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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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
(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, 2009
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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, 2009
(Unaudited)
Claymore Dividend & Income Fund
(Formerly Dreman/Claymore
Dividend & Income Fund) | DCS
photo
logo: CLAYMORE(SM)
www.claymore.com/dcs
... your path to the LATEST,
most up-to-date INFORMATION about the
Claymore Dividend & Income Fund
The shareholder report you are reading right now is just the beginning of the
story. Online at
WWW.CLAYMORE.COM/DCS, 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
We 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, 2009
DCS | Claymore Dividend & Income Fund
Dear SHAREHOLDER
This report covers the performance of the Claymore Dividend & Income Fund (the
"Fund")(1) for the semiannual period ended April 30, 2009. Although we have seen
some improvement in market conditions in recent months, the investment
environment during most of the period covered by this report was very difficult,
and the Fund underperformed its benchmark.
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 the
Fund's security selection process during the period covered by this report came
from Dreman Value Management's ("DVM") contrarian value philosophy of investing,
which focused on what DVM believed to be quality companies trading at attractive
valuations relative to the market.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. All NAVs, market prices and
dividends have been adjusted to reflect the 1 for 5 reverse stock split that
occurred on June 5, 2009. For the six-month period ending April 30, 2009, the
Fund generated a total return based on market price of -34.68% and a return of
-38.98% based on NAV. As of April 30, 2009, the Fund's market price of $9.15
represented a discount of 20.4% to NAV of $11.49. As of October 31, 2008, the
Fund's market price of $14.90 represented a discount of 24.2% to NAV of $19.65.
During the six-month period ended April 30, 2009, the Fund paid quarterly
dividends of $0.225 per share in November 2008 and February 2009. As the value
of the Fund's total assets declined, the reduced asset base no longer provided
income and dividends sufficient to sustain the quarterly dividend rate. In May
2009, the Fund declared a quarterly dividend of $0.100 per share.
The drop in the value of the Fund's assets made it necessary to reduce the
Fund's leverage. On September 29, October 20, and November 26, 2008, the Fund
announced the redemption of an aggregate $310 million of its Auction Market
Preferred Shares ("AMPS"). Further redemptions totaling $50 million were
announced on January 30 and February 26, 2009. As of April 30, 2009, $65 million
of AMPS remain outstanding.
On November 26, 2008, Fitch Ratings, one of the two rating agencies that provide
credit ratings to the Fund's AMPS, downgraded the rating assigned to the AMPS
issued by the Fund to `AA' from `AAA'. The `AA' rating has also been placed on
Rating Watch Negative.
We encourage common 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 23 of the Fund's semiannual 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
purchased in the market at a price less than NAV. Conversely, when the market
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.
We thank you for your continued investment in the Fund, and we sincerely hope to
report improved performance in the future. For the most up-to-date information
on your investment, please visit the Fund's website at www.claymore.com/dcs.
(1) On June 17, 2009 the name of the Fund changed to Claymore Dividend & Income
Fund from Dreman/Claymore Dividend & Income Fund.
SemiAnnual Report | April 30, 2009 | 3
DCS | Claymore Dividend & Income Fund | DEAR SHAREHOLDER continued
AN UPDATE ON THE FUND
On June 17, 2009, the Fund's Board of Trustees approved the termination of
Dreman Value Management's ("DVM") investment sub-advisory agreement with the
Fund. The sub-advisory agreement shall no longer be in effect as of close of
business on August 17, 2009 or upon such earlier date as DVM may waive the
requirements of notice. On this same date, the Board of Trustees of the Fund
approved the appointment of a new investment sub-adviser to the Fund, Manning &
Napier Advisors, Inc. Pursuant to this change, Manning & Napier has entered into
an interim investment sub-advisory agreement with Claymore Advisors, LLC, the
Fund's investment adviser and the Fund. The sub-advisory agreement will be
submitted to the Fund's shareholders for their approval within 150 days. The
Fund will continue to seek its primary investment objective of providing a high
level of current income, with a secondary objective of capital appreciation.
Manning & Napier Advisors, Inc., has been a registered investment adviser since
1970. The firm manages approximately $16 billion for individuals, corporations,
pension plans, foundations and other entities. For more than 35 years, Manning &
Napier has focused on managing clients' investments through a variety of market
conditions, including five bear markets. A distinguishing feature of Manning &
Napier's management style is a disciplined investment approach across a wide
variety of investment strategies and market environments, with special attention
to mitigating downside risk. Manning & Napier is an ideal fit with Claymore's
philosophy of providing access to what we believe to be best-in-class asset
managers.
In addition, Claymore announced that the Fund's name will change to Claymore
Dividend & Income Fund. The Fund's NYSE ticker symbol will not change. The
Fund's Board of Trustees also approved a change to a non-fundamental investment
policy of the Fund to increase the percentage of the Fund's total assets that
may be invested in U.S. dollar-denominated securities of foreign issuers from
20% to 40%. Such investments in securities of foreign issuers may include
investments in American Depositary Receipts, or "ADRs." The prices of such U.S.
dollar-denominated securities of foreign issuers may be affected by factors not
present with securities traded in the U.S. markets, including, political and
economic conditions, less stringent regulation and higher volatility. As a
result, such securities may be less liquid and more volatile than U.S.
securities. Pursuant to a 60-day notice provision in the Prospectus, this change
will go into effect no earlier than August 17, 2009.
Sincerely,
Claymore Advisors, LLC
June 19, 2009
4 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund
MANAGEMENT REPORT ON FUND PERFORMANCE
E. Clifton Hoover assumed primary responsibility for the day-to-day management
of the investment portfolio of the Claymore Dividend & Income Fund (the
"Fund")(1) in February 2009. Mr. Hoover had worked in collaboration with David
Dreman, Founder, Chairman and Chief Investment Officer of Dreman Value
Management, LLC, as a member of the Fund's portfolio management team on
management of the Fund since 2006.
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's objectives were focused on securities that they
believed were undervalued or inexpensive relative to other investments.
Currently, the Fund may invest up to 20% of its total assets, with the
percentage measured at the time of the investment, in U.S. dollar-denominated
securities of foreign issuers(2). 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. In addition, the Fund
may purchase and sell certain derivative instruments, including, but not limited
to, options, futures contracts and options on futures contracts, for various
portfolio management purposes, including to seek income or capital appreciation,
facilitate portfolio management and mitigate risks.
Equity securities were selected using a contrarian value philosophy of
investing. DVM sought to take advantage of market inefficiencies and investor
over-reaction to perceived negatives affecting solid companies that they
believed to be financially sound. DVM looked for stocks that they believed were
trading below their intrinsic values, with prices that were low relative to
their earnings (P/E - the most common measure of how expensive a stock is), book
value (P/B) and/or cash flow (P/CF). The stock selections were based on
fundamental "bottom-up" analysis--a process of evaluation that accounts for the
individual merits of each stock.
The last annual report for this Fund, published six months ago, described the
preceding year as a time of economic uncertainty and turmoil in capital markets.
In the ensuing months, there was pronounced deterioration in the economy and
financial markets, not only in the U.S. but throughout the world. In December
2008, the National Bureau of Economic Research (NBER) officially declared that
the U.S. economy had fallen into a recession that began in December 2007. With
the economy and financial markets closely interrelated, the limited availability
of credit and a lack of investor confidence hit asset prices, and the resulting
loss of wealth contributed further to an economic slowdown. The U.S. economy
continued to contract, with drops in real Gross Domestic Product, a broad
measure of economic activity adjusted for price changes and inflation, at annual
rates of more than 5% in the fourth quarter of 2008 and the first quarter of
2009.
There was a pronounced decline in the equity market and in essentially all asset
classes that carry risk in the final months of 2008. In early 2009, there began
to be signs of improvement in credit markets and in some aspects of the economy.
Bonds began to recover in the first quarter of 2009, and the U.S. equity market
rallied in March and April. Markets have remained quite volatile, and returns
for many indices were negative for the six months ended April 2009. The Standard
& Poor's 500 Index, generally regarded as a good indicator of the broad stock
market, returned -8.53% for the six-month period from November 1, 2008, through
April 30, 2009. For the same six-month period the return of the MSCI World
Index, which measures performance of world equity markets, was -5.25%. Most
European markets were down for the period, but equity markets in some developing
countries were quite strong.
