Notes To Financial Statements
September 30,
2007 (unaudited)
1. Significant Accounting and
Operating Policies
Clough Global Allocation Fund is a closed-end management investment
company (the Fund) that was organized under the laws of the state of Delaware
by an Amended Agreement and Declaration of Trust dated April 27, 2004. The Fund
is a non-diversified series with an investment objective to provide a high
level of total return. The Declaration of Trust provides that the Trustees may
authorize separate classes of shares of beneficial interest.
Security
Valuation:
The net asset value per Share of the
Fund is determined no less frequently than daily, on each day that the American
Stock Exchange (the Exchange) is open for trading, as of the close of regular
trading on the Exchange (normally 4:00 p.m. New York time). Trading may take
place in foreign issues held by the Fund at times when the Fund is not open for
business. As a result, the Funds net asset value may change at times when it
is not possible to purchase or sell shares of the Fund. Securities held by the
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. Over-the-counter securities
traded on NASDAQ are valued based upon the closing price. Debt securities for
which the over-the-counter market is the primary market are normally valued on
the basis of prices furnished by one or more pricing services at the mean
between the latest available bid and asked prices. 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. 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. Securities for which there is no such quotation or valuation
and all other assets are valued at fair value in good faith by or at the
direction of the Trustees.
Foreign
Securities:
The Fund may invest a portion of
its assets in foreign securities. In the event that the 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 the 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 included with the fluctuations arising from changes in market values of
securities held and reported with all other foreign currency gains and losses
in the Funds Statement of Operations.
Options:
The Fund may purchase or write (sell) put and call options. One of the
risks associated with purchasing an option among others, is that the Fund pays
a premium whether or not the option is exercised. Additionally, the Fund bears
the risk of loss of premium and change in market value should the counterparty
not perform under the contract. Put and call options purchased are accounted
for in the same manner as portfolio securities. 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.
19
When the Fund writes an option, an amount equal to the premium received
by the 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 the Fund on the expiration date as
realized gains from investments. The difference between the premium and the
amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or, if the premium is less than
the amount paid for the closing purchase transaction, as a realized 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 the Fund has
realized a gain or loss. If a put option is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The 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 and purchased options are non-
income producing securities.
Written option activity as of September 30, 2007 was as follows:
Written Call Options
|
|
Contracts
|
|
Premiums
|
|
Outstanding, March 31, 2007
|
|
|
|
$
|
|
|
Positions opened
|
|
590
|
|
159,282
|
|
Expired
|
|
(120
|
)
|
(38,759
|
)
|
Closed
|
|
(470
|
)
|
(120,523
|
)
|
Outstanding, September 30, 2007
|
|
|
|
$
|
|
|
Market Value, September 30, 2007
|
|
|
|
$
|
|
|
Written Put Options
|
|
Contracts
|
|
Premiums
|
|
Outstanding, March 31, 2007
|
|
12,000
|
|
$
|
1,321,509
|
|
Positions opened
|
|
|
|
|
|
Expired
|
|
(12,000
|
)
|
(1,321,509
|
)
|
Closed
|
|
|
|
|
|
Outstanding, September 30, 2007
|
|
|
|
$
|
|
|
Market Value, September 30, 2007
|
|
|
|
$
|
|
|
Short
Sales:
The Fund may sell a security it does not
own in anticipation of a decline in the fair value of that security. When the
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 the Fund sold the security short, or a loss, unlimited in
size, will be recognized upon the termination of the short sale.
Income
Taxes:
The Funds 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.
Distributions
to Shareholders:
The Fund intends to make a
level dividend distribution each quarter to Common Shareholders after payment
of interest on any outstanding borrowings or dividends on any outstanding
preferred shares. The level dividend rate may be modified by the Board of
Trustees from time to time. Any net capital gains earned by the Fund are
distributed at least annually to the extent necessary to avoid federal income
and excise taxes. Distributions to shareholders are recorded by the Fund on the
ex-dividend date. The Fund has applied to the Securities and Exchange
Commission for
20
an exemption from Section 19(b) of the 1940 Act and Rule 19b-1
thereunder permitting the Fund to make periodic distributions of long-term
capital gains, provided that the distribution policy of the Fund with respect
to its Common Shares calls for periodic (e.g., quarterly/monthly) distributions
in an amount equal to a fixed percentage of the Funds average net asset value
over a specified period of time or market price per common share at or about
the time of distribution or pay-out of a level dollar amount.
