|
|
|
Notes to Financial Statements
|
|
Clough Global Funds
|
March 31, 2013
|
|
|
In the event a board approved independent pricing service is unable to provide an evaluated price
for a security or Clough Capital Partners L.P. (the advisor) believes the price provided is not reliable, securities of each Fund may be valued at fair value as described above. In these instances the advisor may seek to find an
alternative independent source, such as a broker/dealer to provide a price quote, or by using evaluated pricing models similar to the techniques and models used by the independent pricing service. These fair value measurement techniques may utilize
unobservable inputs (Level 3).
On a monthly basis, the Fair Value Committee of each Fund meets and discusses securities that have been
fair valued during the preceding month in accordance with the Funds Fair Value Procedures and reports quarterly to the Board of Trustees on the results of those meetings.
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,
2012
|
|
|
Realized
Gain/(Loss)
|
|
|
Change in
Unrealized
Appreciation/
(Depreciation)
|
|
|
Sales Proceeds
|
|
|
Transfer
out of
Level 3
|
|
|
Balance
as of
March
31,
2013
|
|
|
Net change in
unrealized
appreciation/
(depreciation)
included in
the
Statements
of
Operations
attributable
to Level 3
investments
held at
March 31,
2013
|
|
|
|
Common Stocks
|
|
$
|
19,963
|
|
|
$
|
(71,735
|
)
|
|
$
|
69,500
|
|
|
$
|
(10,910
|
)
|
|
$
|
(6,818
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
Total
|
|
$
|
19,963
|
|
|
$
|
(71,735
|
)
|
|
$
|
69,500
|
|
|
$
|
(10,910
|
)
|
|
$
|
(6,818
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
Clough Global Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in
Securities
|
|
Balance
as of
March 31,
2012
|
|
|
Realized
Gain/
(Loss)
|
|
|
Change in
Unrealized
Appreciation/
(Depreciation)
|
|
|
Sales Proceeds
|
|
|
Transfer
out of
Level 3
|
|
|
Balance
as of
March 31,
2013
|
|
|
Net change in
unrealized
appreciation/
(depreciation)
included in
the
Statements of
Operations
attributable
to Level
3
investments
held at
March 31,
2013
|
|
|
|
Common Stocks
|
|
$
|
29,944
|
|
|
$
|
(107,610
|
)
|
|
$
|
104,257
|
|
|
$
|
(16,365
|
)
|
|
$
|
(10,226
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
Asset/Mortgage Backed Securities
|
|
|
585,045
|
|
|
|
5,902
|
|
|
|
(118,718
|
)
|
|
|
(472,229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
614,989
|
|
|
$
|
(101,708
|
)
|
|
$
|
(14,461
|
)
|
|
$
|
(488,594
|
)
|
|
$
|
(10,226
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
Clough Global Opportunities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in
Securities
|
|
Balance
as of
March 31,
2012
|
|
|
Realized
Gain/
(Loss)
|
|
|
Change in
Unrealized
Appreciation/
(Depreciation)
|
|
|
Sales Proceeds
|
|
|
Transfer
out of
Level 3
|
|
|
Balance
as of
March 31,
2013
|
|
|
Net change in
unrealized
appreciation/
(depreciation)
included in
the
Statements of
Operations
attributable
to Level
3
investments
held at
March 31,
2013
|
|
|
|
Common Stocks
|
|
$
|
69,869
|
|
|
$
|
(251,107
|
)
|
|
$
|
243,285
|
|
|
$
|
(38,188
|
)
|
|
$
|
(23,859
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
Total
|
|
$
|
69,869
|
|
|
$
|
(251,107
|
)
|
|
$
|
243,285
|
|
|
$
|
(38,188
|
)
|
|
$
|
(23,859
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
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
|
|
|
Clough Global Funds
|
|
Notes to Financial Statements
|
|
|
March 31, 2013
|
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. These spot contracts are used by the broker to settle investments denominated in foreign currencies.
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.
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
Funds 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
Statements 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, 2013, was $27,492,302, $40,005,654 and $97,099,108 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 year ended March 31, 2013 is reported on the Statements of Operations as Interest expense margin account. Interest amounts payable by the Funds as of March 31, 2013 are reported on the Statements 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. Each Fund expects normally to close its short sales
against-the-box by delivering newly acquired stock.
Derivatives Instruments and Hedging Activities:
The following discloses the
Funds use of derivative instruments and hedging activities.