Convertible preferred securities, which in the past have been less volatile than
straight equities, experienced extreme market dislocation in the autumn of 2008.
Hedge funds, which had become major investors in convertible securities, were
forced to sell convertibles into a market with little demand because they were
unable to get the financing they had used in the past. The result was a dramatic
drop in the prices of convertible preferreds. Eventually, extraordinarily low
prices began to attract new investors, mainly equity and bond managers. From
mid-November through the first few months of 2009, there was a significant
rebound in convertibles, so that return of the Merrill Lynch All U.S.
Convertibles Index for the six-month period from November 1, 2008, through April
30, 2009, was 11.50%.
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(1) On June 17, 2009 the name of the Fund changed to Claymore Dividend & Income
Fund from Dreman/Claymore Dividend & Income Fund. Additionally on this date, the
Fund's Board of Trustees approved the appointment of a new investment
sub-advisor to the Fund, Manning & Napier Advisors, Inc. and provided notice of
termination to Dreman Value Management, LLC as an investment sub-advisor to the
Fund.
(2) On June 17, 2009 the Board also approved a change to a non fundamental
investment policy of the Fund to increase the percentage from 20% to 40% in U.S.
dollar-denominated securities of foreign issuers. See previous page under "An
Update on the Fund" for more information.
SemiAnnual Report | April 30, 2009 | 5
DCS | Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
In contrast to prior periods, bonds with more credit risk generally performed
better than less risky bonds during the six-month period from November 1, 2008
through April 30, 2009. The Barclays Capital US Aggregate Bond Index, which
measures return of the high-quality U.S. bond market as a whole, returned 7.74%,
but the return of the Merrill Lynch High Yield Master II Index, which measures
performance of the high-yield bond market, was 15.20%. The Barclays Capital
10-20 Year U.S. Treasury Index was also quite strong, with a return of 11.40%.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. All NAVs and market prices
have been adjusted to reflect the 1 for 5 reverse stock split that occurred on
June 5, 2009. As of April 30, 2009, the Fund's market price of $9.15 represented
a discount of 20.4% to NAV of $11.49. As of October 31, 2008, the Fund's market
price of $14.90 represented a discount of 24.2% to NAV of $19.65.
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.
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. We have also included in the portfolio some
convertible preferred stocks, which offer yields comparable to those of
high-yield bonds, along with the potential for capital appreciation if the
underlying common stock performs well.
Like many closed-end funds, the Fund utilizes leverage as part of its investment
strategy. The purpose of leverage is to finance the purchase of additional
securities that provide income and potentially greater capital appreciation
potential to common shareholders than could be achieved from a portfolio that is
not leveraged. Leverage tends to work well in flat and positive markets; it
generally contributes to return whenever the total return of the portfolio's
investments is less than the cost of leverage. However, when leveraged
investments fall in price, leverage can magnify the negative return, which was
the case during the last six months.
In the exceptionally difficult market conditions that prevailed during much of
this reporting period, it became necessary to reduce leverage, as described
below, because of a drop in the value of the Fund's assets. This reduction in
leverage, of course, required the Fund to raise cash by selling securities. A
major source of funds was the sale of energy trusts, which had originally been
selected mainly for their high dividends, rather than for total return, into
markets that were suffering from supply and demand imbalances. There was a
substantial reduction in the Fund's holdings of high-yield bonds and preferred
stocks, in many cases selling into markets with very poor liquidity. The
combination of the considerable degree of leverage on the portfolio in a
declining market and the process of reducing leverage by selling securities into
very weak markets were significant causes of the Fund's poor performance over
the last six months.
Several positions in the energy and financial sectors had a significant negative
impact on the Fund's performance during the period ended April 30, 2009. Energy
positions that detracted included Devon Energy Corporation (3.6% of long-term
investments), an exploration and production company, and two Canadian energy
trusts, Crescent Point Energy Trust (not held in portfolio at period end) and
Bonavista Energy Trust (not held in portfolio at period end). In the financial
sector, a put option written on the Financial Select Sector SPDR ETF by the Fund
detracted from performance. While the position was gradually reduced during the
period, the remaining position was exercised in January with the Fund purchasing
shares in the underlying ETF. The Fund ultimately disposed of these shares in
February. Also negative was a position in an 8.55% coupon bond issued by
Barclays PLC, a global financial services provider.
A position in the energy sector that contributed to performance for the period
ended April 30, 2009 was Anadarko Petroleum Corporation (3.6% of long-term
investments), an exploration and production company. In the financial sector,
several stocks purchased near the end of the period contributed to performance.
These include JPMorgan Chase & Co. (2.2% of long-term investments), a financial
holding company; Goldman Sachs Group, Inc., (2.4% of long-term investments) a
bank holding and investment banking firm; and American Express Company (1.5% of
long-term investments), a global payments and travel company.
The Fund's leverage has been 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 drop in value of
the Fund's assets made it necessary to reduce leverage.
6 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
On September 29, October 20, and November 26, 2008, the Fund announced the
redemption of an aggregate $310 million of its AMPS. Further redemptions
totaling $50 million were announced on January 30 and February 26, 2009. As of
April 30, 2009, the Fund had $65 million of AMPSoutstanding.
On November 26, 2008, Fitch Ratings, one of the two rating agencies that provide
credit ratings to the Fund's AMPS, downgraded the rating assigned to the AMPS
issued by the Fund to `AA' from `AAA'. The `AA' rating has also been placed on
Rating Watch Negative.
The Fund has five series of AMPS, three that auction each week and two that
auction every 28 days. The broad auction-rate preferred securities market
remains essentially frozen, as it has been since February 2008. The auctions for
nearly all auction-rate preferred shares, including those issued by the Fund,
continue to fail. Investors need to be aware that 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, 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.
During the six-month period ended April 30, 2009, established maximum rates were
based on a spread of 150 basis points (125 basis points while the Fund was rated
AAA by Fitch) over the applicable LIBOR rates, with the maximum rates ranging
from 1.73% to 5.39%.
Given the very low interest rates that have been established for the Fund's AMPS
over the last six months, the leverage has been helpful as the market has
rebounded. During this period leverage has helped to create capital appreciation
and has contributed to net investment income, since the portfolio is yielding
more than the cost of leverage.
There is no guarantee that the Fund's leverage strategy will be successful, and
the Fund's use of leverage may cause the Fund's NAV and market price of common
shares to be more volatile. During the recent market volatility, leverage has
been a handicap. Leverage adds value only when the return on securities
purchased exceeds the cost of leverage.
On May 11, 2009, the Fund announced that its Board of Trustees had approved a
1-for-5 reverse share split of the Fund's common shares which was completed on
June 5, 2009. This reverse share split decreased the Fund's common shares
outstanding, increased the net asset value per common share by a proportional
amount and has the potential to increase the market price per common share by a
proportional amount. The objective of the reverse share split was to increase
the Fund's market price per common share, thereby reducing the per share
transaction costs associated with buying or selling the Fund's common shares in
the secondary market on the New York Stock Exchange.
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INDEX DEFINITIONS:
Indices are unmanaged and it is not possible to invest directly in an index.
S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries.
MSCI World Index is a free float-adjusted market capitalization index that
measures global developed market equity performance of the developed market
country indices of Europe, Australasia, the Far East, the U.S. and Canada.
The Merrill Lynch All U.S. Convertibles Index (VXA0) is comprised of
approximately 500 issues of convertible bonds and preferred stock of all
qualities.
The Barclays Capital US Aggregate Bond Index covers the U.S. dollar-denominated,
investment-grade, fixed rate, taxable bond market of SEC-registered securities.
The Index includes bonds from the Treasury, government-related, corporate,
mortgage-backed securities (agency fixed-rate and hybrid ARM passthroughs),
asset-backed securities and collateralized mortgage-backed securities sectors.
U.S. Agency Hybrid Adjustable Rate Mortgage (ARM) securities were added to the
U.S. Aggregate Index on April 1, 2007 but are not eligible for the Global
Aggregate Index.
Merrill Lynch High Yield Master II Index is a commonly used benchmark index for
high yield corporate bonds. It is a measure of the broad high yield market.
The Barclays Capital 10-20 Year U.S. Treasury Index is comprised of securities
in the Treasury Index (i.e., public obligations of the U.S. Treasury) with a
maturity from 10 up to (but not including) 20 years.