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 the 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:
The Funds financial statements are
prepared in accordance with accounting principles generally accepted in the
United States of America. This requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
these estimates.
Reclassifications:
Certain prior period amounts have been reclassified to conform to the current
year presentation format.
Recent
Accounting Pronouncements:
In June 2006, the
Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48
Accounting for Uncertainty in Income Taxes, that requires the tax effects of
certain tax positions to be recognized. These tax positions must meet a more
likely than not standard that, based on their technical merits, have a more
than 50 percent likelihood of being sustained upon examination. FASB
Interpretation No. 48 is effective for fiscal periods beginning after December
15, 2006. At adoption, the financial statements must be adjusted to reflect
only those tax positions that are more likely than not of being sustained.
Management of the Fund is currently evaluating the impact that FASB
Interpretation No. 48 will have on the Funds financial statements.
In September 2006, the FASB issued FASB Statement No. 157, Fair
Valuation Measurement (SFAS No. 157), which defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Fund is
currently evaluating the potential impact the adoption of SFAS No. 157 will
have on the Funds financial statements.
In February 2007, the FASB issued FASB Statement No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities Including an
amendment of FASB Statement No. 115 (SFAS No. 159), which permits entities
to choose to measure many financial instruments and certain other items at fair
value. This Statement is expected to expand the use of fair value measurement,
which is consistent with the FASBs long-term measurement objectives for
accounting for financial instruments. This Statement is effective as of the
beginning of an entitys first fiscal year that begins after November 15, 2007.
The Fund is currently evaluating the potential impact the adoption of SFAS No.
159 will have on the Funds financial statements.
21
2. Taxes
Net unrealized appreciation/depreciation of investments based on
federal tax cost as of September 30, 2007, were as follows:
Gross appreciation (excess of value over
tax cost)
|
|
$
|
41,468,770
|
|
Gross depreciation (excess of tax cost over
value)
|
|
(8,752,114
|
)
|
Net unrealized appreciation
|
|
$
|
32,716,656
|
|
Cost of investments for income tax purpose
|
|
$
|
330,578,797
|
|
3. Capital Transactions
Common Shares:
There are an unlimited number of no par value common shares of beneficial
interest authorized. Of the 10,434,606 common shares outstanding on September
30, 2007, ALPS Fund Services, Inc. (ALPS) owned 5,236 shares.
Transactions in common shares were as follows:
|
|
For the
|
|
For the
|
|
|
|
Six Months Ended
|
|
Year Ended
|
|
|
|
September 30, 2007
|
|
March 31, 2007
|
|
Common shares outstanding - beginning of
period
|
|
10,434,606
|
|
10,169,924
|
|
Common shares issued as reinvestment of
dividends
|
|
|
|
264,682
|
|
Common shares outstanding - end of period
|
|
10,434,606
|
|
10,434,606
|
|
Preferred
Shares:
On September 15, 2004, the Funds Board
of Trustees authorized the issuance of an unlimited number of no par value
preferred shares, in addition to the existing common shares, as part of the
Funds leverage strategy. Preferred shares issued by the Fund have seniority
over the common shares.
The Fund is subject to certain limitations and restrictions while
preferred shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation
value. Specifically, the Fund is required under the Investment Company Act of
1940 to maintain an asset coverage with respect to the outstanding preferred
shares of 200% or greater.
The Fund has one series of Auction Market Preferred Shares (AMPS),
W28. On December 1, 2004, the Fund issued 3,800 shares of AMPS with a net asset
and liquidation value of $25,000 per share plus accrued dividends. Dividends on
the AMPS are cumulative and are paid based on an annual rate set through
auction procedures. Distributions of net realized capital gains, if any, are
paid annually. As of September 30, 2007, the annualized dividend rate for the
AMPS was 6.30%. The dividend rate, as set by the auction process, is generally
expected to vary with short-term interest rates. The rate may vary in a manner
unrelated to the income received on the Funds assets, which could have either
a beneficial or detrimental impact on net investment income and gains available
to Common Shareholders. Preferred Shares, which are entitled to one vote per
share, generally vote with the Common Shares but vote separately as a class to
elect two Trustees and on any matters affecting the rights of the Preferred
Shares.
