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 811-21455
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Dreman/Claymore Dividend & Income Fund
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(Exact name of registrant as specified in charter)
2455 Corporate West Drive
Lisle, IL 60532
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(Address of principal executive offices) (Zip code)
J. Thomas Futrell
Claymore Advisors, LLC
2455 Corporate West Drive
Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: October 31
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Date of reporting period: April 30, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
SEMIANNUAL
REPORT
April 30, 2008
(Unaudited)
Dreman/Claymore | DCS
Dividend & Income Fund
Logo: DREMAN VALUE MANAGEMENT, LLC
Logo: Claymore(R)
www.dremanclaymore.com
... YOUR PATH TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
DREMAN/CLAYMORE DIVIDEND & INCOME FUND
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.DREMANCLAYMORE.COM, you will find:
o Daily, weekly and monthly data on share prices, net asset values,
distributions and more
o Monthly portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and advisor contact information
Dreman Value Management and Claymore Securities are constantly updating and
expanding shareholder information services on the Fund's website, in an ongoing
effort to provide you with the most current information about how your Fund's
assets are managed, and the results of our efforts. It is just one more small
way we are working to keep you better informed about your investment in the
Fund.
2 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Photo of: David N. Dreman
Dear SHAREHOLDER |
We thank you for your investment in Dreman/Claymore Dividend & Income Fund (the
"Fund"). This report covers the Fund's performance for the semi-annual period
ended April 30, 2008.
As you may know, the Fund's primary investment objective is to provide a high
level of current income, with a secondary objective of capital appreciation. The
basis for our security selection process comes from Dreman Value Management's
contrarian value philosophy of investing, which focuses on what we believe to be
quality companies trading at attractive valuations relative to the market. Since
many of the income-oriented securities in the portfolio are sensitive to changes
in interest rates, we frequently employ hedging techniques to help balance the
impact on return of rising or falling interest rates.
All Fund returns cited -- whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six-month period
ended April 30, 2008, the Fund provided total returns of -18.51% and -18.88%
based on market price and NAV, respectively. As of April 30, 2008, the Fund's
market price of $15.35 represented a discount of 14.0% to NAV of $17.85. Six
months earlier, at October 31, 2007, the Fund's NAV was $22.79 and the closing
market price was $19.62. Since its inception on January 27, 2004, through April
30, 2008, the Fund generated average annual total returns of 0.19% and 4.31%
based on market price and NAV, respectively. Returns for the six-month period
ended April 30, 2008 suffered as a result of the liquidity crisis, which
negatively impacted the Fund's holdings of financial and other high yielding
stocks and bonds. We believe we have taken advantage of significant
opportunities that have arisen during these difficult times, which should result
in strong performance as the current financial crisis recedes.
During the six-month period ended April 30, 2008, the Fund paid two quarterly
dividends of $0.325 each. The current dividend rate represents an annualized
distribution rate of 8.47% based upon the closing market price of $15.35 on
April 30, 2008. Given the Fund's tax characteristics for the 2007 calendar year,
the Fund's current dividend rate represents a tax-advantaged distribution rate
of 10.79% for an individual shareholder subject to the maximum federal income
tax rate of 35%. The final determination of the tax characteristics of dividends
paid is made after the end of each calendar year. There can be no assurance that
this characterization is indicative of future allocations or that this
distribution rate will be achieved in the future.
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 26 of the Fund's semi-annual report. When
shares trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the quarterly dividend distribution in common shares of the Fund
purchase in the market at a price less than NAV. Conversely, when the market
SemiAnnual Report | April 30, 2008 |3
DCS | Dreman/Claymore Dividend & Income Fund | DEAR SHAREHOLDER continued
price of the Fund's common shares is at a premium above NAV, the DRIP reinvests
participants' dividends in newly-issued common shares at NAV, subject to an IRS
limitation that the purchase price cannot be more than 5% below the market price
per share. The DRIP provides a cost-effective means to accumulate additional
shares and enjoy the benefits of compounding returns over time. Since the Fund
endeavors to maintain a steady monthly distribution rate, the DRIP plan
effectively provides an income averaging technique, which causes shareholders to
accumulate a larger number of Fund shares when the market price is depressed
than when the price is higher.
We provide a detailed discussion of the Fund's performance over the last six
months in the Questions & Answers section of the report. You'll find information
on the overall market environment, a discussion of which sectors and securities
contributed and detracted from the Fund's performance and a summary of our
contrarian value investment philosophy in that section, which begins on page 5
of this report.
We thank you for your continued investment in the Fund and we are honored that
you have chosen the Fund as part of your investment portfolio. For the most
up-to-date information on your investment, please visit the Fund's website at
www.dremanclaymore.com
Sincerely,
/s/ David N. Dreman
David N. Dreman
Founder, Chairman and Chief Investment Officer of Dreman Value Management, LLC
and Trustee of the Dreman/Claymore Dividend & Income Fund
May 25, 2008
4 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
QUESTIONS & ANSWERS |
David N. Dreman is primarily responsible for the day-to-day management of the
investment portfolio of the Dreman/Claymore Dividend & Income Fund (the "Fund").
Mr. Dreman is the Founder, Chairman and Chief Investment Officer of Dreman Value
Management, LLC. In the following interview he shares his thoughts on the equity
market and the performance of the Fund during the six-month period ended April
30, 2008.
--------------------------------------------------------------------------------
WILL YOU REMIND US OF THIS FUND'S OBJECTIVES AND THE WAY IT IS MANAGED?
The Fund's investment objective is to provide a high level of current income,
with a secondary objective of capital appreciation.
Under normal market conditions, the Fund will invest at least 80% of its total
assets in dividend-paying or other income-producing securities, and at least 65%
of the Fund's total assets will consist of investments in dividend-paying common
and preferred stocks. The Fund may invest up to 20% of its total assets in U.S.
dollar-denominated securities of foreign issuers. There is no minimum credit
rating for preferred stocks and debt securities in which the Fund may invest,
although the Fund will not invest more than 10% of its total assets in
non-convertible fixed-income securities of below investment-grade quality.
The basis for our security selection process comes from Dreman Value
Management's contrarian value philosophy of investing, which is based on our
belief that consensus opinion, especially when it comes to investing, is often
wrong. We seek companies that we believe are financially sound and that have,
for one reason or another, fallen out of favor with the investing public. We
look for stocks that we feel are trading below their intrinsic values, with
prices that are low relative to their earnings (P/E - the most common measure of
how expensive a stock is), book value (P/B) and cash flow (P/CF). Historically,
such companies have provided potential for above-market returns over time. We
base our stock selection on fundamental "bottom-up" analysis -- a process of
evaluation that accounts for the individual merits of each stock. While our
disciplined process has generated favorable results over time, there is no
guarantee that the perceived intrinsic value we see in individual securities
will be realized.
In selecting equity securities, we try to take advantage of market
inefficiencies and investor over-reaction to perceived negatives affecting solid
companies. We consider our approach a defensive style of investing, as many of
the securities in which we invest are, in our opinion, undervalued in the
market. Certain elements of the Fund's sector positioning add a further measure
of defensiveness. For example, throughout the six-month period ended April 30,
2008, the Fund had minimal exposure to economically sensitive sectors such as
materials and industrials.
In order to achieve the Fund's income objective, we hold positions in utility
stocks, preferred stocks and corporate bonds. Since many of the income-oriented
securities in the portfolio are sensitive to changes in interest rates, we
frequently employ hedging techniques to help balance the impact on return of
rising or falling interest rates. We believe that this defensive value-oriented
style of investing has good potential to provide investors with attractive
risk-adjusted returns over time from a combination of income and capital
appreciation in a wide variety of market environments.
In evaluating the Fund's performance, and especially when comparing performance
to equity indices such as the S&P 500 Index and the Russell 1000(R) Value Index,
it is important to remember that this is not a typical equity fund. About a
third of the Fund's assets are in corporate bonds, convertible preferred stocks,
and preferred stocks, which are held primarily because of the high level of
income they tend to provide while the convertible feature of the convertible
preferred stocks also adds the potential for appreciation over time. The returns
of corporate bonds and preferred stocks tend to be less volatile than those of
equities and therefore can be expected to provide lower rates of
SemiAnnual Report | April 30, 2008 | 5
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
total return than equities over the long run. (Volatility is a measure of the
extent to which the price of a financial asset fluctuates.)
--------------------------------------------------------------------------------
PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT OVER THE LAST SIX
MONTHS.
This has been an extraordinarily challenging time for all investors. Some
commentators have gone so far as to say that we have recently experienced the
worst financial crisis since the Great Depression. Certainly the U.S. economy,
though weak, is not in the terrible condition it was in the 1930s, but liquidity
has largely vanished from many areas of the financial markets. What began in
early 2007 as a correction in the U.S. housing market accelerated into a crisis
in the sub-prime mortgage market with profound implications for the entire
economy. Very wide spreads between bid and ask prices of high yield bonds,
preferred stocks and other high yield securities has made it challenging to
trade these securities. Because of a few rather dramatic trading excesses and
business failures, banks have been reluctant to lend to one another, and there
has been an extreme degree of risk aversion throughout credit markets.
The Federal Reserve Board (the "Fed") reduced interest rates seven times between
September 2007 and April 2008, striving to strike a balance between providing
liquidity to financial markets and keeping inflation at a moderate level. Even
with these stimulus measures, recent trends in employment and consumer spending,
accompanied by a spike in energy prices, have led many economists to forecast
that the U.S. will experience a recession during 2008.
In this very tough environment, markets have been extremely volatile, and
virtually all equity indices posted negative returns. The S&P 500 Index, which
is generally regarded as a good indicator of the broad stock market, returned
-9.64% for the six-month period ended April 2008. The best performing securities
were those with little or no credit risk: the Lehman 10-20 Year U.S. Treasury
Index returned 6.26%. The Lehman Brothers Aggregate Bond Index, which measures
return of the U.S. bond market as a whole, returned 4.08%, but the return of the
Merrill Lynch High Yield Master II Index, which measures performance of the
high-yield bond market, was -0.77%.
--------------------------------------------------------------------------------
HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the six-month period
ending April 30, 2008, the Fund provided total returns of -18.51% and -18.88%
based on market price and NAV, respectively. As of April 30, 2008, the Fund's
market price of $15.35 represented a discount of 14.0% to NAV of $17.85. Six
months earlier, at October 31, 2007, the Fund's closing market price was $19.62
and NAV was $22.79. It is worth noting that the Fund's performance began to show
improvement in April, and this improvement continued through late May.
As most investors may know, the market value of the Fund's shares fluctuates
from time to time, and it may be higher or lower than the Fund's NAV. The
current discount to NAV may provide an opportunity for suitable investors to
purchase shares of the Fund at prices below the market value of the securities
in the underlying portfolio. We believe that, over the long term, the progress
of the NAV will be reflected in the market price return to shareholders.
--------------------------------------------------------------------------------
WHICH TRENDS OR INVESTMENT DECISIONS HAD THE GREATEST IMPACT ON THE FUND'S
PERFORMANCE OVER THE LAST SIX MONTHS?
The Fund has traditionally had three major return engines -- high-dividend
paying equities owned mainly for their dividends, equities selected for overall
return potential, and high-yield bonds. In recent months we have also found some
very attractive opportunities in convertible preferred stocks, which offer
yields comparable to those of high-yield bonds, along with the poten-
6 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
tial for capital appreciation if the underlying common stock performs well.