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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.
NOT A COMPLETE INVESTMENT PROGRAM. 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.
SemiAnnual Report | April 30, 2009 | 7
DCS | Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
EQUITY RISK. Substantially all of the Fund's assets will be invested in common
stocks and preferred equity securities, and therefore a principal risk of
investing in the Fund is equity risk. Equity risk is the risk that securities
held by the Fund will fall due to general market or economic conditions,
perceptions regarding the industries in which the issuers of securities held by
the Fund participate, and the particular circumstances and performance of
particular companies whose securities the Fund holds.
PREFERRED SECURITIES RISK. There are special risks associated with investing in
preferred securities, including: Deferral. Preferred securities may include
provisions that permit the issuer, at its discretion, to defer distributions for
a stated period without any adverse consequences to the issuer. Non-Cumulative
Dividends. Some preferred stocks are non-cumulative, meaning that the dividends
do not accumulate and need not ever be paid. Subordination. Preferred securities
are subordinated to bonds and other debt instruments in a company's capital
structure in terms of priority to corporate income and liquidation payments, and
therefore will be subject to greater credit risk than more senior debt
instruments. Liquidity. Preferred securities may be substantially less liquid
than many other securities, such as common stocks or U.S. government securities.
Limited Voting Rights. Generally, preferred security holders (such as the Fund)
have no voting rights with respect to the issuing company unless preferred
dividends have been in arrears for a specified number of periods, at which time
the preferred security holders may have the right to elect a number of directors
to the issuer's board. Special Redemption Rights. In certain varying
circumstances, an issuer of preferred securities may redeem the securities prior
to a specified date.
INCOME RISK. The income Common Shareholders receive from the Fund is based
primarily on the dividends and interest it earns from its investments, which can
vary widely over the short and long term. If prevailing market interest rates
drop, distribution rates of the Fund's portfolio holdings of preferred
securities and debt securities may decline which then may adversely affect the
Fund's distributions on Common Shares as well. The Fund's income also would
likely be affected adversely when prevailing short-term interest rates increase
and the Fund is utilizing Financial Leverage.
"VALUE INVESTING" RISK. The Fund focuses its investments on dividend paying or
other income producing securities that the Investment Manager believes are
undervalued or inexpensive relative to other investments. These types of
securities may present risks in addition to the general risks associated with
investing in securities. These securities generally are selected on the basis of
an issuer's fundamentals relative to current market price. Such securities are
subject to the risk of misestimation of certain fundamental factors. In
addition, during certain time periods market dynamics may strongly favor
"growth" securities of issuers that do not display strong fundamentals relative
to market price based upon positive price momentum and other factors.
Disciplined adherence to a `" investment mandate during such periods can result
in significant underperformance relative to overall market indices and other
managed investment vehicles that pursue growth style investments and/or flexible
style mandates.
INTEREST RATE RISK. Interest rate risk is the risk that fixed income securities
such as preferred and debt securities will decline in value because of changes
in market interest rates. When market interest rates rise, the market value of
such securities generally will fall. The Fund's investment in such securities
means that the net asset value and market price of the Common Shares will tend
to decline if market interest rates rise. During periods of declining interest
rates, the issuer of a security may exercise its option to prepay principal
earlier than scheduled, forcing the Fund to reinvest in lower yielding
securities. In addition, the Fund is subject to call or prepayment risk and
extension risk.
INFLATION RISK. Inflation risk is the risk that the value of assets or income
from investments will be worth less in the future as inflation decreases the
value of money. As inflation increases, the real value of the Common Shares and
distributions thereon can decline. In addition, during any periods of rising
inflation, the interest or dividend rates payable by the Fund on any Financial
Leverage the Fund may have issued would likely increase, which would tend to
further returns to holders of Common Shares.
LOWER GRADE SECURITIES. 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, which are commonly referred to as
"junk bonds." Securities of below investment grade quality are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal when due and therefore involve a greater risk of default and are
commonly referred to as "junk bonds".
FOREIGN SECURITIES RISK. The Fund may invest in U.S. dollar-denominated
securities of foreign issuers, including, but not limited to American Depositary
Receipts ("ADRs"). The prices of such U.S. dollar-denominated securities of
foreign issuers may be affected by factors not present with securities traded in
the U.S. markets, including, political and economic conditions, less stringent
regulation and higher volatility. As a result, such securities may be less
liquid and more volatile than U.S. securities.
DERIVATIVES RISK. The Fund may participate in certain derivative transactions,
such as futures contracts, options or swap transactions. Such transactions
entail certain execution, market, liquidity, hedging and tax risks.
Participation in these markets involves investment risks and transaction costs
to which the Fund would not be subject absent the use of these strategies. If
the Investment Manager's prediction of movements in the direction of the
securities and interest rate markets is inaccurate, the consequences to the Fund
may leave the Fund in a worse position than if it had not used such strategies.
ILLIQUID SECURITIES RISK. The Fund may invest in securities for which there is
no readily available trading market or that are otherwise illiquid. It may be
difficult to sell such securities at a price representing the fair value and,
where registration of such securities is required, a considerable period may
elapse between a decision to sell the securities and the time when the Fund
would be permitted to sell.
FUND DISTRIBUTION RISK. 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.
RISKS OF INVESTING IN AMPS. There also risks associated with investing in
Auction Market Preferred Shares or AMPS. The AMPS are redeemable, in whole or in
part, at the option of the Fund on any dividend payment date for the AMPS, and
will be subject to mandatory redemption in certain circumstances. The AMPS will
not be listed on an exchange. You may only buy or sell AMPS 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. Visit Preferred
Share Daily Rates for more Fund information and additional risk on investing in
AMPS.
FINANCIAL LEVERAGE. Although the use of Financial Leverage by the Fund may
create an opportunity for increased net income and capital appreciation for the
Common Shares, it also results in additional risks and can magnify the effect of
any losses. If the income and gains earned on securities purchased with
Financial Leverage proceeds are greater than the cost of Financial Leverage, the
Fund's return will be greater than if Financial Leverage had not been used.
Conversely, if the income or gain from the securities purchased with such
proceeds does not cover the cost of Financial Leverage, the return to the Fund
will be less than if Financial Leverage had not been used. There is no assurance
that a leveraging strategy will be successful.
In addition to the risks described above, the Fund is also subject to: Market
Discount Risk, Industry Concentration Risk, Other Investment Companies Risk,
Non-Diversified Status Risk, Management Risk, Dependence on Key Personnel Risk,
Current Developments Risk, Anti-Takeover Provisions, and Market Disruption Risk.
Please see www.claymore.com/dcs for a more detailed discussion about Fund risks
and considerations.
8 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund
Fund SUMMARY | AS OF APRIL 30, 2009 (unaudited)
FUND STATISTICS
--------------------------------------------------------
Share Price* $9.15
Common Share Net Asset Value* $11.49
Premium/Discount to NAV -20.4%
Net Assets Applicable to Common
Shares ($000) $104,284
--------------------------------------------------------
TOTAL RETURNS
--------------------------------------------------------
(INCEPTION 1/27/04) MARKET NAV
--------------------------------------------------------
Six Months -34.68% -38.98%
One Year -86.62% -85.94%
Three Year - average annual -50.29% -50.01%
Five Year - average annual -31.05% -29.51%
Since Inception - average annual -31.69% -28.75%
--------------------------------------------------------
% OF LONG-TERM
SECTOR BREAKDOWN** INVESTMENTS
--------------------------------------------------------
Financials 34.9%
Energy 21.7%
Health Care 10.7%
Consumer Staples 10.5%
Industrials 9.9%
Consumer Discretionary 8.9%
Telecommunication Services 1.4%
Information Technology 1.1%
Materials 0.9%
--------------------------------------------------------
% OF LONG-TERM
INDUSTRY BREAKDOWN INVESTMENTS
--------------------------------------------------------
Oil & Gas 21.7%
Insurance 11.6%
Diversified Financial Services 10.9%
Specialty Retail 6.2%
Commercial Banks 6.1%
Health Care 5.8%
Tobacco 5.3%
Food 5.2%
Pharmaceuticals 4.9%
Thrifts & Mortgage Finance 3.6%
Aerospace & Defense 3.2%
Industrial Conglomerates 2.5%
Capital Markets 2.4%
Machinery 2.2%
Air Freight & Logistics 1.5%
Media 1.4%
Diversified Telecommunication 1.4%
Software 1.1%
Hotels Restaurants & Leisure 1.1%
Metals & Mining 0.9%
Road & Rail 0.5%
Lodging 0.2%
Other 0.3%
--------------------------------------------------------
Past performance does not guarantee future results.All portfolio data is subject
to change daily. For more current information, please visit
www.claymore.com/dcs. The above summaries are provided for informational
purposes only and should not be viewed as recommendations.
