<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21583
---------------------------------------------
Clough Global Allocation Fund
-----------------------------
(exact name of registrant as specified in charter)
1625 Broadway, Suite 2200, Denver, Colorado 80202
-------------------------------------------------
(Address of principal executive offices) (Zip code)
Erin E. Douglas, Secretary
Clough Global Allocation Fund
1625 Broadway, Suite 2200
Denver, Colorado 80202
(Name and address of agent for service)
Registrant's telephone number, including area code: 303-623-2577
Date of fiscal year end: May 31
Date of reporting period: May 31, 2005
<Page>
Item 1. REPORTS TO STOCKHOLDERS.
<Page>
[CLOUGH GLOBAL ALLOCATION FUND LOGO]
1625 BROADWAY, SUITE 2200
DENVER, CO 80202
1-877-256-8445
[CLOUGH GLOBAL ALLOCATION FUND LOGO]
[ALPS MUTUAL FUNDS SERVICES, INC. LOGO]
THIS FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR INSURER.
FOR MORE INFORMATION ABOUT THE FUND, INCLUDING A PROSPECTUS, PLEASE VISIT
www.cloughglobal.com OR CALL 1-877-256-8445.
[GRAPHIC]
ANNUAL REPORT
MAY 31, 2005
<Page>
SHAREHOLDER LETTER
MAY 31, 2005
To My Fellow Shareholders in the Clough Global Allocation Fund:
The Fund began investing on July 29, 2004 and is about to complete its first
year of existence. We are pleased with its performance to date. Its closing
market price on May 31, 2005 was $22.59 per share, 12.95% above its $20.00
initial offering price. In addition, three cash distributions totaling $0.93 per
share have been paid, so the Fund's total return to shareholders based on market
price has been 18.24%. Meanwhile the Fund's underlying net asset value has
increased 8.74%, from $19.10 to $20.77 per share on May 31st. The Fund's market
price has consistently been at a premium to net asset value.
The Fund is first of all an asset allocation fund and we aggressively manage the
mix between our bond and stock holdings. In recent months a number of our equity
themes provided stocks at attractive prices so the Fund is currently
over-weighted in stocks. As of May 31, 2005 the fund had 70% of it total
investments invested in stocks and 27% in bonds. On the equity side, the Fund is
invested in what we believe to be the five or six most attractive investment
themes in the global financial markets. The remainder of this letter explains
our current themes.
Our largest exposure is in global energy, with primary focus on North American
gas exploration and production companies and companies which provide rigs and
services for deep-water drilling. Investors and policymakers are coming to
realize that the major oil and gas fields that provided the world's energy over
the past 50 years are obsolete or depleting, and the investment necessary to
replace those reserves has not been made. At current oil and gas prices, our
producing companies are rapidly building cash, in many instances to levels that
will exceed the firm's entire equity value in a few short years. High energy
prices will be with us for years into the future because entirely new oil and
gas fields must be developed to augment supplies, yet most of these fields lie
beneath 5,000 feet of water. The industry has been slow to build new rigs and
accelerate drilling activity. This reluctance to invest in new equipment has
substantially increased the value of existing rigs and our investments in
deep-water drillers.
The Fund has a global mandate and holds substantial investments in Japan.
Japanese stocks are still down 70% from their highs of over sixteen years ago,
yet both Japanese banks and companies have restructured and corporate
profitability has improved markedly. Several of the Japanese stocks owned in the
Fund are selling for little more than their cash holdings. Japan's economy has
been recovering since 2002, largely due to exports, but today employment and
incomes are improving, unemployment is declining and the strength of domestic
demand is becoming more pronounced. Domestic capital spending, largely by
smaller and mid-sized companies, has been rising at better than a 20% annual
rate, and we think Japan could become the world's fastest growing developed
economy. Our holdings are centered in companies that benefit from domestic
demand such as banks, real estate firms and retailers.
We have also invested in emerging Asian countries, largely through exchange
traded funds. China remains the world's premier growth story which is having an
effect throughout Asia. Asian markets tend to act as leading indicators of
global growth and some are moving higher once again. The Fund's holdings provide
exposure in Hong Kong, which is China's primary financial center, Taiwan and
Malaysia.
1
<Page>
Much of the Fund's remaining equity exposure is to a number of industries whose
stocks offer both low price/earnings ratios and high cash flows. Two industries
which offer both are the utilities and the global property/casualty insurance
companies. We recently added to the Fund's utility holdings for several reasons.
Some companies with attractive nuclear assets are offering dividend yields in
excess of 4%, roughly in line with the yield on the ten year Treasury, and we
believe those dividends will grow in coming years. More importantly, a recent
PriceWaterhouseCoopers study estimated that $12.7 trillion will be invested in
the global electric power infrastructure over the next 25 years to meet an
expected doubling in electricity consumption. Much of the nation's transmission
grid is aging and needs replacement and blackouts will become more frequent. A
potential catalyst for attracting investment in the electric infrastructure is a
repeal of the Public Utilities Holding Company Act. Even Warren Buffet has
publicly announced he would invest $10-15 billion in electric utilities if the
act were repealed. Others have noted there are ten times more utility companies
than needed and the industry is highly fractionalized. The average utility stock
trades at slightly less than 8 times free cash flow (equivalent to a 13% free
cash flow return), and a 3.6% dividend yield. A wave of consolidation would
follow the Act's repeal, similar to the one which increased the value of banking
franchises in the 1990s.
We have also increased our holdings among global property/casualty insurers, one
of the only industries to our knowledge whose stocks sell at 7 times earnings.
We still think investors are too bearish about the downside of the underwriting
cycle, that AIG's difficulties indicate managements can no longer cover up poor
underwriting results with unauthorized accounting techniques and aggressive
investing strategies. As such, we believe that underwriting cycles will
moderate, and that cash flows will continue to build.
Long-term government yields have declined to new lows for the cycle in the face
of near universal belief that they were headed higher, and that could help
stabilize global economies. Many commentators insist on identifying growth with
inflation and convinced themselves price inflation was something the markets had
to deal with. We think otherwise. Outside of energy and a few selected
commodities, there is plenty of productive capacity and in most manufacturing
and consumer goods sectors, even outside of autos, capacity continues to rise.
Inflation measures are declining everywhere, even in China. We think the major
surprise will be how low inflation will be as the year unfolds. We believe
rising bond prices in the face of falling currencies in Europe are clearly
pointing to deflation. The danger, of course, is that if deflation returns to
certain sectors and companies lose pricing power, stock prices will weaken in
those sectors.
Our Fund strives to find the winners and losers in such a world. If investment
is excessive in most industries, we will endeavor to find the sectors where that
is not the case, because capital will be available to them at a very low cost.
That is the essence of the opportunities we see in the energy and emerging
market sectors. If companies have to be more careful with their capital and can
no longer invest for low returns, we will find those companies where cash is
building and where cash returns are high and ignored in the marketplace. That is
the essence of our investments in Japan and global insurance.
2
<Page>
We were pleased to increase the Fund's quarterly cash distribution from $0.30 to
$0.33 in the most recent quarter and we will aim over time to increase the
payout to our shareholders in line with the increase in the Fund's net asset
value. We thank you for investing in the Clough Global Allocation Fund and
invite you to read the updates on our investment thinking on the Fund's website,
www.cloughglobal.com.
Sincerely,
/s/ Charles I. Clough, Jr.
Charles I. Clough, Jr.
Chairman and CEO of Clough Capital Partners, L.P.
Clough Capital Partners, L.P. is a Boston-based investment management firm that
has over $1 billion under management. For equities, the firm uses a global and
theme-based investment approach based on identifying chronic shortages and
growth opportunities. For fixed-income, Clough believes changing economic
fundamentals help reveal potential global credit market opportunities based
primarily on flow of capital into or out of a country. Clough was founded in
2000 by Chuck Clough and partners James Canty and Eric Brock. The three are the
portfolio managers for the Clough Global Allocation Fund.