4. PORTFOLIO
SECURITIES
Purchases and sales of investment securities, other than short-term
securities, for the six months ended September 30, 2007 aggregated $225,538,910
and $243,993,183, respectively. Purchase and sales of U.S. government and
agency securities, other than short-term securities, for the six months ended
September 30, 2007 aggregated $11,707,300 and $10,136,773, respectively.
22
5. Investment Advisory and
Administration Agreements
Clough Capital Partners L.P. (Clough) serves as the Funds investment
adviser pursuant to an Investment Advisory Agreement (Advisory Agreement)
with the Fund. As compensation for its services to the Fund, Clough receives an
annual investment advisory fee of 0.70% based on the Funds average daily total
assets, computed daily and payable monthly. ALPS serves as the Funds
administrator pursuant to an Administration, Bookkeeping and Pricing Services
Agreement with the Fund. As compensation for its services to the Fund, ALPS
receives an annual administration fee of 0.285% based on the Funds average
daily total assets, computed daily and payable monthly. ALPS will pay all
expenses incurred by the Fund, with the exception of advisory fees, trustees
fees, portfolio transaction expenses, litigation expenses, taxes, cost of
preferred shares, expenses of conducting repurchase offers for the purpose of
repurchasing fund shares, and extraordinary expenses.
6. Other
Each Independent Trustee of the Fund receives a quarterly retainer of
$3,500 and an additional $1,500 for each meeting attended. The Chairman of the
Board of Trustees receives a quarterly retainer of $4,200 and $1,800 for each
meeting attended. The Chairman of the Audit Committee receives a quarterly
retainer of $3,850 and attendance fee of $1,650 per meeting.
23
dividend reinveStment Plan
September 30, 2007 (unaudited)
Unless the registered owner of Common Shares elects to receive cash by
contacting The Bank of New York (the Plan Administrator or BONY), all
dividends declared on Common Shares will be automatically reinvested by the
Plan Administrator for shareholders in the Funds 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 BONY as dividend disbursing agent. You may elect not to participate in the
Plan and to receive all dividends in cash by contacting BONY, 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 Shareholders Common
Shares are registered. Whenever the Fund declares a dividend or other
distribution (together, a Dividend) payable in cash, non-participants in the
Plan will receive cash and participants in the Plan will receive the equivalent
in Common Shares. The Common Shares will be acquired by the Plan Administrator
for the participants accounts, depending upon the circumstances described
below, either (i) through receipt of additional unissued but authorized Common
Shares from the Fund (Newly Issued Common Shares) or (ii) by purchase of
outstanding Common Shares on the open market (Open-Market Purchases) on the
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 participants 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
24
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 shareholders name and held for
the account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commissions incurred in connection with Open-Market Purchases. The
automatic reinvestment of Dividends will not relieve participants of any
federal, state or local income tax that may be payable (or required to be
withheld) on such Dividends. Participants that request a sale of Common Shares
through the Plan Administrator are subject to brokerage commissions. The Fund
reserves the right to amend or terminate the Plan. There is no direct service
charge to participants with regard to purchases in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by the
participants.
All correspondence or questions concerning the Plan should be directed
to the Plan Administrator, The Bank of New York, 101 Barclay Street, New York,
New York 10286, 11E, Transfer Agent Services, 800-433-8191.
25
Fund Proxy Voting Policies & Procedures
September 30,
2007 (unaudited)
Fund policies and procedures used in determining how to vote proxies
relating to portfolio securities and a summary of proxies voted by the Fund for
the period ended June 30, 2007 are available without a charge, upon request, by
contacting the Fund at 1-877-256-8445 and on the U.S. Securities and Exchange
Commissions (Commission) website at http://www.sec.gov.
Portfolio Holdings
September 30,
2007 (unaudited)
The Fund files its 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 Forms N-Q are
available upon request, by contacting the Fund at 1-877-256-8445 and on the
Commissions website at http://www.sec.gov. You may also review and copy form
N-Q at the Commissions 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
September 30,
2007 (unaudited)
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940 that the Fund may purchase at market prices from
time to time shares of its common stock in the open market.