Common stocks represented 68.9% of the portfolio as of October 31, 2007 and
55.5% as of April 30, 2008. Since equities represent such a large percentage of
the portfolio, they are generally the main determinant of performance of the
portfolio as a whole. The equity portion of the portfolio was down more than the
overall market during the six-month period ended April 30, 2008 in large part
because the portfolio has a significant concentration in financials, which
performed poorly. We have considered the financial sector appropriate for the
Fund because of the currently high dividends rates paid by many of the stocks in
the sector. However, this positioning detracted from performance during this
period as the market has turned away from the entire financial sector because of
credit issues related to problems in the sub-prime mortgage business. During the
summer of 2007, we carefully evaluated the financial stocks in this portfolio
and culled the riskier issues, including those with significant exposure to
subprime mortgages and monoline insurers. The financial stocks that remain in
the portfolio are large, high-quality companies such as Fannie Mae (18.4% of
long-term investments), Bank of America Corp. (1.6% of long-term investments)
and Wachovia Corp. (0.8% of long-term investments). However, in the current
environment of crisis, essentially all financial stocks have performed very
poorly. We regard this situation as a temporary over-reaction by the market, and
we continue to hold these attractive stocks, taking the opportunity to average
down by buying additional shares on weakness. A large holding that was hurt by
problems in the mortgage market was Fannie Mae, since hitting a low point in
mid-March, this stock has recovered sharply, and we believe there is great
potential for significant further gain, however, there is no guarantee of this
occurring.
The major positive was the Fund's positioning in the energy sector, which
represented 26.4% of the equity position as of April 30, 2008, compared with a
14.0% energy sector weight in the S&P 500 Index. We have held a significant
position in energy stocks for some time because we believe that worldwide demand
for energy is growing faster than supply and that energy prices will therefore
remain high. Several of the Fund's largest energy holdings including Devon
Energy Corp. (3.0% of long-term investments) and Apache Corp. (1.3% of long-term
investments) moved up sharply during this period. In order to generate the level
of income appropriate for this Fund, a number of our energy holdings are
Canadian income trusts with energy-related operations. Income trusts are
publicly-traded entities whose interests in oil or gas fields are traded on
securities exchanges like shares of corporate stock. Due to their structure, the
income generated by these trusts is often treated as qualified dividend income.
Several of these stocks including Fairborne Energy Trust (0.6% of long-term
investments) and BP Prudhoe Bay Royalty Trust (0.3% of long-term investments)
were among the best performing issues in the portfolio during this period.
Also positive was a large position in Altria Group, Inc. (5.0% of long-term
investments), which recently spun off its international business as a new public
company, Philip Morris International (5.1% of long-term investments). We have
been gradually selling some of the international business and replacing it with
more of the domestic company, which currently offers a higher yield. Altria has
announced that it intends to increase its dividend as it cuts costs; we believe
the stock could move up significantly over the next few years.
Straight (non-convertible) preferred stocks, which represent 28.9% of the
portfolio as of April 30, 2008, earned income for shareholders, but there was
price depreciation in this sector, reflecting concerns about liquidity, solvency
and whether the Fed would be successful in stemming this credit crisis.
Companies in need of capital have recently been issuing convertible preferred
shares with very favorable terms. We recently purchased a
SemiAnnual Report | April 30, 2008 | 7
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
Washington Mutual preferred issue, which has already moved up nicely in price,
and we are finding other attractive opportunities in this market.
The high yield market was essentially frozen for much of the period covered by
this report. Like preferred stocks, high yield bonds, which represent 5.3% of
the portfolio as of April 30, 2008, provided income, but total returns on most
issues were flat to slightly negative as prices dropped in a very thin market
with scarcely any new issues. During this period, we have found some convertible
preferred stocks, offering yields comparable to high yield bonds, to be more
attractive sources of income, and they also have equity upside potential,
however, there is no guarantee of this occurring.
--------------------------------------------------------------------------------
PLEASE TELL US ABOUT THE FUND'S DISTRIBUTIONS DURING THE PERIOD.
During the six-month period ended April 30, 2008, the Fund paid two quarterly
dividends of $0.325 each. The current dividend rate represents an annualized
distribution rate of 8.47% based upon the closing market price of $15.35 on
April 30, 2008.
Given the Fund's tax characteristics for the 2007 calendar year, the Fund's
current dividend rate represents a tax-advantaged distribution rate of 10.79%
for an individual shareholder subject to the maximum federal income tax rate of
35%. The final determination of the tax characteristics of dividends paid is
made after the end of each calendar year. There can be no assurance that this
characterization is indicative of future allocations or that this distribution
rate will be achieved in the future.
--------------------------------------------------------------------------------
WOULD YOU EXPLAIN THE FUND'S LEVERAGE STRATEGY?
Like many of its peers, the Fund utilizes leverage as part of its investment
strategy. The Fund's leverage is achieved through the issuance of Auction Market
Preferred Shares ("AMPS"). AMPS holders receive a dividend that is reset
typically every seven or 28 days, depending on the series. The purpose of
leverage is to finance the purchase of additional securities that provide income
and potentially greater appreciation potential to common shareholders than could
be achieved from a portfolio that is not leveraged. However, when leveraged
investments fall in price, leverage may reduce overall return, and this was the
case during the last six months. As of April 30, 2008, the Fund continues to be
leveraged, with AMPS equivalent to approximately 34.4% of the Fund's managed
assets.
The broad auction-rate preferred securities market has experienced considerable
disruption in the past several months, and your Fund was not immune to this
disruption. The result has been failed auctions on nearly all auction-rate
preferred shares, including AMPS such as those issued by the Fund. We believe
that this increase in failed auctions is simply a liquidity issue. Investors
need to be aware that a failed auction is not a default, nor does it require the
redemption of a fund's auction-rate preferred shares. Provisions in the offering
documents of the Fund's AMPS provide a mechanism to set a maximum rate in the
event of a failed auction, and, thus, investors will continue to be entitled to
receive payment for holding these AMPS. This maximum rate is determined based
upon a multiple of or a spread to LIBOR, whichever is greater.
The Fund has five series of AMPS, three that auction each week and two that
auction every 28 days. The most recent auctions for these series have failed, as
have auctions of most AMPS. The established maximum rates for auctions during
the week prior to May 25, 2008 ranged from 3.54% to 3.68%. These maximum rates
are not significantly different from, and in many cases are lower than, past
successful auctions. We will continue to evaluate the benefits and impacts of
leverage on the Fund, as well as exploring other methods of utilizing leverage.
8 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
--------------------------------------------------------------------------------
WHAT IS YOUR OUTLOOK FOR THE MARKETS AND THE FUND IN THE COMING MONTHS?
The last few months have been a challenging time for equity investors. Although
there remain significant questions about the direction of the economy, we feel
there are signs the market is moving towards a bottom, although there are still
likely to be some speed bumps ahead, which makes the timing of an upturn
extremely difficult to predict. With our contrarian philosophy, a major way we
seek to add value is to take advantage of the over-reactions of investors to bad
news, selectively buying attractive equities, preferreds and bonds on weakness,
and conditions such as those experienced in the last few months provide some
very interesting opportunities.
The portfolio is currently structured fairly defensively, with little exposure
to cyclical sectors such as materials and mining. We believe that the
concentration in solid financial companies will prove advantageous in the months
ahead.
SemiAnnual Report | April 30, 2008 | 9
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DCS RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the Portfolio Managers and
Claymore only through the report period as stated on the cover. These views are
subject to change at any time, based on market and other conditions and should
not be construed as a recommendation of any kind. The material may also contain
forward-looking statements that involve risk and uncertainty, and there is no
guarantee they will come to pass. There can be no assurance that the Fund will
achieve its investment objectives. The value of the Fund will fluctuate with the
value of the underlying securities. Historically, closed-end funds often trade
at a discount to their net asset value. Past performance does not guarantee
future results.
There can be no assurance that the Fund will achieve its investment objectives.
The value of the Fund will fluctuate with the value of the underlying
securities.
A principal risk of investing in the Fund is equity risk, which is the risk that
the value of the securities held by the Fund will fall due to general market and
economic conditions, perceptions regarding the industries in which the issuers
of securities held by the Fund participate, or factors relating to specific
companies in which the Fund invests. Stock of an issuer in the Fund's portfolio
may decline in price if the issuer fails to make anticipated dividend payments
because, among other reasons, the issuer of the security experiences a decline
in its financial condition. Common stock in which the Fund will invest is
structurally subordinated to preferred stock, bonds and other debt instruments
in a company's capital structure, in terms of priority to corporate income, and
therefore will be subject to greater dividend risk than preferred stock or debt
instruments of such issuers. In addition, while common stock has historically
generated higher average returns than fixed income securities, common stock has
also experienced significantly more volatility in those returns. An adverse
event, such as an unfavorable earnings report, may depress the value of common
stock of an issuer held by the Fund. Also, the price of common stock of an
issuer is sensitive to general movements in the stock market. A drop in the
stock market may depress the price of most or all of the common stocks held by
the Fund.
The Fund is intended for investors seeking a high level of current income and
capital appreciation over the long term. The Fund is not meant to provide a
vehicle for those who wish to play short-term swings in the stock market. An
investment in the common shares of the Fund should not be considered a complete
investment program. Each common shareholder should take into account the Fund's
investment objectives as well as the Common Shareholder's other investments when
considering an investment in the Fund.
Pursuant to its distribution policy, the Fund intends to make regular quarterly
distributions on its Common Shares. In order to make such distributions, the
Fund may have to sell a portion of its investment portfolio at a time when
independent investment judgment may not dictate such action. In addition, the
Fund's ability to make distributions more frequently than annually from any net
realized capital gains by the Fund is subject to the Fund obtaining exemptive
relief from the Securities and Exchange Commission, which cannot be assured. To
the extent the total quarterly distributions for a year exceed the Fund's net
investment company income and net realized capital gain for that year, the
excess will generally constitute a return of capital. Such return of capital
distributions generally are tax free up to the amount of a common shareholder's
tax basis in the common shares (generally, the amount paid for the common
shares).
AUCTION MARKET PREFERRED SHARES (AMPS) RISK. The AMPS are redeemable, in whole
or in part, at the option of the Fund on any dividend payment date for the AMPS,
and are subject to mandatory redemption in certain circumstances. The AMPS are
not listed on an exchange. You may buy or sell AMPS only through an order placed
at an auction with or through a broker-dealer that has entered into an agreement
with the auction agent and the Fund or in a secondary market maintained by
certain broker dealers. These broker-dealers are not required to maintain this
market, and it may not provide you with liquidity.
An investment in the Fund is subject to certain risks and other considerations.
Such risks and considerations include, but are not limited to: No Operating
History; Hedging Risk; Not a Complete Investment Program; Market Discount Risk;
Equity Risk; Special Risks Related to Preferred Securities; Income Risk; Value
Investing Risk; Fund Distribution Risk; Interest Rate Risk; Inflation Risk;
Foreign Securities; Non-diversified Status; Industry Concentration Risk; Lower-
Rated Securities; Financial Leverage; Management Risk; Dependence on Key
Personnel; Anti-Takeover Provisions; Illiquid Securities; Common Stock Risk;
Special Risks of Derivative Transactions and Geopolitical Risks. There can be no
assurance that a percentage of dividends paid on common shares, if any, will
consist of qualifying dividend income.