* Reflects 1 for 5 reverse stock split that occurred on June 5, 2009.
** Securities are classified by sectors that represent broad groupings of
related industries
line chart:
SHARE PRICE & NAV PERFORMANCE*
Share
Price NAV
($) ($)
------ -----
4/30/08 89.25 76.75
90.2 77.85
90.95 78.25
90.95 78.25
90.95 78.25
90.9 77.95
93.2 78.85
91.45 78.6
90.95 79.4
90.45 77.9
90.45 77.9
90.45 77.9
90.65 78.85
89.75 77.15
90.25 77.8
91.7 78.45
92.3 78.85
92.3 78.85
92.3 78.85
91.5 79.35
91.55 78.7
90.25 77.65
90.8 77.85
89.2 76.75
89.2 76.75
89.2 76.75
89.2 76.75
88.1 77.9
88.55 76.7
88.3 77.85
87.85 78.1
87.85 78.1
87.85 78.1
87.75 77.05
86.2 76.45
85.25 75.2
87.9 75.45
85.35 74.45
85.35 74.45
85.35 74.45
83.55 73.7
82.95 72.65
82.35 71.45
83.15 71.65
83.5 73.45
83.5 73.45
83.5 73.45
84.25 72.5
83.8 71.4
83.15 70.55
82.4 70.85
80.4 70.25
80.4 70.25
80.4 70.25
79.75 68.85
79 68.45
79.25 67.95
76.15 65.9
75.6 64.5
75.6 64.5
75.6 64.5
75 63.5
75.45 63.4
73.65 62.5
72.7 62.3
72.7 62.3
72.7 62.3
72.7 62.3
68.7 59.25
70.6 60.85
68.2 59.2
66.25 57.4
62.65 54.15
62.65 54.15
62.65 54.15
60.05 51.35
55.1 47.95
57.9 49.5
60.35 51.85
63.9 51.85
63.9 51.85
63.9 51.85
65.5 54.1
66.2 56.05
66.95 57.1
62.85 55.2
62.5 54.3
62.5 54.3
62.5 54.3
60.4 52.45
62.7 54.7
65.4 55.4
63.5 55.45
63.7 55.2
63.7 55.2
63.7 55.2
62.75 54.9
64.65 55.45
64.45 55.5
61.6 54.35
61.55 53.95
61.55 53.95
61.55 53.95
61.85 52.95
60.45 53
58.5 50.45
58.95 50.65
58.75 50.7
58.75 50.7
58.75 50.7
55.4 49.15
54.4 47.45
53.65 45.75
54.3 46.15
54.45 46.65
54.45 46.65
54.45 46.65
53.75 45.25
54.8 46.75
56.45 48.1
58.8 50.45
58.5 50.4
58.5 50.4
58.5 50.4
58.5 50.4
57.65 51.4
57.65 50.65
54.55 49.7
55.7 49.2
55.7 49.2
55.7 49.2
46.85 45.3
42.3 38.6
42.35 34.7
43.05 34.45
43.85 34.7
43.85 34.7
43.85 34.7
38.35 31.8
38.25 30.25
34.95 25.1
38.8 26.85
44.35 32.75
44.35 32.75
44.35 32.75
42.8 32.5
41.05 31.6
40.1 32
40.95 32.85
39.4 31.35
39.4 31.35
39.4 31.35
31.7 26.45
33.3 26.05
34 25.75
30.95 24.6
29.9 24.05
29.9 24.05
29.9 24.05
25.8 21.65
21.9 18.8
19.5 16.15
15.65 12.75
13.85 10.5
13.85 10.5
13.85 10.5
17.5 13
20.05 13.85
16.65 11.85
17.6 12.7
18 13.25
18 13.25
18 13.25
20.4 14.45
19.45 15.15
16.6 13.75
16.8 13.1
15.6 12.6
15.6 12.6
15.6 12.6
13.9 12
16.15 12.4
17.35 13.15
10/30/08 18.3 13.9
19.65 14.9
19.65 14.9
19.65 14.9
19.75 15.4
21.9 16
20.35 15.55
17.95 14.65
18.55 14.75
18.55 14.75
18.55 14.75
18.15 13.85
17.05 13.1
14.8 11.8
16.8 12.4
15.75 12.05
15.75 12.05
15.75 12.05
14.85 11
14.55 11.15
12.85 10.05
9.2 8.6
10.35 7.5
10.35 7.5
10.35 7.5
12.75 8.45
13.1 8.65
13.95 9.3
13.95 9.3
14.05 9.25
14.05 9.25
14.05 9.25
11.45 8.4
11.85 8.8
12.1 8.5
10.9 8.05
10.9 8.35
10.9 8.35
10.9 8.35
11.95 8.6
11.9 8.55
12.6 8.65
12.4 8.85
11.95 8.8
11.95 8.8
11.95 8.8
11.95 8
12.75 8.25
12.7 8.35
12 8.05
12.35 8.15
12.35 8.15
12.35 8.15
11.7 8.15
11.5 8.05
11.55 8.05
11.55 8.05
11.8 8.4
11.8 8.4
11.8 8.4
12.25 8.35
12.55 8.9
12.8 9.45
12.8 9.45
13.7 10.1
13.7 10.1
13.7 10.1
14.25 10.5
15.1 11.4
14.65 11.05
14.85 11.1
14.3 10.8
14.3 10.8
14.3 10.8
13.55 10.35
13.8 10.3
13 9.7
12.7 9.5
12.65 9.6
12.65 9.6
12.65 9.6
12.65 9.6
11.3 9
12.05 9.45
11.5 9.15
11.8 9.35
11.8 9.35
11.8 9.35
12 9.4
12.05 9.5
12.6 10
12.15 9.6
11.85 9.4
11.85 9.4
11.85 9.4
11.45 9.5
11.6 9.45
11.5 9.25
11.6 9.5
11.9 9.55
11.9 9.55
11.9 9.55
12.1 9.55
11.3 9.35
11.05 9.35
10.9 9.15
10.9 8.65
10.9 8.65
10.9 8.65
10.9 8.65
9.8 8.1
9.6 7.8
9.5 7.1
9.15 6.7
9.15 6.7
9.15 6.7
8.55 6.25
8.85 6.75
8.7 6.5
8.85 6.9
8.6 6.45
8.6 6.45
8.6 6.45
7.65 6.1
7.6 5.7
7.65 5.8
7.15 5.45
7.05 5.05
7.05 5.05
7.05 5.05
7.1 4.95
7.7 5.3
7.7 5.5
8.1 5.95
8.3 6
8.3 6
8.3 6
8.55 6.05
8.75 6.55
9.25 6.55
9.35 6.7
9.2 6.55
9.2 6.55
9.2 6.55
10.25 7.3
10.05 7.4
10.25 7.7
10.45 7.9
10.1 7.65
10.1 7.65
10.1 7.65
9.55 7.1
9.75 7.25
10.05 7.4
10.55 7.85
10.7 8.15
10.7 8.15
10.7 8.15
10.6 8.05
10.3 7.7
10.45 7.85
11.35 8.5
11.35 8.5
11.35 8.5
11.35 8.5
11.65 8.65
11.3 8.65
11.6 8.85
11.75 9.15
11.9 9.4
11.9 9.4
11.9 9.4
11.05 8.95
11.45 9.1
11.2 9.1
11.35 9.1
11.75 9.15
11.75 9.15
11.75 9.15
11.45 9.1
11.35 9.1
11.55 9.25
4/30/09 11.49 9.15
pie chart:
PORTFOLIO COMPOSITION (% of Total Investments)
Asset Class
Common Stocks 68.4%
Short-Term Investments 11.4%
Corporate Bonds 9.4%
Preferred Stocks 8.9%
Convertible Preferred Stocks 1.6%
Limited Partnership 0.3%
% OF LONG-TERM
TOP TEN ISSUERS INVESTMENTS
--------------------------------------------------------
Prudential PLC 6.7%
Dairy Farmers of America 5.2%
ConocoPhillips 4.2%
Old Mutual Capital Funding LP 3.9%
Staples, Inc. 3.8%
Altria Group, Inc. 3.7%
Anadarko Petroleum Corp. 3.6%
Devon Energy Corp. 3.6%
UnitedHealth Group, Inc. 3.3%
Apache Corp. 3.3%
--------------------------------------------------------
SemiAnnual Report | April 30, 2009 | 9
DCS | Claymore Dividend & Income Fund
Portfolio of INVESTMENTS | April 30, 2009 (unaudited)
NUMBER
OF SHARES VALUE
------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 140.8%
COMMON STOCKS - 108.7%
CONSUMER DISCRETIONARY - 12.2%
59,900 Carnival Corp. (Panama) (a) $ 1,610,112
160,500 Lowe's Cos., Inc. 3,450,750
270,800 Staples, Inc. 5,583,896
96,500 Walt Disney Co. (The) 2,113,350
------------------------------------------------------------------
12,758,108
------------------------------------------------------------------
CONSUMER STAPLES - 7.4%
334,800 Altria Group, Inc. 5,467,284
62,000 Philip Morris International, Inc. 2,244,400
------------------------------------------------------------------
7,711,684
------------------------------------------------------------------
ENERGY - 30.5%
123,600 Anadarko Petroleum Corp. 5,322,216
66,100 Apache Corp. 4,816,046
153,300 Chesapeake Energy Corp. 3,021,543
54,300 Chevron Corp. 3,589,230
151,600 ConocoPhillips 6,215,600
102,400 Devon Energy Corp. 5,309,440
38,600 Occidental Petroleum Corp. 2,172,794
71,300 Valero Energy Corp. 1,414,592