Shareholder Meeting
September 30,
2007 (unaudited)
On July 23, 2007, the Fund held its Annual Meeting of Shareholders (the
Meeting) for the purpose of voting on a proposal to re-elect two trustees of
the Fund. The results of the proposal are as follows:
Proposal 1:
Re-election of Trustees
|
|
Edmund J. Burke
|
|
James E. Canty
|
|
For
|
|
9,999,004
|
|
9,999,004
|
|
Abstain
|
|
0
|
|
0
|
|
Withheld
|
|
258,603
|
|
258,603
|
|
26
Investment Advisory Agreement
September 30,
2007 (unaudited)
On July 12, 2007, the Board of Trustees met in person to, among other
things, review and consider the renewal of the Advisory Agreement. In its
consideration of the Advisory Agreement, the Trustees, including the
non-interested Trustees, considered in general the nature, quality and scope of
services to be provided by Clough.
Prior to the beginning of their review of the Advisory Agreement, counsel
to the Fund, who also serves as independent counsel to the non-interested
Trustees, discussed with the Trustees their fiduciary responsibilities in
general and also specifically with respect to the renewal of the Advisory
Agreement.
Mr. Canty, as Partner of Clough, next presented Cloughs materials
regarding consideration of renewal of the Advisory Agreement. Mr. Canty stated
that included in the Board materials were responses by Clough to a
questionnaire drafted by legal counsel to the Fund to assist the Board in
evaluating whether to renew the Advisory Agreements (the 15(c) Materials).
Mr. Canty noted that the 15(c) Materials were extensive, and included
information relating to the Funds investment results; portfolio composition;
advisory fee and expense comparisons; financial information regarding Clough;
descriptions such as compliance monitoring; and portfolio trading practices and
information about the personnel providing investment management services to the
Fund, and the nature of services provided under the Advisory Agreement.
Mr. Canty discussed the organizational structure of Clough and the
qualifications of Clough and its principals to act as the Funds adviser. He
reviewed the professional experience of the portfolio managers, referring the
Trustees to the biographies of Chuck Clough, Eric Brock, and himself, Partners
at Clough, emphasizing that Mr. Clough, Mr. Brock, and he each had substantial
experience as an investment professional. Mr. Canty stated that Clough is the
investment adviser to the Fund, the Clough Global Equity Fund and the Clough
Global Opportunities Fund, all closed-end funds. The Trustees, all of whom
currently serve as Trustees for the Fund, the Clough Global Equity Fund and the
Clough Global Opportunities Fund, acknowledged their familiarity with the
expertise and standing in the investment community of Messrs. Clough, Canty,
and Brock, and their satisfaction with the expertise of Clough and the services
provided by Clough to the Fund. The Trustees concluded that the portfolio
management team was well qualified to serve the Fund in those functions.
Mr. Canty then reviewed Cloughs current staffing as well as future
staffing plans. He described Cloughs procedures relating to compliance and
oversight with respect to Cloughs brokerage allocation policies. He discussed
Cloughs order management systems that contain pre-trade compliance functions
that review each trade against certain of the Funds investment restrictions
and applicable 1940 Act and Internal Revenue Code restrictions, and the efforts
that Cloughs Chief Compliance Officer will undertake to summarize monthly for
Cloughs management and quarterly for the Trustees any violations that may
occur, as well any other violations detected through the manual monitoring that
supplements the order management systems testing. He also reviewed the
adequacy of Cloughs facilities. Mr. Canty further discussed the portfolio
turnover rate of the Fund. The Trustees concluded that Clough appeared to have
adequate procedures and personnel in place to ensure compliance by Clough with
applicable law and with the Funds investment objectives and restrictions.
Mr. Canty next reviewed the terms of the Advisory Agreement, stating
that Clough would receive a fee of 0.70% of the average daily total assets of
the Fund. He then discussed the fees charged by Clough to other clients for
which it provides comparable services. Mr. Canty discussed the actual dollar
amount of management fees paid under the Advisory
27
Agreement. The Trustees then reviewed Cloughs income statement for the
year ended December 31, 2006, and its balance sheet as of that date. The
Trustees further reviewed a profit and loss analysis as it relates to Cloughs
advisory businesses.
Mr. Canty discussed the possible benefits Clough may accrue because of
its relationship with the Fund as well as potential benefits that accrue to the
Fund because of its relationship with Clough. Mr. Canty stated that Clough does
not realize any direct benefits due to the allocation of brokerage and related
transactions on behalf of the Fund.
The Board of Trustees reviewed and discussed materials prepared and
distributed in advance of the meeting regarding the comparability of the investment
advisory fees of the Fund with the investment advisory fees of other investment
companies, which had been prepared at the request of ALPS by Lipper Analytical
Services (Lipper.) Lippers report contained information regarding investment
performance, comparisons of cost and expense structures of the Fund with other
funds cost and expense structures, as well as comparisons of the Funds
performance with the performance during similar periods of members of an
objectively identified peer group and related matters.