The Funds investment objectives not only permit the Funds to
purchase investment securities, they also allow the Funds to enter into various types of derivative contracts, including, but not limited to, purchased and written options and warrants. In doing so, the Funds will employ strategies in differing
combinations to permit them to increase, decrease, or change the level or types of exposure to market factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity securities;
they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow
the Funds to pursue their objectives more quickly and efficiently than if they were to make direct purchases or sales of securities capable of effecting a similar response to market factors.
Market Risk Factors:
In pursuit of their investment objectives, certain Funds may seek to use derivatives to increase or decrease their
exposure to the following market risk factors:
Equity Risk: Equity risk relates to the change in value of equity
securities as they relate to increases or decreases in the general market.
Risk of Investing in Derivatives: The Funds
use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. In instances where the Funds are using derivatives to decrease or hedge exposures to market risk factors for securities held by
the Funds, there are also risks that those derivatives may not perform as expected, resulting in losses for the combined or hedged positions.
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows
the Funds to increase their market value exposure relative to their net assets and can substantially increase the volatility of the Funds performance.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Funds. Typically, the associated risks are not the
risks that the Funds are attempting to increase or decrease exposure to, per their investment objectives, but are the additional risks from investing in derivatives.
Examples of these associated risks are liquidity risk, which is the risk that the Funds will not be able to sell the derivative in
the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Funds. Associated risks can be different for each type of derivative and are discussed by each
derivative type in the notes that follow.
|
|
|
|
|
|
Annual Report | March 31, 2013
|
|
39
|
|
|
|
Notes to Financial Statements
|
|
Clough Global Funds
|
March 31, 2013
|
|
|
Each Fund may acquire put and call options and options on stock
indices and enter into stock index futures contracts, certain credit derivatives transactions and short sales in connection with its equity investments. In connection with a Funds investments in debt securities, it may enter into related
derivatives transactions such as interest rate futures, swaps and options thereon and certain credit derivatives transactions. Derivatives transactions of the types described above subject a Fund to increased risk of principal loss due to imperfect
correlation or unexpected price or interest rate movements. Each Fund also will be subject to credit risk with respect to the counterparties to the derivatives contracts purchased by a Fund. If a counterparty becomes bankrupt or otherwise fails to
perform its obligations under a derivatives contract due to financial difficulties, each Fund may experience significant delays in obtaining any recovery under the derivatives contract in a bankruptcy or other reorganization proceeding. Each Fund
may obtain only a limited recovery or may obtain no recovery in such circumstances.
Option Writing/Purchasing:
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 year ended March 31, 2013 is reported on the
Statements of Operations as Interest expense margin account. Interest amounts payable by the Funds as of March 31, 2013 are reported on the Statements 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, 2013 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clough Global Allocation Fund
|
|
|
|
|
|
|
|
|
|
Written Call Options
|
|
|
Written Put Options
|
|
|
|
|
|
|
Contracts
|
|
|
Premiums
|
|
|
Contracts
|
|
|
Premiums
|
|
|
|
|
Outstanding, March 31, 2012
|
|
|
23
|
|
|
$
|
40,409
|
|
|
|
|
|
|
$
|
|
|
|
|
Positions opened
|
|
|
2,666
|
|
|
|
185,897
|
|
|
|
1,450
|
|
|
|
1,703,580
|
|
|
|
Exercised
|
|
|
(23)
|
|
|
|
(40,409)
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,020)
|
|
|
|
(89,363)
|
|
|
|
(250)
|
|
|
|
(476,993)
|
|
|
|
Closed
|
|
|
(1,646)
|
|
|
|
(96,534)
|
|
|
|