[CHART]
PORTFOLIO ALLOCATION
(AS A PERCENTAGE OF TOTAL INVESTMENTS)
<Table>
Common Stocks - 69.13%
U.S. Government & Agency Obligations - 25.15%
Exchange Traded Funds 1.94%
Foreign Government & Agency Obligations - 1.74%
Preferred Stock - 0.95%
Options Purchased - 0.78%
Corporate Bonds & Notes - 0.21%
Money Market Mutual Funds - 0.10%
</Table>
3
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Clough Global Allocation Fund
We have audited the accompanying statement of assets and liabilities of the
Clough Global Allocation Fund (the "Fund"), including the statement of
investments, as of May 31, 2005, and the related statement of operations and
statement of changes in net assets for the period from July 28, 2004
(commencement of operations) to May 31, 2005, and the financial highlights for
the period presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of May 31, 2005, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Clough Global Allocation Fund as of May 31, 2005, the results of its operations
and changes in its net assets for the period from July 28, 2004 (commencement of
operations) to May 31, 2005, and the financial highlights for the period
presented, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touch LLP
Denver, Colorado
July 19, 2005
4
<Page>
STATEMENT OF INVESTMENTS
MAY 31, 2005
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCK 102.23%
CONSUMER/RETAIL 7.81%
AMR Corp. * 140,500 $ 1,812,450
B & G Foods Inc. 67,000 972,840
Blue Nile Inc. * 85,400 2,552,606
Continental Airlines - Class B * 102,100 1,415,106
Kokuyo Co., Ltd. 91,000 1,167,838
Lion Corp. 170,000 889,585
Martek Biosciences Corp. * 1,000 37,390
Nikon Corp. 86,000 957,888
Noritz Corp. 41,200 648,678
Sapporo Holdings Ltd. 117,000 585,296
Tempur-Pedic International * 126,800 2,958,244
Wacoal Corp. 84,000 1,120,568
York-Benimaru Co., Ltd. 33,000 921,185
------------
16,039,674
------------
ENERGY 27.00%
COAL 6.93%
ALPHA Natural Resources Inc. * 82,000 1,959,800
Arch Coal Inc. 25,600 1,240,320
CONSOL Energy Inc. 16,000 765,600
Delta Petroleum Corp. * 25,000 285,500
Fording Canadian Coal Trust 33,500 3,009,640
KFx Inc. * 164,000 2,159,880
Massey Energy Co. 36,000 1,455,480
Peabody Energy Corp. 70,000 3,341,800
------------
14,218,020
------------
EXPLORATION & PRODUCTION 5.60%
Burlington Resources Inc. 20,000 1,013,600
Canadian Natural Resources 20,000 583,400
Chesapeake Energy Corp. 140,000 2,865,800
Compton Petroleum Corp. * 55,000 470,800
Energy Partners Ltd. * 15,000 342,750
EOG Resources Inc. 14,000 698,460
Murphy Oil Corp. 15,000 1,466,250
Petroleo Brasileiro S.A. - ADR 10,050 474,360
Petroquest Energy Inc. * 148,600 835,132
Suncor Energy Inc. 59,000 2,324,010
Talisman Energy Inc. 12,500 413,281
------------
11,487,843
------------
</Table>
5
<Page>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
ENERGY (CONTINUED)
OIL SERVICES & DRILLERS 14.47%
BJ Services Co. 24,000 $ 1,208,400
Cooper Cameron Corp. * 63,000 3,723,930
Diamond Offshore Drilling 43,000 2,031,750
ENSCO International Inc. 8,000 266,400
Global Santa Fe Corp. 43,000 1,575,520
Grant Prideco Inc. * 60,000 1,441,200
Halliburton Co. 71,400 3,051,636
Hydril Co. * 11,700 607,347
Key Energy Services Inc. * 49,000 538,510
Maverick Tube Corp. * 46,400 1,401,744
Nabors Industries Ltd. * 23,000 1,267,530
National - Oilwell Varco Inc. * 98,870 4,449,150
Patterson Utility Energy Inc. 19,000 503,310
Precision Drilling Corp. * 8,000 631,280
Schlumberger Ltd. 14,000 957,180
Tetra Technologies Inc. * 11,500 317,400
Transocean Inc. * 92,000 4,582,520
Weatherford International Ltd. * 22,000 1,156,540
------------
29,711,347
------------
55,417,210
------------
FINANCE 13.80%
ACOM Co. Ltd. 19,400 1,249,307
Aiful Corp. 18,000 1,324,980
Apollo Investment Corp. 228,200 3,740,198
Banco LatinoAmericano 40,000 732,000
Brookline Bancorp, Inc. 105,000 1,596,000
Cohen & Steers, Inc. 149,500 2,665,585
Daiwa Securities Group Inc. 278,000 1,767,193
Fidelity Bankshares, Inc. 43,270 1,070,933
First Niagara Financial Group, Inc. 17,700 230,454
Mitsubishi Tokyo Financial ADR 102,900 854,070
Mitsubishi Tokyo Financial 350 2,918,145
NewAlliance Bancshares, Inc. 38,000 524,020
Nikko Cordial Corp. 208,000 915,970
Nomura Holdings Inc.ADR 79,300 1,003,938
Nomura Holdings Inc. 80,000 1,013,405
Promise Co. Ltd. 13,000 810,816
Provident Financial Services, Inc. 15,700 279,146
Sovereign Bancorp, Inc. 24,600 549,072
The Bank of Yokohama Ltd. 376,000 2,161,537
The Joyo Bank Ltd. 233,000 1,187,056
The Shizuoka Bank Ltd. 141,000 1,221,060
UFJ Holdings Inc. * 100 507,624
------------
28,322,509
------------
</Table>
6
<Page>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
HEALTHCARE 3.65%
Biosphere Medical Inc. * 182,703 $ 860,531
HCA Inc. 14,200 766,800
Omnicare Inc. 46,400 1,778,048
Pfizer Inc. 88,200 2,460,780
Sepracor Inc. * 26,700 1,622,292
------------
7,488,451
------------
INDUSTRIAL 9.68%
Abitibi-Consolidated Inc. 260,000 1,170,000
Airport Facilities Co., Ltd. 59,000 330,480
American Science & Engineering Inc. * 53,000 2,019,830
Bowne & Co Inc. 156,300 2,070,975
Bridgestone Corp. 109,000 2,153,991
Canfor Corp. * 105,700 1,327,592
Chicago Bridge & Iron Co. 12,100 261,360
Georgia Gulf Corp. 18,500 587,930
GOL Linhas Aereas Inteligentes S.A. - ADR 30,000 993,300
Hexcel Corp. * 10,000 163,400
Insituform Technologies - Class A * 99,100 1,470,644
Kansas City Southern * 67,000 1,339,330
Matrix Service Co. * 5,000 20,650
Methanex Corp. 26,400 490,776
Nisshinbo Industries Inc. 137,000 1,055,157
Nova Chemicals Corp. 47,300 1,509,343
Pall Corp. 28,500 831,915
Sasol Ltd. - ADR 74,000 1,835,200
Willbros Group Inc. * 21,000 243,180
------------
19,875,053
------------
INSURANCE 12.12%
ACE Ltd. 39,300 1,698,546
Aflac Inc. 10,000 415,500
Allmerica Financial Corp. * 37,600 1,312,992
Bristol West Holdings Inc. 173,000 2,992,900
CNA Financial Corp. * 25,000 689,500
Everest Re Group Ltd. 31,900 2,854,731
IPC Holdings Ltd. 36,700 1,403,041
Metlife Inc. 28,000 1,248,800
Montpelier Re Holdings Ltd. 10,000 343,500
Partnerre Ltd. 51,700 3,415,819
Platinum Underwriters Holdings 106,000 3,222,400
The Progressive Corp. 8,200 787,774
Renaissance Holdings Ltd. 73,400 3,457,140
Selective Insurance Group, Inc. 13,800 664,194
Specialty Underwriters' Alliance Inc. * 50,000 394,500
------------
24,901,337
------------
</Table>
7
<Page>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
MEDIA 3.07%
China Netcom Group - ADR 5,000 $ 136,000
China Techfaith Wireless - ADR * 20,000 348,000
Mobile Telesystems - ADR 27,900 979,290
Toho Co., Ltd. 46,000 647,547
Verizon Communications Inc. 72,500 2,565,050
Viacom Inc. - Class A 46,885 1,614,719
------------
6,290,606
------------
METALS 4.42%
AK Steel Holding Corp. * 120,000 918,000
APEX Silver Mines Ltd. * 82,200 1,105,590
Ivanhoe Mines Ltd. * 299,700 2,220,777
Olin Corp. 88,700 1,664,899
Pan American Silver Corp. * 56,700 810,243
Sherritt International Corp. 186,000 1,355,880
Western Silver Corp. * 104,000 990,080
------------
9,065,469
------------
REAL ESTATE INVESTMENT TRUST 1.11%
Education Realty Trust Inc. 20,000 343,400
Goldcrest Co. Ltd. 13,000 638,353
Government Properties Trust 30,000 273,000
TOC Co. Ltd. 26,650 102,628
Trustreet Properties Inc. 58,000 913,500
------------
2,270,881
------------
TECHNOLOGY 3.97%
Applied Materials Inc. 66,600 1,092,906
Magal Security Systems Ltd. * 66,443 639,182
MEMC Electronic Materials * 23,400 320,580
Microsoft Corp. 121,700 3,139,860
Radvision Ltd. * 152,445 2,141,852
Stats ChipPac Ltd. -ADR * 113,000 815,860
------------
8,150,240
------------
TRANSPORTATION 2.72%
East Japan Railway Co. 290 1,440,048
Golar LNG, Ltd. * 106,000 1,253,980
Nippon Express Co., Ltd. 150,000 685,430
Overseas Shipholding Group 36,000 2,199,600
------------
5,579,058
------------
</Table>
8
<Page>
<Table>
<Caption>
SHARES VALUE
- ------------------------------------------------------------------------------
UTILITIES 12.88%
AES Corp. * 70,300 $ 1,046,767
Ameren Corp. 57,000 3,111,060
ATMOS Energy Corp. 19,300 545,997
DTE Energy Co. 47,000 2,234,380
Dynegy Inc. - Class A * 215,000 999,750
Entergy Corp. 26,000 1,867,580
Exelon Corp. 32,000 1,499,200
FPL Group, Inc. 30,000 1,219,500
Great Plains Energy, Inc. 20,000 630,000
Northeast Utilities 100,000 1,981,000
OGE Energy Corp. 49,000 1,359,750
PPL Corp. 15,000 862,650
Progress Energy, Inc. 45,000 1,990,350
