UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21712
Clough Global Equity Fund
(exact name of registrant as specified in charter)
1290 Broadway, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip code)
Erin D. Nelson, Secretary
Clough Global Equity Fund
1290 Broadway, Suite 1100
Denver, Colorado 80203
(Name and address of agent for service)
Registrants telephone number, including area code: 303-623-2577
Date of fiscal year end: | March 31 | |
Date of reporting period: | March 31, 2013 |
Item 1. Reports to Stockholders.
SECTION 19(B) DISCLOSURE
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March 31, 2013 (Unaudited) |
Clough Global Allocation Fund and Clough Global Equity Fund (each a Fund and collectively, the Funds), acting pursuant to a Securities and Exchange Commission (SEC) exemptive order and with the approval of each Funds Board of Trustees (the Board), have adopted a plan, consistent with each Funds investment objectives and policies to support a level distribution of income, capital gains and/or return of capital (the Plan). In accordance with the Plan, Clough Global Allocation Fund currently distributes $0.30 per share on a quarterly basis and Clough Global Equity Fund distributes $0.29 per share on a quarterly basis.
The fixed amount distributed per share is subject to change at the discretion of each Funds Board. Under the Plan, each Fund will distribute all available investment income to its shareholders, consistent with each Funds primary investment objectives and as required by the Internal Revenue Code of 1986, as amended (the Code). If sufficient investment income is not available on a quarterly basis, each Fund will distribute long-term capital gains and/or return of capital to shareholders in order to maintain a level distribution. Each quarterly distribution to shareholders is expected to be at the fixed amount established by the Board, except for extraordinary distributions and potential distribution rate increases or decreases to enable each Fund to comply with the distribution requirements imposed by the Code.
Shareholders should not draw any conclusions about either Funds investment performance from the amount of these distributions or from the terms of the Plan. Each Funds total return performance on net asset value is presented in its financial highlights table.
The Board may amend, suspend or terminate either Funds Plan without prior notice if it deems such action to be in the best interest of either Fund or its shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if either Funds stock is trading at or above net asset value) or widening an existing trading discount. Each Fund is subject to risks that could have an adverse impact on its ability to maintain level distributions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, increased market volatility, companies suspending or decreasing corporate dividend distributions and changes in the Code. Please refer to each Funds prospectus for a more complete description of its risks.
Please refer to Additional Information for a cumulative summary of the Section 19(a) notices for each Funds current fiscal period. Section 19(a) notices for each Fund, as applicable, are available on the Clough Global Closed-End Funds website www.cloughglobal.com.
Clough Global Funds |
Table of Contents |
Clough Global Funds | ||
March 31, 2013 (Unaudited) |
2 | www.cloughglobal.com |
Clough Global Funds |
Shareholder Letter | |
March 31, 2013 (Unaudited) |
Annual Report | March 31, 2013 | 3 |
Shareholder Letter |
Clough Global Funds | |
March 31, 2013 (Unaudited) |
4 | www.cloughglobal.com |
Portfolio Allocation | ||
March 31, 2013 (Unaudited) |
Annual Report | March 31, 2013 | 5 |
Portfolio Allocation |
Clough Global Equity Fund | |
March 31, 2013 (Unaudited) |
6 | www.cloughglobal.com |
Portfolio Allocation | ||
March 31, 2013 (Unaudited) |
Annual Report | March 31, 2013 |
7 |
Report of Independent Registered Public Accounting Firm |
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To the Shareholders and Board of Trustees of
Clough Global Allocation Fund,
Clough Global Equity Fund, and
Clough Global Opportunities Fund
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund (each a Fund, collectively the Funds), as of March 31, 2013, and the related statements of operations and cash flows for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the periods indicated prior to March 31, 2012, were audited by another independent registered public accounting firm whose report dated May 18, 2011, expressed unqualified opinions on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund as of March 31, 2013, the results of their operations and their cash flows for the year then ended, and the statement of changes in their net assets and their financial highlights for each of two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
COHEN FUND AUDIT SERVICES, LTD.
Cleveland, Ohio
May 21, 2013
8 |
www.cloughglobal.com |
Statement of Investments | ||
March 31, 2013 |
Annual Report | March 31, 2013 | 9 |
Statement of Investments |
Clough Global Allocation Fund | |
March 31, 2013 |
10 | www.cloughglobal.com |
Clough Global Allocation Fund |
Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
11 |
Statement of Investments | Clough Global Allocation Fund | |
March 31, 2013 |
12 |
www.cloughglobal.com |
Clough Global Allocation Fund | Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
13 |
Statement of Investments | Clough Global Allocation Fund | |
March 31, 2013 |
(a) | Pledged security; a portion or all of the security is pledged as collateral for securities sold short or borrowings as of March 31, 2013. (See Note 1 and Note 6) |
(b) | Loaned security; a portion or all of the security is on loan at March 31, 2013. |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of March 31, 2013, these securities had a total value of $9,070,702 or 5.00% of net assets. |
(d) | Non-income producing security. |
(e) | Securities were purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Funds Board of Trustees. As of March 31, 2013, the aggregate market value of those securities was $580,450, representing 0.32% of net assets. |
(f) | Less than 0.0005%. |
(g) | Rate shown represents the bond equivalent yield to maturity at date of purchase. |
Total Return Swap Contracts
Counter Party | Reference Entry/Obligation |
Notional Amount |
Floating Rate Paid by the Fund |
Floating Rate Index | Termination Date |
Net Unrealized Loss |
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Credit Suisse First Boston |
Daqin Railway Co., Ltd. |
$ | 382,418 | 75 Bps + 1-Month LIBOR | LIBOR 1-Month | 8/26/2014 | $ | (7,731) | ||||||||||||
Morgan Stanley |
Bharti Infratel, Ltd. |
1,535,035 | 30 Bps + 1D FEDEF | 1D FEDEF | 12/30/2014 | (283,102) | ||||||||||||||
Morgan Stanley |
Citic Securities Co., Ltd. |
1,474,938 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | (229,832) | ||||||||||||||
Morgan Stanley |
Daqin Railway Co., Ltd. |
865,999 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | (47,869) | ||||||||||||||
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$ | 4,258,390 | $ | (568,534) | |||||||||||||||||
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See Notes to the Financial Statements.
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14 |
www.cloughglobal.com |
Clough Global Equity Fund | Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
15 |
Statement of Investments | Clough Global Equity Fund | |
March 31, 2013 |
16 |
www.cloughglobal.com |
Clough Global Equity Fund | Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
17 |
Statement of Investments | Clough Global Equity Fund | |
March 31, 2013 |
18 |
www.cloughglobal.com |
Clough Global Equity Fund |
Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
19 |
Statement of Investments | Clough Global Equity Fund | |
March 31, 2013 |
(a) | Pledged security; a portion or all of the security is pledged as collateral for securities sold short or borrowings as of March 31, 2013. (See Note 1 and Note 6) |
(b) | Loaned security; a portion or all of the security is on loan at March 31, 2013. |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of March 31, 2013, these securities had a total value of $16,910,007 or 5.70% of net assets. |
(d) | Non-income producing security. |
(e) | Securities were purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Funds Board of Trustees. As of March 31, 2013, the aggregate market value of those securities was $865,094, representing 0.29% of net assets. |
(f) | Less than 0.0005%. |
(g) | Rate shown represents the bond equivalent yield to maturity at date of purchase. |
Total Return Swap Contracts
Counter Party | Reference Entry/Obligation |
Notional Amount |
Floating Rate Paid by the Fund |
Floating Rate Index |
Termination Date |
Net Unrealized Loss |
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Morgan Stanley |
Annui Conch Cement Co., Ltd. |
$ | 1,702,413 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | $ | (252,531 | ) | |||||||||
Morgan Stanley |
Bharti Infratel, Ltd. |
2,468,093 | 30 Bps + 1D FEDEF | 1D FEDEF | 12/24/2014 | (455,184 | ) | |||||||||||
Morgan Stanley |
Citic Securities Co., Ltd. |
2,434,134 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | (379,294 | ) | |||||||||||
Morgan Stanley |
Daqin Railway Co., Ltd. |
816,958 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | (37,690 | ) | |||||||||||
Morgan Stanley |
Daqin Railway Co., Ltd. |
1,868,700 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/17/2013 | (75,256 | ) | |||||||||||
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$ | 9,290,298 | $ | (1,199,955 | ) | ||||||||||||||
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See Notes to the Financial Statements.
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20 |
www.cloughglobal.com |
Clough Global Opportunities Fund | Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
21 |
Statement of Investments | Clough Global Opportunities Fund | |
March 31, 2013 |
22 |
www.cloughglobal.com |
Clough Global Opportunities Fund | Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
23 |
Statement of Investments | Clough Global Opportunities Fund | |
March 31, 2013 |
24 |
www.cloughglobal.com |
Clough Global Opportunities Fund | Statement of Investments | |
March 31, 2013 |
Annual Report | March 31, 2013 |
25 |
Statement of Investments | Clough Global Opportunities Fund | |
March 31, 2013 |
(a) | Pledged security; a portion or all of the security is pledged as collateral for securities sold short or borrowings as of March 31, 2013. (See Note 1 and Note 6) |
(b) | Loaned security; a portion or all of the security is on loan at March 31, 2013. |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of March 31, 2013, these securities had a total value of $38,427,846 or 5.07% of net assets. |
(d) | Non-income producing security. |
(e) | Securities were purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Funds Board of Trustees. As of March 31, 2013, the aggregate market value of those securities was $2,461,331, representing 0.32% of net assets. |
(f) | Less than 0.0005%. |
(g) | Rate shown represents the bond equivalent yield to maturity at date of purchase. |
Total Return Swap Contracts
Counter Party | Reference Entry/Obligation |
Notional Amount |
Floating Rate Paid by the Fund |
Floating Rate Index | Termination Date |
Net Unrealized Loss |
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Credit Suisse First Boston |
Daqin Railway Co., Ltd. |
$ | 1,618,020 | 75 Bps + 1-Month LIBOR | LIBOR 1-Month | 8/26/2014 | $ | (32,711 | ) | |||||||||||
Morgan Stanley |
Bharti Infratel, Ltd. |
6,471,229 | 30 Bps + 1D FEDEF | 1D FEDEF | 12/30/2014 | (1,193,472 | ) | |||||||||||||
Morgan Stanley |
Citic Securities Co., Ltd. |
6,241,939 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | (972,649 | ) | |||||||||||||
Morgan Stanley |
Daqin Railway Co., Ltd. |
3,664,039 | 55 Bps + 1D FEDEF | 1D FEDEF | 6/19/2014 | (202,533 | ) | |||||||||||||
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$ | 17,995,227 | $ | (2,401,365 | ) | ||||||||||||||||
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See Notes to the Financial Statements.
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26 |
www.cloughglobal.com |
Clough Global Funds | Statement of Investments | |
March 31, 2013 |
Abbreviations:
1D FEDEF - Federal Funds Effective Rate (Daily)
AB - Aktiebolag is the Swedish equivalent of the term corporation
ADR - American Depositary Receipt
AG - Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders
Bps - Basis Points
CNY - Chinese Yuan Renminbi
CSI - China Securities Index Company Limited
CSOP - China Southern Asset Management
ETF - Exchange Traded Fund
FTSE - Financial Times and the London Stock Exchange
LP - Limited Partnership
Ltd. - Limited
MSCI - Morgan Stanley Capital International
NV - Naamloze Vennootschap (Dutch: Limited Liability Company)
PLC - Public Limited Liability
REIT - Real Estate Investment Trust
RQFII - Renminbi Qualified Foreign Institutional Investors
S.A. - Generally designates corporations in various countries, mostly those employing the civil law
SpA - Societa` Per Azioni is an Italian shared company
S&P - Standard & Poors
SPDR - Standard & Poors Depositary Receipt
For Fund compliance purposes, each Funds industry classifications refer to any one of the industry sub-classifications used by one or more widely recognized market indexes, and/or as defined by each Funds management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited.
See Notes to the Financial Statements.