(1,200)
|
|
|
|
(1,226,587)
|
|
|
|
|
Outstanding, March 31, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
Market Value, March 31, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Clough Global Equity Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written Call Options
|
|
|
Written Put Options
|
|
|
|
|
|
|
Contracts
|
|
|
Premiums
|
|
|
Contracts
|
|
|
Premiums
|
|
|
|
|
Outstanding, March 31, 2012
|
|
|
38
|
|
|
$
|
66,763
|
|
|
|
|
|
|
$
|
|
|
|
|
Positions opened
|
|
|
4,317
|
|
|
|
298,287
|
|
|
|
2,400
|
|
|
|
2,807,501
|
|
|
|
Exercised
|
|
|
(38)
|
|
|
|
(66,763)
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,690)
|
|
|
|
(143,209)
|
|
|
|
(400)
|
|
|
|
(763,188)
|
|
|
|
Closed
|
|
|
(2,627)
|
|
|
|
(155,078)
|
|
|
|
(2,000)
|
|
|
|
(2,044,313)
|
|
|
|
|
Outstanding, March 31, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
Market Value, March 31, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
Clough Global Funds
|
|
Notes to Financial Statements
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clough Global Opportunities Fund
|
|
|
|
|
|
|
|
|
|
Written Call Options
|
|
|
Written Put Options
|
|
|
|
|
|
|
Contracts
|
|
|
Premiums
|
|
|
Contracts
|
|
|
Premiums
|
|
|
|
|
Outstanding, March 31, 2012
|
|
|
4,601
|
|
|
$
|
601,577
|
|
|
|
|
|
|
$
|
|
|
|
|
Positions opened
|
|
|
14,956
|
|
|
|
919,489
|
|
|
|
5,800
|
|
|
|
6,814,322
|
|
|
|
Exercised
|
|
|
(101)
|
|
|
|
(177,450)
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(3,500)
|
|
|
|
(355,181)
|
|
|
|
(1,000)
|
|
|
|
(1,907,971)
|
|
|
|
Closed
|
|
|
(15,956)
|
|
|
|
(988,435)
|
|
|
|
(4,800)
|
|
|
|
(4,906,351)
|
|
|
|
|
Outstanding, March 31, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
Market Value, March 31, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
Swaps:
During the period each Fund engaged in total return swaps. A swap is an agreement that obligates two
parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. Each Fund may utilize swap agreements as a means to gain
exposure to certain assets and/or to hedge or protect the Fund from adverse movements in securities prices or interest rates. Each Fund is subject to equity risk and interest rate risk in the normal course of pursuing its investment
objective through investments in swap contracts. Swap agreements entail the risk that a party will default on its payment obligation to a Fund. If the other party to a swap defaults, a Fund would risk the loss of the net amount of the payments that
it contractually is entitled to receive. If each Fund utilizes a swap at the wrong time or judges market conditions incorrectly, the swap may result in a loss to the Fund and reduce the Funds total return. Swap agreements traditionally were
privately negotiated and entered into in the over-the-counter market. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) of 2010 now permits certain swap agreements to be cleared through a
clearinghouse and traded on an exchange or swap execution facility. New regulations under the Dodd-Frank Act could, among other things, increase the cost of such transactions.
Total return swaps involve an exchange by two parties in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying
asset, which includes both the income it generates and any capital gains over the payment period. A Funds maximum risk of loss from counterparty risk or credit risk is the discounted value of the payments to be received from/paid to the
counterparty over the contracts remaining life, to the extent that the amount is positive. The risk is mitigated by having a netting arrangement between a Fund and the counterparty and by the posting of collateral to a Fund to cover the
Funds exposure to the counterparty.
International Swaps and Derivatives Association, Inc. Master Agreements (ISDA Master
Agreements) govern OTC financial derivative transactions entered into by a Fund and those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or
termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to early terminate could
be material to the financial statements.
During the year ended March 31, 2013, the Funds invested in swap agreements consistent with
the Funds investment strategies to gain exposure to certain markets or indices.
Warrants:
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 Funds 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 Funds use of derivative instruments.