10 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Fund SUMMARY | AS OF APRIL 30, (2008) (unaudited)
FUND STATISTICS
-------------------------------------------------------
Share Price $15.35
Common Share Net Asset Value $17.85
Premium/Discount to NAV -14.0%
Net Assets Applicable to Common Shares ($000) $810,419
-------------------------------------------------------
TOTAL RETURNS
-------------------------------------------------------
(INCEPTION 1/27/04) MARKET NAV
-------------------------------------------------------
Six Months -18.51% -18.88%
One Year -25.58% -22.10%
Three Year - average annual 0.67% 2.05%
Since Inception - average annual 0.19% 4.31%
-------------------------------------------------------
% OF LONG-TERM
SECTOR BREAKDOWN* INVESTMENTS
-------------------------------------------------------
Financials 48.8%
Energy 26.4%
Consumer Staples 14.5%
Health Care 2.8%
Utilities 2.3%
Investment Companies 1.2%
Consumer Discretionary 1.1%
Other 2.9%
-------------------------------------------------------
% OF LONG-TERM
INDUSTRY BREAKDOWN INVESTMENTS
-------------------------------------------------------
Diversified Financial Services 26.6%
Oil & Gas 26.3%
Tobacco 13.7%
Commercial Banks 9.1%
Insurance 6.5%
Thrifts & Mortgage Finance 4.6%
Real Estate & Real Estate Investment Trusts 1.6%
Electric Utilities 1.6%
Pharmaceuticals 1.4%
Health Care Providers & Services 1.3%
Investment Companies 1.2%
Diversified Telecommunication 0.1%
Other 6.0%
-------------------------------------------------------
Past performance does not guarantee future results. All portfolio data is
subject to change daily. For more current information, please visit
www.claymore.com. The above summaries are provided for informational purposes
only and should not be viewed as recommendations.
* Securities are classified by sectors that represent broad groupings of
related industries
Line Chart:
SHARE PRICE & NAV PERFORMANCE
SHARE PRICE NAV
22.15 24.41
22.07 24.46
22.1 24.56
22.14 24.74
22.13 24.72
22.2 24.82
22.15 24.78
22.28 24.85
22.06 24.55
21.85 24.46
21.81 24.43
21.8 24.47
22 24.65
21.97 24.76
22.15 24.93
22.19 25.01
22.18 25.05
22.18 25
21.83 24.67
21.98 24.8
22.02 24.82
22.15 24.96
22.2 24.88
22.37 25.13
22.65 25.17
22.54 25
22.32 24.78
21.82 24.39
21.97 24.48
22.06 24.67
21.76 24.45
21.97 24.68
21.97 24.72
22.16 24.86
22.13 24.77
22.13 24.72
21.79 24.31
21.72 24.42
21.59 24.14
21.53 24.05
21.32 24.06
21.61 24.19
21.6 24.18
21.48 24.13
21.65 24.34
21.77 24.47
21.68 24.47
21.9 24.35
21.85 24.48
21.64 24.12
21.49 24.19
21.86 24.58
21.85 24.6
21.72 24.43
21.55 24.42
21.41 24.31
21.43 24.4
21.25 24.06
21.1 24.03
20.54 23.43
20.33 23.51
20.25 23.04
20.06 22.73
20 22.86
19.93 22.68
19.93 22.69
20.01 22.7
19.47 22.09
19.62 22.7
19.92 22.86
20.07 23.06
19.7 22.4
19.63 22.53
19.27 22.15
18.6 21.69
18.27 21.33
18.46 21.59
19.01 22.35
19.39 22.33
19.66 22.17
19.73 22.37
19.73 22.54
19.93 22.7
19.96 22.6
19.62 22.18
19.9 22.39
19.75 22.24
19.9 22.54
20.17 22.78
20.03 22.49
20.08 22.42
19.77 22.23
19.49 22.05
19.57 22.21
19.61 22.27
19.66 22.31
19.58 22.33
19.38 22.26
20 22.96
20 23.19
20 22.94
20 23
19.87 22.9
19.81 22.87
19.98 23.04
20.01 23.12
19.97 22.95
20.09 23.27
20.07 23.5
20.12 23.5
20.2 23.58
20.31 23.71
20.3 23.64
20.44 23.71
20.39 23.68
20.32 23.59
20.38 23.62
20.15 23.36
19.92 23.04
19.86 23.08
19.75 22.91
19.29 22.43
19.28 22.39
19.36 22.42
19.29 22.35
19.36 22.34
19.72 22.75
19.74 22.69
19.5 22.52
19.62 22.79
19.15 22.04
18.94 21.75
18.67 21.51
18.84 22.02
18.32 20.78
17.94 20.76
17.56 20.55
17.33 20.12
17.5 20.6
17.6 20.44
17.22 19.62
16.91 19.52
16.24 18.79
15.69 17.86
15.1 17.31
15.27 17.89
14.5 17.03
14.63 17.3
15.1 18.14
15.06 18.29
15.79 19.32
16.14 19.12
16.05 18.71
16.25 19.08
16.51 19.65
16.51 19.52
16.65 19.65
16.18 18.67
15.86 18.46
15.83 18.7
15.74 18.32
15.37 18.12
15.51 18.22
15.36 18.25
15.07 18.35
15.44 18.65
15.93 18.9
16.12 18.97
15.95 18.75
15.82 18.7
15.8 18.72
15.95 18.58
16.08 18.62
15.79 18.14
15.64 18.2
15.52 17.83
15.65 17.99
15.81 18.22
15.81 18.33
16.16 18.52
15.94 18.15
16 18.02
15.8 17.33
15.39 17.02
15.17 16.93
15.66 17.45
15.71 17.8
15.42 17.61
15.94 18.1
16.29 18.4
16.3 18.4
16.48 18.76
16.81 19.17
16.66 18.82
16.5 18.11
16.47 17.81
16.52 18.09
16.22 17.97
16.15 17.86
16.12 17.98
15.85 17.85
15.9 17.69
15.76 17.71
15.4 17.72
15.33 18
15.1 17.72
15.19 17.88
15.52 18.17
15.84 18.28
15.73 18.23
15.72 18.1
15.52 17.48
15.45 17.27
15.35 17.16
15.59 17.32
15.36 16.69
15.15 16.6
14.48 15.94
14.81 16.81
14.6 16.43
14.28 16.59
14.3 16.17
13.65 15.44
14.12 16.45
13.72 16.08
14.19 16.65
14.6 16.96
14.78 17.17
14.78 16.98
14.78 16.78
14.28 16.51
14.37 16.45
14.73 17.09
14.87 17.16
14.94 17.18
14.64 17.06
14.81 17.36
14.79 17.21
14.77 16.99
14.73 16.95
14.43 16.64
14.19 16.62
14.22 16.88
14.48 17.45
14.78 17.64
15.26 17.99
15.31 17.88
15.36 17.51
15 17.33
15.06 17.86
15.41 18.19
15.58 18.13
15.42 17.92
15.35 17.85
Pie Chart:
PORTFOLIO COMPOSITION (% of Total Investments)
Asset Class
-----------
Common Stocks 55.5%
Preferred Stocks 28.9%
Convertible Preferred Stocks 7.5%
Corporate Bonds 5.3%
Investment Companies 1.2%
Term-Loans 1.1%
Call Options Purchased 0.2%
Limited Partnership 0.2%
Short-Term Investments 0.1%
% OF LONG-TERM
TOP TEN ISSUERS INVESTMENTS
-------------------------------------------------------
Fannie Mae 18.4%
Philip Morris International, Inc. 5.1%
Altria Group, Inc. 5.0%
Washington Mutual, Inc. 4.9%
ConocoPhillips 4.7%
Crescent Point Energy Trust 3.1%
Devon Energy Corp. 3.0%
Universal Corp. 3.0%
Chevron Corp. 2.3%
Bonavista Energy Trust 2.2%
-------------------------------------------------------
SemiAnnual Report | April 30, 2008 | 11
DCS | Dreman/Claymore Dividend & Income Fund
Portfolio of INVESTMENTS | APRIL 30, (2008) (unaudited)
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
TOTAL INVESTMENTS - 155.3%
COMMON STOCKS - 86.4%
CONSUMER DISCRETIONARY - 0.3%
123,700 Regal Entertainment Group - Class A $ 2,345,352
--------------------------------------------------------------------------------
CONSUMER STAPLES - 16.5%
3,154,450 Altria Group, Inc. 63,089,000
1,264,965 Philip Morris International, Inc. (e) 64,551,164
367,132 Vector Group Ltd. 6,325,684
--------------------------------------------------------------------------------
133,965,848
--------------------------------------------------------------------------------
ENERGY - 40.6%
163,800 Anadarko Petroleum Corp. 10,902,528
116,600 Apache Corp. 15,703,688
821,500 ARC Energy Trust (Canada) 21,241,049
150,000 Baytex Energy Trust (Canada) 3,772,500
889,700 Bonavista Energy Trust (Canada) (d) 27,315,583
43,800 BP Prudhoe Bay Royalty Trust 4,051,938
303,400 Chevron Corp. 29,171,910
686,200 ConocoPhillips (f) 59,116,130
1,200,900 Crescent Point Energy Trust (Canada) 38,527,533
337,000 Devon Energy Corp. (f) 38,215,800
100,000 Double Hull Tankers, Inc. (Channel Islands) 1,025,000
403,700 Enerplus Resources Fund (Canada) 18,126,130
868,300 Fairborne Energy Ltd. (Canada) 7,828,581
546,828 Harvest Energy Trust (Canada) 12,139,582
82,900 NAL Oil & Gas Trust (Canada) 1,191,929
365,600 Pengrowth Energy Trust - Class A (Canada) 7,205,976
813,000 Penn West Energy Trust (Canada) 24,528,210
100,800 San Juan Basin Royalty Trust 3,873,744
91,800 Vermilion Energy Trust (Canada) 3,616,032
95,200 W.P. Stewart & Co. (Bermuda) 143,752
57,500 Williams Coal Seam Gas Trust 579,600
--------------------------------------------------------------------------------
328,277,195
--------------------------------------------------------------------------------
FINANCIALS - 23.6%
99,400 Allstate Corp. 5,005,784
228,300 Apollo Investment Corp. 3,693,894
540,000 Bank of America Corp. 20,271,600
750,000 Cypress Shapridge Investments, Inc. - REIT (a) (c) 4,500,000
1,515,000 Fannie Mae (f) 42,874,500
68,600 Hartford Financial Services Group, Inc. 4,889,122
724,800 KeyCorp. 17,489,424
233,600 PNC Financial Services Group, Inc. 16,200,160
415,000 Regions Financial Corp. 9,096,800
448,600 U.S. Bancorp 15,203,054
348,300 Wachovia Corp. 10,152,945
3,356,458 Washington Mutual, Inc. (f) 41,250,869
--------------------------------------------------------------------------------
190,628,152
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
HEALTH CARE - 3.0%
362,400 Eli Lilly & Co. $ 17,445,936
211,400 UnitedHealth Group, Inc. 6,897,982
--------------------------------------------------------------------------------
24,343,918
--------------------------------------------------------------------------------
INDUSTRIALS - 0.7%
333,900 Contrans Income Fund (Canada) 2,934,182
56,800 Eagle Bulk Shipping, Inc. (Marshall Island) 1,671,624
104,900 New Flyer Industries, Inc. (Canada) 1,181,180
--------------------------------------------------------------------------------
5,786,986
--------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.1%
107,000 Alaska Communications Systems Group, Inc. 1,196,260
--------------------------------------------------------------------------------
UTILITIES - 1.6%
261,300 Empire District Electric Co. 5,442,879
152,200 Great Plains Energy, Inc. 3,902,408
90,000 Progress Energy, Inc. 3,779,100
--------------------------------------------------------------------------------
13,124,387
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS - 86.4%
(Cost $664,496,983) 699,668,098
--------------------------------------------------------------------------------
PREFERRED STOCKS - 45.0%
CONSUMER DISCRETIONARY - 0.2%
81,250 Red Lion Hotels Capital Trust, 9.500% 2,011,344
--------------------------------------------------------------------------------
CONSUMER STAPLES - 1.4%
140,000 Dairy Farmers of America, 7.875% (a) 11,484,382
--------------------------------------------------------------------------------
FINANCIALS - 41.7%
200,000 ABN AMRO Capital Fund Trust VII, 6.080% 4,288,000
80,000 AEGON N.V., 6.875% (Netherlands) 1,826,400
33,400 Arch Capital Group, Ltd., 7.875% (Bermuda) 821,640
340,000 Arch Capital Group, Ltd., 8.000% (Bermuda) 8,500,000
20,000 Aspen Insurance Holdings Ltd., 7.401% (Bermuda) (b) 438,750
218,100 Axis Capital Holdings Ltd., Series A, 7.250% (Bermuda) 5,197,323
50,000 Axis Capital Holdings Ltd., Series B, 7.500%
(Bermuda) (b) 4,821,875
10,000,000 Barclays Bank PLC, 8.550% (United Kingdom) (a) (b) 10,026,870
11,000,000 CA Preferred Funding Trust, 7.000% 10,644,568
189,300 Chevy Chase Bank, Series C, 8.000% 4,562,130
60,000 CIT Group, Inc., Series A, 6.350% 828,600
225,000 CIT Group, Inc. 8.750% 12,543,750
300,000 Deutsche Bank Capital Funding Trust VIII, 6.375% 6,840,000
412,000 Endurance Specialty Holdings, Ltd., 7.750% (Bermuda) 9,743,800
200,000 Fannie Mae, Series E, 5.100% 6,856,260
4,400,000 Fannie Mae, 8.250% (f) 110,176,000
80,000 Fannie Mae, Series O, 7.000% (b) 3,685,000
1,200,000 Fannie Mae, 6.750% 27,732,000
280,000 Fannie Mae, Series P, 4.500% (a) (b) 5,040,000
48,700 Franklin Bank Corp., Series A, 7.500% 377,425
100,000 Freddie Mac, Series O, 5.810% 4,075,000
25,000 Freddie Mac, Series T, 6.420% 1,203,750
See notes to financial statements.