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Annual Report | March 31, 2013 |
27 |
Statements of Assets and Liabilities | Clough Global Funds | |
March 31, 2013 |
Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
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ASSETS: |
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Investments, at value (Cost - see below) |
$ | 267,663,323 | $ | 437,172,688 | $ | 1,134,401,811 | ||||||
Foreign Currency, at value (Cost $8,633, $14,018 and $36,461) |
8,633 | 14,017 | 36,459 | |||||||||
Deposit with broker for securities sold short |
69,072,139 | 115,094,100 | 288,724,152 | |||||||||
Deposit with broker for total return swap contracts |
3,850,739 | 9,222,940 | 17,120,506 | |||||||||
Dividends receivable |
202,045 | 367,910 | 852,151 | |||||||||
Interest receivable |
365,746 | 438,395 | 1,736,223 | |||||||||
Receivable for investments sold |
10,183,297 | 13,195,836 | 23,790,622 | |||||||||
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Total Assets |
351,345,922 | 575,505,886 | 1,466,661,924 | |||||||||
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LIABILITIES: |
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Due to custodian |
602,714 | 1,008,842 | 2,452,399 | |||||||||
Loan payable |
89,800,000 | 147,000,000 | 388,900,000 | |||||||||
Interest due on loan payable |
12,881 | 21,086 | 55,786 | |||||||||
Securities sold short (Proceeds $65,682,232, $111,423,120 and $277,422,058) |
66,983,318 | 113,490,782 | 282,925,278 | |||||||||
Payable for investments purchased |
11,720,236 | 15,400,543 | 30,625,097 | |||||||||
Unrealized depreciation on total return swap contracts |
568,534 | 1,199,955 | 2,401,365 | |||||||||
Dividends payable - short sales |
29,277 | 47,574 | 123,926 | |||||||||
Interest payable - margin account |
30,756 | 42,497 | 130,312 | |||||||||
Accrued investment advisory fee |
201,780 | 427,853 | 1,205,202 | |||||||||
Accrued administration fee |
82,153 | 152,126 | 385,664 | |||||||||
Accrued trustees fee |
4,971 | 4,971 | 4,971 | |||||||||
Other payables and accrued expenses |
40 | 40 | 65 | |||||||||
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Total Liabilities |
170,036,660 | 278,796,269 | 709,210,065 | |||||||||
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Net Assets |
$ | 181,309,262 | $ | 296,709,617 | $ | 757,451,859 | ||||||
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Cost of Investments |
$ | 253,188,005 | $ | 409,102,236 | $ | 1,060,176,499 | ||||||
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COMPOSITION OF NET ASSETS: |
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Paid-in capital |
$ | 166,087,962 | $ | 266,419,905 | $ | 733,569,470 | ||||||
Overdistributed net investment income |
(1,019,963) | (2,013,693) | (5,320,120) | |||||||||
Accumulated net realized gain/(loss) on investment securities, written options, total return swap contracts, securities sold short and foreign currency transactions |
3,637,097 | 7,502,996 | (37,111,674) | |||||||||
Net unrealized appreciation in value of investment securities, written options, total return swap contracts, securities sold short and translation of assets and liabilities denominated in foreign currency |
12,604,166 | 24,800,409 | 66,314,183 | |||||||||
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Net Assets |
$ | 181,309,262 | $ | 296,709,617 | $ | 757,451,859 | ||||||
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Shares of common stock outstanding of no par value, unlimited shares authorized |
10,434,606 | 17,840,705 | 51,736,859 | |||||||||
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Net assets value per share |
$ | 17.38 | $ | 16.63 | $ | 14.64 | ||||||
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See Notes to the Financial Statements.
28 |
www.cloughglobal.com |
Clough Global Funds | Statements of Operations | |
For the Year Ended March 31, 2013 |
Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
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INVESTMENT INCOME: |
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Dividends (net of foreign withholding taxes of $70,125, $115,993 and $283,059) |
$ | 4,417,103 | $ | 7,799,345 | $ | 18,716,677 | ||||||
Interest on investment securities |
712,340 | 784,896 | 2,806,077 | |||||||||
Hypothecated securities income (See Note 6) |
107,608 | 172,215 | 501,159 | |||||||||
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Total Income |
5,237,051 | 8,756,456 | 22,023,913 | |||||||||
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EXPENSES: |
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Investment advisory fee |
2,142,138 | 4,495,628 | 12,957,443 | |||||||||
Administration fee |
872,156 | 1,598,446 | 4,146,382 | |||||||||
Interest on loan |
1,180,722 | 1,932,809 | 5,113,396 | |||||||||
Interest expense - margin account |
269,047 | 444,573 | 1,145,258 | |||||||||
Trustees fee |
127,364 | 127,563 | 127,563 | |||||||||
Dividend expense - short sales |
688,498 | 1,121,623 | 2,920,235 | |||||||||
Other expenses |
26,838 | 19,758 | 21,502 | |||||||||
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Total Expenses |
5,306,763 | 9,740,400 | 26,431,779 | |||||||||
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Net Investment Loss |
(69,712) | (983,944) | (4,407,866) | |||||||||
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NET REALIZED GAIN/(LOSS) ON: |
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Investment securities |
24,958,582 | 40,944,160 | 85,789,337 | |||||||||
Securities sold short |
3,273,485 | 5,058,198 | 14,018,291 | |||||||||
Written options |
1,756,731 | 2,891,304 | 7,011,300 | |||||||||
Total return swap contracts |
(112,013) | (174,134) | (473,796) | |||||||||
Foreign currency transactions |
(736,407) | (1,185,512) | (3,066,474) | |||||||||
NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: |
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Investment securities |
(2,632,864) | (1,538,547) | 9,736,891 | |||||||||
Securities sold short |
(2,291,702) | (3,687,914) | (9,730,672) | |||||||||
Written options |
135,484 | 223,842 | 650,071 | |||||||||
Total return swap contracts |
(568,534) | (1,199,955) | (2,401,365) | |||||||||
Translation of assets and liabilities denominated in foreign currencies |
(2,585) | (4,143) | (11,019) | |||||||||
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Net gain on investment securities, securities sold short, written options, total return swap contracts and foreign currency transactions |
23,780,177 | 41,327,299 | 101,522,564 | |||||||||
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Net Increase in Net Assets Attributable to Common Shares from Operations |
$ | 23,710,465 | $ | 40,343,355 | $ | 97,114,698 | ||||||
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See Notes to the Financial Statements.
Annual Report | March 31, 2013 |
29 |
Statements of Changes in Net Assets | Clough Global Funds | |
Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||||||||||||||||||||
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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 |
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COMMON SHAREHOLDERS OPERATIONS: |
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Net investment income/(loss) |
$ | (69,712 | ) | $ | 2,710,451 | $ | (983,944 | ) | $ | 3,679,630 | $ | (4,407,866 | ) | $ | 7,360,979 | |||||||||
Net realized gain/(loss) from: |
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Investment securities |
24,958,582 | 3,921,480 | 40,944,160 | 5,899,035 | 85,789,337 | 22,058,687 | ||||||||||||||||||
Securities sold short |
3,273,485 | (3,187,186 | ) | 5,058,198 | (5,060,458 | ) | 14,018,291 | (13,376,652 | ) | |||||||||||||||
Written options |
1,756,731 | 533,161 | 2,891,304 | 888,686 | 7,011,300 | 2,113,455 | ||||||||||||||||||
Total return swap contracts |
(112,013 | ) | | (174,134 | ) | | (473,796 | ) | | |||||||||||||||
Foreign currency transactions |
(736,407 | ) | 513,129 | (1,185,512 | ) | 855,880 | (3,066,474 | ) | 2,193,963 | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on investment securities, securities sold short, total return swap contracts, written options and translation of assets and liabilities denominated in foreign currencies |
(5,360,201 | ) | (13,351,122 | ) | (6,206,717 | ) | (22,860,951 | ) | (1,756,094 | ) | (61,439,158 | ) | ||||||||||||
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Net Increase/(Decrease) in Net Assets From Operations |
23,710,465 | (8,860,087 | ) | 40,343,355 | (16,598,178 | ) | 97,114,698 | (41,088,726 | ) | |||||||||||||||
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DISTRIBUTIONS TO COMMON SHAREHOLDERS: |
| |||||||||||||||||||||||
Net investment income |
(9,391,145 | ) | (12,521,527 | ) | (15,521,413 | ) | (20,279,371 | ) | (55,875,807 | ) | (54,503,782 | ) | ||||||||||||
Net realized gains |
(3,130,382 | ) | | (5,173,804 | ) | | | | ||||||||||||||||
Tax return of capital |
| | | (415,846 | ) | | (1,372,025 | ) | ||||||||||||||||
|
||||||||||||||||||||||||
Net Decrease in Net Assets from Distributions |
(12,521,527 | ) | (12,521,527 | ) | (20,695,217 | ) | (20,695,217 | ) | (55,875,807 | ) | (55,875,807 | ) | ||||||||||||
|
||||||||||||||||||||||||
Net Increase/(Decrease) in Net Assets Attributable to Common Shares |
11,188,938 | (21,381,614 | ) | 19,648,138 | (37,293,395 | ) | 41,238,891 | (96,964,533 | ) | |||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
NET ASSETS ATTRIBUABLE TO COMMON SHARES: |
| |||||||||||||||||||||||
Beginning of period |
170,120,324 | 191,501,938 | 277,061,479 | 314,354,874 | 716,212,968 | 813,177,501 | ||||||||||||||||||
|
||||||||||||||||||||||||
End of period* |
$ | 181,309,262 | $ | 170,120,324 | $ | 296,709,617 | $ | 277,061,479 | $ | 757,451,859 | $ | 716,212,968 | ||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
* Includes Overdistributed Net Investment Income of: |
$ | (1,019,963 | ) | $ | (194,347 | ) | $ | (2,013,693 | ) | $ | (484,189 | ) | $ | (5,320,120 | ) | $ | (1,841,611 | ) | ||||||
|
See Notes to the Financial Statements.