------------------------------------------------------------------
31,861,461
------------------------------------------------------------------
FINANCIALS - 24.7%
83,500 Allstate Corp. (The) 1,948,055
87,700 American Express Co. 2,211,794
408,800 Bank of America Corp. 3,650,584
250,400 Citigroup, Inc. (a) 763,720
26,900 Goldman Sachs Group, Inc. (The) 3,456,650
99,800 JPMorgan Chase & Co. 3,293,400
62,500 PNC Financial Services Group, Inc. 2,481,250
59,200 SunTrust Banks, Inc. 854,848
29,000 Travelers Cos., Inc. (The) 1,193,060
121,200 US Bancorp 2,208,264
2,090,015 Washington Mutual, Inc. (a) 229,902
172,300 Wells Fargo & Co. 3,447,723
------------------------------------------------------------------
25,739,250
------------------------------------------------------------------
HEALTH CARE - 15.1%
82,100 Aetna, Inc. 1,807,021
227,600 Pfizer, Inc. 3,040,736
206,700 UnitedHealth Group, Inc. 4,861,584
99,700 Wyeth 4,227,280
40,900 Zimmer Holdings, Inc. (a) 1,799,191
------------------------------------------------------------------
15,735,812
------------------------------------------------------------------
NUMBER
OF SHARES VALUE
------------------------------------------------------------------
INDUSTRIALS - 14.0%
46,700 Caterpillar, Inc. $ 1,661,586
250,325 Contrans Income Fund (Canada) (a) 800,635
37,100 Eaton Corp. 1,624,980
38,300 FedEx Corp. 2,143,268
286,100 General Electric Co. 3,619,165
50,300 Northrop Grumman Corp. 2,432,005
47,800 United Technologies Corp. 2,334,552
------------------------------------------------------------------
14,616,191
------------------------------------------------------------------
INFORMATION TECHNOLOGY - 1.6%
82,500 Microsoft Corp. 1,671,450
------------------------------------------------------------------
MATERIALS - 1.3%
32,700 Newmont Mining Corp. 1,315,848
------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 1.9%
66,600 Verizon Communications, Inc. 2,020,644
------------------------------------------------------------------
TOTAL COMMON STOCKS - 108.7%
(Cost $122,329,831) 113,430,448
------------------------------------------------------------------
PREFERRED STOCKS - 14.2%
CONSUMER DISCRETIONARY - 0.3%
20,850 Red Lion Hotels Capital Trust, 9.500% 271,050
------------------------------------------------------------------
CONSUMER STAPLES - 7.4%
140,000 Dairy Farmers of America, 7.875% (b) 7,678,132
------------------------------------------------------------------
FINANCIALS - 6.5%
50,000 Axis Capital Holdings Ltd., Series B,
7.500% (Bermuda) (c) 3,009,375
60,000 CIT Group, Inc., Series A, 6.350% 345,000
1,060,000 Fannie Mae, 6.750% (a) 641,300
200,000 Fannie Mae, Series E, 5.100% (a) 202,500
80,000 Fannie Mae, Series O, 7.000% (a) 88,000
280,000 Fannie Mae, Series P, 4.500% (a) 142,800
1,500,000 Fannie Mae, Series S, 8.250% (a) 1,245,000
100,000 Freddie Mac, Series O, 5.810% (a) 92,500
25,000 Freddie Mac, Series T, 6.420% (a) 18,750
577,400 Scottish Re Group Ltd., 7.250%
(Cayman Islands) (a) 1,046,537
------------------------------------------------------------------
6,831,762
------------------------------------------------------------------
TOTAL PREFERRED STOCKS - 14.2%
(Cost $125,827,550) 14,780,944
------------------------------------------------------------------
See notes to financial statements.
10 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund | PORTFOLIO OF INVESTMENTS (unaudited)
continued
NUMBER
OF SHARES VALUE
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 2.6%
FINANCIALS - 2.6%
505 Fannie Mae, 5.375% (a) $ 926,612
1,500,000 Fannie Mae, Series 08-1, 8.750% (a) 1,740,000
--------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $124,831,000) 2,666,612
--------------------------------------------------------------------------------
OPTIONAL
PRINCIPAL AMOUNT CALL PROVISIONS
--------------------------------------------------------------------------------
CORPORATE BONDS - 14.9%
FINANCIALS - 14.9%
$13,354,000 Old Mutual Capital Funding LP,NR,
8.000%, 5/29/49 (Channel Islands) 6/22/09 @ 100 5,708,835
2,000,000 Preferred Term Securities XI Ltd., NR
Subordinate Income Notes 0.000%,
9/24/33 (a) (b) N/A 11,000
3,000,000 Preferred Term Securities XIX Ltd., NR
Subordinate Income Notes 0.000%,
12/22/35 (a) (b) N/A 2,400
2,000,000 Preferred Term Securities XX Ltd., NR
Subordinate Income Notes 0.000%, 3/22/38(a)(b) N/A -
2,000,000 Preferred Term Securities XXI Ltd., NR
Subordinate Income Notes 0.000%, 3/22/38(a) N/A -
19,000,000 Prudential PLC, A-, 6.500%, 6/29/49
(United Kingdom) (c) 6/23/09 @ 100 9,880,000
--------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $40,654,589) 15,602,235
--------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
------------------------------------------------------------------
LIMITED PARTNERSHIP - 0.4%
REAL ESTATE - 0.4%
400,000 Kodiak Funding, LP (d)
(Cost $3,562,000) $ 400,000
------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 140.8%
(Cost $417,204,970) 146,880,239
------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 18.2%
18,956,949 Dreyfus Money Market Bond Fund
(Cost $18,956,949) 18,956,949
------------------------------------------------------------------
TOTAL INVESTMENTS - 159.0%
(Cost $436,161,919) 165,837,188
Other Assets in excess of
Liabilities - 3.3% 3,446,484
Preferred Shares, at Liquidation
Value - (-62.3% of Net Assets Applicable to
Common Shares or -39.2% of
Total Investments) (65,000,000)
------------------------------------------------------------------
NET ASSETS APPLICABLE TO
COMMON SHARES - 100.0% $104,283,672
==================================================================
LP - Limited Partnership
N/A - Not Applicable
PLC - Public Limited Company
(a) Non-income producing security.
(b) 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,
2009, these securities amounted to 7.4% of net assets applicable to common
shares.