12 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
FINANCIALS (CONTINUED)
80,000 Goldman Sachs Group, Inc., 6.200% $ 1,879,200
200,000 Hilltop Holdings, Inc. 8.250% 4,086,000
7,042,000 HSBC Capital Funding LP, 10.176%
(Channel Islands) (a) (b) 8,721,193
12,840,000 HSBC Capital Funding LP, 9.547%
(Channel Islands) (a) (b) 13,381,219
100,000 HSBC Holdings PLC, Series A, 6.200% (United Kingdom) 2,250,000
140,500 Lehman Brothers Holdings, Inc., Series F, 6.500% 3,003,890
2,000,000 Lloyds TSB Bank PLC, 6.900% (United Kingdom) 1,940,000
80,000 LTC Properties, Inc. - REIT, Series F, 8.000% 1,951,200
200,000 Merrill Lynch & Co., Inc. 6.700% 4,560,000
50,000 MetLife, Inc., Series B, 6.500% 1,151,500
100,000 Morgan Stanley, Series A, 4.000% (b) 1,909,000
245,000 Odyssey Re Holdings Corp., Series A, 8.125% 6,063,750
152,100 Odyssey Re Holdings Corp., Series B, 6.020% (b) 3,312,738
400,000 Omega Healthcare Investors, Inc - REIT,
Series D, 8.375% 9,960,000
31,000,000 Prudential PLC, 6.500% (United Kingdom) (d) 27,214,900
100,000 Santander Finance Preferred SA Unipersonal, 6.800%
(Spain) 2,236,000
577,400 Scottish Re Group Ltd., 7.250% (Cayman Islands) (b) 3,229,860
--------------------------------------------------------------------------------
337,079,591
--------------------------------------------------------------------------------
UTILITIES - 1.7%
80,000 Alabama Power Co., 5.300% 1,686,400
120,000 PPL Electric Utilities Corp., 6.250% 2,880,000
385,500 Southern Union Co., 7.550% 9,386,925
--------------------------------------------------------------------------------
13,953,325
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS - 45.0%
(Cost $402,179,182) 364,528,642
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 11.7%
CONSUMER STAPLES - 4.7%
25,000 Universal Corp., 6.750% (d) 38,193,750
--------------------------------------------------------------------------------
FINANCIALS - 7.0%
505 Fannie Mae, 5.375% (d) 35,855,126
142 Washington Mutual, Inc. 14,200,000
11,000,000 Washington Mutual Preferred Funding LLC, 6.895%
(a) (b) 6,825,588
--------------------------------------------------------------------------------
56,880,714
--------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $95,132,904) 95,074,464
--------------------------------------------------------------------------------
INVESTMENT COMPANIES - 1.8%
116,000 Cohen & Steers REIT and Preferred Income Fund 2,484,720
246,200 Evergreen Income Advantage Fund 2,883,002
222,600 Hyperion Brookfield Total Return Fund, Inc 1,576,008
190,000 Nuveen Multi-Strategy Income and Growth Fund 2 2,025,400
161,200 Nuveen Quality Preferred Income Fund II 1,832,844
272,200 Pioneer High Income Trust 4,156,494
--------------------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(Cost $18,999,070) 14,958,468
--------------------------------------------------------------------------------
PRINCIPAL OPTIONAL
AMOUNT CALL PROVISIONS VALUE
--------------------------------------------------------------------------------------
CORPORATE BONDS - 8.2%
COMMUNICATIONS - 0.3%
$ 300,000 Idearc, Inc., BB-, 8.000%, 11/15/16 11/15/11 @ 104 $ 196,500
2,700,000 Univision Communications, CCC, 9.75%,
3/15/15 (a) 3/15/11 @ 105 1,957,500
--------------------------------------------------------------------------------------
2,154,000
--------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 1.1%
900,000 ARAMARK Corp., B, 8.500%, 2/01/15 2/01/11 @ 104 942,750
3,000,000 Ford Motor Co., CCC+, 7.450%, 7/16/31 N/A 2,257,500
3,000,000 General Motors Corp., B, 8.375%, 7/15/33 N/A 2,298,750
2,000,000 Hertz Corp. (The), B, 10.500%, 1/01/16 1/01/11 @ 105 2,022,500
2,535,000 Station Casinos, Inc., B-, 6.500%,
2/01/14 2/01/09 @ 102 1,673,100
--------------------------------------------------------------------------------------
9,194,600
--------------------------------------------------------------------------------------
ENERGY - 0.4%
2,871,000 Compton Petroleum Finance Corp., B, 7.625%,
12/01/13 (Canada) 12/01/09 @ 104 2,835,113
500,000 Connacher Oil and Gas Ltd., BB, 10.250%,
12/15/15 (Canada) (a) 12/15/11 @ 105 530,000
--------------------------------------------------------------------------------------
3,365,113
--------------------------------------------------------------------------------------
FINANCIALS - 3.6%
3,000,000 Ford Motor Credit Co., B, 7.375%, 2/1/11 N/A 2,760,009
13,354,000 Old Mutual Capital Funding LP, NR,
8.000%, 5/29/49 (Channel Islands) 12/22/08 @ 100 12,953,380
2,000,000 Preferred Term Securities XI Ltd., NR
Subordinate Income Notes 19.000%,
9/24/33 (a) (b) N/A 1,353,800
3,000,000 Preferred Term Securities XIX Ltd., NR
Subordinate Income Notes 13.500%,
12/22/35 (a) (b) N/A 1,830,000
2,000,000 Preferred Term Securities XX Ltd., NR
Subordinate Income Notes 14.000%, 3/22/38
(a) (b) N/A 1,215,000
2,000,000 Preferred Term Securities XXI Ltd., NR
Subordinate Income Notes 15.000%, 3/22/38 (b) N/A 1,384,000
5,400,000 RBS Capital Trust, Series B, 6.800%,
12/29/49 9/30/08 @ 100 5,239,080
3,250,000 Royal Bank Of Scotland Group PLC, A, 7.648%,
8/29/49 (United Kingdom) (b) 9/30/31 @ 100 2,745,899
--------------------------------------------------------------------------------------
29,481,168
--------------------------------------------------------------------------------------
HEALTH CARE - 1.3%
1,900,000 Community Health Systems Inc, B,
8.875%, 7/15/15 7/15/11 @ 104 1,985,500
2,300,000 HCA, Inc., B-, 6.500%, 2/15/16 N/A 2,070,000
4,500,000 HCA, Inc., BB-, 9.250%, 11/15/16 11/15/11 @ 105 4,848,750
1,600,000 ReAble Therapeutics Finance Corp., B-,
10.875%, 11/15/04 (a) 11/15/11 @ 105 1,612,000
--------------------------------------------------------------------------------------
10,516,250
--------------------------------------------------------------------------------------
INDUSTRIALS - 0.5%
1,500,000 Casella Waste Systems, Inc., B, 9.750%,
2/01/13 6/12/08 @ 105 1,477,500
2,000,000 Crown Cork & Seal Co., Inc., B, 8.000%,
4/15/23 6/12/08 @ 102 1,880,000
500,000 Owens-Illinois, Inc., B+, 7.800%, 5/15/18 N/A 507,500
--------------------------------------------------------------------------------------
3,865,000
--------------------------------------------------------------------------------------
See notes to financial statements.
SemiAnnual Report | April 30, 2008 | 13
DCS | Dreman/Claymore Dividend & Income Fund |
PORTFOLIO OF INVESTMENTS (unaudited) continued
PRINCIPAL OPTIONAL
AMOUNT CALL PROVISIONS VALUE
--------------------------------------------------------------------------------------
MATERIALS - 0.3%
$ 5,000,000 Abitibi-Consolidated Co., CCC+,
8.375%, 4/01/15 (Canada) N/A $ 2,075,000
--------------------------------------------------------------------------------------
RETAIL - 0.4%
1,900,000 Rite Aid Corp., 8.625%, 3/01/15 3/01/11 @ 104 1,553,250
2,000,000 Neiman-Marcus Group, Inc., B+,
9.000%, 10/15/15 10/15/10 @ 105 2,090,000
--------------------------------------------------------------------------------------
3,643,250
--------------------------------------------------------------------------------------
UTILITIES - 0.3%
2,000,000 Texas Competitive Electric Holdings Co. LLC, CCC
10.25%, 11/1/15 (a) 11/1/11 @ 105 2,095,000
--------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS - 8.2%
(Cost $75,661,024) 66,389,381
--------------------------------------------------------------------------------------
TERM-LOANS (FUNDED) - 1.5%
2,394,000 Bausch & Lomb Term Loan, Parent Tranche,
5.946%, 4/26/15 (b) 2,367,690
300,000 Bausch & Lomb Term Loan, Delayed Tranche,
5.946%, 4/26/15 (b) 296,703
530,701 First Data Corp., Tranche B3, 5.446%, 9/24/14 (b) 498,958
7,429,299 First Data Corp., Tranche B3, 5.348%, 9/24/14 (b) 6,984,938
2,556,429 TXU Bank, Tranche B2, 6.596%, 10/10/14 (b) 2,452,574
428,571 TXU Bank, Tranche B2, 6.477%, 10/10/14 (b) 411,161
--------------------------------------------------------------------------------------
TOTAL TERM-LOANS (FUNDED)
(Cost $13,431,410) 13,012,024
--------------------------------------------------------------------------------------
TERM-LOANS (UNFUNDED) - 0.1%
300,000 Bausch & Lomb Term Loan, Delayed Tranche, 4/26/15 (b)
(Cost $301,108) 296,703
--------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------------
LIMITED PARTNERSHIP - 0.2%
REAL ESTATE - 0.2%
Kodiak Funding, LP (c)
4,000,000 (Cost $3,570,000) 1,924,928
--------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.1%
602,717 Dreyfus Money Market Bond Fund
(Cost $602,717) 602,717
--------------------------------------------------------------------------------------
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS PURCHASED(e) DATE PRICE VALUE
------------------------------------------------------------------------------------------------------
CALL OPTIONS PURCHASED - 0.3%
4,000 Financial Select Sector SPDR Fund January 2009 $ 30.00 $ 460,000
44,000 Financial Select Sector SPDR Fund January 2009 33.00 1,936,000
------------------------------------------------------------------------------------------------------
TOTAL CALL OPTIONS PURCHASED
(Cost $14,839,584) 2,396,000
------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 155.3%
(Cost $1,289,213,982) 1,258,851,425
Liabilities in excess of Other Assets - (0.1%) (992,263)
Total Options Written (Premiums received $18,449,426) - (2.8%) (22,440,000)
Preferred Shares, at Liquidation Value - (-52.4% of Net Assets Applicable
to Common Shares or -33.8% of Total Investments) (425,000,000)
------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES - 100.0% $ 810,419,162
======================================================================================================
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) PUT OPTIONS WRITTEN(e) DATE PRICE VALUE
------------------------------------------------------------------------------------------------------
48,000 Financial Select Sector SPDR Fund January 2009 $ 30.00 $ 22,440,000
------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Premiums received $18,449,426) $ 22,440,000
======================================================================================================
LP - Limited Partnership
REIT - Real Estate Investment Trust
(a) Securities are 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. At April 30,
2008, these securities amounted to 8.8% of net assets applicable to common
shares.