30 |
www.cloughglobal.com |
Clough Global Funds | Statements of Cash Flows | |
March 31, 2013 |
Clough Global Allocation Fund |
Clough Global Equity Fund |
Clough Global Opportunities Fund |
||||||||||
|
||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
| |||||||||||
Net increase in net assets from operations |
$ | 23,710,465 | $ | 40,343,355 | $ | 97,114,698 | ||||||
Adjustments to reconcile net increase/(decrease) in net assets from operations to net cash provided by operating activities: |
||||||||||||
Purchase of investment securities |
(561,312,166) | (923,575,326) | (2,306,707,617) | |||||||||
Proceeds from disposition of investment securities |
572,155,103 | 919,940,630 | 2,338,848,984 | |||||||||
Proceeds from securities sold short transactions |
249,603,069 | 415,844,355 | 1,057,199,069 | |||||||||
Cover securities sold short transactions |
(230,293,367) | (380,327,262) | (977,008,394) | |||||||||
Premiums received from written options transactions |
1,889,477 | 3,105,788 | 7,733,811 | |||||||||
Premiums paid on closing written options transactions |
(173,155) | (281,248) | (1,324,088) | |||||||||
Purchased options transactions |
(4,832,478) | (7,962,002) | (20,827,392) | |||||||||
Proceeds from purchased options transactions |
1,035,798 | 1,700,740 | 10,404,590 | |||||||||
Net proceeds from short-term investment securities |
9,163,533 | 39,880,563 | 57,026,515 | |||||||||
Net realized gain from investment securities |
(24,958,582) | (40,944,160) | (85,789,337) | |||||||||
Net realized gain on securities sold short |
(3,273,485) | (5,058,198) | (14,018,291) | |||||||||
Net realized loss on total return swap contracts |
112,013 | 174,134 | 473,796 | |||||||||
Net realized gain on written options |
(1,756,731) | (2,891,304) | (7,011,300) | |||||||||
Net realized loss on foreign currency transactions |
736,407 | 1,185,512 | 3,066,474 | |||||||||
Net change in unrealized depreciation on investment securities, securities sold short, written options, total return swap contracts and translation of assets and liabilities denominated in foreign currencies |
5,360,201 | 6,206,717 | 1,756,094 | |||||||||
Net payments on total return swap contracts |
(112,013) | (174,134) | (473,796) | |||||||||
Premium amortization |
344,623 | 369,219 | 1,528,782 | |||||||||
Discount accretion |
(21,435) | (40,736) | (102,983) | |||||||||
Increase in deposits with brokers for securities sold short and total return swap contracts |
(25,767,733) | (48,438,448) | (108,614,434) | |||||||||
Decrease in dividends receivable |
385,271 | 603,671 | 1,634,173 | |||||||||
Increase in interest receivable |
(155,526) | (170,631) | (961,463) | |||||||||
Increase in due to custodian |
602,714 | 1,008,842 | 2,452,399 | |||||||||
Increase in interest due on loan payable |
1,146 | 1,876 | 4,965 | |||||||||
Decrease in dividends payable - short sales |
(50,246) | (82,260) | (214,758) | |||||||||
Increase in interest payable - margin account |
7,059 | 3,829 | 29,408 | |||||||||
Increase in accrued investment advisory fee |
19,124 | 44,461 | 91,198 | |||||||||
Increase in accrued administration fee |
7,786 | 15,809 | 29,182 | |||||||||
Increase in accrued trustees fee |
661 | 860 | 859 | |||||||||
Decrease in other payables |
(260) | (260) | (285) | |||||||||
|
||||||||||||
Net cash provided by operating activities |
12,427,273 | 20,484,392 | 56,340,859 | |||||||||
|
||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
| |||||||||||
Cash distributions paid |
(12,521,527) | (20,695,217) | (55,875,807) | |||||||||
|
||||||||||||
Net cash used in financing activities |
(12,521,527) | (20,695,217) | (55,875,807) | |||||||||
|
||||||||||||
Effect of exchange rates on cash |
(139,090) | (171,317) | (544,360) | |||||||||
|
||||||||||||
Cash and foreign currency, beginning of period |
$ | 241,977 | $ | 396,159 | $ | 115,767 | ||||||
Cash and foreign currency, end of period |
$ | 8,633 | $ | 14,017 | $ | 36,459 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
| |||||||||||
Cash paid during the period for interest from bank borrowing: |
$ | 1,179,576 | $ | 1,930,933 | $ | 5,108,431 |
See Notes to the Financial Statements.
Annual Report | March 31, 2013 |
31 |
Financial Highlights | Clough Global Allocation Fund | |
For a share outstanding throughout the periods indicated |
For the Year Ended March 31, 2013 |
For the Year Ended March 31, 2012 |
For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended |
||||||||||||||||
|
||||||||||||||||||||
PER COMMON SHARE OPERATING PERFORMANCE: |
| |||||||||||||||||||
Net asset value - beginning of period |
$16.30 | $18.35 | $16.90 | $13.24 | $21.60 | |||||||||||||||
|
||||||||||||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income/(loss) |
(0.01)* | 0.26* | 0.38* | 0.32* | 0.30* | |||||||||||||||
Net realized and unrealized gain/(loss) on investments |
2.29 | (1.11) | 2.27 | 4.44 | (7.05) | |||||||||||||||
Distributions to preferred shareholders from: |
||||||||||||||||||||
Net investment income |
| | | | (0.05) | |||||||||||||||
|
||||||||||||||||||||
Total Income/(Loss) from Investment Operations |
2.28 | (0.85) | 2.65 | 4.76 | (6.80) | |||||||||||||||
|
||||||||||||||||||||
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: |
| |||||||||||||||||||
Net investment income |
(0.90) | (1.20) | (1.20) | (0.46) | (0.81) | |||||||||||||||
Net realized gains |
(0.30) | | | | (0.31) | |||||||||||||||
Tax return of capital |
| | | (0.64) | (0.44) | |||||||||||||||
|
||||||||||||||||||||
Total Distributions to Common Shareholders |
(1.20) | (1.20) | (1.20) | (1.10) | (1.56) | |||||||||||||||
|
||||||||||||||||||||
Net asset value - end of period |
$17.38 | $16.30 | $18.35 | $16.90 | $13.24 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Market price - end of period |
$15.07 | $13.94 | $16.24 | $15.92 | $10.68 | |||||||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Total Investment Return - Net Asset Value:(1) |
16.19% | (3.48)% | 17.30% | 38.14% | (32.20)% | |||||||||||||||
Total Investment Return - Market Price:(1) |
17.81% | (6.73)% | 10.20% | 61.32% | (37.50)% | |||||||||||||||
RATIOS AND SUPPLEMENTAL DATA: |
| |||||||||||||||||||
Net assets attributable to common shares, end of period (000s) |
$181,309 | $170,120 | $191,502 | $176,317 | $138,185 | |||||||||||||||
Ratios to average net assets attributable to common shareholders: |
||||||||||||||||||||
Total expenses |
3.24% | 3.05% | 2.87% | 3.22% | 3.35%(2) | |||||||||||||||
Total expenses excluding interest expense and dividends on short sales expense |
1.93% | 1.80% | 1.74% | 1.88% | 2.76%(2) | |||||||||||||||
Net investment income/(loss) |
(0.04)% | 1.61% | 2.28% | 1.96% | 1.73%(2) | |||||||||||||||
Preferred share dividends |
N/A | N/A | N/A | N/A | 0.30% | |||||||||||||||
Portfolio turnover rate |
250% | 192% | 172% | 115% | 233% | |||||||||||||||
|
||||||||||||||||||||
Borrowings at End of Period |
||||||||||||||||||||
Aggregate Amount Outstanding (000s) |
$89,800 | $89,800 | $89,800 | $89,800 | $60,200 | |||||||||||||||
Asset Coverage Per $1,000 (000s) |
$3,019 | $2,894 | $3,133 | $2,963 | $3,295 |
* | Based on average shares outstanding. |
(1) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at the closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at price obtained under the Funds dividend reinvestment plan. Total investment returns do not reflect brokerage commissions on the purchase or sale of the Funds common shares. Past performance is not a guarantee of future results. |
(2) | Ratios do not reflect dividend payments to preferred shareholders. |
See Notes to the Financial Statements.
32 |
www.cloughglobal.com |
Clough Global Equity Fund | Financial Highlights | |
For a share outstanding throughout the periods indicated |
For the Year Ended March 31, 2013 |
For the Year Ended March 31, 2012 |
For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended March 31, 2009 |
||||||||||||||||
|
||||||||||||||||||||
PER COMMON SHARE OPERATING PERFORMANCE: |
| |||||||||||||||||||
Net asset value - beginning of period |
$15.53 | $17.62 | $16.29 | $12.28 | $20.88 | |||||||||||||||
|
||||||||||||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income/(loss) |
(0.06)* | 0.21* | 0.30* | 0.22* | 0.16* | |||||||||||||||
Net realized and unrealized gain/(loss) on investments |
2.32 | (1.14) | 2.19 | 4.82 | (7.21) | |||||||||||||||
Distributions to preferred shareholders from: |
||||||||||||||||||||
Net investment income |
| | | | (0.03) | |||||||||||||||
|
||||||||||||||||||||
Total Income/(Loss) from Investment Operations |
2.26 | (0.93) | 2.49 | 5.04 | (7.08) | |||||||||||||||
|
||||||||||||||||||||
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: |
| |||||||||||||||||||
Net investment income |
(0.87) | (1.14) | (1.16) | (0.39) | (0.24) | |||||||||||||||
Net realized gains |
(0.29) | | | | (0.48) | |||||||||||||||
Tax return of capital |
| (0.02) | | (0.64) | (0.80) | |||||||||||||||
|
||||||||||||||||||||
Total Distributions to Common Shareholders |
(1.16) | (1.16) | (1.16) | (1.03) | (1.52) | |||||||||||||||
|
||||||||||||||||||||
Net asset value - end of period |
$16.63 | $15.53 | $17.62 | $16.29 | $12.28 | |||||||||||||||
|
||||||||||||||||||||
Market price - end of period |
$14.70 | $13.09 | $15.37 | $14.33 | $9.77 | |||||||||||||||
|
||||||||||||||||||||
Total Investment Return - Net Asset Value:(1) |
16.90% | (4.08)% | 17.05% | 43.62% | (34.55)% | |||||||||||||||
Total Investment Return - Market Price:(1) |
22.60% | (7.32)% | 16.07% | 58.80% | (39.60)% | |||||||||||||||
RATIOS AND SUPPLEMENTAL DATA: |
| |||||||||||||||||||
Net assets attributable to common shares, end of period (000s) |
$296,710 | $277,061 | $314,355 | $290,577 | $219,059 | |||||||||||||||
Ratios to average net assets attributable to common shareholders: |
||||||||||||||||||||
Total expenses |
3.67% | 3.43% | 3.23% | 3.57% | 3.81%(2) | |||||||||||||||
Total expenses excluding interest expense and dividends on short sales expense |
2.35% | 2.18% | 2.10% | 2.25% | 2.26%(2) | |||||||||||||||
Net investment income/(loss) |
(0.37)% | 1.34% | 1.87% | 1.43% | 0.95%(2) | |||||||||||||||
Preferred share dividends |
N/A | N/A | N/A | N/A | 0.20% | |||||||||||||||
Portfolio turnover rate |
250% | 183% | 173% | 116% | 207% | |||||||||||||||
|
||||||||||||||||||||
Borrowings at End of Period |
| |||||||||||||||||||
Aggregate Amount Outstanding (000s) |
$147,000 | $147,000 | $147,000 | $147,000 | $98,200 | |||||||||||||||
Asset Coverage Per $1,000 (000s) |
$3,018 | $2,885 | $3,138 | $2,977 | $3,231 |
* | Based on average shares outstanding. |
(1) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at the closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at price obtained under the Funds dividend reinvestment plan. Total investment returns do not reflect brokerage commissions on the purchase or sale of the Funds common shares. Past performance is not a guarantee of future results. |
(2) | Ratios do not reflect dividend payments to preferred shareholders. |
See Notes to the Financial Statements.