Public Service Enterprise Group 43,300 2,403,150
Southern Co. 30,000 1,018,500
Southern Union Co. * 35,000 856,450
Teco Energy Inc. 40,000 707,200
Williams Companies Inc. 114,000 2,098,740
------------
26,432,024
------------
TOTAL COMMON STOCKS
(Cost $197,836,836) 209,832,512
- ------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS 2.87%
iSHARES
MSCI Hong Kong 197,400 2,378,670
MSCI Malaysia 219,800 1,483,650
MSCI Pacific 15,000 1,353,750
MSCI Taiwan 57,000 675,450
------------
TOTAL EXCHANGE TRADED FUNDS
(Cost $5,526,170) 5,891,520
- ------------------------------------------------------------------------------
PREFERRED STOCK 1.39%
Ashford Hospital Trust 50,000 1,315,000
XL Capital Ltd. * 64,500 1,549,290
------------
TOTAL PREFERRED STOCK
(Cost $2,769,117) 2,864,290
- ------------------------------------------------------------------------------
MONEY MARKET MUTUAL FUNDS 0.15%
J.P. Morgan Prime Money Market Fund 304,609 304,609
------------
TOTAL MONEY MARKET MUTUAL FUNDS
(Cost $304,609) 304,609
- ------------------------------------------------------------------------------
</Table>
9
<Page>
<Table>
<Caption>
PRINCIPAL
DUE DATE COUPON AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES 0.31%
McMoran Exploration Co.
10/06/2011 5.25% $ 500,000 $ 644,375
-------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $500,000) 644,375
- ---------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS 2.57%
UK Treasury
09/07/2015 4.75% 2,800,000 5,272,114
-------------
TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS
(Cost $5,297,287) 5,272,114
- ---------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS 37.19%
UNITED STATES TREASURY NOTES
01/15/2009** 3.250% 15,000,000 14,776,770
01/15/2010*** 3.625% 20,000,000 19,909,380
02/15/2015*** 4.000% 22,000,000 21,955,318
-------------
UNITED STATES TREASURY BOND
02/15/2031 5.375% 17,000,000 19,693,446
-------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $74,286,460) 76,334,914
- ---------------------------------------------------------------------------------------------------------
</Table>
OPTIONS PURCHASED 1.16%
<Table>
<Caption>
EXPIRATION EXERCISE NUMBER OF
NAME DATE PRICE CONTRACTS VALUE
- ---------------------------------------------------------------------------------------------------------
Energy Select Sector SPDR 06/18/05 43 500 83,750
Energy Select Sector SPDR 09/17/05 40 500 71,250
iShares Russell 2000 08/20/05 121 750 243,750
Oil Service HOLDRS 07/16/05 85 4,500 1,980,000
-------------
TOTAL OPTIONS PURCHASED
(Cost $3,198,125) 2,378,750
- ---------------------------------------------------------------------------------------------------------
<Caption>
Total Investments 147.87% $ 303,523,084
(Cost $289,718,604)
Liabilities in Excess of Other Assets -1.56% (3,212,936)
Liquidation Preference of Auction
Market Preferred Shares, Series W28
(including dividends payable on
(preferred sales) -46.31% (95,049,856)
- ---------------------------------------------------------------------------------------------------------
NET ASSETS ATTRIBUTABLE
TO COMMON SHARES 100.00% $ 205,260,292
=========================================================================================================
</Table>
*Non-income producing security
**Security, or portion of security, is being held as collateral for written
options
*** Security, or portion of security, is being held as collateral for
short sales.
ADR - American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
10
<Page>
SCHEDULE OF PUT OPTIONS WRITTEN
<Table>
<Caption>
EXPIRATION EXERCISE NUMBER OF
NAME DATE PRICE CONTRACTS VALUE
- ---------------------------------------------------------------------------------------------------------
Energy Select Sector SPDR 6/18/05 39 (750) $ (13,125)
iShares Russell 2000 8/20/05 112 (750) (78,750)
Oil Service HOLDRS 7/16/05 85 (4,700) (458,250)
-------------
TOTAL PUT OPTIONS WRITTEN
(Premiums Received $1,104,985) (550,125)
- ---------------------------------------------------------------------------------------------------------
</Table>
SCHEDULE OF SECURITIES SOLD SHORT
<Table>
<Caption>
NAME SHARES VALUE
- ------------------------------------------------------------------------------
AON Corp. (19,000) (473,670)
AVON Products Inc. (20,600) (818,644)
Capital One Financial Corp. (8,500) (640,900)
Comerica Inc. (7,200) (402,336)
Commerce Bancorp Inc. (11,000) (305,250)
DaimlerChrysler AG (21,000) (846,090)
Danaher Corp. (4,300) (237,059)
Dillards Inc. - Class A (99,000) (2,368,080)
Factset Research Systems Inc. (26,900) (861,069)
Fairmont Hotels & Resorts (27,000) (931,230)
Fastenal Co. (6,700) (389,404)
FirstMerit Corp. (39,200) (999,600)
Ford Motor Co. (130,000) (1,297,400)
General Motors Corp. (55,400) (1,746,762)
HNI Corp. (9,000) (464,310)
iShares Russell 2000 (80,000) (9,792,000)
Jefferies Group Inc. (48,300) (1,710,303)
Marsh & McLennan Companies (84,800) (2,462,592)
Polaris Industries Inc. (37,500) (1,967,625)
Popular Inc. (9,900) (233,145)
Precision Castparts Corp. (6,500) (505,245)
Principal Financial Group (19,100) (761,899)
Retail HOLDRs Trust (22,000) (2,053,700)
SLM Corp. (10,000) (482,700)
Station Casinos Inc. (5,200) (338,520)
Toro Co. (33,800) (1,455,090)
W Holding Co. Inc. (13,400) (121,002)
Washington Mutual Inc. (23,000) (949,900)
Winnebago Industries (18,300) (598,227)
Yankee Candle Co. (5,750) (181,413)
------------
TOTAL SECURITIES SOLD SHORT
(Proceeds $37,854,388) (36,395,165)
- ------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<Page>
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 2005
<Table>
ASSETS:
Investments, at value (Cost - see below) $ 303,523,084
Cash 18,481
Deposit with broker for securities sold short 49,859,900
Dividends receivable 302,481
Interest receivable 1,132,971
- --------------------------------------------------------------------------------
Total assets 354,836,917
- --------------------------------------------------------------------------------
LIABILITIES:
Securities sold short (Proceeds $37,854,388) 36,395,165
Put options written at value (Premiums received $1,104,985) 550,125
Payable for investments purchased 17,139,715
Dividends payable - short sales 66,687
Accrued investment advisory fee 198,287
Accrued administration fee 80,731
Accrued trustees fee 5,737
Accrued offering costs 77,483
Other payables 12,839
- --------------------------------------------------------------------------------
Total Liabilities 54,526,769
- --------------------------------------------------------------------------------
PREFERRED STOCK:
Auction market preferred shares, Series W28, including
dividends payable on preferred shares ($25,000 liquidation
value per share, no par value, 3,800 shares issued and
outstanding) 95,049,856
- --------------------------------------------------------------------------------
NET ASSETS $ 205,260,292
================================================================================
Cost of investments $ 289,718,604
================================================================================
COMPOSITION OF NET ASSETS:
Paid in capital $ 187,242,139
Accumulated net realized gain on investments, foreign
currency transactions, options and securities sold short 2,201,606
Net unrealized appreciation in value of investments,
securities sold short and translation of assets and
liabilities denominated in foreign currencies 15,816,547
- --------------------------------------------------------------------------------
NET ASSETS $ 205,260,292
================================================================================
Shares of common stock outstanding of no par value,
unlimited shares authorized 9,877,834
================================================================================
Net asset value per share $ 20.78
================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 28, 2004 (INCEPTION) TO MAY 31, 2005
<Table>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $147,597) $ 2,235,922
Interest 2,607,542
Other Income 264,389
- --------------------------------------------------------------------------------
Total Income 5,107,853
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 1,613,056
Administration fee 656,744
Trustees fee 84,392
Dividend expense on short sales 582,726
Interest on loan 36,297
Broker/dealer fees 118,424
Miscellaneous 5,223