(b) Floating or variable rate security.
(c) Security is valued in accordance with Fair Valuation procedures established
in good faith by the Board of Trustees. The total market value of such
securities is $6,424,928 which represents 0.8% of Net Assets Applicable to
Common Shares.
(d) All or a portion of this security position represents cover for outstanding
options written.
(e) Non-income producing security.
(f) All or a portion of these securities have been physically segregated in
connection with swap agreements and open futures contracts.
Ratings shown are per Standard & Poor's; securities classified NR are not rated
by Standard & Poor's.
All percentages shown in the Portfolio of Investments are based on Net Assets
Applicable to Common Shares unless otherwise noted.
See notes to financial statements.
14 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Statement of ASSETS AND LIABILITIES | APRIL 30, (2008) (unaudited)
ASSETS
Investments in securities, at value (cost $1,289,213,982) $1,258,851,425
Receivable for securities sold 17,148,815
Dividends and interest receivable 4,887,693
Variation margin receivable 50,351
--------------------------------------------------------------------------------------------------------------
Total assets 1,280,938,284
--------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written at value (premiums received of $18,449,426) 22,440,000
Payable for securities purchased 16,504,997
Unrealized depreciation on interest rate swap 3,255,716
Variation margin payable 1,654,688
Advisory fee payable 845,138
Dividends payable - preferred shares 380,691
Due to custodian 300,000
Administrative fee payable 16,821
Accrued expenses and other liabilities 121,071
--------------------------------------------------------------------------------------------------------------
Total liabilities 45,519,122
--------------------------------------------------------------------------------------------------------------
PREFERRED SHARES, AT REDEMPTION VALUE
Auction Market Preferred Shares $.01 par value per share; 17,000 authorized,
issued and outstanding at $25,000 per share liquidation preference 425,000,000
--------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $810,419,162
==============================================================================================================
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, $.01 par value per share; unlimited number of shares authorized,
45,399,424 shares issued and outstanding $ 453,994
Additional paid-in capital 859,670,266
Accumulated net unrealized depreciation on investments, currency, options,
and swap transactions (38,952,795)
Accumulated net realized loss on investments, futures, options, currency,
and swap transactions (4,804,915)
Accumulated distributions in excess of net investment income (5,947,388)
--------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $810,419,162
==============================================================================================================
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS
(based on 45,399,424 common shares outstanding) $ 17.85
==============================================================================================================
See notes to financial statements.
SemiAnnual Report | April 30, 2008 l
DCS | Dreman/Claymore Dividend & Income Fund
Statement of OPERATIONS | FOR THE SIX MONTHS ENDED APRIL 30, (2008) (unaudited)
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $1,128,140) $ 30,158,010
Interest (net of foreign withholding taxes of $183,608) 7,588,432
--------------------------------------------------------------------------------------------------------------
Total income $ 37,746,442
--------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 5,271,646
Auction agent fee-preferred shares 550,854
Custodian fee 118,148
Professional fees 112,768
Administrative fee 106,773
Fund accounting 100,692
Printing expenses 89,907
Trustees' fees and expenses 82,529
Insurance expense 28,935
NYSE listing 17,836
Transfer agent fee 9,919
Miscellaneous 7,437
Rating agency fee 7,098
--------------------------------------------------------------------------------------------------------------
Total expenses 6,504,542
--------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 31,241,900
--------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES, SWAP AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Options 8,234,924
Investments (13,609,226)
Swaps (209,621)
Futures (202,916)
Foreign currency transactions (4,373)
Net change in unrealized appreciation (depreciation) on:
Options (14,582,999)
Investments (190,562,533)
Swaps (3,411,525)
Futures (1,344,360)
Foreign currency translations (782)
--------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS, FUTURES, OPTIONS, AND SWAP TRANSACTIONS (215,693,411)
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHARES FROM
Net investment income (10,216,572)
--------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $(194,668,083)
==============================================================================================================
See notes to financial statements.
16 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Statements of CHANGES IN NET ASSETS APPLICABLE TO COMMON SHARES |
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 2008 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2007
----------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS
Net investment income $ 31,241,900 $ 69,743,712
Net realized gain (loss) on investments, futures, options, currency,
and swap transactions (5,791,212) 5,361,408
Net change in unrealized appreciation (depreciation) on investments,
futures, currency, options, and swap transactions (209,902,199) (44,064,690)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (10,216,572) (22,730,366)
----------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to common shareholders
resulting from operations (194,668,083) 8,310,064
----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (29,509,626) (59,019,251)
----------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (29,509,626) (59,019,251)
----------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to common shareholders (224,177,709) (50,709,187)
NET ASSETS
Beginning of period 1,034,596,871 1,085,306,058
----------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income of ($5,947,388) and $2,536,910, respectively.) $ 810,419,162 $1,034,596,871
================================================================================================================
See notes to financial statements.
SemiAnnual Report | April 30, 2008 | 17
DCS | Dreman/Claymore Dividend & Income Fund
Financial HIGHLIGHTS |
FOR THE
PERIOD
FOR THE JANUARY 27,
SIX MONTHS ENDED FOR THE FOR THE FOR THE 2004*
PER SHARE OPERATING PERFORMANCE APRIL 30, YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING 2008 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
THROUGHOUT THE PERIOD (UNAUDITED) 2007 2006 2005 2004
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.79 $ 23.91 $ 20.62 $ 18.89 $ 19.10(b)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.69 1.54 1.42 1.20 0.86
Net realized and unrealized gain (loss)
on investments, futures and swap transactions (4.75) (0.86) 3.61 2.11 (0.18)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income and return of capital
(common share equivalent basis) (0.23) (0.50) (0.44) (0.28)(g) (0.09)
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (4.29) 0.18 4.59 3.03 0.59
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.65) (1.30) (1.30) (1.30) (0.65)
Return of capital -- -- -- 0.00(f) --
------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (0.65) (1.30) (1.30) (1.30) (0.65)
------------------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED SHARES' OFFERING EXPENSES CHARGED
TO PAID-IN-CAPITAL -- -- -- -- (0.15)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.85 $ 22.79 $ 23.91 $ 20.62 $ 18.89
====================================================================================================================================
MARKET VALUE, END OF PERIOD $ 15.35 $ 19.62 $ 21.61 $ 18.20 $ 17.88
====================================================================================================================================
TOTAL INVESTMENT RETURN (C)
Net asset value -18.88% 0.67% 23.05% 16.24% 2.47%
Market value -18.51% (3.53)% 26.97% 8.97% (7.33)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, applicable to common shareholders,
end of period (thousands) $ 810,419 $1,034,697 $1,085,306 $ 936,010 $ 857,388
Preferred Shares, at liquidation value ($25,000
per share liquidation preference) (thousands) $ 425,000 $ 425,000 $ 425,000 $ 425,000 $ 425,000
Preferred Shares asset coverage per share $ 72,672 $ 85,859 $ 88,842 $ 80,059 $ 75,435
Ratios to Average Net Assets applicable to
Common Shares:
Total expenses, including interest expense 1.59%(d)(h) 1.42%(h) 1.47% 1.50% 1.53%(d)
Interest expense -- -- -- -- 0.07%(d)
Net investment income, prior to effect of
dividends to preferred shares 7.64%(d) 6.47% 6.41% 5.82% 6.20%(d)
Net investment income, after effect of
dividends to preferred shares 5.14%(d) 4.36% 4.40% 4.45% 5.57%(d)
Ratios to Average Managed Assets: (e)
Total expenses, including interest expense 1.05%(d)(h) 1.02%(h) 1.03% 1.03% 1.05%(d)
Interest expense -- -- -- -- 0.05%(d)
Net investment income, prior to effect of
dividends to preferred shares 5.04%(d) 4.64% 4.50% 4.00% 4.28%(d)
Portfolio turnover 37% 55% 25% 17% 6%
* Commencement of operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(d) Annualized.
(e) Managed assets is equal to net assets applicable to common shareholders
plus outstanding leverage, such as the liquidation value of preferred
shares.
(f) Amount is less than $.01.
(g) Distributions partially from return of capital
(h) Expense ratio does not reflect fees and expenses incurred indirectly by the
Fund as a result of its investments in shares of other investment
companies. If these fees were included in the expense ratio, the net impact
to the expense ratio would be 0.02% for the six-months ended April 30, 2008
and the year ended October 31, 2007. The impact to the expense ratio as a
result of investments in other investment companies was not required prior
to 2007. As a result, the impact has not been disclosed for the years prior
to 2007.
See notes to financial statements.
18 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Notes to FINANCIAL STATEMENTS | APRIL 30, (2008) (unaudited)
Note 1 - ORGANIZATION:
Dreman/Claymore Dividend & Income Fund (the "Fund") was organized as a Delaware
statutory trust on October 20, 2003. The Fund is registered as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended.
The Fund's primary investment objective is to provide a high level of current
income, with a secondary objective of capital appreciation. The Fund will pursue
its investment objectives by investing its assets primarily in dividend-paying
common and preferred stocks. There can be no assurance that the Fund will
achieve its investment objectives. The Fund's investment objectives are
considered fundamental and may not be changed without shareholder approval.
Note 2 - ACCOUNTING POLICIES:
The preparation of the financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund.
(A) VALUATION OF INVESTMENTS
The Fund values equity securities at the last reported sale price on the
principle exchange or in the principle OTC market in which such securities are
traded, as of the close of regular trading on the NYSE on the day the securities
are being valued or, if there are no sales, at the mean between the last
available bid and asked prices on that day. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Debt securities are valued by
independent pricing services or dealers using the mean of the closing bid and
asked prices for such securities or, if such prices are not available, at prices
for securities of comparable maturity, quality and type. For those securities
where quotations or prices are not available, valuations are determined in
accordance with procedures established in good faith by the Board of Trustees.
Futures contracts are valued using the settlement price established each day on
the exchange on which they are traded. Interest rate swaps are valued at closing
prices for such contracts established by the exchange or dealer market on which
they are traded. Exchange traded options are valued at the mean between the bid
and asked prices on the principal exchange on which it is traded. Short-term
securities with maturities of 60 days or less at time of purchase are valued at
amortized cost, which approximates market value.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
(C) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates or to manage the duration of
its portfolio. The swaps are valued at current market value and any unrealized
gain or loss is included in the Statement of Operations. The Fund accrues for
the interim payments on swap contracts on a daily basis, with the net amount
recorded within unrealized appreciation/depreciation of swap contracts on the
Statement of Assets and Liabilities. Once the interim payments are settled in
cash, the net amount is recorded as realized gain/loss on swaps, in addition to
realized gain/loss recorded upon the termination of swap contracts on the
Statement of Operations. During the period that the swap agreement is open, the
Fund may be subject to risk from the potential inability of the counterparty to
meet the terms of the agreement. The swaps involve elements of both market and
credit risk in excess of the amounts reflected on the Statement of Assets and
Liabilities.