As the Fund is unique in the marketplace, Lipper had a difficult time
presenting a large peer group for comparison. The Trustees compared fees from
nine (9) closed-end investment companies that are leveraged (i.e., issue debt
or preferred stock) versus the Funds fees. The investment advisory fee for
this group ranged from 0.645% to 1.00%, with a median of 0.940%. The total
expenses for this group ranged from 0.711% to 1.340%, with a median of 1.108%.
The Funds total expenses were 1.028%.
The Trustees stated that the objectives of the funds in the analysis
differed from the Funds objectives and policies. In conjunction with Lippers
reports, the Trustees also reviewed a comparative fund universe prepare by
Clough. The Trustees believed that the Lipper report, augmented by Cloughs
analysis, provided a sufficient comparative universe. Nevertheless, the
Trustees requested that there be an on-going effort to identify funds and
groups of funds that might provide additional benchmarks that could be useful.
The Trustees then reviewed the Funds performance as compared to the
performance of the leveraged closed-end fund universe selected by Lipper. The
Trustees reviewed the Funds performance as compared to the nine (9) leveraged
funds for one-year performance ended as of May 31, 2007. The performance ranged
from a high of 37.61% to a low of 11.38% with a median of 23.23%. The Funds
performance during such time period was 12.40%. The Trustees then reviewed
performance data since the Funds inception through May 31, 2007. The
performance data ranged from a high of 31.72% to the Funds low of 16.92% with
a median of 23.35%.
At this point, Mr. Burke and Mr. Canty, both interested persons of
the Fund, as well as the other representatives of ALPS and Clough, left the
meeting. The non-interested Trustees, with the assistance of legal counsel,
reviewed and discussed in more detail the information that had been presented
relating to Clough, the Advisory Agreement and Cloughs profitability.
Mr. Burke, Mr. Canty, and the representatives of ALPS rejoined the
meeting. The Board of Trustees of the Fund, present in person, with the
non-interested Trustees present in person voting separately, unanimously
concluded that the investment advisory fee of 0.70% of the Funds total assets
are fair and reasonable for the Fund and that the renewal of the Advisory
Agreement is in the best interests of the Fund and its shareholders.
28
Trustees & Officers
September 30,
2007 (unaudited)
Information pertaining to the Trustees and Officers of the Trust is set
forth below. Trustees deemed to be interested persons of the Trust as defined
in the 1940 Act are referred to as Interested Trustees. Additional
information about the Trustees is available, without charge, upon request by
contacting the Fund at 1-877-256-8445.
INTERESTED TRUSTEES AND OFFICERS
Name, Age and Address
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Position(s) Held
with Funds/
Length of Time
Served
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Principal Occupation(s) During
past 5 years* and other
Directorships Held by Trustee
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Number of
Portfolios in
Fund Complex
Overseen by
Trustee
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James E. Canty
Age - 45
One Post Office Square
40th Floor
Boston, MA 02109
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Trustee and
Portfolio Manager/
Since Inception
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Mr. Canty is a founding partner, Chief Financial Officer and General
Counsel for Clough. Prior to founding Clough in 2000, Mr. Canty worked as a
corporate and securities lawyer and Director of Investor Relations for
Converse, Inc. from 1995 to 2000. He was a corporate and securities lawyer
for the Boston offices of Goldstein & Manello, P.C. from 1993 to 1995 and
Bingham, Dana and Gould from 1990 to 1993. Mr. Canty served as an Adjunct
Professor at Northeastern University from 1996 to 2000. Mr. Canty is
currently a member of the Board of Directors of Clough Offshore Fund, Ltd and
Board of Trustees of Clough Global Equity Fund and Clough Global
Opportunities Fund. Because of his affiliation with Clough, Mr. Canty is
considered an interested Trustee of the Fund.