- --------------------------------------------------------------------------------
Total Expenses 3,096,862
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,010,991
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investment securities 6,458,848
Foreign currency transactions 1,321,704
Closing and expiration of option contracts written (115,697)
Securities sold short 2,929,786
Change in net unrealized appreciation/depreciation on
investments, options, securities sold short and tranlastion
of assets and liabilities denominated in foreign currencies 15,816,547
- --------------------------------------------------------------------------------
Net gain on investments, foreign currency transactions,
options and securities sold short 26,411,188
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM NET
INVESTMENT INCOME (1,340,792)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE
TO COMMON SHARES FROM OPERATIONS 27,081,387
================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<Page>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JULY 28, 2004 (INCEPTION) TO MAY 31, 2005
<Table>
COMMON SHAREHOLDER OPERATIONS:
Net investment income $ 2,010,991
Net realized gain (loss) from:
Investment securities 6,458,848
Foreign currency transactions 1,321,704
Options (115,697)
Securities sold short 2,929,786
Change in unrealized appreciation / depreciation on
investments, options, securities sold short and tranlastion
of assets and liabilities denominated in foreign currencies 15,816,547
Distributions to Preferred Shareholders:
From net investment income (1,340,792)
- --------------------------------------------------------------------------------
Net increase in net assets attributable to common
shares from operations 27,081,387
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income (9,063,234)
- --------------------------------------------------------------------------------
Net decrease in net assets from distributions (9,063,234)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares, net of offering costs 166,775,000
Proceeds from the underwriters' over-allotment option
of common shares excerised, net of offering costs 17,535,200
Net asset value of common stock issued to stockholders
from reinvestment of dividends 4,081,939
Costs from issuance of preferred shares (1,250,000)
- --------------------------------------------------------------------------------
Net increase in net assets from capital share transactions 187,142,139
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON SHARES 205,160,292
- --------------------------------------------------------------------------------
NET ASSETS ATTRIBUTABLE TO COMMON SHARES:
Beginning of period 100,000
- --------------------------------------------------------------------------------
End of period $ 205,260,292
================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<Page>
FINANCIAL HIGHLIGHTS
FOR THE PERIOD JULY 28 (INCEPTION) TO MAY 31, 2005
<Table>
PER COMMON SHARE OPERATING PERFORMANCE
Net asset value - beginning of period $ 19.10
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08
Net realized and unrealized gain on investments 2.84
Distributions to Preferred Shareholders:
From net investment income (0.14)
- --------------------------------------------------------------------------------
Total from investment operations 2.78
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
From net investment income (0.93)
- --------------------------------------------------------------------------------
Total distributions (0.93)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Common share offering costs charged to paid in capital (0.04)
Preferred share offering costs and sales load charged to
paid in capital (0.13)
- --------------------------------------------------------------------------------
Total capital share transactions (0.17)
- --------------------------------------------------------------------------------
Net asset value - end of period $ 20.78
================================================================================
Market price - end of period $ 22.59
================================================================================
TOTAL INVESTMENT RETURN - NET ASSET VALUE (1) 13.89%
TOTAL INVESTMENT RETURN - MARKET PRICE (1) 18.24%
RATIOS AND SUPPLEMENTAL DATA
Net assets attributable to common shares, end of period (000) $ 205,260
Ratio to average net assets attributable to common shareholders:
Net expenses(3) 1.89%(2)
Net expenses excluding dividends on short sales(3) 1.54%(2)
Net investment income(3) 1.23%(2)
Preferred share dividends 0.82%(2)
Portfolio turnover rate 236%
Average commission rate paid $ 0.0464
AUCTION MARKET PREFERRED SHARES
Liquidation value, end of period,
including dividends on preferred shares (000) $ 95,050
Total shares outstanding (000) 3.8
Asset coverage per share(4) $ 79,029
Liquidation preference per share $ 25,000
Average market value per share(5) $ 25,000
</Table>
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A PURCHASE OF A COMMON SHARE
AT THE OPENING ON THE FIRST DAY AND A SALE AT CLOSING ON THE LAST DAY OF
EACH PERIOD REPORTED. TOTAL INVESTMENT RETURN ON NET ASSET VALUE REFLECTS A
SALES LOAD OF $.90 PER SHARE. DIVIDENDS AND DISTRIBUTIONS, IF ANY, ARE
ASSUMED FOR PURPOSES OF THIS CALCULATION TO BE REINVESTED AT PRICES
OBTAINED UNDER THE TRUST'S DIVIDEND REINVESTMENT PLAN. TOTAL INVESTMENT
RETURNS DO NOT REFLECT BROKERAGE COMMISSIONS. TOTAL INVESTMENT RETURNS FOR
LESS THAN A FULL YEAR ARE NOT ANNUALIZED. PAST PERFORMANCE IS NOT A
GUARANTEE OF FUTURE RESULTS.
(2) ANNUALIZED.
(3) RATIOS DO NOT REFLECT DIVIDEND PAYMENTS TO PREFERRED SHAREHOLDERS
(4) CALCULATED BY SUBTRACTING THE FUND'S TOTAL LIABILITIES (EXCLUDING PREFERRED
SHARES) FROM THE FUND'S TOTAL ASSETS AND DIVIDING BY THE NUMBER OF
PREFERRED SHARES OUTSTANDING.
(5) BASED ON MONTHLY PRICES.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<Page>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2005
1. SIGNIFICANT ACCOUNTING AND OPERATING POLICIES
Clough Global Allocation Fund is a closed-end management investment company (the
"Fund") that was organized under the laws of the state of Delaware by an
Agreement and Declaration of Trust dated April 27, 2004. The Fund is a
non-diversified series with an investment objective to provide a high level of
total return. The Declaration of Trust provides that the Trustees may authorize
separate classes of shares of beneficial interest.
SECURITY VALUATION: The net asset value per Share of the Fund is determined no
less frequently than daily, on each day that the American Stock Exchange (the
"Exchange") is open for trading, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Trading may take place in foreign
issues held by the Fund at times when the Fund is not open for business. As a
result, the Fund's net asset value may change at times when it is not possible
to purchase or sell shares of the Fund. Securities held by the fund for which
exchange quotations are readily available are valued at the last sale price, or
if no sale price or if traded on the over-the-counter market, at the mean of the
bid and asked prices on such day. Over-the-counter securities traded on NASDAQ
are valued based upon the closing price. Debt securities for which the
over-the-counter market is the primary market are normally valued on the basis
of prices furnished by one or pricing services at the mean between the latest
available bid and asked prices. As authorized by the Trustees, debt securities
(other than short-term obligations) may be valued on the basis of valuations
furnished by a pricing service which determines valuations based upon market
transactions for normal, institutional-size trading units of securities.
Short-term obligations maturing within 60 days are valued at amortized cost,
which approximates value, unless the Trustees determine that under particular
circumstances such method does not result in fair value. Over-the-counter
options are valued at the mean between bid and asked prices provided by dealers.
Financial futures contracts listed on commodity exchanges and exchange-traded
options are valued at closing settlement prices. Securities for which there is
no such quotation or valuation and all other assets are valued at fair value in
good faith by or at the direction of the Trustees.