(c) Floating or variable rate security.
(d) 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 $400,000 which represents 0.4% of Net Assets Applicable to
Common Shares.
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.
SemiAnnual Report | April 30, 2009 | 11
DCS | Claymore Dividend & Income Fund
Statement of ASSETS AND LIABILITIES | APRIL 30, 2009 (unaudited)
ASSETS
Investments in securities, at value (cost $436,161,919) $ 165,837,188
Receivable for securities sold 8,211,031
Dividends and interest receivable 400,201
Other assets 52,045
----------------------------------------------------------------------------------------------------------------
Total assets 174,500,465
----------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 4,947,010
Advisory fee payable 104,679
Dividends payable - preferred shares 24,283
Administrative fee payable 3,240
Due to custodian 885
Accrued expenses and other liabilities 136,696
----------------------------------------------------------------------------------------------------------------
Total liabilities 5,216,793
----------------------------------------------------------------------------------------------------------------
PREFERRED SHARES, AT REDEMPTION VALUE
Auction Market Preferred Shares $.01 par value per share; 2,600 authorized,
issued and outstanding at $25,000 per share liquidation preference 65,000,000
----------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 104,283,672
----------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, $.01 par value per share; unlimited number of shares authorized,
9,079,885* shares issued and outstanding $ 453,994
Additional paid-in capital 843,184,328
Accumulated net unrealized depreciation on investments (270,324,731)
Accumulated net realized loss on investments, futures, options and currency transactions (469,377,971)
Accumulated undistributed net investment income 348,052
----------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 104,283,672
----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS
(based on 9,079,885* common shares outstanding) $ 11.49
----------------------------------------------------------------------------------------------------------------
* Reflects 1 for 5 reverse stock split that occurred on June 5, 2009.
See notes to financial statements.
12 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund
Statement of OPERATIONS | FOR THE SIX MONTHS ENDED APRIL 30, 2009 (unaudited)
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $276,524) $ 4,918,448
Interest (net of foreign withholding taxes of $37,785) 2,617,893
----------------------------------------------------------------------------------------------------------------
Total income $ 7,536,341
----------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 862,621
Auction agent fee-preferred shares 140,763
Professional fees 137,472
Trustees' fees and expenses 126,979
Printing expenses 64,823
Fund accounting 43,317
Administrative fee 27,111
Custodian fee 27,013
Insurance expense 20,094
NYSE listing 17,500
Transfer agent fee 9,141
Rating agency fee 7,345
Miscellaneous 26,819
----------------------------------------------------------------------------------------------------------------
Total expenses 1,510,998
----------------------------------------------------------------------------------------------------------------
Advisory fees waived (34,902)
----------------------------------------------------------------------------------------------------------------
Net Expenses 1,476,096
----------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,060,245
----------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES TRANSACTIONS
Net realized gain (loss) on:
Investments (195,394,670)
Options (48,177,765)
Foreign currency transactions 5,344
Futures 4,559,567
Net change in unrealized appreciation (depreciation) on:
Investments 109,515,494
Options 57,714,499
Foreign currency translations (229)
Futures (2,705,311)
----------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS, FUTURES, AND OPTIONS TRANSACTIONS (74,483,071)
----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHARES FROM
Net investment income (1,430,829)
----------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ (69,853,655)
================================================================================================================
See notes to financial statements.
SemiAnnual Report | April 30, 2009 | 13
DCS | Claymore Dividend & Income Fund
Statements of CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS |
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 2009 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2008
------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS
Net investment income $ 6,060,245 $ 61,443,761
Net realized loss on investments, futures, options and
currency transactions (239,007,524) (234,296,949)
Net change in unrealized appreciation (depreciation) on investments,
futures, currency and options transactions 164,524,453 (605,798,588)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (1,430,829) (18,702,569)
------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets applicable to common shareholders
resulting from operations (69,853,655) (797,354,345)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (4,085,948) (42,775,963)
Return of capital - (16,243,288)
------------------------------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (4,085,948) (59,019,251)
------------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to common shareholders (73,939,603) (856,373,596)
NET ASSETS
Beginning of period 178,223,275 1,034,596,871
------------------------------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income of $348,052 and ($195,416), respectively.) $ 104,283,672 $ 178,223,275
====================================================================================================================================
See notes to financial statements.
14 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund
Financial HIGHLIGHTS
FOR THE PERIOD
JANUARY 27,
FOR THE FOR THE FOR THE FOR THE FOR THE 2004*
PER SHARE OPERATING PERFORMANCE SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING APRIL 30, 2009 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
THROUGHOUT THE PERIOD** (UNAUDITED) 2008 2007 2006 2005 2004
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.65 $ 113.95 $ 119.55 $ 103.10 $ 94.45 $ 95.50(b)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.65 6.75 7.70 7.09 6.00 4.30
Net realized and unrealized gain (loss) on
investments, futures and swap transactions (8.21) (92.50) (4.30) 18.08 10.55 (0.90)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income and return of
capital (common share equivalent basis) (0.15) (2.05) (2.50) (2.22) (1.40)(g) (0.45)
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (7.71) (87.80) 0.90 22.95 15.15 2.95
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.45) (4.70) (6.50) (6.50) (6.50) (3.25)
Return of capital - (1.80) - - 0.00(f) -
------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (0.45) (6.50) (6.50) (6.50) (6.50) (3.25)
------------------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED SHARES' OFFERING EXPENSES
CHARGED TO PAID-IN-CAPITAL - - - - - (0.75)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.49 $ 19.65 $ 113.95 $ 119.55 $ 103.10 $ 94.45
------------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 9.15 $ 14.90 $ 98.10 $ 108.05 $ 91.00 $ 89.40
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (c)
Net asset value (38.98)% (81.30)% 0.67% 23.05% 16.24% 2.47%
Market value (34.68)% (83.31)% (3.53)% 26.97% 8.97% (7.33)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, applicable to common shareholders,
end of period (thousands) $ 104,284 $ 178,223 $ 1,034,697 $1,085,306 $ 936,010 $ 857,388
Preferred Shares, at liquidation value ($25,000
per share liquidation preference) (thousands) $ 65,000 $ 125,000 $ 425,000 $ 425,000 $ 425,000 $ 425,000
Preferred Shares asset coverage per share $ 65,109 $ 60,645 $ 85,859 $ 88,842 $ 80,059 $ 75,435
Ratios to Average Net Assets applicable to Common Shares:
Total expenses, including interest expense and
net of fee waiver. 2.75%(d)(h) 1.76%(h) 1.42%(h) 1.47% 1.50% 1.53%(d)
Total expenses, including interest expense
and excluding fee waiver. 2.82%(d) - - - - -
Interest expense - - - - - 0.07%(d)
Net investment income, after fee waiver, prior
to effect of dividends to preferred shares 11.30%(d) 9.15% 6.47% 6.41% 5.82% 6.20%(d)
Net investment income, before fee waiver, prior
to effect of dividends to preferred shares 11.23%(d) - - - - -
Net investment income, after fee waiver, after
effect of dividends to preferred shares 8.63%(d) 6.36% 4.36% 4.40% 4.45% 5.57%(d)
Net investment income, before fee waiver, after
effect of dividends to preferred shares 8.56%(d) - - - - -
Ratios to Average Managed Assets: (e)
Total expenses including interest expense and
net of fee waiver. 1.46%(d)(h) 1.08%(h) 1.02%(h) 1.03% 1.03% 1.05%(d)
Total expenses, including interest expense and
excluding fee waiver. 1.49%(d) - - - - -
Interest expense - - - - - 0.05%(d)
Net investment income, after fee waiver, prior
to effect of dividends to preferred shares 5.97%(d) 5.62% 4.64% 4.50% 4.00% 4.28%(d)
Net investment income, before fee waiver, prior
to effect of dividends to preferred shares 5.94%(d) - - - - -
Portfolio turnover 65% 68% 57% 25% 17% 6%
* Commencement of operations.
** Reflects 1 for 5 reverse stock split that occurred on June 5, 2009.
(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 approximately 0.01% for the six
months ended April, 30,2009, and 0.02% for the years ended October 31,
2008 and 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.