The effect on derivatives instruments on each Funds Statements of Assets and Liabilities as of March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
Fund
|
|
Risk Exposure
|
|
Statement of Assets and Liabilities Location
|
|
Number of
Contracts
|
|
|
Fair Value
|
|
|
|
|
Clough Global Opportunities Fund
|
|
Equity Contracts
|
|
Investments, at value
|
|
|
7,000
|
|
|
$
|
752,500
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
Fund
|
|
Risk Exposure
|
|
Statement of Assets and Liabilities Location
|
|
Notional Amount
|
|
|
Fair Value
|
|
|
|
|
Clough Global Allocation Fund
|
|
Equity Contracts
|
|
Unrealized depreciation on total return swap contracts
|
|
$
|
4,258,390
|
|
|
$
|
(568,534)
|
|
|
|
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|
|
Annual Report | March 31, 2013
|
|
41
|
|
|
|
Notes to Financial Statements
|
|
Clough Global Funds
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
Fund
|
|
Risk Exposure
|
|
Statement of Assets and Liabilities Location
|
|
Notional Amount
|
|
|
Fair Value
|
|
|
|
|
Clough Global Equity Fund
|
|
Equity Contracts
|
|
Unrealized depreciation on total return swap contracts
|
|
$
|
9,290,298
|
|
|
$
|
(1,199,955)
|
|
|
|
|
Clough Global Opportunities Fund
|
|
Equity Contracts
|
|
Unrealized depreciation on total return swap contracts
|
|
$
|
17,995,227
|
|
|
$
|
(2,401,365)
|
|
|
|
|
The effect of derivatives instruments on each Funds Statement of Operations for the year ended March 31,
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
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/Net realized gain/(loss) on Written options/Net realized gain/(loss) on Total return swap contracts/Net change in unrealized
appreciation/(depreciation) on Investment securities/Net change in unrealized appreciation/(depreciation) on Written options/Net change in unrealized appreciation/(depreciation) on Total return swap contracts
|
|
$
|
(3,035,051
|
)
|
|
$
|
(910,076
|
)
|
|
|
Clough Global Equity Fund
|
|
Equity
Contracts
|
|
Net realized gain/(loss) on Investment securities/Net realized gain/(loss) on Written options/Net realized gain/(loss) on Total return swap contracts/Net change in unrealized
appreciation/(depreciation) on Investment securities/Net change in unrealized appreciation/(depreciation) on Written options/Net change in unrealized appreciation/(depreciation) on Total return swap contracts
|
|
$
|
(4,986,020
|
)
|
|
$
|
(1,776,384
|
)
|
|
|
Clough Global Opportunities Fund
|
|
Equity
Contracts
|
|
Net realized gain/(loss) on Investment securities/Net realized gain/(loss) on Written options/Net realized gain/(loss) on Total return swap contracts/Net change in unrealized
appreciation/(depreciation) on Investment securities/Net change in unrealized appreciation/(depreciation) on Written options/Net change in unrealized appreciation/(depreciation) on Total return swap contracts
|
|
$
|
(11,729,249
|
)
|
|
$
|
(3,606,948
|
)
|
|
|
The average purchased and written option contracts volume and the average purchased and written option contracts
notional volume during the year ended March 31, 2013 is noted below for each of the Funds.
|
|
|
|
|
|
|
|
|
Fund
|
|
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
|
|
1,926
|
|
$ 22,188,425
|
|
542
|
|
$ 19,242,948
|
Clough Global Equity Fund
|
|
3,101
|
|
$ 36,315,764
|
|
882
|
|
$ 31,707,095
|
Clough Global Opportunities Fund
|
|
14,044
|
|
$ 112,710,201
|
|
3,249
|
|
$ 82,254,671
|
|
The average total return swap contracts volume and the average total return swap contracts notional volume during
the year ended March 31, 2013 is noted below for each of the Funds.
|
|
|
|
|
Fund
|
|
Average Swap
Contract Shares
Volume
|
|
Average Swap Contract
Notional Volume
|
|
Clough Global Allocation Fund
|
|
509,661
|
|
$ 870,462
|
Clough Global Equity Fund
|
|
1,018,199
|
|
$ 1,822,154
|
Clough Global Opportunities Fund
|
|
2,156,367
|
|
$ 3,677,779
|
|
|
|
|
Clough Global Funds
|
|
Notes to Financial Statements
|
|
|
March 31, 2013
|
Income Taxes:
Each 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. As of and during the year ended March 31, 2013, the Funds did not have
a liability for any unrecognized tax benefits. The Funds file U.S. federal, state, and local tax returns as required. The Funds tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute
of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for
income taxes.
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) of the Investment Company Act of 1940, as amended (the 1940 Act), and Rule 19b-1 there under 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 Funds 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.
Securities Transactions and
Investment Income:
Investment security transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. Certain dividend income from foreign securities will be recorded, in the exercise of reasonable
diligence, 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 recorded on the accrual basis. 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.
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 Funds 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, 2013, 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 95.46%, 78.22% and 84.50% 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.
New Accounting Pronouncements:
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand
the effect of these arrangements on a Funds financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.
|
|
|
|
|
|
Annual Report | March 31, 2013
|
|
43
|
|
|
|
Notes to Financial Statements
|
|
Clough Global Funds
|
March 31, 2013
|
|
|
The amendments in ASU No. 2013-01 clarify the intended scope of disclosures required by ASU No.