The Fund entered into interest rate swap agreements during the six months ended
April 30, 2008 in order to partially hedge its exposure to short-term interest
rates paid to its auction market preferred shareholders. Details of the swap
agreement outstanding as of April 30, 2008 were as follows:
NOTIONAL UNREALIZED
TERMINATION AMOUNT FIXED FLOATING APPRECIATION
COUNTERPARTY DATE (000) RATE RATE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 09/21/2009 $150,000 4.34% 1 Month LIBOR $(3,255,716)
For the swap noted, the Fund pays the fixed rate and receives the floating rate.
(D) FUTURES
A futures contract is an agreement to buy or sell a financial instrument at a
particular price on a stipulated future date. Upon entering into a futures
contract, the Fund is required to make an initial margin deposit established by
the exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the counterparty an amount of cash equal
to the daily fluctuation in the value of the contract. Such receipt or payment
is known as the
SemiAnnual Report | April 30, 2008 | 19
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
variation margin and is recorded by the Fund as unrealized appreciation or
depreciation. The Fund bears the market risk that arises from the change in the
value of these financial instruments.
At April 30, 2008, the following futures contracts were outstanding:
UNREALIZED
SHORT NUMBER OF EXPIRATION ORIGINAL VALUE AT APPRECIATION
CONTRACTS CONTRACTS MONTH VALUE APRIL 30, 2008 (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------
US Treasury Bonds (CBT) 2,118 June-08 $246,901,645 $247,574,355 $ (672,710)
S&P 500 (CME) 38 June-08 $ 12,495,350 $ 13,167,000 (671,650)
--------------------------------------------------------------------------------------------------------------
$(1,344,360)
(E) OPTIONS
The Fund may purchase or sell, (write) options on securities and securities
indices which are listed on a national securities exchange or in the
over-the-counter ("OTC") market as a means of achieving additional return or of
hedging the value of the Fund's portfolio. An option on a security is a contract
that gives the holder of the option, in return for a premium, the right to buy
from (in the case of a call) or sell to (in the case of a put) the writer of the
option the security underlying the option at a specified exercise or "strike"
price. The writer of an option on a security has an obligation upon exercise of
the option to deliver the underlying security upon payment of the exercise price
(in the case of a call) or to pay the exercise price upon delivery of the
underlying security (in the case of a put). There are several risks associated
with transactions in options on securities. As the writer of a covered call
option, the Fund forgoes, during the option's life, the opportunity to profit
from increases in the market value of the security covering the call option
above the sum of the premium and the strike price of the call but has retained
the risk of loss should the price of the underlying security decline. The writer
of an option has no control over the time when it may be required to fill its
obligation as writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
security at the exercise price.
(F) DISTRIBUTIONS
The Fund intends to declare quarterly dividends to common shareholders at a
fixed rate per common share based on its projected performance, which rate may
be adjusted from time to time. Accordingly, for U.S. generally accepted
accounting principles, the Fund may declare and pay dividends in excess of its
net investment income on the Statement of Operations. However, the ultimate
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles. Permanent differences relating to the difference between book and
tax characterization of distributions have been reclassed on the Statements of
Assets and Liabilities.
(G) CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the bid and asked price of the respective exchange
rates on the last day of the period. Purchases and sales of investments
denominated in foreign currencies are translated at the exchange rate on the
date of the transaction.
Foreign exchange gain or loss resulting from holding of a foreign currency,
expiration of a currency exchange contract, difference in the exchange rates
between the trade date and settlement date of an investment purchased or sold,
and the difference between dividends actually received compared to the amount
shown in a Fund's accounting records on the date of receipt are included as net
realized gains or losses on foreign currency forwards and currency transactions
in the Fund's Statement of Operations.
Foreign exchange gain or loss on assets and liabilities, other than investments,
are included in unrealized appreciation (depreciation) on foreign currency
transactions.
Note 3 - INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENT AND OTHER
AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC ("the Adviser"), the Adviser will furnish offices,
necessary facilities and equipment, provide administrative services, oversee the
activities of Dreman Value Management, LLC (the "Investment Manager"), provide
personnel including certain officers required for the Fund's administrative
management and compensate all officers and trustees of the Fund who are its
affiliates. As compensation for these services, the Fund will pay the Adviser a
fee, payable monthly, in an amount equal to 0.85% of the Fund's average managed
assets (net assets applicable to common shareholders plus any assets
attributable to financial leverage).
The Adviser has entered into a Sub-Advisory Agreement with the Investment
Manager. Pursuant to the terms of this agreement, the Investment Manager, under
the supervision of the Fund's Board of Trustees and the Adviser, will provide a
continuous investment program for the Fund's portfolio; provide investment
research and make and execute recommendations for the purchase and sale of
securities; and provide certain facilities and personnel, including officers
required for the Fund's administrative management, and compensation of all
officers and trustees of the Fund who are its affiliate. For these services, the
Adviser has agreed to pay the
20 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
Investment Manager an aggregate amount equal to 60% of the investment advisory
fees paid to the Adviser by the Fund, net of any additional compensation
payments to underwriters of the common share offering.
Under a separate Fund Administration agreement, the Adviser provides fund
administration services to the Fund.
The Advisor receives a fund administration fee payable monthly at the annual
rate set forth below as a percentage of the average daily managed assets of the
Fund.
MANAGED ASSETS RATE
-----------------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
-----------------------------------------------------------------------
For the six months ended April 30, 2008 the Fund recognized expenses of
approximately $106,800 for these services.
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting
agent, and transfer agent. As custodian, BNY is responsible for the custody of
the Fund's assets. As accounting agent BNY is responsible for maintaining the
books and records of the Fund's securities and cash. As transfer agent, BNY is
responsible for performing transfer agency services for the Fund.
Note 4 - FEDERAL INCOME TAXES:
The Fund intends to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing substantially all of its ordinary income and long-term
capital gains, if any, during each calendar year, the Fund intends not to be
subject to U.S. federal excise tax.
Information on the components of investments as of April 30, 2008 is as follows:
NET TAX
NET TAX UNREALIZED
COST OF GROSS TAX GROSS TAX UNREALIZED DEPRECIATION ON
INVESTMENTS UNREALIZED UNREALIZED DEPRECIATION ON DERIVATIVES AND
FOR TAX PURPOSES APPRECIATION DEPRECIATION INVESTMENTS FOREIGN CURRENCY
----------------------------------------------------------------------------------------------------------------
$1,288,248,459 $175,831,460 $(205,228,494) $(29,397,034) $(7,246,290)
----------------------------------------------------------------------------------------------------------------
The difference between book and tax basis unrealized appreciation/(depreciation)
is attributable to the tax deferral of losses on wash sales, income
reclassifications from real estate investment trusts, royalty trusts,
partnerships and investments in preferred securities.
For the year ended October 31, 2007, the tax character of distributions paid to
common and preferred shareholders as reflected in the statement of changes in
net assets was as follows:
DISTRIBUTIONS PAID FROM: 2007
--------------------------------------------------------------------------------
Capital gain - common shares $ 8,831,953
Capital gain - preferred shares 3,392,877
Ordinary income - common shares 50,187,298
Ordinary income - preferred shares 19,337,489
--------------------------------------------------------------------------------
$81,749,617
--------------------------------------------------------------------------------
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Company's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. Management
has evaluated the implications of FIN 48 and has determined it does not have any
impact on the financial statements as of April 30, 2008. Tax years 2004, 2005,
2006, and 2007 are still subject to examination by major jurisdictions
Note 5 - INVESTMENTS IN SECURITIES:
For the six months ended April 30, 2008, the cost of purchases and proceeds from
sales of investments, excluding options and short-term securities, were
$477,605,749 and $504,401,921, respectively.
SemiAnnual Report | April 30, 2008 | 21
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
Transactions in option contracts during the six months ended April 30, 2008 were
as follows:
NUMBER OF CONTRACTS PREMIUMS RECEIVED
------------------------------------------------------------------------------------------
Options outstanding, beginning of year 69,186 $ 13,938,789
Options written during the period 66,130 25,801,854
Options expired during the period (33,250) (8,234,924)
Options assigned during the period (54,066) (13,056,293)
------------------------------------------------------------------------------------------
Options outstanding, end of period 48,000 $ 18,449,426
------------------------------------------------------------------------------------------
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 45,399,424 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue any shares during the period ended
April 30, 2008.
PREFERRED SHARES
On March 23, 2004, the Fund issued 3,400 shares of Preferred Shares Series M7,
3,400 shares of Preferred Shares Series T28, 3,400 shares of Preferred Shares
Series W7, 3,400 shares of Preferred Shares Series TH28 and 3,400 shares of
Preferred Shares Series F7 each with a net asset and liquidation value of
$25,000 per share plus accrued dividends. Bank of New York Mellon is the auction
agent and provides administrative, transfer agency, and dividend distribution
services for the preferred shares. Dividends are accumulated daily at an annual
rate set through auction procedures.
The broad auction-rate preferred securities market, including the Fund's Auction
Market Preferred Shares ("AMPS"), has experienced considerable disruption in the
past several months. The result has been failed auctions on nearly all
auction-rate preferred shares, including the Fund's AMPS. A failed auction is
not a default, nor does it require the redemption of the Fund's AMPS. Provisions
in the offering documents of the Fund's AMPS provide a mechanism to set a
maximum rate in the event of a failed auction. This maximum rate is LIBOR +
1.25% or LIBOR x 125%, whichever is greater.
For the six months ended April 30, 2008, the annualized dividend rates ranged
from:
HIGH LOW AT APRIL 30, 2008
-----------------------------------------------------------------------
Series M7 5.85% 3.85% 4.01%
Series T28 5.70% 3.90% 4.15%
Series W7 6.00% 3.93% 4.08%
Series TH28 6.15% 3.97% 3.97%
Series F7 5.85% 3.79% 4.04%
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.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect Class I Trustees and on
any matters affecting the rights of the Preferred Shares.
Note 7 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would require
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
22 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS (unaudited) continued
Note 8 - ACCOUNTING PRONOUNCEMENTS:
In September 2006, the FASB released Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the
definition of fair value for financial reporting, establishes a framework for
measuring fair value and requires additional disclosures about the use of fair
value measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. As of April 30, 2008, the Fund does not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosure will be required about the inputs used to develop
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivatives instruments and related hedge fund
items are accounted for, and c) how derivative instruments and related hedge
items affect a fund's financial position, results of operations and cash flows.
SFAS No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. As of April 30, 2008,
management does not believe the adoption of SFAS No. 161 will impact the
financial statement amounts; however, additional footnote disclosures may be
required about the use of derivative instruments and hedging items.
Note 9 - SUBSEQUENT EVENT:
On May 1, 2008, the Board of Trustees declared a quarterly dividend of $0.325
per common share. This dividend was payable on May 30, 2008 to shareholders of
record on May 15, 2008.
SemiAnnual Report | April 30, 2008 | 23
DCS | Dreman/Claymore Dividend & Income Fund
Supplemental INFORMATION | (unaudited)
TRUSTEES
The Trustees of the Dreman/Claymore Dividend & Income Fund and their principal
occupations during the past five years:
NUMBER OF
PORTFOLIOS
IN THE FUND
COMPLEX***
NAME, ADDRESS*, YEAR TERM OF OFFICE** PRINCIPAL OCCUPATIONS DURING OVERSEEN
OF BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND BY OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Richard L. Crandall Since 2004 Managing Partner of Aspen Partners, LLC 1 Chairman, Novell, Inc., and
Year of Birth: 1943 since 2003, Founding Co-Partner of Arbor Pelstar, LLC Director, Diebold
Trustee Venture Partners, LLC since 2000, and Inc., and iTracs Corp.