SemiAnnual Report | April 30, 2009 | 15
DCS | Claymore Dividend & Income Fund
Notes to FINANCIAL STATEMENTS | APRIL 30, 2009 (unaudited)
Note 1 - ORGANIZATION:
Claymore Dividend & Income Fund (formerly 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
principal exchange or in the principal 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.
In September, 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 157, "Fair Valuation
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 establishes three different categories for valuations. Level 1 valuations
are those based upon quoted prices in active markets. Level 2 valuations are
those based upon quoted prices in inactive markets or based upon significant
observable inputs (e.g. yield curves; benchmark interest rates; indices). Level
3 valuations are those based upon unobservable inputs (e.g. discounted cash flow
analysis; non-market based methods used to determine fair valuation). Details of
the valuations as of April 30, 2009 were as follows:
VALUATIONS AT APRIL 30, 2009
(VALUE IN $000S) Securities Derivatives Total
--------------------------------------------------------------------------------
Assets:
Level 1 $ 149,835 $ - $ 149,835
Level 2 15,602 - 15,602
Level 3 400 - 400
--------------------------------------------------------------------------------
Total $ 165,837 $ - $ 165,837
================================================================================
Liabilities:
Level 1 $ - $ - $ -
Level 2 - - -
Level 3 - - -
--------------------------------------------------------------------------------
Total $ - $ - $ -
================================================================================
LEVEL 3 HOLDINGS Securities Derivatives Total
--------------------------------------------------------------------------------
Beginning Balance at 10/31/08 $ 2,900 $ - $ 2,900
Total Realized Gain/Loss (5,633) - (5,633)
Change in Unrealized Gain/Loss 5,000 - 5,000
Net Purchases and Sales (1,867) - (1,867)
Net Transfers In/Out - - -
--------------------------------------------------------------------------------
Ending Balance at 4/30/09 $ 400 $ - $ 400
================================================================================
See notes to financial statements.
16 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund | NOTES TO FINANCIAL STATEMENTS
(unaudited) continued
(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. As of April 30, 2009 there were no swap agreements outstanding.
(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 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. As of April 30, 2009
there were no future contracts outstanding.
(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. A writer
of a put option is exposed to the risk of loss if fair value of the underlying
securities declines, but profits only to the extent of the premium received if
the underlying security increases in value. 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. As of
April 30, 2009 there were no option contracts outstanding.
(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.
SemiAnnual Report | April 30, 2009 | 17
DCS | Claymore Dividend & Income Fund | Notes to Financial Statements
(unaudited) continued
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 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.
The Adviser voluntarily agreed to waive a portion of its fee at the annual rate
of 0.08% of the Fund's average daily Managed Assets beginning January 27, 2009,
all of which is assumed by the Investment Manager. This waiver is voluntary in
nature and can be discontinued or increased at the Adviser's discretion.
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, 2009 the Fund recognized expenses of
approximately $27,111 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, 2009 is as follows:
NET TAX
COST OF NET TAX UNREALIZED
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED DEPRECIATION
FOR TAX UNREALIZED UNREALIZED DEPRECIATION ON ON DERIVATIVES AND
PURPOSES APPRECIATION DEPRECIATION INVESTMENTS FOREIGN CURRENCY
---------------------------------------------------------------------------------------------------------------
$435,289,632 $18,700,845 $(288,153,289) $(269,452,444) $ -
---------------------------------------------------------------------------------------------------------------
As of October 31, 2008, the components of accumulated earnings/(losses)
(excluding paid-in capital) on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM
INCOME/ GAINS/
(ACCUMULATED (ACCUMULATED
ORDINARY LOSS) CAPITAL LOSS)
------------------------------------------------
$(417,293) $(228,315,546)
------------------------------------------------
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.
At October 31, 2008, for federal income tax purposes, the Fund had a capital
loss carryforward of $228,315,546 available to offset future capital gains. The
capital loss carryforward is set to expire on October 31, 2016.
18 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund | Notes to Financial Statements
(unaudited) continued
The current balance of the capital loss carryover exceeds the total net assets
of the fund at April 30, 2009. As a result, it is unlikely that the Fund will be
able to fully utilize the benefits of the capital loss carryover prior the
expiration date. Any unused capital loss carryover balances will be reclassified
against paid in capital after expiration. This reclassification will have no
impact on the total net assets of the Fund.
For the year ended October 31, 2008, 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: 2008
--------------------------------------------------------------
Capital gain - common shares $ 377,304*
Capital gain - preferred shares 164,966*
Ordinary income - common shares 42,398,659
Ordinary income - preferred shares 18,537,603
Return of capital- common shares 16,243,288
--------------------------------------------------------------
$ 77,721,820
==============================================================
*The Fund hereby designates these distributions as long term capital gains
according to IRC Section 852(b)(3)(C).
During the period ended April 30, 2009, distributions of $5,516,777 were paid to
common and preferred shareholders. The classification of these distributions for
federal income tax purposes will be determined at October 31, 2009.
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 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, 2009. Tax years 2005, 2006, 2007 and 2008
are still subject to examination by major jurisdictions.
Note 5 - INVESTMENTS IN SECURITIES:
For the six months ended April 30, 2009, the cost of purchases and proceeds from
sales of investments, excluding options and short-term securities, were
$129,072,183 and $233,626,510, respectively.
Transactions in option contracts during the six months ended April 30, 2009 were
as follows:
Number of
Contracts Premiums Received
--------------------------------------------------------------------------------
Options outstanding, beginning of year 40,208 $15,628,765
Options written during the period - -
Options expired during the period - -
Options closed during the period (23,200) (8,497,251)
Options assigned during the period (17,008) (7,131,514)
--------------------------------------------------------------------------------
Options outstanding, end of period - $ -
================================================================================
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 9,079,885 (Reflects 1 for 5 reverse split that occurred on June 5, 2009)
issued and outstanding. In connection with the Fund's dividend reinvestment
plan, the Fund did not issue any shares during the six months ended April 30,
2009, or the year ended October 31, 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. On September 29, 2008 and October 20,
2008, the Fund announced redemptions of 1,200 shares of each series of AMPS,
respectively. On November 26, 2008, January 30, 2009 and February 26, 2009, the
Fund announced redemptions of 80 shares, 120 shares and 280 shares of each
series, respectively. 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 continued to experience considerable
disruption since February 2008. 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. On November 26, 2008, Fitch
Ratings, one of the
SemiAnnual Report | April 30, 2009 | 19
DCS | Claymore Dividend & Income Fund | NOTES TO FINANCIAL STATEMENTS
(unaudited) continued
two rating agencies that provide credit ratings to the Fund's AMPS, downgraded
the rating assigned to the AMPS issued by the Fund to `AA' from `AAA'. Due to
the downgrade, the maximum rates were based on a spread of 150 basis points over
the applicable LIBOR rates.
Dividends are accumulated daily at an annual rate set through auction
procedures.
For the six months ended April 30, 2009, the annualized dividend rates ranged
from:
HIGH LOW AT APRIL 30, 2009
--------------------------------------------------------------------------------
Series M7 3.39% 1.74% 1.82%
Series T28 5.39% 1.91% 1.94%
Series W7 3.27% 1.73% 1.83%
Series TH28 4.51% 1.83% 1.95%
Series F7 2.57% 1.74% 1.82%
The Fund is subject to certain limitations and restrictions while AMPS 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 AMPS at their liquidation value.
AMPS, 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 AMPS
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.
Note 8 - ACCOUNTING PRONOUNCEMENTS:
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. In September 2008, the FASB
issued a Staff Position amending SFAs No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The amendment would require disclosures by
seller of credit derivatives, including credit derivatives embedded in hybrid
instrument. The amendment is effective for financial statements issued for
fiscal years and interim periods ending after November 15, 2008. As of April 30,
2009, management does not believe the adoption of SFAS No.161 nor amendment SFAS
No. 133 will impact the financial statement amounts; however, additional
footnote disclosures may be required about the use of derivative instruments and
hedging items.
In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP
157-4 provides guidance on how to determine the fair value of assets and
liabilities when the volume and level of activity for the asset/liability has
significantly decreased. FSP 157-4 also provides guidance on identifying
circumstances that indicate a transaction is not orderly. In addition, FSP 157-4
requires disclosure in interim and annual periods of the inputs and valuation
techniques used to measure fair value and a discussion of changes in valuation
techniques. FSP 157-4 is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of FSP 157-4 is not expected to have a
significant impact on these financial statements.