Annual Report | March 31, 2013 |
33 |
Financial Highlights | Clough Global Opportunities Fund | |
For a share outstanding throughout the periods indicated |
For the Year Ended March 31, 2013 |
For the Year Ended March 31, 2012 |
For the Year Ended March 31, 2011 |
For the Year Ended March 31, 2010 |
For the Year Ended March 31, 2009 |
||||||||||||||||
|
||||||||||||||||||||
PER COMMON SHARE OPERATING PERFORMANCE: |
|
|||||||||||||||||||
Net asset value - beginning of period |
$13.84 | $15.72 | $14.68 | $11.55 | $19.03 | |||||||||||||||
|
||||||||||||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income/(loss) |
(0.09)* | 0.14* | 0.25* | 0.17* | 0.12* | |||||||||||||||
Net realized and unrealized gain/(loss) on investments |
1.97 | (0.94) | 1.87 | 3.94 | (6.20) | |||||||||||||||
Distributions to preferred shareholders from: |
||||||||||||||||||||
Net investment income |
| | | | (0.04) | |||||||||||||||
|
||||||||||||||||||||
Total Income/(Loss) from Investment Operations |
1.88 | (0.80) | 2.12 | 4.11 | (6.12) | |||||||||||||||
|
||||||||||||||||||||
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: |
| |||||||||||||||||||
Net investment income |
(1.08) | (1.05) | (1.08) | (0.29) | (0.06) | |||||||||||||||
Net realized gains |
| | | | (0.03) | |||||||||||||||
Tax return of capital |
| (0.03) | | (0.69) | (1.27) | |||||||||||||||
|
||||||||||||||||||||
Total Distributions to Common Shareholders |
(1.08) | (1.08) | (1.08) | (0.98) | (1.36) | |||||||||||||||
|
||||||||||||||||||||
CAPITAL SHARE TRANSACTIONS: |
|
|||||||||||||||||||
Preferred share offering costs and sales load charged to paid-in capital |
| | | | 0.00(1) | |||||||||||||||
|
||||||||||||||||||||
Total Capital Share Transactions |
| | | | 0.00(1) | |||||||||||||||
|
||||||||||||||||||||
Net asset value - end of period |
$14.64 | $13.84 | $15.72 | $14.68 | $11.55 | |||||||||||||||
|
||||||||||||||||||||
Market price - end of period |
$12.87 | $11.78 | $13.85 | $13.04 | $9.20 | |||||||||||||||
|
||||||||||||||||||||
Total Investment Return - Net Asset Value:(2) |
15.87% | (3.88)% | 16.21% | 37.93% | (32.68)% | |||||||||||||||
Total Investment Return - Market Price:(2) |
19.67% | (7.14)% | 15.27% | 53.82% | (37.48)% | |||||||||||||||
RATIOS AND SUPPLEMENTAL DATA: |
|
|||||||||||||||||||
Net assets attributable to common shares, end of period (000s) |
|
$757,452 |
|
$716,213 | $813,178 | $759,601 | $597,605 | |||||||||||||
Ratios to average net assets attributable to common shareholders: |
||||||||||||||||||||
Total expenses |
3.86% | 3.61% | 3.40% | 3.72% | 3.84%(3) | |||||||||||||||
Total expenses excluding interest expense and dividends on short sales expense |
2.52% | 2.35% | 2.25% | 2.39% | 2.38%(3) | |||||||||||||||
Net investment income/(loss) |
(0.64)% | 1.04% | 1.74% | 1.19% | 0.80%(3) | |||||||||||||||
Preferred share dividends |
N/A | N/A | N/A | N/A | 0.23% | |||||||||||||||
Portfolio turnover rate |
241% | 193% | 171% | 115% | 224% | |||||||||||||||
|
||||||||||||||||||||
Borrowings at End of Period |
||||||||||||||||||||
Aggregate Amount Outstanding (000s) |
$388,900 | $388,900 | $388,900 | $388,900 | $239,500 | |||||||||||||||
Asset Coverage Per $1,000 (000s) |
$2,948 | $2,842 | $3,091 | $2,953 | $3,495 |
* | Based on average shares outstanding. |
(1) | Less than $0.005. |
(2) | Total investment return is calculated assuming a purchase of a common share at the opening on the first day and a sale at the closing on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at price obtained under the Funds dividend reinvestment plan. Total investment returns do not reflect brokerage commissions on the purchase or sale of the Funds common shares. Total investment returns for less than a full year are not annualized. Past performance is not a guarantee of future results. |
(3) | Ratios do not reflect dividend payments to preferred shareholders. |
See Notes to the Financial Statements.
34 |
www.cloughglobal.com |
Clough Global Funds | Notes to Financial Statements | |
March 31, 2013 |
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING AND OPERATING POLICIES
Clough Global Allocation Fund, Clough Global Equity Fund, and Clough Global Opportunities Fund, (each, a Fund and collectively, the Funds) are closed-end management investment companies that were organized under the laws of the state of Delaware by an Amended Agreement and Declaration of Trust dated April 27, 2004 and January 25, 2005, respectively for Clough Global Allocation Fund and Clough Global Equity Fund and an Agreement and Declaration of Trust dated January 12, 2006 for Clough Global Opportunities Fund. Each Fund is a non-diversified series with an investment objective to provide a high level of total return. Each Declaration of Trust provides that the Board of Trustees may authorize separate classes of shares of beneficial interest.
The following is a summary of significant accounting policies followed by the Funds. These policies are in conformity with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements during the reporting period. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Funds ultimately realize upon sale of the securities. The financial statements have been prepared as of the close of the New York Stock Exchange (NYSE or the Exchange) on March 28, 2013.
The net asset value per share of each Fund is determined no less frequently than daily, on each day that the Exchange is open for trading, as of the close of regular trading on the Exchange (normally 4:00 p.m. New York time). Trading may take place in foreign issues held by the Fund at times when a Fund is not open for business. As a result, each Funds net asset value may change at times when it is not possible to purchase or sell shares of a Fund.
Investment Valuation: Securities held by each Fund for which exchange quotations are readily available are valued at the last sale price, or if no sale price or if traded on the over-the-counter market, at the mean of the bid and asked prices on such day. Most securities listed on a foreign exchange are valued at the last sale price at the close of the exchange on which the security is primarily traded. In certain countries market maker prices are used since they are the most representative of the daily trading activity. Market maker prices are usually the mean between the bid and ask prices. Certain markets are not closed at the time that the Funds prices its portfolio securities. In these situations, snapshot prices are provided by the individual pricing services or other alternate sources at the close of the NYSE as appropriate. Securities not traded on a particular day are valued at the mean between the last reported bid and the asked quotes, or the last sale price when appropriate; otherwise fair value will be determined by the board-appointed fair valuation committee. Debt securities for which the over-the-counter market is the primary market are normally valued on the basis of prices furnished by one or more pricing services or dealers at the mean between the latest available bid and asked prices. As authorized by the Board of Trustees, debt securities (other than short-term obligations) may be valued on the basis of valuations furnished by a pricing service which determines valuations based upon market transactions for normal, institutional-size trading units of securities or a matrix method which considers yield or price of comparable bonds provided by a pricing service. Short-term obligations maturing within 60 days are valued at amortized cost, which approximates value, unless the Board of 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. Total return swaps are priced based on valuations provided by a board approved independent third party pricing agent. If a total return swap price cannot be obtained from an independent third party pricing agent the Fund shall seek to obtain a bid price from at least one independent and/or executing broker.
If the price of a security is unavailable in accordance with the aforementioned pricing procedures, or the price of a security is unreliable, e.g., due to the occurrence of a significant event, the security may be valued at its fair value determined by management pursuant to procedures adopted by the Board of Trustees. For this purpose, fair value is the price that a Fund reasonably expects to receive on a current sale of the security. Due to the number of variables affecting the price of a security, however; it is possible that the fair value of a security may not accurately reflect the price that a Fund could actually receive on a sale of the security. As of March 28, 2013, there were no fair valued securities.
A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Various inputs are used in determining the value of each Funds investments as of the reporting period end. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 |
Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Annual Report | March 31, 2013 |
35 |
Notes to Financial Statements | Clough Global Funds | |
March 31, 2013 |
Level 2 |
Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 |
Significant unobservable prices or inputs (including the Funds own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used as of March 31, 2013 in valuing each Funds investments carried at value. The Funds recognize transfers between the levels as of the beginning of the annual period in which the transfer occurred. There were no transfers between Levels 1 and 2 during the year end ended March 31, 2013.
Clough Global Allocation Fund
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
||||||||||||||||
Assets |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$ | 41,713,673 | $ | | $ | | $ | 41,713,673 | ||||||||
Consumer Staples |
6,392,888 | | | 6,392,888 | ||||||||||||
Energy |
27,783,129 | | | 27,783,129 | ||||||||||||
Energy Infrastructure & Capital Equipment |
1,134,544 | | | 1,134,544 | ||||||||||||
Financials |
38,392,697 | 2,645,418 | | 41,038,115 | ||||||||||||
Health Care |
31,263,858 | | | 31,263,858 | ||||||||||||
Industrials |
19,236,638 | | | 19,236,638 | ||||||||||||
Information Technology |
27,264,110 | | | 27,264,110 | ||||||||||||
Materials |
4,735,808 | | | 4,735,808 | ||||||||||||
Telecommunication Services |
447,286 | | | 447,286 | ||||||||||||
Utilities |
1,022,044 | | | 1,022,044 | ||||||||||||
Exchange Traded Funds |
1,777,938 | | | 1,777,938 | ||||||||||||
Preferred Stocks |
691,809 | | | 691,809 | ||||||||||||
Corporate Bonds |
| 1,611,364 | | 1,611,364 | ||||||||||||
Asset/Mortgage Backed Securities |
| 441,859 | | 441,859 | ||||||||||||
Government & Agency Obligations |
41,422,788 | | | 41,422,788 | ||||||||||||
Short-Term Investments |
19,685,472 | | | 19,685,472 | ||||||||||||
|
||||||||||||||||
TOTAL |
$ | 262,964,682 | $ | 4,698,641 | $ | | $ | 267,663,323 | ||||||||
|
||||||||||||||||
Other Financial Instruments |
||||||||||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
Securities Sold Short |
$ | (66,983,318) | $ | | $ | | $ | (66,983,318) | ||||||||
Total Return Swap Contracts** |
| (568,534) | | (568,534) | ||||||||||||
|
||||||||||||||||
TOTAL |
$ | (66,983,318) | $ | (568,534) | $ | | $ | (67,551,852) | ||||||||
|
*For detailed industry descriptions, see the accompanying Statement of Investments.
**Swap contracts are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contracts value from trade date.
Clough Global Equity Fund
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
||||||||||||||||
Assets |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$ | 78,530,801 | $ | | $ | | $ | 78,530,801 | ||||||||
Consumer Staples |
12,243,105 | | | 12,243,105 | ||||||||||||
Energy |
52,752,681 | | | 52,752,681 | ||||||||||||
Energy Infrastructure & Capital Equipment |
1,855,966 | | | 1,855,966 | ||||||||||||
Financials |
66,666,609 | 4,369,651 | | 71,036,260 | ||||||||||||
Health Care |
55,741,588 | | | 55,741,588 | ||||||||||||
Industrials |
36,647,717 | | | 36,647,717 | ||||||||||||
Information Technology |
51,362,358 | | | 51,362,358 | ||||||||||||
Materials |
7,874,062 | | | 7,874,062 | ||||||||||||
Telecommunication Services |
731,373 | | | 731,373 | ||||||||||||
Utilities |
1,643,546 | | | 1,643,546 |
36 |
www.cloughglobal.com |
Clough Global Funds | Notes to Financial Statements | |
March 31, 2013 |
Clough Global Equity Fund (continued) Investments in Securities at Value* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
||||||||||||||||
Assets (continued) |
||||||||||||||||
Exchange Traded Funds |
$ | 3,256,952 | $ | | $ | | $ | 3,256,952 | ||||||||
Preferred Stocks |
1,131,260 | | | 1,131,260 | ||||||||||||
Corporate Bonds |
| 865,094 | | 865,094 | ||||||||||||
Government & Agency Obligations |
46,270,510 | | | 46,270,510 | ||||||||||||
Short-Term Investments |
15,229,415 | | | 15,229,415 | ||||||||||||
|
||||||||||||||||
TOTAL |
$ | 431,937,943 | $ | 5,234,745 | $ | | $ | 437,172,688 | ||||||||
|
||||||||||||||||
Other Financial Instruments |
||||||||||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
Securities Sold Short |
$ | (113,490,782) | $ | | $ | | $ | (113,490,782) | ||||||||
Total Return Swap Contracts** |
| (1,199,955) | | (1,199,955) | ||||||||||||
|
||||||||||||||||
TOTAL |
$ | (113,490,782) | $ | (1,199,955) | $ | | $ | (114,690,737) | ||||||||
|
*For detailed industry descriptions, see the accompanying Statement of Investments.
**Swap contracts are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contracts value from trade date.
Clough Global Opportunities Fund
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
||||||||||||||||
Assets |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$ | 177,005,578 | $ | | $ | | $ | 177,005,578 | ||||||||
Consumer Staples |
27,182,805 | | | 27,182,805 | ||||||||||||
Energy |
127,051,453 | | | 127,051,453 | ||||||||||||
Energy Infrastructure & Capital Equipment |
4,815,646 | | | 4,815,646 | ||||||||||||
Financials |
162,281,919 | 11,212,684 | | 173,494,603 | ||||||||||||
Health Care |
132,536,691 | | | 132,536,691 | ||||||||||||
Industrials |
81,299,183 | | | 81,299,183 | ||||||||||||
Information Technology |
115,146,199 | | | 115,146,199 | ||||||||||||
Materials |
20,075,992 | | | 20,075,992 | ||||||||||||
Telecommunication Services |
1,891,899 | | | 1,891,899 | ||||||||||||
Utilities |
4,299,648 | | | 4,299,648 | ||||||||||||
Exchange Traded Funds |
7,525,945 | | | 7,525,945 | ||||||||||||
Preferred Stocks |
2,949,978 | | | 2,949,978 | ||||||||||||
Corporate Bonds |
| 6,584,987 | | 6,584,987 | ||||||||||||
Government & Agency Obligations |
174,612,860 | | | 174,612,860 | ||||||||||||
Purchased Options |
752,500 | | | 752,500 | ||||||||||||
Short-Term Investments |
77,175,844 | | | 77,175,844 | ||||||||||||
|
||||||||||||||||
TOTAL |
$ | 1,116,604,140 | $ | 17,797,671 | $ | | $ | 1,134,401,811 | ||||||||
|
||||||||||||||||
Other Financial Instruments |
||||||||||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
Securities Sold Short |
$ | (282,925,278) | $ | | $ | | $ | (282,925,278) | ||||||||
Total Return Swap Contracts** |
| (2,401,365) | | (2,401,365) | ||||||||||||
|
||||||||||||||||
TOTAL |
$ | (282,925,278) | $ | (2,401,365) | $ | | $ | (285,326,643) | ||||||||
|
*For detailed industry descriptions, see the accompanying Statement of Investments.