FOREIGN SECURITIES: The Fund may invest a portion of its assets in foreign
securities. In the event that the Fund executes a foreign security transaction,
the Fund will generally enter into a forward foreign currency contract to settle
the foreign security transaction. Foreign securities may carry more risk than
U.S. securities, such as political, market and currency risks.
The accounting records of the Fund are maintained in U.S. dollars. Prices of
securities denominated in foreign currencies are translated into U.S. dollars at
the closing rates of exchange at period end. Amounts related to the purchase and
sale of foreign securities and investment income are translated at the rates of
exchange prevailing on the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments is
included with the fluctuations arising from changes in market values of
securities held and reported with all other foreign currency gains and losses in
the Fund's Statement of Operations.
OPTIONS: The Fund may purchase or write (sell) put and call options. One of the
risks associated with purchasing an option among others, is that the Fund pays a
premium whether or not the option is exercised. Additionally, the Fund bears the
risk of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired through
the exercise of call options is
16
<Page>
increased by premiums paid. The proceeds from securities sold through the
exercise of put options are decreased by the premiums paid.
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
value of the option written. Premiums received from writing options that expire
unexercised are treated by the Fund on the expiration date as realized gains
from investments. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or, if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Fund. The Fund, as writer of an option, bears the
market risk of an unfavorable change in the price of the security underlying the
written option. Written and purchased options are non- income producing
securities.
Written option activity as of May 31, 2005 was as follows:
<Table>
<Caption>
WRITTEN PUT OPTIONS CONTRACTS PREMIUMS
- -----------------------------------------------------------------------
Outstanding, July 28, 2004 (Inception)
Positions opened 17,775 $ 2,603,734
Expired (4,625) (647,654)
Closed (6,950) (851,095)
- -----------------------------------------------------------------------
Outstanding, May 31, 2005 6,200 $ 1,104,985
=======================================================================
Market Value, May 31, 2005 $ (550,125)
=======================================================================
</Table>
SHORT SALES: The Fund may sell a security it does not own in anticipation of a
decline in the fair value of that security. When the Fund sells a security
short, it must borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale. A gain, limited to the price
at which the Fund sold the security short, or a loss, unlimited in size, will be
recognized upon the termination of the short sale.
INCOME TAXES: The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders. Therefore, no federal income tax
provision is required.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to make a level dividend
distribution each quarter to Common Shareholders after payment of interest on
any outstanding borrowings or dividends on any outstanding preferred shares. The
level dividend rate may be modified by the Board of Trustees from time to time.
Any net capital gains earned by the Fund are distributed at least annually to
the extent necessary to avoid federal income and excise taxes. Distributions to
shareholders are recorded by the Fund on the ex-dividend date. The Fund has
applied to the Securities and Exchange Commission for an exemption from Section
19(b) of the 1940 Act and Rule 19b-1 thereunder permitting the Fund to make
periodic distributions of long-term capital gains, provided that the
distribution policy of the Fund with respect to its Common Shares calls for
periodic (e.g., quarterly/monthly) distributions in an amount equal to a fixed
percentage of the Fund's average net asset value over a specified period of time
or market price per common share at or about the time of distribution or pay-out
of a level dollar amount.
17
<Page>
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Investment security transactions
are accounted for as of trade date. Dividend income is recorded on the
ex-dividend date. Interest income, which includes amortization of premium and
accretion of discount, is accrued as earned. Realized gains and losses from
securities transactions and unrealized appreciation and depreciation of
securities are determined using the highest cost basis for both financial
reporting and income tax purposes.
USE OF ESTIMATES: The Fund's financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of increases and decreases in net assets from operations during the reporting
period. Actual results could differ from these estimates.
2. TAXES
THE TAX CHARACTER OF THE DISTRIBUTIONS PAID BY THE FUND DURING THE PERIOD JULY
28, 2004 (INCEPTION) TO MAY 31, 2005, WAS AS FOLLOWS:
<Table>
<Caption>
2005
- ---------------------------------------------------------------
DISTRIBUTIONS PAID FROM:
Ordinary Income $ 10,404,026
Tax-Exempt Income -
Long-Term Capital Gain
- ---------------------------------------------------------------
Total $ 10,404,026
===============================================================
</Table>
As of May 31, 2005, the components of distributable earnings on a tax basis were
as follows:
<Table>
(Over)/undistributed net investment income 4,243,740
Accumulated net realized gain (loss) -
Unrealized appreciation 13,774,413
- ---------------------------------------------------------------
Total $ 18,018,153
===============================================================
</Table>
Net unrealized appreciation/depreciation of investments based on federal tax
cost were as follows:
<Table>
AS OF MAY 31, 2005
Gross appreciation (excess of value over tax cost) 19,027,876
Gross depreciation (excess of tax cost over value) (5,253,463)
- ----------------------------------------------------------------------
Net unrealized appreciation 13,774,413
======================================================================
Cost of investments for income tax purpose $ 291,760,738
======================================================================
</Table>
3. CAPITAL TRANSACTIONS
COMMON SHARES: There are an unlimited number of no par value common shares of
beneficial interest authorized. Of the 9,877,834 common shares outstanding on
May 31, 2005, ALPS Mutual Funds Services, Inc. owned 5,236 shares. The Fund
issued 8,750,000 common shares in its initial public offering on July 28, 2004.
These common shares were issued at $20.00 per share before the underwriting
discount of $0.90 per share. An additional 650,000 common shares and 270,000
common shares were issued on August 27,
18
<Page>
2004 and September 15, 2004, respectively. These common shares were also issued
at $20.00 per share before the underwriting discount of $0.90 per share.
Offering costs of $386,800 (representing $.04 per common share) were offset
against proceeds of the offering and have been charged to paid-in capital of the
common shares. ALPS agreed to pay those offering costs of the Fund (other than
sales load, but inclusive of the reimbursement of the underwriter expenses of
$.0067 per common share) that exceed $.04 per common share.
Net investment income (loss) and net realized gain (loss) may differ from
financial statement and tax purposes. These differences are primarily due to the
treatment of certain investment securities and distribution allocations. These
permanent differences in the character of income and distributions between
financial statements and tax basis have been reclassified. During the year ended
May 31, 2005, $8,393,035 was reclassified from accumulated capital gains to
undistributed ordinary income. Net assets of the Fund were unaffected by the
reclassifications and the calculation of net investment income per share in the
Financial Highlights excludes these adjustments.
Transactions in common shares for the year ended May 31, 2005, were as follows:
<Table>
Common shares outstanding - beginning of period 5,236
Common shares issued in connection with initial public offering 8,750,000
Common shares issued from underwriters' over-allotment option exercised 920,000
Common shares issued as reinvestment of dividends 202,598
- ---------------------------------------------------------------------------------
Common shares outstanding - end of period 9,877,834
- ---------------------------------------------------------------------------------
</Table>
PREFERRED SHARES: On September 15, 2004, the Fund's Board of Trustees authorized
the issuance of an unlimited number of no par value preferred shares, in
addition to the existing common shares, as part of the Fund's leverage strategy.
Preferred shares issued by the Fund have seniority over the common shares.
Offering costs associated with the issuance of preferred shares, estimated at
$300,000, and the underwriters' sales load totaling $950,000, have been borne by
the common shareolders as a direct reduction to paid in capital.
The Fund is subject to certain limitations and restrictions while preferred
shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation value.
Specifically, the Fund is required under the Investment Company Act of 1940 to
maintain an asset coverage with respect to the outstanding preferred shares of
200% or greater.
The Fund has one series of Auction Market Preferred Shares ("AMPS"), W28. On
December 1, 2004, the Fund issued 3,800 shares of AMPS with a net asset and
liquidation value of $25,000 per share plus accrued dividends. Dividends on the
AMPS are cumulative and are paid based on an annual rate set through auction
procedures. Distributions of net realized capital gains, if any, are paid
annually. As of May 31, 2005, the annualized dividend rate for the AMPS was
3.14%. The dividend rate, as set by the auction process, is generally expected
to vary with short-term interest rates. The rate may vary in a manner unrelated
to the income received on the Fund's assets, which could have either a
beneficial or detrimental impact on net investment income and gains available to
Common Shareholders.
19
<Page>
Preferred Shares, which are entitled to one vote per share, generally vote with
the Common Shares but vote separately as a class to elect two Trustees and on
any matters affecting the rights of the Preferred Shares.