Chairman of Enterprise Software Roundtable
since 1994. Formerly, Director and Special
Advisor of GIGA Information Group
(1995-2003) and Chairman of GIGA Information
Group (2002-2003), Founder and ex-Chairman
and CEO of Comshare, Inc. (1966-1994).
------------------------------------------------------------------------------------------------------------------------------------
Roman Friedrich III Since 2004 Founder of Roman Friedrich & Company, which 1 Director, StrataGold Corp.;
Year of Birth: 1946 specializes in the provision of financial Gateway Gold Corp. and GFM
Trustee advisory services to corporations in the Resources Ltd.
resource sector. Previously, Managing
Director at TD Securities. Managing Director
Lancaster Financial Ltd.; Wood Gundy; Burns
Fry Ltd.; President, Chase Manhattan Bank
(Canada) Ltd.
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, a law 44 None
Year of birth: 1953 firm specializing in corporate law, estate
Trustee planning and business transactions from
2000-present. Formerly, Executive Vice
President, General Counsel and Corporate
Secretary of Van Kampen Investments
(1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Formerly, Vice President, Manager and 41 None.
Year of birth: 1958 Portfolio Manager of Nuveen Asset Management
Trustee (1998-1999), Vice President of Nuveen
Investment Advisory Corp. (1992-1999), Vice
President and Manager of Nuveen Unit
Investment Trusts (1991-1999), and Assistant
Vice President and Portfolio Manager of
Nuveen Unit Investment Trusts (1988-1999),
each of John Nuveen & Company, Inc.
(1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso+ Since 2004 Formerly, Senior Managing Director and Chief 44 None.
Year of birth: 1965 Administrative Officer (2007-2008) and
Trustee and (through General Counsel (2001-2007) of Claymore
June 5, 2008) Chief Legal Advisors, LLC and Claymore Securities, Inc.
and Executive Officer Formerly, Assistant General Counsel, John
Nuveen and Company Inc. (1999-2000). Former
Vice President and Associate General Counsel
of Van Kampen Investments, Inc. (1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
David N. Dreman++ Since 2004 Founder, Chairman and Chief Investment 1 Trustee, The Institute of
Harborside Financial Officer of Dreman Value Management, LLC, an Behavioral Finance, Jazz
Center investment advisory firm with approximately Aspen, and University of
Plaza 10, Suite 800 $17.2 billion under management, in various Manitoba.
Jersey City, NJ 07311-4037 mutual funds including several branded under
Year of birth: 1936 the Scudder-Dreman name; annuity products;
Trustee institutional accounts, including pension,
foundation and endowment funds; and SMAs for
high net-worth individuals. Author of
several books including Contrarian
Investment Strategies: The Next Generation
and Psychology and the Stock Market. Forbes
columnist for 25 years and co-editor of the
academic journal, The Journal of Behavioral
Finance.
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees unless otherwise noted: 2455 Corporate West Drive,
Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
- Messrs. Crandall and Dalmaso, as Class I Trustees, are expected to
stand for re-election at the Fund's 2008 annual meeting of
shareholders.
- Messrs. Friedrich and Nyberg, as Class II Trustees, are expected to
stand for re-election at the Fund's 2009 annual meeting of the
shareholders.
- Messrs. Dreman and Toupin, as Class III Trustees, are expected to
stand for re-election at the Fund's 2010 annual meeting of the
shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
+ Mr. Dalmaso is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund as a result of his position as an officer
(through May 13, 2008) of and his equity ownership in the Adviser and
certain of its affiliates.
++ Mr. Dreman is an "interested person" (as defined in section 2(a)(19) of the
1940 Act) of the Fund because of his position as an officer of Dreman Value
Management, LLC, the Fund's Investment Manager.
24 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
SUPPLEMENTAL INFORMATION (unaudited) continued
OFFICERS
The officers of the Dreman/Claymore Dividend & Income Fund and their principal
occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Effective June 5, 2008 Senior Managing Director and Chief Investment Officer of
Year of birth: 1955 Claymore Advisors, LLC and Claymore Securities Inc.
Chief Executive Officer (2008-present). Formerly Managing Director of Research,
Nuveen Asset Management (2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Kevin M. Robinson Effective June 5, 2008 Senior Managing Director and General Counsel of Claymore
Year of birth: 1959 Advisors, LLC, Claymore Securities, Inc. and Claymore Group,
Chief Legal Officer Inc. (2007-present) Formerly, Associate General Counsel and
Assistant Corporate Secretary of NYSE Euronext, Inc. (2000-2007)
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors, LLC and
Year of birth: 1964 Claymore Securities, Inc. (2005-present). Formerly, Chief
Chief Accounting Officer, Financial Officer of Claymore Group Inc. (2005-2006);
Chief Financial Officer Managing Director of Claymore Advisors, LLC and Claymore
and Treasurer Securities, Inc. (2003-2005). Treasurer of Henderson Global
Funds and Operations Manager for Henderson Global Investors
(NA) Inc., (2002-2003). Managing Director, FrontPoint
Partners LLC (2001-2002).
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore
Year of birth: 1957 Advisors, LLC. (2006 to present). Chief Compliance
Chief Compliance Officer Officer/Assistant Secretary of Harris Investment Management,
Inc. (2003-2006). Director-Compliance of Harrisdirect LLC
(1999-2003).
------------------------------------------------------------------------------------------------------------------------------------
James Howley Since 2006 Vice President, Fund Administration of Claymore Advisors,
Year of birth: 1972 LLC. (2004-present). Previously, Manager, Mutual Fund
Assistant Treasurer Administration of Van Kampen Investments, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Patterson Since 2006 Vice President, of Claymore Advisors, LLC (2006-present).
Year of birth: 1971 Previously, Securities Counsel, Caterpillar, Inc.,
Secretary (2004-2006); Associate, Skadden, Arps, Slate, Meagher &
Flom, LLP (2002-2004).
------------------------------------------------------------------------------------------------------------------------------------
Melissa Nguyen Since 2005 Vice President of Claymore Advisors, LLC (2005-present).
Year of birth: 1978 Previously, Associate, Vedder, Price, Kaufman & Kammholz,
Assistant Secretary P.C. (2003-2005).
------------------------------------------------------------------------------------------------------------------------------------
E. Clifton Hoover Since 2006 Co-Chief Investment Officer and Managing Director of Dreman
Year of Birth: 1957 Value Management, LLC (2006 to present). Managing Director
Vice President and Portfolio Manager of NFJ Investment Group (1997-2006)
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
SemiAnnual Report | April 30, 2008 | 25
DCS | Dreman/Claymore Dividend & Income Fund
Dividend Reinvestment PLAN | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
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 of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund 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 New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission 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 commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants 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 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 instruction of the participants.
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
commission 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.
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 Mellon, P.O. Box 463, East Syracuse,
New York 13057-0463; Attention: Shareholder Services Department, Phone Number:
(866) 488-3559.
26 | SemiAnnual Report | April 30, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Investment Advisory
AGREEMENT AND SUBADVISORY AGREEMENT APPROVALS | (unaudited)
On December 7, 2007, the Board of Trustees (the "Board"), including those
trustees who are not interested persons as defined by the Investment Company Act
of 1940 (the "Independent Trustees"), of Dreman/Claymore Dividend and Income
Fund (the "Fund") met to consider the renewal of: (1) the investment advisory
agreement ("Investment Advisory Agreement") between the Fund and Claymore
Advisors, LLC ("Adviser") and (2) the subadvisory agreement ("Subadvisory
Agreement") among the Adviser, the Fund and Dreman Value Management, L.L.C.
("Sub-Adviser"). (The Investment Advisory Agreement and the Subadvisory
Agreement are together referred to as the "Advisory Agreements.") As part of its
review process, the Nominating and Governance Committee of the Board (referred
to as the "Committee" and consisting solely of the Independent Trustees) was
represented by independent legal counsel. The Board reviewed materials received
from the Adviser, the Sub-Adviser and independent legal counsel. The Board also
had previously received, throughout the year, Board meeting information
regarding performance and operating results of the Fund.
In preparation for its review, the Committee communicated with independent legal
counsel regarding the nature of information to be provided, and independent
legal counsel, on behalf of the Committee, sent a formal request for
information. The Adviser and the Sub-Adviser provided extensive information in
response to that request as well as to a follow-up request for supplemental
information. Among other information, the Adviser and Sub-Adviser provided
general information to assist the Committee in assessing the nature and quality
of services provided by the Adviser and Sub-Adviser and information comparing
the investment performance, advisory fees and total expenses of the Fund to
other funds, information about the profitability from the Advisory Agreements to
each of the Adviser and the Sub-Adviser and the compliance policies and
procedures adopted by each of the Adviser and the Sub-Adviser.
Based upon their review, the Committee and the Board concluded that it was in
the best interest of the Fund to renew each of the Advisory Agreements and,
accordingly, recommend to the Board of Trustees the renewal of each Advisory
Agreement. In reaching this conclusion for the Fund, no single factor was
determinative in the Board's analysis, but rather the Board considered a variety
of factors.
INVESTMENT ADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Adviser, the Board noted that the Adviser had delegated responsibility for the
investment and reinvestment of the Fund's assets to the Sub-Adviser. The Board
considered the Adviserresponsibility to oversee the Sub-Adviser and that the
Adviser has similar oversight responsibilities for other registered funds for
which it serves as investment adviser. The Board members reviewed financial
information regarding the Adviser and its parent company and considered the
parent company's guaranty of the Adviser's obligations under the Investment
Advisory Agreement. The Board members also considered the secondary market
support services provided by the Adviser to the Fund and the Adviser's
collaboration with the Sub-Adviser on the Fund's use of leverage and in
evaluating the Fund's distribution rate. The Board members considered the
experience and qualifications of the Adviser's personnel, including those
personnel providing compliance oversight and oversight of the Sub-Adviser's
portfolio management process. Specifically, the Board noted the ongoing
oversight activities performed by the Adviser, including on-site diligence
visits and regular monitoring of compliance with policies and procedures and
with the Fund's investment parameters as described in its prospectus and
statement of additional information. After considering these factors, the Board
concluded that the Adviser and its personnel were qualified to serve the Fund in
such capacity.
The Board considered the Fund's investment performance by reviewing the Fund's
total return on a net asset value and market price basis for the three month,
six month, one year, three year and since inception (January 29, 2004) periods
ended September 30, 2007 and compared it to comparable performance of a peer
group of closed-end funds (defined as funds that invest a majority of assets in
dividend paying equity securities and that may have a specific goal of paying
qualified dividend income) for the same time periods. The Board also considered
the Fund's investment performance for calendar years 2004, 2005 and 2006 and
comparable S&P 500 Index returns for the same periods. The Board considered that
the Adviser does not directly control investment performance but had delegated
such duties to the Sub-Adviser. The Board concluded that the Adviser had
selected a Sub-Adviser that was well-qualified to manage the Fund and had
appropriately reviewed and monitored the Sub-Adviser's investment performance
and efforts to seek the Fund's investment objectives. Accordingly, the Board
concluded that the Adviser's performance was satisfactory.