**Swap contracts are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contracts value from trade date.
Annual Report | March 31, 2013 |
37 |
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 |
Balance as of March 31, 2013 |
Net change in March 31, |
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
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
38 |
www.cloughglobal.com |
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 |
$ | | $ | | ||||||||||||||
|
40 |
www.cloughglobal.com |
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) | ||||||||
|
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 | ||
|
42 |
www.cloughglobal.com |
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.
44 |
www.cloughglobal.com |
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.
46 |
www.cloughglobal.com |
Clough Global Funds | Notes to Financial Statements | |
March 31, 2013 |
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.
Annual Report | March 31, 2013 |
47 |
Dividend Reinvestment Plan | Clough Global Funds | |
March 31, 2013 (Unaudited) |
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.
48 |
www.cloughglobal.com |
Clough Global Funds | Additional Information | |
March 31, 2013 (Unaudited) |
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.
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 is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that each Fund may purchase at market prices from time to time shares of its common stock in the open market.
The 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.
Total Cumulative Distributions for the year ended March 31, 2013 |
% Breakdown of the Total Cumulative Distributions for the year ended March 31, 2013 | |||||||||||||||||||||||
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Net Investment Income |
Net |
Return of Capital |
Total Per Common Share |
Net Investment Income |
Net |
Return of Capital |
Total Per Common Share | |||||||||||||||||
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Clough Global Allocation Fund |
$ | 0.0391 | $ | 0.2743 | $ | 0.8866 | $ | 1.2000 | 3.26% | 22.86% | 73.88% | 100.00% | ||||||||||||
Clough Global Equity Fund |
$ | 0.0033 | $ | 0.2867 | $ | 0.8700 | $ | 1.1600 | 0.28% | 24.72% | 75.00% | 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.
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:
Clough Global Allocation Fund | Clough Global Equity Fund | Clough Global Opportunities Fund | ||||
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Corporate Dividends Received Deduction |
6.67% | 3.25% | 0.00% | |||
Qualified Dividend Income |
6.87% | 3.46% | 0.00% |
Please consult a tax advisor if you have questions about federal or state income tax laws, or how to prepare your tax returns.
Annual Report | March 31, 2013 |
49 |
Trustees & Officers | Clough Global Funds | |
March 31, 2013 (Unaudited) |
Name, Address1 and Age | Position(s) Held with the Funds |
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years |
Number of Portfolios in Fund Complex Overseen by Trustee5 |
Other Directorships Held by Trustee During the Past Five Years | |||||
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Non-Interested Trustees/Nominees | ||||||||||
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Robert L. Butler Age, 72 |
Chairman of the Board and Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2015 GLQ: 2013 GLO: 2014 |
Since 2001, Mr. Butler has been an independent consultant for businesses. Mr. Butler has over 45 years experience in the investment business, including 17 years as a senior executive with a global investment management/natural resources company and 20 years with a securities industry regulation organization, neither of which Mr. Butler has been employed by since 2001. | 3 | N/A | |||||
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Adam D. Crescenzi Age, 70 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2014 GLQ: 2015 GLO: 2013 |
Mr. Crescenzi is a Trustee of Dean College. He has been a founder and investor of several start-up technology and service firms. He currently is the Founding Partner of Simply Tuscan Imports LLC since 2007. He also serves as a Director of two non-profit organizations. He retired from CSC Index as Executive Vice-President of Management Consulting Services. | 3 | N/A | |||||
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John F. Mee Age, 69 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2013 GLQ: 2014 GLO: 2015 |
Mr. Mee is an attorney practicing commercial law, family law, product liability and criminal law. Mr. Mee is currently a member of the Bar of the Commonwealth of Massachusetts. He serves on the Board of Directors of The College of the Holy Cross Alumni Association and Concord Carlisle Scholarship Fund, a Charitable Trust. Mr. Mee was from 1990 to 2009 an Advisor at the Harvard Law School Trial Advocacy Workshop. | 3 | N/A | |||||
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Richard C. Rantzow Age, 74 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2015 GLQ: 2013 GLO: 2014 |
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. | 3 | N/A |
50 |
www.cloughglobal.com |
Clough Global Funds | Trustees & Officers | |
March 31, 2013 (Unaudited) |
Name, Address1 and Age | Position(s) Held with the Funds |
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years |
Number of Portfolios in Fund Complex Overseen by Trustee5 |
Other Directorships Held by Trustee During the Past Five Years | |||||
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Non-Interested Trustees/Nominees | ||||||||||
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Jerry G. Rutledge Age, 68 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2014 GLQ: 2015 GLO: 2013 |
Mr. Rutledge is the President and owner of Rutledges Inc., a retail clothing business. Mr. Rutledge was from 1994 to 2007 a Regent of the University of Colorado. In addition, Mr. Rutledge is currently serving as a Director of the University of Colorado Hospital. Mr. Rutledge also served as a Director of the American National Bank from 1985 to 2009. | 4 | Mr. Rutledge is currently a Trustee of the Financial Investor Trust. | |||||
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Hon. Vincent W. Versaci Age, 42 |
Trustee | Trustee since: GLV: 2013 GLQ: 2013 GLO: 2013
Term expires: GLV: 2014 GLQ: 2015 GLO: 2016 |
Judge Versaci has served as a Judge and Supreme Court Justice in the State of New York since January, 2003. Currently, Judge Versaci is assigned as an Acting Supreme Court Justice and presides over the Surrogates Court for Schenectady County, New York. Previously, Judge Versaci has served as an Adjunct Professor at Schenectady County Community College and a practicing attorney with an emphasis on civil and criminal litigation primarily in New York State Courts. | 3 | N/A | |||||
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Interested Trustees6 / Nominees | ||||||||||
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Edmund J. Burke7 Age, 52 |
Trustee and President | Trustee since: GLV: 2006 GLQ: 2006 GLO: 2006
Term expires: GLV: 2013 GLQ: 2014 GLO: 2015
President since: GLV: 2004 GLQ: 2005 GLO: 2006 |
Mr. Burke joined ALPS in 1991 and is currently the Chief Executive Officer and President of ALPS Holdings, Inc., and a Director of ALPS Advisors, Inc., ALPS Distributors, Inc., ALPS Fund Services, Inc., and FTAM Distributors, Inc. Mr. Burke is deemed an affiliate of each Fund as defined under the 1940 Act. | 4 | Mr. Burke is also Trustee, Chairman and President of Financial Investors Trust. Mr. Burke is a Trustee and Vice President of the Liberty All-Star Equity Fund and is a Director and Vice President of the Liberty All-Star Growth Fund, Inc. | |||||
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James E. Canty8 Age, 50
Clough Capital Partners, LP One Post Office Square 40th Floor Boston, MA 02109 |
Trustee | Trustee since: GLV: 2004 GLQ: 2005 GLO: 2006
Term expires: GLV: 2015 GLQ: 2013 GLO: 2014 |
Mr. Canty is a founding partner and Portfolio Manager for Clough. Mr. Canty is deemed an affiliate of each Fund as defined under the 1940 Act. Mr. Canty is currently a member of the Board of Directors of Clough Offshore Fund, Ltd and Clough Offshore Fund (QP), Ltd. Mr. Canty is also currently a Trustee of St. Bonaventure University. Mr. Canty is a Certified Public Accountant. |
3 | N/A |
Annual Report | March 31, 2013 |
51 |
Trustees & Officers | Clough Global Funds | |
March 31, 2013 (Unaudited) |
Name, Address1 and Age | Position(s) Held with the Funds |
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years |
Number of Portfolios in Fund Complex Overseen by Trustee5 |
Other Directorships Held by Trustee During the Past Five Years | |||||
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Officers | ||||||||||
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Jeremy O. May Age, 43 |
Treasurer | Officer since9: GLV: 2004 GLQ: 2005 GLO: 2006 | Mr. May joined ALPS in 1995 and is currently President and Director of ALPS and Director of ALPS Advisors, Inc., ALPS Distributors, Inc., ALPS Holdings, Inc. and ALPS Portfolio Solutions Distributors, Inc. Mr. May is deemed an affiliate of each Fund as defined under the 1940 Act. Mr. May is also the Treasurer of the Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., Financial Investors Trust and Financial Investors Variable Insurance Trust. Mr. May is also President, Chairman and Trustee of the Reaves Utility Income Fund. Mr. May is currently on the Board of Directors of the University of Colorado Foundation. | N/A | N/A | |||||
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Erin D. Nelson, Esq. Age, 36 |
Secretary | Officer since9: GLV: 2004 GLQ: 2005 GLO: 2006 | Ms. Nelson joined ALPS in 2003 and is currently Vice-President and Assistant General Counsel of ALPS and Vice-President of ALPS Advisors, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributors, Inc. Ms. Nelson is deemed an affiliate of each Fund as defined under the 1940 Act. | N/A | N/A | |||||
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Theodore J. Uhl Age, 38 |
Chief Compliance Officer | Officer since9: GLV: 2010 GLQ: 2010 GLO: 2010 | Mr. Uhl joined ALPS in October 2006, and is currently Vice President and Deputy Compliance Officer of ALPS. Prior to his current role, Mr. Uhl served as Senior Risk Manager for ALPS from October 2006 until June 2010. Before joining ALPS, Mr. Uhl served as Sr. Analyst with Enenbach and Associates (RIA), and a Sr. Financial Analyst at Sprint. Because of his position with ALPS, Mr. Uhl is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Uhl is currently Chief Compliance Officer of Drexel Hamilton Mutual Funds, Financial Investors Trust, Reaves Utility Income Fund and Transparent Value Trust. | N/A | N/A |
52 |
www.cloughglobal.com |
Clough Global Funds | Trustees & Officers | |
March 31, 2013 (Unaudited) |
Name, Address1 and Age | Position(s) Held with the Funds |
Term of office and length of service with GLV2, GLQ3 & GLO4 |
Principal Occupation(s) During Past Five Years |
Number of Portfolios in Fund Complex Overseen by Trustee5 |
Other Directorships Held by Trustee During the Past Five Years | |||||
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Officers | ||||||||||
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Dawn Cotten Age, 35 |
Assistant Treasurer | Officer since9: GLV: 2010 GLQ: 2010 GLO: 2010 |
Ms. Cotten joined ALPS in June 2009 as a Vice President, Fund Controller. Prior to joining ALPS, Ms. Cotten served as Assistant Vice President of Fund Accounting for Madison Capital Management from February 2009 to June 2009. Prior to this, Ms. Cotten served as Financial Reporting Manager for Janus Capital Group. Ms. Cotten is deemed an affiliate of each Fund as defined under the 1940 Act. Ms. Cotten is currently Assistant Treasurer of RiverNorth Funds, Stone Harbor Investment Funds, Stone Harbor Emerging Markets Income Fund and Stone Harbor Emerging Markets Total Income Fund. | N/A | N/A |
1 | Address: 1290 Broadway, Suite 1100, Denver, Colorado 80203, unless otherwise noted. |
2 | GLV commenced operations on July 28, 2004. |
3 | GLQ commenced operations on April 27, 2005. |
4 | GLO commenced operations on April 25, 2006. |
5 | The Fund Complex for all Trustees, except Mr. Rutledge and Mr. Burke, consists of the Clough Global Allocation Fund, Clough Global Equity Fund and Clough Global Opportunities Fund. The Fund Complex for Mr. Rutledge and Mr. Burke consists of Clough Global Allocation Fund, Clough Global Equity Fund, Clough Global Opportunities Fund and the Clough China Fund, a series of the Financial Investors Trust. |
6 | Interested Trustees of a Fund as defined in the 1940 Act. |
7 | Mr. Burke is considered to be an Interested Trustee because of his affiliation with ALPS, which acts as each Funds administrator. |
8 | Mr. Canty is considered to be an Interested Trustee because of his affiliation with Clough, which acts as each Funds investment adviser. |
9 | Officers are elected annually and each officer will hold such office until a successor has been elected by the Board. |
Annual Report | March 31, 2013 |
53 |
Item 2. | Code of Ethics. |
(a) | The registrant, as of the end of the period covered by the report, has adopted a code of ethics that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller or any persons performing similar functions on behalf of the registrant. |
(b) | Not Applicable. |
(c) | During the period covered, by this report, no amendments were made to the provisions of the code of ethics adopted in 2 (a) above. |
(d) | During the period covered by this report, no implicit or explicit waivers to the provision of the code of ethics adopted in 2 (a) above were granted. |
(e) | Not Applicable. |
(f) | The registrants Code of Ethics is attached as an Exhibit 12.A.1 hereto. |
Item 3. | Audit Committee Financial Expert. |
The registrants Board of Trustees has determined that the registrant has as least one audit committee financial expert serving on its audit committee. The Board of Trustees has designated Richard C. Rantzow as the registrants audit committee financial expert. Mr. Rantzow is independent as defined in paragraph (a)(2) of Item 3 to Form N-CSR.