4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term securities,
for the period ended May 31, 2005 aggregated $735,335,133 and $474,960,275,
respectively. Purchase and sales of U.S. government and agency securities, other
than short-term securities, for the period ended May 31, 2005 aggregated
$243,416,105 and $162,787,168, respectively.
5. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
Clough Capital Partners L.P. ("Clough") serves as the Fund's investment adviser
pursuant to an Investment Advisory Agreement with the Fund. As compensation for
its services to the Fund, Clough receives an annual investment advisory fee of
0.70% based on the Fund's average daily total assets, computed daily and payable
monthly.
ALPS Mutual Funds Services, Inc. ("ALPS") serves as the Fund's administrator
pursuant to an Administration, Bookkeeping and Pricing Services Agreement with
the Fund. As compensation for its services to the Fund, ALPS receives an annual
administration fee of 0.285% based on the Fund's average daily total assets,
computed daily and payable monthly. ALPS will pay all expenses incurred by the
Fund, with the exception of advisory fees, trustees' fees, portfolio transaction
expenses, litigation expenses, taxes, cost of preferred shares, expenses of
conducting repurchase offers for the purpose of repurchasing fund shares, and
extraordinary expenses.
6. LINE OF CREDIT
On October 27, 2004, a Security Agreement between the Fund and The Bank of New
York ("BONY") was executed which allows the Fund to borrow against a secured
line of credit from BONY an aggregate amount of up to $87,500,000. The
borrowings under the BONY line of credit are secured by pledging the Fund's
portfolio securities as collateral. During the period ended May 31, 2005, the
average borrowing was $1,436,957 with an average rate on borrowings of 3.24%.
7. OTHER
The Independent Trustees of the Fund receive a quarterly retainer of $3,500 and
an additional $1,500 for each meeting attended.
Unless the registered owner of Common Shares elects to receive cash by
contacting The Bank of New York (the "Plan Administrator" or "BONY"), all
dividends declared on Common Shares will be automatically reinvested by the Plan
Administrator for shareholders in the Fund's Dividend Reinvestment Plan (the
"Plan"), in additional Common Shares. Shareholders who elect not to participate
in the Plan will receive all dividends and other distributions in cash paid by
check mailed directly to the shareholder of record (or, if the Common Shares are
held in street or other nominee name, then to such nominee) by BONY as dividend
disbursing agent. You may elect not to participate in the Plan and to receive
all dividends in cash by contacting BONY, as dividend disbursing
20
<Page>
DIVIDEND REINVESTMENT PLAN
MAY 31, 2005 (UNAUDITED)
agent, at the address set forth below. Participation in the Plan is completely
voluntary and may be terminated or resumed at any time without penalty by notice
if received and processed by the Plan Administrator prior to the dividend record
date; otherwise such termination or resumption will be effective with respect to
any subsequently declared dividend or other distribution. Some brokers may
automatically elect to receive cash on your behalf and may re-invest that cash
in additional Common Shares for you. If you wish for all dividends declared on
your Common Shares to be automatically reinvested pursuant to the Plan, please
contact your broker.
The Plan Administrator will open an account for each Common Shareholder under
the Plan in the same name in which such Common Shareholder's Common Shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in Common
Shares. The Common Shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized Common Shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding Common
Shares on the open market ("Open-Market Purchases") on the American Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commissions per Common Share is equal to
or greater than the net asset value per Common Share, the Plan Administrator
will invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per Common Share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per Common Share on the payment date. If, on the
payment date for any Dividend, the net asset value per Common Share is greater
than the closing market value plus estimated brokerage commissions, the Plan
Administrator will invest the Dividend amount in Common Shares acquired on
behalf of the participants in Open-Market Purchases. In the event of a market
discount on the payment date for any Dividend, the Plan Administrator will have
until the last business day before the next date on which the Common Shares
trade on an "ex-dividend" basis or 30 days after the payment date for such
Dividend, whichever is sooner (the "Last Purchase Date"), to invest the Dividend
amount in Common Shares acquired in Open-Market Purchases. If, before the Plan
Administrator has completed its Open-Market Purchases, the market price per
Common Share exceeds the net asset value per Common Share, the average per
Common Share purchase price paid by the Plan Administrator may exceed the net
asset value of the Common Shares, resulting in the acquisition of fewer Common
Shares than if the Dividend had been paid in Newly Issued Common Shares on the
Dividend payment date. Because of the foregoing difficulty with respect to
Open-Market Purchases, the Plan provides that if the Plan Administrator is
unable to invest the full Dividend amount in Open-Market Purchases during the
purchase period or if the market discount shifts to a market premium during the
purchase period, the Plan Administrator may cease making Open-Market Purchases
and may invest the uninvested portion of the Dividend amount in Newly Issued
Common Shares at the net asset value per Common Share at the close of business
on the Last
21
<Page>
Purchase Date provided that, if the net asset value is less than or equal to 95%
of the then current market price per Common Share; the dollar amount of the
Dividend will be divided by 95% of the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common Shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instructions of the participants. In the case of
Common Shareholders such as banks, brokers or nominees which hold shares for
others who are the beneficial owners, the Plan Administrator will administer the
Plan on the basis of the number of Common Shares certified from time to time by
the record shareholder's name and held for the account of beneficial owners who
participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commissions incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends. Participants that request a sale of Common Shares through the Plan
Administrator are subject to brokerage commissions. The Fund reserves the right
to amend or terminate the Plan. There is no direct service charge to
participants with regard to purchases in the Plan; however, the Fund reserves
the right to amend the Plan to include a service charge payable by the
participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York, 101 Barclay Street, New York, New York
10286, 20th Floor, Transfer Agent Services, (800) 433-8191.
22
<Page>
FUND PROXY VOTING POLICIES & PROCEDURES
MAY 31, 2005 (UNAUDITED)
Fund policies and procedures used in determining how to vote proxies relating to
portfolio securities are available without a charge, upon request, by contacting
the Fund at 1-877-256-8445 and on the Commission's website at
http://www.sec.gov.
PORTFOLIO HOLDINGS
MAY 31, 2005 (UNAUDITED)
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q within 60 days
after the end of the period. Copies of the Fund's Forms N-Q are available on the
Commission's website at http://www.sec.gov. You may also review and copy Form
N-Q at the Commission's Public Reference Room in Washington, D.C. For more
information about the operation of the Public Reference Room, please call the
Commission at 1-800-SEC-0330. Information on the Fund's N-Q is available without
a charge, upon request, by contacting the Fund at 1-877-256-8445 and on the
website at http://www.cloughglobal.com
NOTICE
MAY 31, 2005 (UNAUDITED)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
SHAREHOLDER TAX INFORMATION
MAY 31, 2005 (UNAUDITED)
Certain tax information regarding the Fund is required to be provided to
shareholders based upon the fund's income and distributions for the taxable year
ended May 31, 2005. The information and distributions reported herein may differ
from information and distributions taxable to shareholders for the calendar year
ended December 31, 2005.
During the fiscal year ended May 31, 2005, 8.82% of the dividends paid by the
Fund qualify for the corporate dividends received deduction. Also, during the
fiscal year ended May 31, 2005, 12.02% of the dividends paid by the Fund met the
requirements regarding qualified dividend income.
23
<Page>
TRUSTEES & OFFICERS
MAY 31, 2005 (UNAUDITED)
Information pertaining to the trustees and officers of the Trust is set forth
below. Trustees deemed to be interested persons of the Trust as defined in the
1940 Act are referred to as "Interested Trustees."
INTERESTED TRUSTEES AND OFFICERS
<Table>
<Caption>
PRINCIPAL OCCUPATION(S) NUMBER OF
POSITION(S) HELD DURING PAST 5 YEARS AND PORTFOLIOS IN FUND
WITH FUNDS/LENGTH OTHER DIRECTORSHIPS HELD COMPLEX OVER-
NAME, AGE AND ADDRESS OF TIME SERVED BY TRUSTEE SEEN BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------
W. ROBERT ALEXANDER Trustee and Mr. Alexander is the Chief Executive 2
Age - 77 Chairman/Since Officer & Chairman of ALPS. Mr.
1625 Broadway, Ste. 2200 Inception Alexander was Vice Chairman of First
Denver, CO 80202 Interstate Bank of Denver,
responsible for Trust, Private
Banking, Retail Banking, Cash
Management Services and Marketing.
Mr. Alexander is currently a member
of the Board of Trustees of the
Hunter and Hughes Trusts as well as
Chairman of Reaves Utility Income
Fund, Clough Global Equity Fund,
Financial Investors Trust and
Financial Investors Variable
Insurance Trust. Because of his
affiliation with ALPS, Mr. Alexander
is considered an "interested" Trustee
of the Fund.