2011-11. These ASUs are effective for interim and annual reporting periods beginning on or after January 1, 2013. The Funds believe the adoption of these ASUs will not have a material impact on the financial statements.
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. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Funds.
The tax character of the distributions paid by the Funds during the years ended March 31, 2013 and March 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clough Global Allocation Fund
|
|
|
Clough Global Equity Fund
|
|
|
Clough Global Opportunities Fund
|
|
|
|
|
|
|
Distributions Paid From:
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
Ordinary Income
|
|
$
|
9,391,145
|
|
|
$
|
12,521,527
|
|
|
$
|
15,521,413
|
|
|
$
|
20,279,371
|
|
|
$
|
55,875,807
|
|
|
$
|
54,503,782
|
|
Long-Term Capital Gains
|
|
|
3,130,382
|
|
|
|
|
|
|
|
5,173,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415,846
|
|
|
|
|
|
|
|
1,372,025
|
|
|
|
Total
|
|
$
|
12,521,527
|
|
|
$
|
12,521,527
|
|
|
$
|
20,695,217
|
|
|
$
|
20,695,217
|
|
|
$
|
55,875,807
|
|
|
$
|
55,875,807
|
|
|
|
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, 2013, certain differences were reclassified. These
differences relate primarily to the differing tax treatment of commodities, passive foreign investment companies (PFICs), foreign currencies and other investments.
The reclassifications were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in Capital
|
|
|
Increase Net
Investment Income
|
|
|
Increase/(Decrease)
Accumulated Net
Realized Gain/(Loss)
|
|
|
|
Clough Global Allocation Fund
|
|
$
|
(5,062,146)
|
|
|
$
|
8,635,241
|
|
|
$
|
(3,573,095)
|
|
Clough Global Equity Fund
|
|
|
(15,123,424)
|
|
|
|
14,975,853
|
|
|
|
147,571
|
|
Clough Global Opportunities Fund
|
|
|
(56,780,658)
|
|
|
|
56,805,164
|
|
|
|
(24,506)
|
|
Included in the amounts reclassified for Clough Global Opportunities Fund was $904,851 of net operating loss.
Capital Losses:
As of March 31, 2013, Clough Global Opportunities Fund had capital loss carryforwards which may reduce the Funds
taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus may 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:
|
|
|
Expiration Date
|
|
Clough Global Opportunities Fund
|
|
March 31, 2018
|
|
$30,946,429
|
During the year ended March 31, 2013, $8,327,692, $ 17,188,410 and $ 65,328,915 of capital loss carryforwards were
utilized by the Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund, respectively.
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.
|
|
|
Clough Global Funds
|
|
Notes to Financial Statements
|
|
|
March 31, 2013
|
The Funds elect to defer to the year ending March 31, 2014, late year ordinary losses in the
amounts of:
|
|
|
|
|
Fund
|
|
Amount
|
|
|
|
Clough Global Allocation Fund
|
|
$
|
275,764
|
|
Clough Global Equity Fund
|
|
$
|
793,569
|
|
Clough Global Opportunities Fund
|
|
$
|
2,139,761
|
|
Tax Basis of Distributable Earnings:
Tax components of distributable earnings are determined in accordance
with income tax regulations which may differ from composition of net assets reported under GAAP.
