2010. Before joining ALPS, Mr. Uhl served as Sr. Analyst with Enenbach and Associates (RIA), and a Sr. Financial Analyst at Sprint. Because of his position with ALPS, Mr. Uhl is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Uhl is currently Chief Compliance Office of Cook and Bynum Funds, Financial Investors Trust, Reaves Utility Income Fund and Transparent Value Trust. | N/A | N/A | |||||
| Dawn Cotten Age, 33 |
Assistant Treasurer | Officer since9: GLV: 2010 GLQ: 2010 GLO: 2010 |
Ms. Cotten joined ALPS in June 2009 as a Fund Controller. Prior to joining ALPS, Ms. Cotten served as Assistant Vice President of Fund Accounting for Madison Capital Management from February 2009 to June 2009. Prior to this, Ms. Cotten served as Financial Reporting Manager for Janus Capital Group. Ms. Cotten is deemed an affiliate of each Fund as defined under the 1940 Act. Ms. Cotten is currently Assistant Treasurer of the James Advantage Funds. | N/A | N/A |
| 1 | Address: 1290 Broadway, Suite 1100, Denver, Colorado 80203, unless otherwise noted. |
| 2 | GLV commenced operations on July 28, 2004. |
| 3 | GLQ commenced operations on April 27, 2005. |
| 4 | GLO commenced operations on April 25, 2006. |
| 5 | The Fund Complex for all Trustees, except Mr. Rutledge and Mr. Burke, consists of the Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund. The Fund Complex for Mr. Rutledge and Mr. Burke consists of Clough Global Allocation Fund, Clough Global Equity Fund, Clough Global Opportunities Fund and the Clough China Fund, a series of the Financial Investors Trust. |
| 6 | “Interested Trustees “ of a Fund as defined in the 1940 Act. |
| 7 | Mr. Burke is considered to be an “Interested Trustee” because of his affiliation with ALPS, which acts as each Fund’s administrator. |
| 8 | Mr. Canty is considered to be an “Interested Trustee” because of his affiliation with Clough, which acts as each Fund’s investment adviser. |
| 9 | Officers are elected annually and each officer will hold such office until a successor has been elected by the Board. |
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| Clough Global Funds |
Notes | |
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| Notes |
Clough Global Funds | |
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Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by the report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or any persons performing similar functions on behalf of the registrant. |
| (b) | Not Applicable. |
| (c) | During the period covered, by this report, no amendments were made to the provisions of the code of ethics adopted in 2 (a) above. |
| (d) | During the period covered by this report, no implicit or explicit waivers to the provision of the code of ethics adopted in 2 (a) above were granted. |
| (e) | Not Applicable. |
| (f) | The registrant’s Code of Ethics is attached as Exhibit 12.A.1 hereto. |
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Trustees has determined that the registrant has as least one audit committee financial expert serving on its audit committee. The Board of Trustees has designated Richard C. Rantzow as the registrant’s “audit committee financial expert.” Mr. Rantzow is “independent” as defined in paragraph (a)(2) of Item 3 to Form N-CSR.
Mr. Rantzow was the Chief Financial Officer and a Director of Ron Miller Associates, Inc. Prior to that, Mr. Rantzow was managing partner of the Memphis office of Ernst & Young until 1990.
Item 4. Principal Accounting Fees and Services.
| (a) |
Audit Fees: The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2011 and 2010 were $28,333 and $28,333, respectively. | |
| (b) |
Audit-Related Fees: The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 in 2011 and $0 in 2010. | |
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| (c) |
Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $3,040 in 2011 and $2,760 in 2010. These fees are comprised of fees relating income tax return preparation fees, excise tax return preparation fees and review of dividend distribution calculation fees. | |
| (d) |
All Other Fees: The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $0 in 2011 and $0 in 2010. These services include agreed upon procedures related to the ratings for the Auction Market Preferred Shares. | |
| (e)(1) |
Audit Committee Pre-Approval Policies and Procedures: All services to be performed by the Registrant’s principal auditors must be pre-approved by the registrant’s audit committee. | |
| (e)(2) |
No services described in paragraphs (b) through (d) were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. | |
| (f) |
Not applicable. | |
| (g) |
The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were $0 for 2011 and $0 for 2010. | |
| (h) |
Not applicable. | |
Item 5. Audit Committee of Listed Registrant.
The registrant has a separately designated standing audit committee established in accordance with Section 3 (a)(58)(A) of the Exchange Act and is comprised of the following members:
Andrew C. Boynton
Robert L. Butler
Adam D. Crescenzi
John F. Mee
Richard C. Rantzow, Committee Chairman
Jerry G. Rutledge
Item 6. Schedule of Investments.