JAMES E. CANTY Trustee and Portfolio Mr. Canty is a founding partner, 2
Age - 42 Manager/ Since Chief Financial Officer and General
One Post Office Square Inception Counsel for Clough. Prior to founding
40th Floor Clough in 2000, Mr. Canty worked as a
Boston, Massachusetts 02109 corporate and securities lawyer and
Director of Investor Relations for
Converse, Inc. from 1995 to 2000. He
was a corporate and securities lawyer
for the Boston offices of Goldstein &
Manello, P.C. from 1993 to 1995 and
Bingham, Dana and Gould from 1990 to
1993. Mr. Canty served as an Adjunct
Professor at Northeastern University
from 1996 to 2000. Mr. Canty is
currently a member of the Board of
Directors of Clough Offshore Fund,
Ltd. and Board of Trustees of the
Clough Global Equity Fund. Because of
his affiliation with Clough, Mr.
Canty is considered an "interested"
Trustee of the Fund.
</Table>
24
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATION(S) NUMBER OF
POSITION(S) HELD DURING PAST 5 YEARS AND PORTFOLIOS IN FUND
WITH FUNDS/LENGTH OTHER DIRECTORSHIPS HELD COMPLEX OVER-
NAME, AGE AND ADDRESS OF TIME SERVED BY TRUSTEE SEEN BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------
EDMUND J. BURKE President/Since Mr. Burke is President and a Director N/A
Age - 44 Inception of ALPS. Mr. Burke joined ALPS in
1625 Broadway, Ste. 2200 1991 as Vice President and National
Denver, CO 80202 Sales Manager. Because of his
position with ALPS, Mr. Burke is
deemed an affiliate of the Trust as
defined under the 1940 Act. Mr. Burke
is currently the President of Reaves
Utility Income Fund, Clough
Global Equity Fund, Financial
Investors Trust and Financial
Investors Variable Insurance Trust.
JEREMY O. MAY Treasurer/Since Mr. May is Managing Director of ALPS. N/A
Age - 35 Inception Mr. May joined ALPS in 1995 as a
1625 Broadway, Ste. 2200 Controller. Because of his position
Denver, CO 80202 with ALPS, Mr. May is deemed an
affiliate of the Trust as defined
under the 1940 Act. Mr. May is
currently the Treasurer of Reaves
Utility Income Fund, Clough Global
Equity Fund, Financial Investors
Trust, Financial Investors Variable
Insurance Trust and First Funds.
ERIN DOUGLAS Secretary/Since Ms. Douglas is Associate Counsel of N/A
Age - 28 Inception ALPS. Ms. Douglas joined ALPS as
1625 Broadway, Ste. 2200 Associate Counsel in January 2003.
Denver, CO 80202 Ms. Douglas is deemed an affiliate of
the Trust as defined under the 1940
Act. Ms. Douglas is currently the
Secretary of Financial Investors
Trust and Clough Global Equity Fund.
BRADLEY J. SWENSON Chief Compliance Mr. Swenson joined ALPS as Chief N/A
Age - 32 Officer/Since March Compliance Officer ("CCO") in May
1625 Broadway, Ste. 2200 2005 2004. Prior to joining ALPS, Mr.
Denver, CO 80202 Swenson served as the Senior Audit
manager at Janus Capital Group.
Before joining Janus Mr. Swenson was
a senior Internal Auditor for
Oppenhiemer Funds. Because of his
position with ALPS and ADI, Mr.
Swenson is deemed an affiliate of the
Trust as defined under the 1940 Act.
Mr. Swenson is currently the CCO of
Financial Investors Trust, Clough
Global Equity Fund, Reaves Utility
Income Fund, SPDR Trust, Midcap SPDR
Trust, and DIAMONDS Trust.
</Table>
25
<Page>
INDEPENDENT TRUSTEES
<Table>
<Caption>
PRINCIPAL OCCUPATION(S) NUMBER OF
POSITION(S) HELD DURING PAST 5 YEARS AND PORTFOLIOS IN FUND
WITH FUNDS/LENGTH OTHER DIRECTORSHIPS HELD COMPLEX OVER-
NAME, AGE AND ADDRESS OF TIME SERVED BY TRUSTEE SEEN BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------
ROBERT BUTLER Trustee/Since Inception Mr. Butler is currently an 2
Age - 64 independent consultant for
12 Harvard Drive businesses. Mr. Butler was President
Hingham, Massachusetts 02043 of the Pioneer Funds Distributor,
Inc. from 1989 to 1998. He was Senior
Vice-President from 1985 to 1988 and
Executive Vice-President and Director
from 1988 to 1999 of the The Pioneer
Group, Inc. While at The Pioneer
Group, Inc. until his retirement in
1999, Mr. Butler was a Director or
Supervisory Board member of a number
of subsidiary and affiliated
companies, including: Pioneer First
Polish Investment Fund, JSC, Pioneer
Czech Investment Company and Pioneer
Global Equity Fund PLC. Mr. Butler is
currently a member of the Board of
Trustees of the Clough Global
Equity Fund.
MR. ANDREW C. BOYNTON Trustee/Since March Mr. Boynton is currently the Dean of 2
Age - 49 2005 the Carroll School of Management at
140 Commonwealth Avenue Boston College. Mr. Boynton served as
Chestnut Hill, Massachusetts Professor of Strategy from 1996 to
02467 2005 and Program Director of the
Executive MBA Program from 1998 to
2005 at International Institute of
Management Development, Lausanne,
Switzerland ("IMD"). Prior to that
he was an Associate Professor at the
Kenan-Flagler Business School,
University of North Carolina, Chapel
Hill from 1994 to 1996, Visiting
Professor at IMD, Lausanne,
Switzerland from 1992 to 1994 and
Assistant Professor, Darden School,
University of Virginia from 1987 to
1992. Mr. Boyton is currently a
member of the Board of Trustees of
the Clough Global Equity Fund.
</Table>
26
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATION(S) NUMBER OF
POSITION(S) HELD DURING PAST 5 YEARS AND PORTFOLIOS IN FUND
WITH FUNDS/LENGTH OTHER DIRECTORSHIPS HELD COMPLEX OVER-
NAME, AGE AND ADDRESS OF TIME SERVED BY TRUSTEE SEEN BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------
MR. ADAM CRESCENZI Trustee/Since Inception Mr. Crescenzi is a founding partner 2
Age - 62 of Telos Partners, a business
100 Walden Street advisory firm founded in 1998. Prior
Concord, Massachusetts 01742 to that, he served as Executive Vice
President of CSC Index. Mr. Crescenzi
is currently a member of the Board of
Directors of the Boch Center of the
Performing Arts, a Trustee of Dean
College, a Trustee of the Clough
Global Equity Fund, and Chairman of
the Board of Directors of Creative
Realities and ICEX, Inc.
JOHN F. MEE, ESQ. Trustee/Since Inception Mr. Mee is an attorney practicing 2
Age - 61 commercial law, family law, products
1625 Broadway, Suite 2200 liability and criminal law. He was an
Denver, Colorado 80202 instructor in the Harvard Law School
Trial Advocacy Workshop from 1990 to
2002. Mr. Mee serves on the Board of
Directors of Holy Cross Alumni
Association and the Board of Trustees
of the Clough Global Equity Fund.
RICHARD C. RANTZOW Trustee/Since Inception Mr. Rantzow was the Chief Financial 2
Age - 66 Officer and a Director of Ron Miller
1625 Broadway, Suite 2200 Associates, Inc. Prior to that, Mr.
Denver, Colorado 80202 Rantzow was Managing Partner of the
Memphis office of Ernst & Young until
1990. Mr. Rantzow is also Chairman of
First Funds Trust and a member of the
Board of Trustees of the Clough
Global Equity Fund.
JERRY G. RUTLEDGE Trustee/Since Inception Mr. Rutledge is the President and 2
Age - 60 owner of Rutledge's Inc., a retail
2745 Springmede Court clothing business. Mr. Rutledge is
Colorado Springs, currently Director of the American
Colorado 80906 National Bank, Regent of the
University of Colorado and a member
of the Board of Trustees of the
Clough Global Equity Fund.
</Table>
27
<Page>
Item 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by the report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller or any persons performing similar functions on
behalf of the registrant.
(b) Not Applicable.
(c) During the period covered, by this report, no amendments were made to
the provisions of the code of ethics adopted in 2 (a) above.