Mr. Rantzow was the Chief Financial Officer and a Director of Ron Miller Associates, Inc. Prior to that, Mr. Rantzow was managing partner of the Memphis office of Ernst & Young until 1990.
Item 4. | Principal Accounting Fees and Services. |
(a) | Audit Fees: The aggregate fees billed for each of the last two fiscal years for professional services rendered by Cohen Fund Audit Services, Ltd (Cohen) for fiscal year ended March 31, 2013 and for fiscal year ended March 31, 2012 for the audit of the registrants annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2013 and 2012 were $20,000 and $20,000, respectively. |
(b) | Audit-Related Fees: The aggregate fees billed in each of the last two fiscal years for assurance and related services by Cohen that are reasonably related to the performance of the audit of the registrants financial statements and are not reported under paragraph (a) of this Item were $0 in 2013 and $0 in 2012. |
(c) | Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by Cohen for tax compliance, tax advice, and tax planning for fiscal year ended March 31, 2013 and Deloitte & Touche LLP for fiscal year ended March 31, 2012 were $3,000 in 2013 and $3,000 in 2012. These fees are comprised of fees relating income tax return preparation fees, excise tax return preparation fees and review of dividend distribution calculation fees. |
(d) | All Other Fees: The aggregate fees billed in each of the last two fiscal years for products and services provided by Cohen, other than the services reported in paragraphs (a) through (c) of this Item were $0 in 2013 and $0 in 2012. These services include agreed upon procedures related to the ratings for the Auction Market Preferred Shares. |
(e)(1) | Audit Committee Pre-Approval Policies and Procedures: All services to be performed by the Registrants principal auditors must be pre-approved by the registrants audit committee. |
(e)(2) | No services described in paragraphs (b) through (d) were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Not applicable. |
(g) | The aggregate non-audit fees billed by the registrants accountant for services rendered to the registrant, and rendered to the registrants investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were $0 for 2013 and $0 for 2012. |
(h) | Not applicable. |
Item 5. | Audit Committee of Listed Registrant. |
The registrant has a separately designated standing audit committee established in accordance with Section 3 (a)(58)(A) of the Exchange Act and is comprised of the following members:
Robert L. Butler
Adam D. Crescenzi
John F. Mee
Richard C. Rantzow, Committee Chairman
Jerry G. Rutledge
Hon. Vincent W. Versaci
Item 6. | Schedule of Investments. |
Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Attached, as Exhibit Item 7, is a copy of the policies and procedures of Clough Capital Partners LP, the investment advisor of the registrant.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
(a)(1) As of: March 31, 2013
Portfolio Managers Name |
Title | Length of Service |
Business Experience: 5 Years | |||
Charles I. Clough, Jr. | Partner and Portfolio Manager | Since Inception | Founding Partner Clough Capital Partners LP. Portfolio Manager for pooled investment accounts, separately managed accounts, and investment companies for over ten years. | |||
Eric A. Brock | Partner and Portfolio Manager | Since Inception | Founding Partner Clough Capital Partners LP. Portfolio Manager for pooled investment accounts, separately managed accounts, and investment companies for over ten years. | |||
James E. Canty | Partner and Portfolio Manager | Since Inception | Founding Partner of Clough Capital LP. Portfolio Manager, Chief Financial Officer and General Counsel for pooled investment accounts, separately managed accounts, and investment companies for over ten years. Mr. Canty is currently a member of the Board of Directors of Clough Offshore Fund, Ltd and Clough Offshore Fund (QP), Ltd. and Board of Trustees of Clough Global Equity Fund and Clough Global Opportunities Fund. Because of his affiliation with Clough, Mr. Canty is an interested Trustee of the Fund. |
(a)(2) As of March 31, 2013, the Portfolio Managers listed above are also responsible for the day-to-day management of the following:
Portfolio Managers Name |
Registered Investment Companies |
Other Pooled Investment Vehicles (1) |
Other Accounts(2) |
Material Conflicts If Any | ||||
Charles I Clough, Jr. |
4 Accounts $2,446.0 million Total Assets
|
5 Accounts $1,345.8 million Total Assets
|
4 Accounts $381.4 million Total Assets
|
See below (3) | ||||
Eric A. Brock |
4 Accounts $2,446.0 million Total Assets
|
5 Accounts $1,345.8 million Total Assets
|
4 Accounts $381.4 million Total Assets
|
See below (3) | ||||
James E. Canty |
4 Accounts $2,446.0 million Total Assets
|
5 Accounts $1,345.8 million Total Assets
|
4 Accounts $381.4 million Total Assets
|
See below (3) |
(1) | The advisory fees are based in part on the performance for each account. |
(2) | The advisory fee is based in part on the performance for four accounts totaling $381.4 million in assets. |
(3) | Material Conflicts: |
Material conflicts of interest may arise as a result of the fact that the Portfolio Managers also have day-to-day management responsibilities with respect to both the Fund and the various accounts listed above (collectively with the Fund, the Accounts). These potential conflicts include:
Limited Resources. The Portfolio Managers cannot devote their full time and attention to the management of each of the Accounts. Accordingly, the Portfolio Managers may be limited in their ability to identify investment opportunities for each of the Accounts that are as attractive as might be the case if the Portfolio Managers were to devote substantially more attention to the management of a single Account. The effects of this potential conflict may be more pronounced where the Accounts have different investment strategies.
Limited Investment Opportunities. If the Portfolio Managers identify a limited investment opportunity that may be appropriate for more than one Account, the investment opportunity may be allocated among several Accounts. This could limit any single Accounts ability to take full advantage of an investment opportunity that might not be limited if the Portfolio Managers did not provide investment advice to other Accounts.
Different Investment Strategies. The Accounts managed by the Portfolio Managers have differing investment strategies. If the Portfolio Managers determine that an investment opportunity may be appropriate for only some of the Accounts or decide that certain of the Accounts should take different positions with respect to a particular security, the Portfolio Managers may effect transactions for one or more Accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other Accounts.
Variation in Compensation. A conflict of interest may arise where Clough or Clough Associates, LLC, as applicable, is compensated differently by the Accounts that are managed by the Portfolio Managers. If certain Accounts pay higher management fees or performance-based incentive fees, the Portfolio Managers might be motivated to prefer certain Accounts over others. The Portfolio Managers might also be motivated to favor Accounts in which they have a greater ownership interest or Accounts that are more likely to enhance the Portfolio Managers performance record or to otherwise benefit the Portfolio Managers.
Selection of Brokers. The Portfolio Managers select the brokers that execute securities transactions for the Accounts that they supervise. In addition to executing trades, some brokers provide the Portfolio Managers with research and other services which may require the payment of higher brokerage fees than might otherwise be available. The Portfolio Managers decision as to the selection of brokers could yield disproportionate costs and benefits among the Accounts that they manage, since the research and other services provided by brokers may be more beneficial to some Accounts than to others.
(a)(3) Portfolio Manager Compensation as of March 31, 2013.
The Portfolio Managers Charles Clough, James Canty and Eric Brock each receive a fixed base salary from Clough. The base salary for each Portfolio Manager is typically determined based on market factors and the skill and experience of each Portfolio Manager. Additionally, Clough distributes substantially all of its annual net profits to those Portfolio Managers, with Mr. Clough receiving a majority share and the remainder being divided between Mr. Brock and Mr. Canty.
(a)(4) Dollar Range of Securities Owned as of March 31, 2013.
Portfolio Managers | Dollar Range of the Registrants Securities Owned by the Portfolio Managers | |
Charles I. Clough, Jr. |
Over $1,000,000 | |
Eric A. Brock |
$25,001 - $50,000 | |
James E. Canty |
$100,001 - $500,000 |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
None
Item 10. Submission of Matters to Vote of Security Holders.
No material changes to the procedures by which the shareholders may recommend nominees to the registrants Board of Trustees have been implemented after the registrants last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrants principal executive officer and principal financial officer have concluded that the Registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. |
(b) | There was no change in the Registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) The Code of Ethics that applies to the registrants principal executive officer and principal financial officer is attached hereto as Exhibit 12.A.1.
(a)(2) The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex-99.Cert.
(a)(3) Not applicable.
(b) A certification for the Registrants Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex-99.906Cert.
(c) The Proxy Voting Policies and Procedures are attached hereto as Ex99. Item 7.
(d) Pursuant to the Securities and Exchange Commissions Order granting relief from Section 19(b) of the Investment Company Act of 1940 dated September 21, 2009, the form of 19(a) Notices to Beneficial Owners are attached hereto as Exhibit 12(d).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CLOUGH GLOBAL EQUITY FUND
By: | /s/ Edmund J. Burke | |
Edmund J. Burke | ||
President & Trustee | ||
Date: | June 7, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
CLOUGH GLOBAL EQUITY FUND
By: | /s/ Edmund J. Burke | |
Edmund J. Burke | ||
President/Principal Executive Officer | ||
Date: | June 7, 2013 | |
By: | /s/ Jeremy O. May | |
Jeremy O. May | ||
Treasurer/Principal Financial Officer | ||
Date: | June 7, 2013 |
Exhibit 12.A.1
CLOUGH GLOBAL FUNDS (GLO, GLQ, GLV)
(the Funds)
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS
I. | PURPOSE OF THE CODE |
The Clough Global Funds(the Funds) code of ethics (this Code) is intended to serve as the code of ethics described in Section 406 of the Sarbanes-Oxley Act of 2002 and Item 2 of Form N-CSR. This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies there under. Insofar as other policies or procedures of the Fund, the Funds adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers, as defined herein, who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds and its investment advisers, and principal underwriters codes of ethics pursuant to Rule 17j-1 under the Investment Company Act of 1940 (the 1940 Act) are separate requirements applying to the Covered Officers and others, and are not part of this Code.
All Covered Officers must become familiar and fully comply with this Code. Because this Code cannot and does not cover every applicable law or provide answers to all questions that might arise, all Covered Officers are expected to use common sense about what is right and wrong, including a sense of when it is proper to seek guidance from others on the appropriate course of conduct.
The purpose of this Code is to set standards for the Covered Officers that are reasonably designed to deter wrongdoing and to promote:
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission (the SEC) and in any other public communications by the Fund; |
| compliance with applicable governmental laws, rules and regulations; |
| the prompt internal reporting of violations of the Code to the appropriate persons as set forth in the Code; and |
| accountability for adherence to the Code. |
II. | COVERED PERSONS |
This Code applies to the Funds Principal Executive Officers and Principal Financial Officers, or any persons performing similar functions on behalf of the Fund (the Covered Officers). Each Covered Person should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Covered Officers are expected to act in accordance with the standards set forth in this Code.