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Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Attached, as Exhibit Item 7, is a copy of the registrant’s policies and procedures.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) As of: March 31, 2011
| Portfolio Managers Name |
Title | Length of Service |
Business Experience: 5 Years | |||
| Charles I. Clough, Jr. | Partner and Portfolio Manager |
Since Inception | Founding Partner Clough Capital Partners LP. Portfolio Manager for pooled investment accounts, separately managed accounts, and investment companies for over ten years. | |||
| Eric A. Brock | Partner and Portfolio Manager |
Since Inception | Founding Partner Clough Capital Partners LP. Portfolio Manager for pooled investment accounts, separately managed accounts, and investment companies for over ten years. | |||
| James E. Canty | Partner and Portfolio Manager |
Since Inception | Founding Partner of Clough Capital LP. Portfolio Manager, Chief Financial Officer and General Counsel for pooled investment accounts, separately managed accounts, and investment companies for over ten years. Mr. Canty is currently a member of the Board of Directors of Clough Offshore Fund, Ltd and Board of Trustees of Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund. Because of his affiliation with Clough, Mr. Canty is an “interested” Trustee of the Fund. |
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(a)(2) As of March 31, 2011, the Portfolio Managers listed above are also responsible for the day-to-day management of the following:
|
Portfolio Managers Name |
Registered Investment Companies |
Other Pooled Investment Vehicles (1) |
Other Accounts(2) |
Material Conflicts If Any | ||||
| Charles I Clough, Jr. |
4 Accounts $2,169.8 million Total Assets |
4 Accounts $1,369.7 million Total Assets |
5 Accounts $370.8 million Total Assets |
See below (3) | ||||
| Eric A. Brock | 4 Accounts $2,169.8 million Total Assets |
4 Accounts $1,369.7 million Total Assets |
5 Accounts $370.8 million Total Assets |
See below (3) | ||||
| James E. Canty | 4 Accounts $2,169.8 million Total Assets |
4 Accounts $1,369.7 million Total Assets |
5 Accounts $370.8 million Total Assets |
See below (3) |
| (1) | The advisory fees are based in part on the performance for each account. |
| (2) | The advisory fee is based in part on the performance for four accounts totaling $365.2 million in assets. |
(3)Material Conflicts:
Material conflicts of interest may arise as a result of the fact that the Portfolio Managers also have day-to-day management responsibilities with respect to both the Fund and the various accounts listed above (collectively with the Fund, the “Accounts”). These potential conflicts include:
Limited Resources. The Portfolio Managers cannot devote their full time and attention to the management of each of the Accounts. Accordingly, the Portfolio Managers may be limited in their ability to identify investment opportunities for each of the Accounts that are as attractive as might be the case if the Portfolio Managers were to devote substantially more attention to the management of a single Account. The effects of this potential conflict may be more pronounced where the Accounts have different investment strategies.
Limited Investment Opportunities. If the Portfolio Managers identify a limited investment opportunity that may be appropriate for more than one Account, the investment opportunity may be allocated among several Accounts. This could limit any single Account’s ability to take full advantage of an investment opportunity that might not be limited if the Portfolio Managers did not provide investment advice to other Accounts.
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Different Investment Strategies. The Accounts managed by the Portfolio Managers have differing investment strategies. If the Portfolio Managers determine that an investment opportunity may be appropriate for only some of the Accounts or decide that certain of the Accounts should take different positions with respect to a particular security, the Portfolio Managers may effect transactions for one or more Accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other Accounts.
Variation in Compensation. A conflict of interest may arise where Clough or Clough Associates, LLC, as applicable, is compensated differently by the Accounts that are managed by the Portfolio Managers. If certain Accounts pay higher management fees or performance-based incentive fees, the Portfolio Managers might be motivated to prefer certain Accounts over others. The Portfolio Managers might also be motivated to favor Accounts in which they have a greater ownership interest or Accounts that are more likely to enhance the Portfolio Managers’ performance record or to otherwise benefit the Portfolio Managers.
Selection of Brokers. The Portfolio Managers select the brokers that execute securities transactions for the Accounts that they supervise. In addition to executing trades, some brokers provide the Portfolio Managers with research and other services which may require the payment of higher brokerage fees than might otherwise be available. The Portfolio Managers’ decision as to the selection of brokers could yield disproportionate costs and benefits among the Accounts that they manage, since the research and other services provided by brokers may be more beneficial to some Accounts than to others.
(a)(3) Portfolio Manager Compensation as of March 31, 2011.
The three Portfolio Managers own 100% of Clough. They each receive a fixed base salary determined based on market factors. Additionally, Clough distributes its annual net profits to the three Portfolio Managers, with Mr. Clough receiving a majority share and the remainder being divided evenly between Mr. Brock and Mr. Canty.
(a)(4) Dollar Range of Securities Owned as of March 31, 2011.
| Portfolio Managers |
Dollar Range of the Registrant’s Securities Owned by the Portfolio Managers | |
| Charles I. Clough, Jr. |
$100,001 - $500,000 | |
| Eric A. Brock |
$50,001 - $100,000 | |
| James E. Canty |
$50,001 - $100,000 |
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. |
None
Item 10. Submission of Matters to Vote of Security Holders.
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No material changes to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Trustees have been implemented after the registrant’s last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. |
| (b) | There was no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) The Code of Ethics that applies to the registrant’s principal executive officer and principal financial officer is attached hereto as Exhibit 12.A.1.
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(a)(2) The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex-99.Cert.
(a)(3) Not applicable.
(b) A certification for the Registrant’s Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex-99.906Cert.
(c) The Proxy Voting Policies and Procedures is attached hereto as Ex99. Item 7.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CLOUGH GLOBAL ALLOCATION FUND
| By: |
/s/ Edmund J. Burke | |
| Edmund J. Burke | ||
| President & Trustee | ||
| Date: |
June 3, 2011 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
CLOUGH GLOBAL ALLOCATION FUND
| By: | /s/ Edmund J. Burke | |
| Edmund J. Burke | ||
| President/Principal Executive Officer | ||
| Date: | June 3, 2011 | |
| By: | /s/ Jeremy O. May | |
| Jeremy O. May | ||
| Treasurer/Principal Financial Officer | ||
| Date: | June 3, 2011 | |