(d) During the period covered by this report, no implicit or explicit
waivers to the provision of the code of ethics adopted in 2 (a) above
were granted.
(e) Not Applicable.
(f) The registrant's Code of Ethics is attached as an Exhibit hereto.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant has as
least one audit committee financial expert serving on its audit committee. The
Board of Trustees has designated Richard C. Rantzow as the registrant's "audit
committee financial expert." Mr. Rantzow is "independent" as defined in
paragraph (a)(2) of Item 3 to Form N-CSR.
Mr. Rantzow was the Chief Financial Officer and a Director of Ron Miller
Associates, Inc. Prior to that, Mr. Rantzow was managing partner of the Memphis
office of Ernst & Young until 1990.
Item 4. PRINCIPAL ACCOUNTING FEES AND SERVICES.
(a) AUDIT FEES: The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements for fiscal years 2005 and 2004 were $29,000 and $0,
respectively.
(b) AUDIT-RELATED FEES: The aggregate fees billed in each of the last
two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements
and are not reported under paragraph (a) of this Item were $0 in
2005 and $0 in 2004.
<Page>
(c) TAX FEES: For the period from July 28, 2004, through May 31, 2005,
aggregate fees of $900 were billed for professional services
rendered by the principal accountant for tax compliance, tax
advice, and tax planning. The fiscal tax fees were for services
for dividend calculation, excise tax preparation, and tax return
preparation.
(d) ALL OTHER FEES: The aggregate fees billed in each of the last two
fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a)
through (c) of this Item are $25,500 in 2005 and $0 in 2004. These
services included comfort work related to the over-allotment
exercise of common stock as well as agreed upon procedures related
to the ratings for the Auction Market Preferred Shares.
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES: All services
to be performed by the Registrant's principal auditors must be
pre-approved by the Registrant's audit committee.
(e)(2) No services described in paragraphs (b) through (d) were approved
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser, and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the last
two fiscal years of the registrant was $0 for 2005 and $0 for
2004.
(h) Not applicable.
Item 5. AUDIT COMMITTEE OF LISTED REGISTRANT.
The registrant has a separately designated standing audit committee established
in accordance with Section 3 (a)(58)(A) of the Exchange Act and is comprised of
the following members:
Andrew C. Boyton
Robert Butler
Adam D. Crescenzi
John F. Mee
Richard C. Rantzow, Committee Chairman
Jerry G. Rutledge
Item 6. SCHEDULE OF INVESTMENTS.
<Page>
Schedule of Investments is included as part of the Report to Stockholders filed
under Item 1 of this form.
Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Attached, as Exhibit Item 7, is a copy of the registrant's policies and
procedures.
Item 8: PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1)
As of: May 31, 2005
<Table>
<Caption>
LENGTH OF
NAME TITLE SERVICE BUSINESS EXPERIENCE: 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------
Charles I Clough, Jr. Partner and Portfolio Since Inception in 2000 Founding Partner Clough Capital Partners LP.
Manager
Eric A. Brock Partner and Portfolio Since Inception in 2000 Founding Partner Clough Capital Partners LP.
Manager
James E. Canty Partner and Portfolio Since Inception in 2000 Founding Partner Clough Capital Partner LP.
Manager 2000 to present, Chief Financial Officer and
General Counsel for Clough Capital Partners
LP. Member of Board of Directors of Clough
Offshore Fund, Ltd., and Board of Trustees of
Clough Global Allocation Fund and Clough
Global Equity Fund. Because of his
affiliation with Clough Capital Partners LP,
Mr. Canty is considered and "interested"
Trustee of the Clough Global Allocation Fund.
</Table>
(a)(2)
As of May 31, 2005, the Portfolio Managers listed above are also responsible for
the day-to-day management of the following:
<Table>
<Caption>
REGISTERED OTHER POOLED MATERIAL
INVESTMENT INVESTMENT OTHER CONFLICTS
PM NAME COMPANIES VEHICLES (1) ACCOUNTS IF ANY
- ---------------------------------------------------------------------------------------
Charles I Clough, Jr. 1 Accounts 3 Accounts 3 Accounts See below (2)
$345.7 million $248.5 million $86.5 million
Total Assets Total Assets Total Assets
Eric A. Brock 1 Accounts 3 Accounts 3 Accounts See below (2)
$345.7 million $248.5 million $86.5 million
</Table>
<Page>
<Table>
<Caption>
TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS
- ---------------------------------------------------------------------------------------
James E. Canty 1 Accounts 3 Accounts 3 Accounts See below (2)
$345.7 million $248.5 million $86.5 million
Total Assets Total Assets Total Assets
</Table>
(1) Advisory fee based in part on performance of accounts.
(2) Material Conflicts:
Material conflicts of interest may arise as a result of the fact that the
Portfolio Managers also have day-to-day management responsibilities with respect
to both the Fund and the various accounts listed above (collectively with the
Fund, the "Accounts"). These potential conflicts include:
LIMITED RESOURCES. The Portfolio Managers cannot devote their full time
and attention to the management of each of the Accounts. Accordingly, the
Portfolio Managers may be limited in their ability to identify investment
opportunities for each of the Accounts that are as attractive as might be the
case if the Portfolio Managers were to devote substantially more attention to
the management of a single Account. The effects of this potential conflict may
be more pronounced where the Accounts have different investment strategies.
LIMITED INVESTMENT OPPORTUNITIES. If the Portfolio Managers identify a
limited investment opportunity that may be appropriate for more than one
Account, the investment opportunity may be allocated among several Accounts.
This could limit any single Account's ability to take full advantage of an
investment opportunity that might not be limited if the Portfolio Managers did
not provide investment advice to other Accounts.
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.
<Page>
(a)(3) Portfolio Manager Compensation as of May 31, 2005.
The Portfolio Managers 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 its annual net profits to the three Portfolio Managers, with
Mr. Clough receiving a majority share and the remainder being divided evenly
between Mr. Brock and Mr. Canty.
(a)(4) Dollar Range of Securities Owned as of May 31, 2005.
<Table>
<Caption>
DOLLAR RANGE OF EQUITY SECURITIES HELD IN
PORTFOLIO MANAGER REGISTRANT (1)
Charles I. Clough, Jr. $100,001 - $500,000
Eric A. Brock None
James E. Canty $10,001-$50,000
</Table>
(1) This information is as of May 31, 2005. "Beneficial Ownership" is
determined in accordance with Section 16a-1(a)(2) of the Securities
Exchange Act of 1934, as amended.
Item 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Not Applicable
Item 10. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
The registrant has adopted the following procedures by which shareholders may
recommend nominees to the registrant's Board of Trustees.
The Board of Trustees of the registrant will as part of its authority and
responsibilities, seek individuals qualified to become members of the Board of
Trustees, including evaluating persons suggested by shareholders. In connection
with filling vacancies or expanding the Board of Trustees, the Board of Trustees
will evaluate the suitability of individual candidates in the context of the
Board as a whole, with the objective of recommending a group or individual
candidate that can best perpetuate the success of the business and represent
shareholder interests through the exercise of sound judgment, relying on its
diversity of experience. Candidates may be nominated by the Board of Trustees or
by shareholders by submitting the name and basic qualifications of the
candidates to the Secretary of the Registrant at Clough Global Allocation Fund,
1625 Broadway, Suite 2200, Denver, Colorado 80202.
Item 11. CONTROLS AND PROCEDURES.
<Page>
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940, as amended) are effective based on their evaluation of
these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There was no change in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940, as amended) during the second fiscal quarter of
the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12. EXHIBITS.
(a)(1) The Code of Ethics that applies to the registrant's principal
executive officer and principal financial officer is attached hereto as
Exhibit 12.A.1.
(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 Ex99.Cert.
(a)(3) Not Applicable.
(b) A certification for the registrant's Principal Executive Officer and
Principal Financial Officer, as required by Rule 30a-2(b) of the Investment
Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act
of 2002 are attached hereto as Ex99.906Cert.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CLOUGH GLOBAL ALLOCATION FUND
By: /s/ Edmund J. Burke
-------------------
Edmund J. Burke
President/Principal Executive Officer
Date: August 3, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
CLOUGH GLOBAL ALLOCATION FUND
By: /s/ Edmund J. Burke
--------------------
Edmund J. Burke
President/Principal Executive Officer
Date: August 3, 2005
By: /s/ Jeremy O. May
-----------------
Jeremy O. May
Treasurer/Principal Financial Officer
Date: August 3, 2005