As of March 31, 2013, the components of distributable
earnings on a tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clough Global
Allocation Fund
|
|
|
Clough Global Equity
Fund
|
|
|
Clough Global
Opportunities Fund
|
|
Accumulated Capital Gains/(Losses)
|
|
|
4,875,005
|
|
|
|
9,407,775
|
|
|
|
(30,946,429)
|
|
Unrealized Appreciation
|
|
|
10,617,876
|
|
|
|
21,668,589
|
|
|
|
56,951,952
|
|
Other Cumulative Effect of Timing Differences
|
|
|
(271,581)
|
|
|
|
(786,652)
|
|
|
|
(2,123,134)
|
|
|
|
Total
|
|
$
|
15,221,300
|
|
|
$
|
30,289,712
|
|
|
$
|
23,882,389
|
|
|
|
Tax Basis of Investments:
Net unrealized appreciation/(depreciation) of investments based on federal tax
cost as of March 31, 2013, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clough Global
Allocation Fund
|
|
|
Clough Global
Equity Fund
|
|
|
Clough Global
Opportunities Fund
|
|
|
|
Gross appreciation (excess of value over tax cost)
|
|
$
|
17,284,722
|
|
|
$
|
33,219,472
|
|
|
$
|
83,432,005
|
|
Gross depreciation (excess of tax cost over value)
|
|
|
(4,795,694)
|
|
|
|
(8,280,840)
|
|
|
|
(18,568,924)
|
|
Net depreciation of foreign currency and derivatives
|
|
|
(1,871,152)
|
|
|
|
(3,270,043)
|
|
|
|
(7,911,129)
|
|
|
|
Net unrealized appreciation
|
|
$
|
10,617,876
|
|
|
$
|
21,668,589
|
|
|
$
|
56,951,952
|
|
|
|
Cost of investments for income tax purposes
|
|
$
|
255,174,295
|
|
|
$
|
412,234,056
|
|
|
$
|
1,069,538,730
|
|
|
|
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, 2013
|
|
|
For the
Year Ended
March 31, 2012
|
|
|
For the
Year Ended
March 31, 2013
|
|
|
For the
Year Ended
March 31, 2012
|
|
|
For the
Year Ended
March 31, 2013
|
|
|
For the
Year Ended
March 31, 2012
|
|
|
|
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, 2013, are listed in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Cost of Investments
Purchased
|
|
|
Proceeds From
Investments Sold
|
|
|
Purchases of Long-Term
U.S. Government
Obligations
|
|
|
Proceeds from Sales of
Long-Term U.S.
Government Obligations
|
|
|
|
Clough Global Allocation Fund
|
|
$
|
484,991,148
|
|
|
$
|
511,935,799
|
|
|
$
|
80,425,136
|
|
|
$
|
59,882,805
|
|
Clough Global Equity Fund
|
|
|
839,846,311
|
|
|
|
863,373,753
|
|
|
|
82,783,514
|
|
|
|
52,542,738
|
|
Clough Global Opportunities Fund
|
|
|
1,960,285,054
|
|
|
|
2,067,147,902
|
|
|
|
329,900,770
|
|
|
|
235,435,652
|
|
|
|
|
|
|
|
|
|
Annual Report | March 31, 2013
|
|
45
|
|
|
|
Notes to Financial Statements
|
|
Clough Global Funds
|
March 31, 2013
|
|
|
5. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
Clough Capital Partners L.P.
(Clough) serves as each Funds 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 Funds, Clough Global Equity Funds and Clough Global Opportunities Funds, respectively, average
daily total assets, computed daily and payable monthly. ALPS Fund Services, Inc. (ALPS) serves as each Funds 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 Funds, Clough Global Equity Funds and Clough Global Opportunities Funds, 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.
COMMITTED FACILITY AGREEMENT AND LENDING AGREEMENT
In January 2009, each Fund entered into a financing package that includes a Committed Facility Agreement (the Agreement), as amended in September 2012, with BNP Paribas Prime Brokerage, Inc.
(BNP) that allowed each Fund to borrow funds. Each Fund is currently borrowing the maximum commitment covered by the agreement. Borrowings under the Agreement are secured by assets of each Fund that are held by a Funds custodian in
a separate account (the pledged collateral) valued at $177,818,764, $292,967,805 and $767,826,684 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 0.75% on the amount borrowed and 0.65% 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, 2013 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 1.30%. As of March 31, 2013, 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, 2013 was 1.03%.
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
Funds 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 Funds 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 Funds 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 Funds 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 Funds 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, 2013.
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Clough Global Funds
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Notes to Financial Statements
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March 31, 2013
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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.
8. SUBSEQUENT EVENTS
The Funds have evaluated the need for
disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no adjustments were required to the financial statements.
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Annual Report | March 31, 2013
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47
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Dividend Reinvestment Plan
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Clough Global Funds
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March 31, 2013 (Unaudited)
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Unless the registered owner of
Common Shares elects to receive cash by contacting Computershare (the Plan Administrator), all dividends declared on Common Shares will be automatically reinvested by the Plan Administrator for shareholders in each 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 Computershare as dividend disbursing agent. You may elect not to participate in the Plan and to receive all dividends in cash by contacting Computershare, 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 reinvest
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 a Fund declares a dividend or other distribution (together, a Dividend) payable in cash, nonparticipants 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 (OpenMarket 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
OpenMarket 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 exdividend
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 OpenMarket Purchases. If, before the Plan Administrator has
completed its OpenMarket 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 OpenMarket Purchases, the Plan provides that
if the Plan Administrator is unable to invest the full Dividend amount in OpenMarket 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
OpenMarket 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 a Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with OpenMarket
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, Computershare, P.O. Box 358035, Pittsburgh, PA
15252-8035.