III. | HONEST AND ETHICAL CONDUCT |
A. | Honesty, Diligence and Professional Responsibility |
Covered Officers are expected to observe both the form and the spirit of the ethical principles contained in this Code. Covered Officers must perform their duties and responsibilities for the Fund:
| with honesty, diligence, and a commitment to professional and ethical responsibility; |
| carefully, thoroughly and in a timely manner; and |
| in conformity with applicable professional and technical standards. |
Covered Officers who are certified public accountants are expected to carry out their duties and responsibilities in a manner consistent with the principles governing the accounting profession, including any guidelines or principles issued by the Public Company Accounting Oversight Board or the American Institute of Certified Public Accountants from time to time.
B. | Objectivity/Avoidance of Undisclosed Conflicts of Interest |
Covered Officers are expected to maintain objectivity and avoid undisclosed conflicts of interest. In the performance of their duties and responsibilities for the Fund, Covered Officers must not subordinate their judgment to personal gain and advantage, or be unduly influenced by their own interests or by the interests of others. Covered Officers must avoid participation in any activity or relationship that constitutes a conflict of interest unless that conflict has been completely disclosed to affected parties and waived by the Trustees on behalf of the Fund. Further, Covered Officers should avoid participation in any activity or relationship that could create the appearance of a conflict of interest.
A conflict of interest would generally arise if, for instance, a Covered Officer directly or indirectly participates in any investment, interest, association, activity or relationship that may impair or appear to impair the Covered Officers objectivity or interfere with the interests of, or the Covered Officers service to, the Fund.
Any Covered Officer who may be involved in a situation or activity that might be a conflict of interest or give the appearance of a conflict of interest must report such situation or activity using the reporting procedures set forth in Section VI of this Code.
Each Covered Officer must not:
| use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; |
| cause the Fund to take action, or fail to take actions, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or |
| use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. |
Each Covered Officer is responsible for his or her compliance with this conflict of interest policy.
C. | Preparation of Financial Statements |
Covered Officers must not knowingly make any misrepresentations regarding the Funds financial statements or any facts in the preparation of the Funds financial statements, and must comply with all applicable laws, standards, principles, guidelines, rules and regulations in the preparation of the Funds financial statements. This section is intended to prohibit:
| making, or permitting or directing another to make, materially false or misleading entries in the Funds financial statements or records; |
| failing to correct the Funds financial statements or records that are materially false or misleading when he or she has the authority to record an entry; and |
| signing, or permitting or directing another to sign, a document containing materially false or misleading financial information. |
Covered Officers must be scrupulous in their application of generally accepted accounting principles. No Covered Officer may (i) express an opinion or state affirmatively that the financial statements or other financial data of the Fund are presented in conformity with generally accepted accounting principles, or (ii) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from generally accepted accounting principles then in effect in the United States.
Covered Officers must follow the laws, standards, principles, guidelines, rules and regulations established by all applicable governmental bodies, commissions or other regulatory agencies in the preparation of financial statements, records and related information. If a Covered Officer prepares financial statements, records or related information for purposes of reporting to such bodies, commissions or regulatory agencies, the Covered Officer must follow the requirements of such organizations in addition to generally accepted accounting principles.
If a Covered Officer and his or her supervisor have a disagreement or dispute relating to the preparation of financial statements or the recording of transactions, the Covered Officer should take the following steps to ensure that the situation does not constitute an impermissible subordination of judgment:
| The Covered Officer should consider whether (i) the entry or the failure to record a transaction in the records, or (ii) the financial statement presentation or the nature or omission of disclosure in the financial statements, as proposed by the supervisor, represents the use of an acceptable alternative and does not materially misrepresent the facts or result in an omission of a material fact. If, after appropriate research or consultation, the Covered Officer concludes that the matter has authoritative support and/or does not result in a material misrepresentation, the Covered Officer need do nothing further. |
| If the Covered Officer concludes that the financial statements or records could be materially misstated as a result of the supervisors determination, the Covered Officer should follow the reporting procedures set forth in Section VI of this Code. |
D. | Obligations to the Independent Auditor of the Fund |
In dealing with the Funds independent auditor, Covered Officers must be candid and not knowingly misrepresent facts or knowingly fail to disclose material facts, and must respond to specific inquiries and requests by the Funds independent auditor.
Covered Officers must not take any action, or direct any person to take any action, to fraudulently influence, coerce, manipulate or mislead the Funds independent auditor in the performance of an audit of the Funds financial statements for the purpose of rendering such financial statements materially misleading.
IV. | FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE |
It is the Funds policy to provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Fund files with, or submits to, the SEC and in any other public communications by the Fund. The Fund has designed and implemented Disclosure Controls and Procedures to carry out this policy.
Covered Officers are expected to familiarize themselves with the disclosure requirements generally applicable to the Fund, and to use their best efforts to promote, facilitate, and prepare full, fair, accurate, timely, and understandable disclosure in all reports and documents that the Fund files with, or submits to, the SEC and in any other public communications by the Fund.
Covered Officers must review the Funds Disclosure Controls and Procedures to ensure they are aware of and carry out their duties and responsibilities in accordance with the Disclosure Controls and Procedures and the disclosure obligations of the Fund. Covered Officers are responsible for monitoring the integrity and effectiveness of the Funds Disclosure Controls and Procedures.
V. | COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS |
Covered Officers are expected to know, respect and comply with all laws, rules and regulations applicable to the conduct of the Funds business. If a Covered Officer is in doubt about the legality or propriety of an action, business practice or policy, the Covered Officer should seek advice from the Covered Officers supervisor or the Funds legal counsel.
In the performance of their work, Covered Officers must not knowingly be a party to any illegal activity or engage in acts that are discreditable to the Fund.
Covered Officers are expected to promote the Funds compliance with applicable laws, rules and regulations. To promote such compliance, Covered Officers may establish and maintain mechanisms to educate employees carrying out the finance and compliance functions of the Fund about any applicable laws, rules or regulations that affect the operation of the finance and compliance functions and the Fund generally.
VI. | REPORTING AND ACCOUNTABILITY |
All Covered Officers will be held accountable for adherence to this Code. Each Covered Officer must, upon the Funds adoption of this Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands this Code by signing the Acknowledgement Form attached hereto as Appendix A. Thereafter, each Covered Officer, on an annual basis, must affirm to the Board that he/she has complied with the requirements of this Code.
Covered Officers may not retaliate against any other Covered Officer of the Fund or their affiliated persons for reports of potential violations that are made in good faith.
The Fund will follow these procedures in investigating and enforcing this Code:
A. | Any Covered Officer who knows of any violation of this Code or who questions whether a situation, activity or practice is acceptable must immediately report such practice to the Funds Audit Committee. The Audit Committee shall take appropriate action to investigate any reported potential violations. If, after such investigation, the Audit Committee believes that no violation has occurred, the Audit Committee is not required to take any further action. Any matter that the Audit Committee believes is a violation will be reported to the Chairman of the Board of Trustees. The Audit Committee shall respond to the Covered Officer within a reasonable period of time. |
B. | If the Covered Officer is not satisfied with the response of the Audit Committee, the Covered Officer shall report the matter to the Chairman of the Board of Trustees. If the Chairman is unavailable, the Covered Officer may report the matter to any other member of the Board of Trustees. The person receiving the report shall consider the matter, refer it to the full Board of Trustees if he or she deems appropriate, and respond to the Covered Officer within a reasonable |
amount of time. If the Board of Trustees concurs that a violation has occurred, it will consider appropriate action, which may include review of and appropriate modifications to applicable policies and procedures or notification to appropriate personnel of the investment adviser or its board. |
C. | If the Board of Trustees determines that a Covered Officer violated this Code, failed to report a known or suspected violation of this Code, or provided intentionally false or malicious information in connection with an alleged violation of this Code, the Board of Trustees may take disciplinary action against any such Covered Officer to the extent the Board of Trustees deems appropriate. No Covered Officer will be disciplined for reporting a concern in good faith. |
To the extent possible and as allowed by law, reports will be treated as confidential. The Fund may report violations of the law to the appropriate authorities.
VII. | DISCLOSURE OF THIS CODE |
This Code shall be disclosed to the public by at least one of the following methods in the manner prescribed by the SEC, unless otherwise required by law:
| Filing a copy of this Code as an exhibit to the Funds annual report on Form N-CSR; |
| Posting the text of this Code on the Funds Internet website and disclosing, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted this Code on its Internet website; or |
| Providing an undertaking in the Funds most recent report on Form N-CSR to provide a copy of this Code to any person without charge upon request, and explaining the manner in which such a request may be made. |
VIII. | WAIVERS |
Any waiver of this Code, including an implicit waiver, granted to a Covered Officer may be made only by the Board of Trustees or a committee of the Board to which such responsibility has been delegated, and must be disclosed by the Fund in the manner prescribed by law and as set forth above in Section VII (Disclosure of this Code).
IX. | AMENDMENTS |
This Code may be amended by the affirmative vote of a majority of the Board of Trustees, including a majority of the independent Trustees. Any amendment of this Code must be disclosed by the Fund in the manner prescribed by law and as set forth above in Section VII (Disclosure of this Code), unless such amendment is deemed to be technical, administrative, or otherwise non-substantive. Any amendments to this Code will be provided to the Covered Officers.
X. | CONFIDENTIALITY |
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board of Trustees of the Fund, the Audit Committee, the legal counsel to the Fund, legal counsel to the independent trustees and such other persons as a majority of the Board of Trustees, including a majority of the independent Trustees, shall determine to be appropriate.
Exhibit 12.A.1
Appendix A
CLOUGH GLOBAL EQUITY FUND
Certification and Acknowledgment of Receipt of Code of Ethics for Principal Executive Officers and Principal Financial Officers
I acknowledge and certify that I have received a copy of the Clough Global Equity Funds Code of Ethics for Principal Executive Officers and Principal Financial Officers (the Code). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures.
I acknowledge and certify that I have read and understand the Code.
|
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Officer Name (Please Print) |
Officer Signature |
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Date |
CLOUGH GLOBAL ALLOCATION FUND
Certification and Acknowledgment of Receipt of Code of Ethics for Principal Executive Officers and Principal Financial Officers
I acknowledge and certify that I have received a copy of the Clough Global Allocation Funds Code of Ethics for Principal Executive Officers and Principal Financial Officers (the Code). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures.
I acknowledge and certify that I have read and understand the Code.
|
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Officer Name (Please Print) |
Officer Signature |
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|
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Date |
CLOUGH GLOBAL OPPORTUNITES FUND
Certification and Acknowledgment of Receipt of Code of Ethics for Principal Executive Officers and Principal Financial Officers
I acknowledge and certify that I have received a copy of the Clough Global Opportunities Funds Code of Ethics for Principal Executive Officers and Principal Financial Officers (the Code). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures.
I acknowledge and certify that I have read and understand the Code.
|
|
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Officer Name (Please Print) |
Officer Signature |
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|
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Date |
Ex. 99.Cert
I, Edmund J. Burke, President and Principal Executive Officer of the Clough Global Equity Fund, certify that:
1. | I have reviewed this report on Form N-CSR of the Clough Global Equity Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions); |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
By: | /s/ Edmund J. Burke | |
Edmund J. Burke | ||
President/Principal Executive Officer | ||
Date: | June 7, 2013 |
I, Jeremy O. May, Treasurer and Principal Financial Officer of the Clough Global Equity Fund, certify that:
1. | I have reviewed this report on Form N-CSR of the Clough Global Equity Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions); |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
By: | /s/ Jeremy O. May | |
Jeremy O. May | ||
Treasurer/Principal Financial Officer | ||
Date: | June 7, 2013 |
Exhibit 99.906Cert
This certification is furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR for the period ended March 31, 2012 of the Clough Global Equity Fund (the Company).