The Board compared the Fund's advisory fee (which includes the subadvisory fee
paid to the Sub-Adviser) and expense ratio to the peer group of funds and to the
advisory fee that the Adviser charges to other closed-end funds for which it
serves as adviser. The Board also considered the mean advisory fees and expense
ratios of the peer group of funds and noted that although the Fund's advisory
fee was higher than the mean, it was within an acceptable range of the mean and
concluded that the Fund's advisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Adviser from its relationship to the Fund, the Board reviewed information
regarding the revenues the Adviser received under the Investment Advisory
Agreement as well as the estimated direct and indirect costs the Adviser incurs
in providing the services to the Fund, including paying the subadvisory fee to
the Sub-Adviser, and concluded that the profitability was not unreasonable.
The Board considered the extent to which economies of scale could be realized
with respect to the management of the Fund as the Fund grows and whether fee
levels reflect a reasonable sharing of such economies of scale for the benefit
of Fund investors. Because of the fixed nature of closed-end funds' assets, the
Board does not expect the Fund to grow significantly in the next twelve months.
The Board also considered the Adviser's statement that, although it has
increased assets under management as a result of new product offerings, it has
also increased staff and upgraded systems as a result and the Adviser thus
anticipates neither economies of scale nor increased costs of services to the
Fund in the coming year and the Board concluded that fee levels were
appropriate.
The Board considered other benefits available to the Adviser because of its
relationship to the Fund and noted that the administrative services fees
received by the Adviser from serving as administrator provides it with
additional revenue but concluded that the advisory fee was reasonable taking
into account the benefits from the administration agreement. In reaching the
conclusion that the advisory fee was reasonable, the Board also considered the
Adviser's statement that it benefited from its association with the Sub-Adviser
because of the Fund, which has opened up other business opportunities to the
Adviser with the Sub-Adviser and may continue to do so in the future.
SUBADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Sub-Adviser, the Board considered the qualifications, experience, good
reputation and skills of the Sub-Adviser's portfolio management and other key
personnel. The Board reviewed changes in personnel and the resulting
strengthening of the Sub-Adviser's investment and other
SemiAnnual Report | April 30, 2008 | 27
DCS | Dreman/Claymore Dividend & Income Fund | INVESTMENT ADVISORY AGREEMENT AND
SUBADVISORY AGREEMENT APPROVALS (unaudited) continued
professional staff. The Board also considered the Sub-Adviser's use of financial
leverage within the Fund in an effort to increase performance and the use of
hedging to reduce interest rate risk to implement the Fund's investment
strategy. The Board considered the Sub-Adviser's success in achieving the Fund's
primary investment objective of providing a high level of current income through
the Fund's distribution rate and tax-advantaged distribution rate. The Board
concluded that the Sub-Adviser was qualified to provide the services under the
Subadvisory Agreement.
In considering investment performance, the Board considered, in addition to the
Sub-Adviser's efforts in pursuing the Fund's primary objective, the
Sub-Adviser's efforts in pursuing the secondary objective of capital
appreciation. The Board considered the Fund's total return, both on a net asset
value basis and market price basis, over various periods. The Board also
considered current market conditions and their impact on the Fund holdings. The
Board noted the Fund's underperformance relative to its peers and market indexes
for periods ended September 30, 2007, but also noted strong performance for
earlier periods. The Board considered the Sub-Adviser's representation that
recent underperformance was largely due to the negative effects of the recent
volatility in U.S. credit markets on the Fund's significant holdings of
securities in the financial services sector and that, notwithstanding the
underperformance of these securities in the short term, the Sub-Adviser believes
they will generate positive returns going forward. In evaluating this
explanation, the Board considered the Sub-Adviser's successful long-term
performance record produced by its contrarian value investment philosophy, which
historically has included periods of underperformance during periods of high
market volatility, but over the long term has produced superior investment
returns. Based upon this review, the Board concluded that it remains confident
that the Sub-Adviser is able to implement the Fund's investment strategy, given
the Sub-Adviser's contrarian style of investing and long-term track record.
The Board reviewed the subadvisory fee paid by the Adviser to the Sub-Adviser
and compared it to the fees charged by the Sub-Adviser to non-fund clients and
other investment company clients for which the Sub-Adviser serves as subadviser
that have a large cap value strategy similar to the Fund's. The Board considered
that the Fund's subadvisory fee was within the range of the other subadvisory
fees charged by the Sub-Adviser to other clients in the large cap value
strategy. The Board also considered the Sub-Adviser's representation that the
Fund requires significantly more work to manage than other clients' accounts
because of the Fund's unique investment strategies, including its distribution
and qualified dividend income policy, and concluded that the subadvisory fee was
reasonable.
With respect to the costs of services to be provided and profits realized by the
Sub-Adviser from its relationship to the Fund, the Board reviewed information
regarding the revenues the Sub-Adviser received from its advisory business as a
whole and considered the Sub-Adviser's statement that it does not allocate its
costs among client accounts and that the Fund requires significantly more work
than its other clients and, accordingly, is less profitable than these other
clients. In concluding that the profitability was not unreasonable, the Board
considered this information provided by the Sub-Adviser as well as the factors
that the subadvisory fee had been negotiated at arm's-length and that the
subadvisory fee rate was competitive.
The Board reviewed the extent to which economies of scale with respect to the
subadvisory services provided to the Fund would be realized as the Fund grows
and whether fee levels reflect a reasonable sharing of such economies of scale
for the benefit of Fund investors. The Board considered the Sub-Adviser's
statement that the Fund requires significantly more work than other client
accounts because of the Fund's investment objective and unique strategies and
that it expected more work to be involved in the coming year to maintain the
Fund's yield in the current interest rate environment. The Board also noted that
the size of the closed-end Fund was relatively fixed and unlikely to grow
significantly in the next twelve months. Given these factors, the Board
concluded that the Fund is unlikely to realize any significant economies of
scale with respect to the subadvisory services to justify a breakpoint at the
time the Subadvisory Agreement was being reviewed.
The Board considered other benefits derived by the Sub-Adviser from its
relationship with the Fund, including the Sub-Adviser's use of soft dollars and
the Sub-Adviser's other business relationships with the Adviser. The Board
concluded that the subadvisory fees were reasonable, taking into account these
benefits.
OVERALL CONCLUSIONS
Based upon all of the information considered and the conclusions reached, the
Board determined that the terms of each Advisory Agreement continue to be fair
and reasonable and that the continuation of each Advisory Agreement is in the
best interests of the Fund.
28 | SemiAnnual Report | April 30, 2008
This Page Intentionally Left Blank.
This Page Intentionally Left Blank.
DCS | Dreman/Claymore Dividend & Income Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Richard L. Crandall
Nicholas Dalmaso*
David N. Dreman*
Roman Friedrich III, Chairman
Ronald A. Nyberg
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
OFFICERS
Nicholas Dalmaso
Chief Executive and Legal Officer
(through June 5, 2008)
J. Thomas Futrell
Chief Executive Officer
(Effective June 5, 2008)
Kevin Robinson
Chief Legal Officer
(Effective June 5, 2008)
Steven M. Hill
Chief Accounting Officer, Chief
Financial Officer and Treasurer
Bruce Saxon
Chief Compliance Officer
James Howley
Assistant Treasury
Matthew J. Patterson
Secretary
Melissa Nguyen
Assistant Secretary
E. Clifton Hoover
Vice President
INVESTMENT MANAGER
Dreman Value Management, LLC
Aspen, Colorado
INVESTMENT ADVISER AND ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
CUSTODIAN AND
TRANSFER AGENT
The Bank of New York Mellon
New York, New York
PREFERRED STOCK -
DIVIDEND PAYING AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate,
Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF DREMAN/CLAYMORE DIVIDEND & INCOME FUND FOR SHAREHOLDERS
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we may share information
with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone except as permitted by law or as is necessary in order to
service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about the
shareholders to Claymore Advisors, LLC employees with a legitimate business need
for the information. The Fund maintains physical, electronic and procedural
safeguards designed to protect the non-public personal information of its
shareholders.
QUESTIONS CONCERNING YOUR SHARES OF DREMAN/CLAYMORE DIVIDEND & INCOME FUND?
o If your shares are held in a Brokerage Account, contact your Broker.
o If you have physical possession of your shares in certificate form,
contact the Fund's Custodian and Transfer Agent: The Bank of New York
Mellon, 101 Barclay 11W, New York, New York 10286 (866) 488-3559
This report is sent to shareholders of Dreman/Claymore Dividend & Income Fund
for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (800) 345-7999 or on the Securities and Exchange Commission's website at
http://www.sec.gov.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (800) 345-7999
or by accessing the Fund's Form N-PX on the Commission's website at
http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Form N-Q is available on the SEC website at
http://www.sec.gov. The Fund's Form N-Q may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC; information on the
operation of the Public Reference Room may be obtained by calling (800) SEC-0330
or by visiting the Fund's website at www.dremanclaymore.com.
In October 2007, the Fund submitted a CEO annual certification to the New York
Stock Exchange ("NYSE") in which the Fund's principal executive officer
certified that he was not aware, as of the date of the certification, of any
violation by the Fund of the NYSE's Corporate Governance listing standards. In
addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and
related Securities and Exchange Commission ("SEC") rules, the Fund's principal
executive and principal financial officers have made quarterly certifications,
included in filings with the SEC on Forms N-CSR and N-Q, relating to, among
other things, the Fund's disclosure controls and procedures and internal control
over financial reporting.
SemiAnnual Report | April 30, 2008 | 31
DCS | Dreman/Claymore Dividend & Income Fund
About the FUND MANAGER |
DREMAN VALUE MANAGEMENT, LLC
Dreman Value Management, LLC is an independently-owned investment management
firm that was founded by David N. Dreman in 1997, and its predecessor firms date
back to 1977. As of April 30, 2008, the firm had approximately $17.2 billion in
assets under management, primarily across institutional accounts and various
investment companies. Independently owned, the firm is a value-oriented
contrarian equity manager and places its primary emphasis on common stocks with
growing dividends and avoiding concept stocks without justifiable valuations.
INVESTMENT PHILOSOPHY
Dreman Value Management is one of the pioneers of contrarian value investing.
Our investment philosophy is based on a disciplined, low P/E approach to stock
selection.
o We invest in undervalued companies that exhibit strong fundamentals,
above-market dividend yields and historic earnings growth, which our
analysis indicates will persist.
o Our strategy is to own strong, fundamentally sound companies and to avoid
speculative stocks or potential bankruptcies.
o We believe that the markets are not perfectly efficient and that, in
particular, behavioral finance plays a considerable role in investor
actions and over-reactions and subsequently in stock price movements.
INVESTMENT PROCESS
Our research studies, numerous academic papers and our long-term performance
record show that out-of-favor stocks (those with low P/E ratios) consistently
and predictably outperform the market.
o Screen for stocks with below market P/E ratios.
o Further refine candidates by applying additional value screens.
o Fundamental analysis is applied to remaining candidates.
o Stocks that pass all the screens and analysis are recommended to the
Investment Committee for approval.
DREMAN VALUE MANAGEMENT, L.L.C.
520 East Cooper Avenue
Suite 230-4
Aspen, CO 81611-9725
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
DCS
LISTED
NYSE(R)
DCS-SAR-0408
ITEM 2. CODE OF ETHICS.
Not applicable for a semi-annual reporting period.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for a semi-annual reporting period.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for a semi-annual reporting period.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for a semi-annual reporting period.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940)
within 90 days of this filing and have concluded based on such evaluation,
that the registrant's disclosure controls and procedures were effective as
of that date in ensuring that information required to be disclosed by the
registrant in this Form N-CSR was recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) of the Investment Company Act of 1940.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) under the investment Company Act of
1940.
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.
(Registrant) Dreman/Claymore Dividend & Income Fund
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By: /s/ J. Thomas Futrell
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Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: July 7, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ J. Thomas Futrell
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Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: July 7, 2008
By: /s/ Steven M. Hill
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Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: July 7, 2008