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Clough Global Funds
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Additional Information
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March 31, 2013 (Unaudited)
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FUND PROXY VOTING POLICIES & PROCEDURES
Each Funds 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, are available without charge, upon request, by contacting the Funds at 1-877-256-8445 and on the Commissions website at http://www.sec.gov.
PORTFOLIO
HOLDINGS
The Funds file their complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form
NQ within 60 days after the end of the period. Copies of the Funds Form NQ are available without a charge, upon request, by contacting the Funds at 18772568445 and on the Commissions website at
http://www.sec.gov. You may also review and copy Form NQ 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
1800SEC0330.
NOTICE
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.
SECTION 19(A) NOTICES
The following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company Act of 1940,
as amended, and the related rules adopted there under. Each Fund estimates the following percentages, of the total distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term
capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage of the total distribution amount. These percentages are disclosed for the fiscal year-to-date cumulative distribution amount
per share for the Fund.
The amounts and sources of distributions reported in these 19(a) notices are only estimates and not for tax
reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Funds investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The
Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
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Total Cumulative Distributions for the year
ended March 31, 2013
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% Breakdown of the Total Cumulative Distributions for the
year ended March 31, 2013
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Net
Investment
Income
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Net
Realized
Capital
Gains
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Return of
Capital
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Total Per
Common
Share
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Net
Investment
Income
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Net
Realized
Capital
Gains
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Return of
Capital
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Total Per
Common
Share
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Clough Global Allocation Fund
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$
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0.0391
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$
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0.2743
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$
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0.8866
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$
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1.2000
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3.26%
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22.86%
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73.88%
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100.00%
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Clough Global Equity Fund
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$
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0.0033
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$
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0.2867
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$
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0.8700
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$
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1.1600
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0.28%
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24.72%
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75.00%
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100.00%
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Each Funds dividend policy is to distribute all or a portion of its net investment income to its shareholders
on a quarterly basis. In order to provide shareholders with a more stable level of dividend distributions, each Fund may at times pay out less than the entire amount of net investment income earned in any particular quarter and may at times in any
particular quarter pay out such accumulated but undistributed income in addition to net investment income earned in that quarter. As a result, the dividends paid by each Fund for any particular quarter may be more or less than the amount of net
investment income earned by the Fund during such quarter. Each Funds current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial
information included in this report.
TAX DESIGNATIONS
Pursuant to Section 852(b)(3) of the
Internal Revenue Code, Clough Global Allocation Fund and Clough Global Equity Fund designate $3,130,382 and $5,173,804 respectively as a long-term capital gain distribution.
The Funds hereby designate the following as a percentage of taxable ordinary income distributions, or up to the maximum amount allowable, for the calendar year ended December 31, 2012:
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Clough Global Allocation Fund
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Clough Global Equity Fund
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Clough Global Opportunities Fund
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Corporate Dividends Received Deduction
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6.67%
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3.25%
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0.00%
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Qualified Dividend Income
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6.87%
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3.46%
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0.00%
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Please consult a tax advisor if you have questions about federal or state income tax laws, or how to prepare your
tax returns.
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Annual Report | March 31, 2013
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49
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Trustees & Officers
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Clough Global Funds
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March 31, 2013 (Unaudited)
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Name, Address
1
and Age
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Position(s) Held
with the Funds
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Term of office
and length of
service with
GLV
2
, GLQ
3
&
GLO
4
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios in
Fund Complex
Overseen
by
Trustee
5
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Other Directorships
Held by Trustee During
the Past Five Years
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Non-Interested Trustees/Nominees
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Robert L. Butler
Age, 72
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Chairman of the Board and Trustee
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Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2015 GLQ: 2013 GLO: 2014
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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.
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3
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N/A
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Adam D. Crescenzi
Age, 70
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Trustee
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Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2014 GLQ: 2015 GLO: 2013
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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.
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3
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N/A
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John F. Mee
Age, 69
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Trustee
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Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2013 GLQ: 2014 GLO: 2015
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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.
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3
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N/A
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Richard C. Rantzow
Age, 74
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Trustee
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Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2015 GLQ: 2013 GLO: 2014
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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. Rantzows 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.
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3
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N/A
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