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3
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Edmund J. Burke
Age - 46
1290 Broadway
Ste. 1100
Denver, CO 80203
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Principal Executive
Officer And
President/Since
Inception
Trustee/
Since July 12, 2006
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Mr. Burke is President and a Director
of ALPS. Mr. Burke joined ALPS in 1991 as Vice President and National
Sales Manager. Because of his position with ALPS, Mr. Burke is deemed an
affiliate of the Trust as defined under the 1940 Act. Mr. Burke is currently
the President of Reaves Utility Income Fund, Financial Investors Variable
Insurance Trust and Financial Investors Trust, and President and a Trustee of
Clough Global Equity Fund and Clough Global Opportunities Fund. Mr. Burke is
also a Trustee and Vice-President of Liberty All-Star Equity Fund and
Director and Vice President of Liberty All-Star Growth Fund, Inc.
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3
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29
Name, Age and Address
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Position(s) Held
with Funds/
Length of Time
Served
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Principal Occupation(s) During
past 5 years* and other
Directorships Held by Trustee
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Number of
Portfolios in
Fund Complex
Overseen by
Trustee
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Jeremy O. May
Age - 37
1290 Broadway
Ste. 1100
Denver, CO 80203
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Treasurer/Since
Inception
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Mr. May is Managing Director of ALPS.
Mr. May joined ALPS in 1995 as a Controller. Because of his position
with ALPS, Mr. May is deemed an affiliate of the Trust as defined under
the 1940 Act. Mr. May is currently the Treasurer of Reaves Utility
Income Fund, Clough Global Equity Fund, Clough Global Opportunities Fund,
Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund, Financial
Investors Variable Insurance Trust and Financial Investors Trust.
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N/A
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Kimberly R. Storms
Age - 34
1290 Broadway
Ste. 1100
Denver, CO 80203
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Assistant
Treasurer/Since
July 13, 2005
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Ms. Storms is Vice President and Director
of Fund Administration and Vice- President of ALPS. Ms. Storms joined ALPS in
1998 as Assistant Controller. Because of her position with ALPS, Ms. Storms
is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Storms
is also Assistant Treasurer of the Clough Global Equity Fund, Clough Global
Opportunities Fund, Reaves Utility Income Fund, Liberty All-Star Growth Fund,
Inc., Liberty All-Star Equity Fund, and Financial Investors Trust and
Assistant Secretary of Ameristock Mutual Fund, Inc.
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N/A
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30
Name, Age and Address
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Position(s) Held
with Funds/
Length of Time
Served
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Principal Occupation(s) During past 5
years* and other Directorships Held
by Trustee
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Number of
Portfolios in
Fund Complex
Overseen by
Trustee
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Erin Douglas*
Age - 30
1290 Broadway
Ste. 1100
Denver, CO 80203
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Secretary/
Since
Inception
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Ms. Douglas is Associate Counsel of ALPS.
Ms. Douglas joined ALPS as Associate Counsel in 2003. Ms. Douglas is deemed
an affiliate of the Trust as defined under the 1940 Act. Ms. Douglas is
currently the Secretary of Clough Global Equity Fund and Clough Global
Opportunities Fund.
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N/A
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Michael T. Akins*
Age - 31
1290 Broadway
Ste. 1100
Denver, CO 80203
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Chief
Compliance
Officer/ Since
September 20, 2006
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Mr. Akins is Deputy Chief Compliance
Officer of ALPS. Mr. Akins served as Assistant Vice-president and Compliance
Officer for UMB Financial Corporation. Before joining UMB, Mr. Akins was an
Account Manager at State Street Corporation. Mr. Akins is deemed an affiliate
of the Fund as defined under the 1940 Act. Mr. Akins also serves as Chief
Compliance Officer of Clough Global Equity Fund, Clough Global Opportunities
Fund, Financial Investors Trust, Financial Investors Variable Insurance
Trust, and Reaves Utility Income Fund.
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N/A
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* Except as otherwise indicated, each individual has held the office
shown or other offices in the same company for the last five years.
31
INDEPENDENT
TRUSTEES
Name, Age and Address
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Position(s) Held
with Funds/
Length of Time
Served
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Principal Occupation(s) During past
5 years* and other Directorships
Held by Trustee
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Number of
Portfolios in
Fund Complex
Overseen by
Trustee
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Andrew C. Boynton
Age - 51
Carroll School of
Management
Boston College
Fulton Hall 510
140 Comm. Ave.
Chestnut Hill, MA 02467
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Trustee/Since
March 2005
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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
(IMD). Prior to that he was an Associate Professor at the Kenan-Flagler
Business School, University of North Carolina, Chapel Hill from 1994 to 1996,
Visiting Professor at IMD, Lausanne, Switzerland from 1992 to 1994 and
Assistant Professor, Darden School, University of Virginia from 1987 to 1992.