I, Edmund J. Burke, the President and Principal Executive Officer of the Company, certify that:
(i) | the Form N-CSR fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(ii) | the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | June 7, 2013 | |
By: | /s/ Edmund J. Burke | |
Edmund J. Burke | ||
President/Principal Executive Officer |
This certification is furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the report on Form N-CSR for the period ended March 31, 2012 of the Clough Global Equity Fund (the Company).
I, Jeremy O. May, the Treasurer and Principal Financial Officer of the Company, certify that:
(i) | the Form N-CSR fully complies with the requirements of Section 13(a) or Section 15(d), as applicable of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(ii) | the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | June 7, 2013 | |
By: | /s/ Jeremy O. May | |
Jeremy O. May | ||
Treasurer/Principal Financial Officer |
CLOUGH CAPITAL PARTNERS, LP |
PROCEDURES |
Procedure Name: |
Proxy Voting Procedures & Proxy Voting Guidelines | |
Related Policy: |
Proxy Voting
| |
Effective Date
|
June 15, 2004, revised August 22, 2007
| |
Responsible Person:
|
Proxy Voting Administrator
| |
Detailed Procedures:
|
1.0 Proxy Voting in General
Proxy votes for client accounts of Clough Capital will be handled by the Proxy Voting Administrator, who will gather all required proxy votes, vote them according to the attached guidelines (Appendix A), prepare the information required in order for ALPS to make the required filings for the mutual fund, and then store them in the Proxy Voting Files for the required period of time. For issues not addressed by the Proxy Voting Guidelines, or for those issues where a determination is made by one of the persons listed in section 4.0 that a vote according to the established Guidelines would not be in the economic interest of a client account, the Proxy Voting Administrator will refer the matter to the Compliance Committee for resolution.
2.0 Proxy Voting Administrator
The duties of the Administrator will include the following: Gather proxies sent to Clough Capital for each of the securities held by a client account or fund Log each proxy into tracking spreadsheet (Appendix B) with all required information listed in section 3.0 Compare the proxy proposals against the Proxy Voting Guidelines & vote all that can be voted based on guidelines Submit proxies that are not addressed in the Guidelines to PMs/Analysts for their opinion Update tracking spreadsheet for votes cast Store original proxy and how voted in the Proxy Voting Files Summarize for the mutual fund at end of year (June 30th) and send to ALPS to complete the Form N-PX for filing with SEC by August 31st
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CLOUGH CAPITAL PARTNERS, LP |
PROCEDURES |
|
3.0 Proxy Voting Record Required
The following information must be recorded and saved by the Administrator for each proxy vote of each security: Name of the issuer of the portfolio security Exchange ticker symbol of the portfolio security CUSIP for the portfolio security (if available) Shareholder meeting date Brief identification of matter voted on Whether the matter is proposed by issuer or a security holder Whether fund cast its vote on the matter How the fund cast its vote (for/against/abstain) Whether fund cast its vote for or against the management position on the issue
This information is required to be filed with the SEC electronically via Form N-PX for all registered investment companies (mutual funds) no later than August 31 for the most recent 12 month period ended June 30. This will be done by the funds administrator, ALPS Fund Services, for the mutual funds sponsored by Clough Capital, but ALPS will need this information from Clough. The information also needs to be sent to ALPS so it is available upon request by shareholders.
4.0 Contradiction to Proxy Voting Guidelines
For the proxy issues outlined in the attached Proxy Voting Guidelines, the Clough Capital voting position will generally be as listed, unless an analyst, trader, or Partner of the firm believes that voting a particular proxy in accordance with the stated guideline would not be in the best economic interests of a client account, in which case that person should bring the matter to the attention of the Proxy Voting Administrator. The Administrator will then refer the matter to the Compliance Committee for resolution. Votes in contradiction to the established Proxy Voting Guidelines will be documented in an appropriate memo to file.
4.1 Votes on Issues not listed in the Proxy Voting Guidelines
If a proxy vote is received and the Proxy Voting Administrator cannot find the particular issue to be voted on the Proxy Voting Guidelines, then the Administrator must summarize the issue and then bring it to the attention of the analyst covering that industry and the relevant portfolio manager for consideration. Once there has been determination made as to how to vote the issue, the analyst should update the Proxy Voting Guidelines for guidance on future, similar issues.
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CLOUGH CAPITAL PARTNERS, LP |
PROCEDURES |
5.0 Record Keeping Requirements
Clough Capital must keep accurate books and records, including those relating to proxy voting. The records that must be maintained in accordance with the Record Keeping Policy are listed under Records Produced below. The Proxy Voting Administrator will be responsible for ensuring that the records listed are maintained.
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Records Produced: |
Proxy statements received regarding client securities Records of votes cast on behalf of clients (Proxy Voting Tracking Spreadsheet) Information gathered for the filing of Form N-PX Form N-PX filed by August 31st of each year for preceding year ended June 30th Records of client requests for proxy voting information Any documents prepared by Clough Capital that were material to making a decision how to vote or that memorialized the basis for the decision
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Evidence of Supervision: |
On a quarterly basis, the Compliance Officer will examine the proxy voting files and ensure that all proxies were voted in accordance with the Policy and documented accordingly, including any votes that presented a potential or actual conflict of interest. This information will be supplied to the Fund CCO as part of the Quarterly Compliance Certification.
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Record Keeping: |
Records will be maintained for 2 years on site and 3 years offsite, except for records for registered mutual funds, which will be maintained for 2 years on site and 4 years offsite. |
CLOUGH CAPITAL PARTNERS, LP |
PROCEDURES |
Appendix A
Proxy Voting Guidelines
For the following proxy issues, the Clough Capital voting position will generally be as listed, unless an analyst, trader, or Partner of the firm believes that voting a particular proxy in accordance with the stated guideline would not be in the best economic interests of a client account, in which case that person should bring the matter to the attention of the Proxy Voting Administrator. The Administrator will then refer the matter to the Compliance Committee for resolution as outlined in the Proxy Voting Procedures.
Category of Issue | Issue
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Clough Position | Rationale/Reasoning | |||
Board of Directors | Election of Directors | Support Management Recommendations | Where no corporate governance issues are implicated | |||
Changes in Board of Directors (removals of directors; filling of vacancies; fixing size of board) | Support Management Recommendations | Management in best position to know if best for company | ||||
Other Issues (e.g. Classified Board; Liability of Board; Qualification of Directors) | Generally Support Management Recommendations | So long as in best economic interests of clients | ||||
Capital Structure | Increase in common stock | Support Management Recommendations | Management in best position to know if best for company | |||
Reclassification of common stock | Support Management Recommendations | Management in best position to know if best for company | ||||
Other Issues (e.g. Additional Shares; Stock Splits; Repurchases, etc.) | Generally Support Management Recommendations | So long as in best economic interests of clients | ||||
Corporate Governance | Addition or amendment of indemnification provisions in companys charter or by-laws | Support Management Recommendations | Management in best position to know if best for company | |||
Other issues (e.g. Confidential Voting; Cumulative Voting; Supermajority Requirements) | Generally Support Management Recommendations | So long as in best economic interests of clients | ||||
Compensation | Compensation of Outside Directors | Support Management Recommendations | Management in best position to know if best for company | |||
Other Issues (e.g. Executive/Director stock option plans; Employee Stock Option Plans; Option Expensing) | Generally Support Management Recommendations | So long as in best economic interests of clients | ||||
CLOUGH CAPITAL PARTNERS, LP |
PROCEDURES |
Anti-Takeover Provisions | Shareholder rights plans (Poison Pills) (shareholder approval of or ratification of these types of plans) | Generally Support Management Recommendations | So long as in best economic interests of clients | |||
Other Issues (e.g. Reincorporation plans; Fair-Price Proposals, etc.) | Generally Support Management Recommendations | So long as in best economic interests of clients | ||||
Mergers & Acquisitions | Special corporate transactions (takeovers; spin-offs; sales of assets; reorganizations; restructurings; recapitalizations) | Generally Support Management Recommendations | So long as in best economic interests of clients | |||
Social & Political Issues | Labor & human rights (global codes of conduct; workplace standards) | Generally Support Management Recommendations | Generally best not to impose these issues from the outside | |||
Other Issues (e.g. Environmental issues; Diversity & Equality; Health & Safety; Government/Military) | Support Management Recommendation | Generally best not to impose these issues from the outside | ||||
Miscellaneous Items | Selection of Independent Auditors | Support Management recommendation | Management in best position to know if best for company | |||
Other Issues (e.g. Limitation of non-audit services provided by independent auditors; Audit Firm Rotation; Bundled Proposals, etc.) | Generally Support Management Recommendations | So long as in best economic interests of clients | ||||
CLOUGH GLOBAL EQUITY FUND
Statement Pursuant to Section 19(a) of the Investment Company Act of 1940
On January 31, 2013, the Clough Global Equity Fund (NYSE MKT: GLQ) (the Fund), a closed-end fund, paid a quarterly distribution on its common stock of $0.29 per share to shareholders of record at the close of business on January 18, 2013.
The following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company Act of 1940, as amended, and the related rules adopted there under. The Fund estimates the following percentages, of the total distribution amount per share, attributable to (i) current and prior fiscal year net investment income, (ii) net realized short-term capital gain, (iii) net realized long-term capital gain and (iv) return of capital or other capital source as a percentage of the total distribution amount. These percentages are disclosed for the current distribution as well as the fiscal year-to-date cumulative distribution amount per share for the Fund.
Current Distribution from: | ||||||||
Per Share ($) | % | |||||||
Net Investment Income |
0.0033 | 1.13% | ||||||
Net Realized Short-Term Capital Gain |
0.0000 | 0.00% | ||||||
Net Realized Long-Term Capital Gain |
0.2867 | 98.87% | ||||||
Return of Capital or other Capital Source |
0.0000 | 0.00% | ||||||
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|
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|
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Total (per common share) |
0.2900 | 100.00% | ||||||
Fiscal Year-to-Date Cumulative Distributions from: |
||||||||
Per Share ($) | % | |||||||
Net Investment Income |
0.0033 | 0.28% | ||||||
Net Realized Short-Term Capital Gain |
0.0000 | 0.00% | ||||||
Net Realized Long-Term Capital Gain |
0.2867 | 24.72% | ||||||
Return of Capital or other Capital Source |
0.8700 | 75.00% | ||||||
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|
|
|
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Total (per common share) |
1.1600 | 100.00% |
The amounts and sources of distributions reported in this 19(a) Notice 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.
Presented below are return figures, based on the change in the Funds Net Asset Value per share (NAV), compared to the annualized distribution rate for this current distribution as a percentage of the NAV on the last day of the month prior to distribution record date.
Fund Performance & Distribution Information
Fiscal Year to Date (04/01/2012 through 12/31/2012) |
| |||
Annualized Distribution Rate as a Percentage of NAV^ |
10.18% | |||
Cumulative Distribution Rate on NAV^ |
7.67% | |||
Cumulative Total Return on NAV* |
-2.64% | |||
|
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Average Annual Total Return on NAV for the 5 Year Period Ending 12/31/2012** |
-7.04% | |||
|
^ Based on the Funds NAV as of December 31, 2012.
*Cumulative fiscal year-to-date return is based on the change in NAV (effect of dividends reinvested not included) for the period April 1, 2012, through December 31, 2012.
**The 5 year average annual total return is based on change in NAV only (no dividends reinvested) and is through the last day of the month prior to the month of the current distribution record date.
While the NAV performance may be indicative of the Funds investment performance, it does not measure the value of a shareholders investment in the Fund. The value of a shareholders investment in the Fund is determined by the Funds market price, which is based on the supply and demand for the Funds shares in the open market. Shareholders should not draw any conclusions about the Funds investment performance from the amount of this distribution or from the terms of the Funds Managed Distribution Plan.
Furthermore, the Board of Trustees reviews the amount of any potential distribution and the income, capital gain or capital available. The Board of Trustees will continue to monitor the Funds distribution level, taking into consideration the Funds net asset value and the financial market environment. The Funds distribution policy is subject to modification by the Board of Trustees at any time. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.
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