Mr. Boynton is also a Trustee of the Clough Global Equity Fund and Clough
Global Opportunities Fund.
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3
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Robert Butler
Age - 66
12 Harvard Drive
Hingham, MA 02043
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Trustee/Since
Inception
Chairman/Since
July 12, 2006
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Mr. Butler is currently an independent
consultant for businesses. Mr. Butler was President of the Pioneer Funds
Distributor, Inc. from 1989 to 1998. He was Senior Vice-President from 1985
to 1988 and Executive Vice-President and Director from 1988 to 1999 of the
Pioneer Group, Inc. While at the Pioneer Group, Inc. until his retirement in
1999, Mr. Butler was a Director or Supervisory Board member of a number of
subsidiary and affiliated companies, including: Pioneer First Polish
Investment Fund, JSC, Pioneer Czech Investment Company and Pioneer Global
Equity Fund PLC. From 1975 to 1984 Mr. Butler was a Vice-President of the
Financial Industry Regulator Authority (formerly known as the National
Association of Securities Dealers). Mr. Butler is currently Chairman and a
Trustee of the Clough Global Equity Fund and Clough Global Opportunities
Fund.
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3
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32
Name, Age and Address
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Position(s) Held
with Funds/
Length of Time
Served
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Principal Occupation(s) During
past 5 years* and other
Directorships Held by Trustee
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Number of
Portfolios in
Fund Complex
Overseen by
Trustee
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Adam Crescenzi
Age - 65
100 Walden Street
Concord, MA 01742
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Trustee/Since Inception
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Mr. Crescenzi is a founding partner of
Telos Partners, a business advisory firm founded in 1998. Prior to that, he
served as Executive Vice President of CSC Index. Mr. Crescenzi is currently a
Trustee of Dean College and Clough Global Equity Fund, Clough Global
Opportunities Fund, and Chairman of the Board of Directors of Creative
Realities and ICEX, Inc. Mr. Crescenzi is an active member of the strategic
committee of the Patrons of Boston College McMullen Museum of Arts and
President of the Italian Cultural Society of Naples, Florida.
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3
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John F. Mee, Esq.
Age - 63
1290 Broadway
Ste. 1100
Denver, CO 80203
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Trustee/Since Inception
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Mr. Mee is an attorney practicing
commercial law, family law, products liability and criminal law. He is an
advisor in the Harvard Law School Trial Advocacy Work-shop from 1990 to
present. Mr. Mee is a member of the Bar of the Commonwealth of Massachusetts.
He serves on the Board of Directors of Holy Cross Alumni Association and
Board of Trustees of the Clough Global Equity Fund and Clough Global
Opportunities Fund.
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3
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Richard C. Rantzow
Age - 69
1290 Broadway
Ste. 1100
Denver, CO 80203
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Trustee/Since Inception
Vice-Chairman/
Since July 12,
2006
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Financial Officer and a Director of Ron
Miller Associates, Inc. (manufacturer). Prior to that, Mr. Rantzow was
Managing Partner (until 1990) of the Memphis office of Ernst & Young. Mr.
Rantzow is also Vice-Chairman and a Trustee of the Clough Global Equity Fund
and Clough Global Opportunities Fund. Mr. Rantzow is also a Trustee of
Liberty All-Star Equity Fund and Director of Liberty All-Star Growth Fund,
Inc. Mr. Rantzow was from 1992 to 2005 Chairman of the First Funds Family of
mutual funds.
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3
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Jerry G. Rutledge
Age - 63
2745 Springmede Court
Colorado Springs, CO 80906
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Trustee/Since Inception
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Mr. Rutledge is the President and owner of
Rutledges Inc., a retail clothing business. Mr. Rutledge is currently
Director of the American National Bank, and a Trustee of Clough Global Equity
Fund and Clough Global Opportunities Fund. Mr. Rutledge was from 1994 to 2007
a Regent of the University of Colorado.
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3
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33
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CLOUGH GLOBAL ALLOCATION FUND
1290 Broadway, Suite 1100
Denver, CO 80203
1-877-256-8445
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This Fund is neither insured nor guaranteed by the U.S. Government, the FDIC,
the Federal Reserve Board or any other governmental agency or insurer.
For more information about the Fund, including a prospectus, please visit
www.cloughglobal.com or call
1-877-256-8445.
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