Note 9 - SUBSEQUENT EVENT:
On May 1, 2009 the Board of Trustees declared a quarterly dividend of $0.100 per
common share. This dividend was payable on May 29, 2009 to shareholders of
record on May 15, 2009.
On May 11, 2009, the Fund announced that its Board of Trustees had approved a
1-for-5 reverse share split of the Fund's common shares which was completed on
June 5, 2009.
On June 17, 2009, the Fund's Board of Trustees approved the termination of
Dreman Value Management's ("DVM") investment sub-advisory agreement with the
Fund. The sub-advisory agreement shall no longer be in effect as of close of
business on August 17, 2009 or upon such earlier date as DVM may waive the
requirements of notice. On this same date, the Board of Trustees of the Fund
approved the appointment of a new investment sub-adviser to the Fund, Manning &
Napier Advisors, Inc. ("Manning & Napier"). Pursuant to this change, Manning &
Napier has entered into an interim investment sub-advisory agreement with
Claymore Advisors, LLC, the Fund's investment adviser and the Fund. In addition,
Claymore announced that the Fund's name will change to Claymore Dividend &
Income Fund. The Fund's NYSE ticker symbol will not change. The Fund's Board of
Trustees also approved a change to a non-fundamental investment policy of the
Fund to increase the percentage of the Fund's total assets that may be invested
in U.S. dollar-denominated securities of foreign issuers from 20% to 40%.
20 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund
Supplemental Information | (unaudited)
TRUSTEES
The Trustees of the Claymore Dividend & Income Fund and their principal
occupations during the past five years:
NAME, ADDRESS*, TERM OF NUMBER OF
YEAR OF OFFICE** PRINCIPAL OCCUPATIONS DURING PORTFOLIOS IN THE
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Richard L. Crandall Since 2004 Managing Partner of Aspen Partners, LLC since 2003, 1 Chairman, Novell, Inc.,
Year of birth: 1944 Founding Co-Partner of Arbor Venture and Pelstar, LLC;
Trustee Partners, LLC since 2000, and Chairman of Director, Diebold,
Enterprise Software Roundtable since 1994. Inc., and iTRACS Corp.
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
Year of birth: 1946 specializes in the provision of financial advisory Corp.; and GFM
Trustee services to corporations in the resource sector. Resources Ltd.
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 firm 47 None
Year of birth: 1953 specializing in corporate law, estate planning and
Trustee 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 Portfolio 44 None
Year of birth: 1958 Manager of Nuveen Asset Management (1998-1999),
Trustee 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:
------------------------------------------------------------------------------------------------------------------------------------
David N. Dreman+ Since 2004 Founder, Chairman and Chief Investment Officer of 1 Trustee, The Institute
Harborside Financial Dreman Value Management, LLC, an investment of Behavioral Finance,
Center advisory firm with approximately $6.3 billion Jazz Aspen, and
Plaza 10, Suite 800 under management, in various mutual funds University of Manitoba.
Jersey City, NJ 07311-4037 including several branded under the
Trustee Scudder-Dreman name; annuity products;
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.
------------------------------------------------------------------------------------------------------------------------------------
David C. Hooten++ Since 2008 Chairman of the Board of Directors and Chief 1 None
Year of birth: 1962 Executive Officer (2001-present) of Claymore Group,
Trustee Inc. and its predecessor Companies.
------------------------------------------------------------------------------------------------------------------------------------
* 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. Friedrich and Nyberg, as Class I Trustees, are expected to stand
for re-election at the Fund's 2009 annual meeting of the shareholders.
-Messrs. Dreman and Toupin, as Class II Trustees, are expected to stand for
re-election at the Fund's 2010 annual meeting of the shareholders.
-Messrs. Crandall and Hooten, as Class III Trustees, are expected to stand
for re-election at the Fund's 2011 annual meeting of shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
+ 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.
++ Mr. Hooten is an "interested person" (as defined in section 2(a)(19) of the
1940 Act) of the Fund because he is an officer of the Adviser and certain
of its affiliates.
SemiAnnual Report | April 30, 2009 | 21
DCS | Claymore Dividend & Income Fund | SUPPLEMENTAL INFORMATION (unaudited)
continued
OFFICERS
The officers of the Claymore Dividend & Income Fund and their principal
occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Since 2008 Senior Managing Director and Chief Investment
Year of birth: 1955 Officer of Claymore Advisors, LLC and Claymore
Chief Executive Officer Securities Inc. (2008-Present). Formerly, Managing
Director of Research, Nuveen Asset Management
(2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Kevin Robinson Since 2008 Senior Managing Director and General Counsel of
Year of birth: 1959 Claymore Advisors, LLC and Claymore Group, Inc.
Chief Legal Officer (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
Year of birth: 1964 and Claymore Securities, Inc. (2005-present).
Chief Accounting Officer, Formerly, Chief Financial Officer of Claymore
Chief Financial Officer Group Inc. (2005-2006); Managing Director of
and Treasurer Claymore Advisors, LLC and Claymore 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).
------------------------------------------------------------------------------------------------------------------------------------
E. Clifton Hoover Since 2006 Co-Chief Investment Officer and Managing Director
Year of birth: 1957 of Dreman Value Management, LLC (2006 to present).
Vice President Managing Director and Portfolio Manager of NFJ
Investment Group (1997-2006).
------------------------------------------------------------------------------------------------------------------------------------
Melissa J. Nguyen Since 2006 Vice President and Assistant General Counsel of
Year of Birth: 1978 Claymore Group Inc. (2005-present). Secretary of
Assistant Secretary certain funds in the Fund Complex; Formerly,
Associate, Vedder Price P.C. (2003-2005).
------------------------------------------------------------------------------------------------------------------------------------
Mark E. Mathiasen Since 2008 Assistant Vice President; Assistant General Counsel
Year of birth: 1978 of Claymore Securities, Inc. (2007-present).
Assistant Secretary Secretary of certain funds in the Fund Complex.
Previously, Law Clerk, Idaho State Courts
(2003-2006).
------------------------------------------------------------------------------------------------------------------------------------
* 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.
22 | SemiAnnual Report | April 30, 2009
DCS | 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, BNY Mellon Shareowner Services, P.O. Box 358015, Pittsburgh,
PA 15252-8015, Phone Number: (866) 488-3559.
SemiAnnual Report | April 30, 2009 | 23
DCS | Claymore Dividend & Income Fund
Investment Advisory
AGREEMENT AND SUBADVISORY AGREEMENT APPROVALS | (unaudited)
On January 15, 2009, 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 Claymore Dividend & Income Fund
(formerly Dreman/Claymore Dividend & 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, LLC ("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 their review, the Committee members 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 program of the
Adviser and the Sub-Adviser. As a part of its analysis, the Committee considered
other options available to the Fund, given its reduced asset size and recent
investment performance history, including a proposal to reorient the Fund's
investment strategy.
Based upon their review, the Committee 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. The
Board subsequently approved the renewal of the Advisory Agreements. 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 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 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
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 27, 2004) periods
ended October 31, 2008 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) and to relevant benchmark indices for the same time
periods. The Board considered that the Adviser does not directly control
investment performance but had delegated such duties to the Sub-Adviser. As
described below, the Board also considered the joint recommendation of the
Adviser and the Sub-Adviser to reorient the Fund's investment strategy in light
of market conditions and the Fund's recent underperformance.
The Board considered the Fund's advisory fee (which includes the subadvisory fee
paid to the Sub-Adviser) and expense ratio. The Board also considered that the
Adviser and the Sub-Adviser had proposed to implement an advisory fee waiver of
eight basis points for a period of two years, with the proposed fee reduction
being allocated entirely to the fees received by the Sub-Adviser from the
Adviser under the Subadvisory Agreement (the "Fee Waiver"). The Board compared
the fees and estimated expense ratios of the Fund based upon various levels of
asset growth to a peer group of other closed-end funds based upon the proposed
reorientation of the investment strategy.
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.
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. Given the size of the Fund and the constraints on its capital
structure, the Board does not anticipate significant economies of scale in the
coming year.
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 provide it with additional
revenue.
SUBADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Sub-Adviser, the Board considered the qualifications, experience, reputation and
skills of the Sub-Adviser's portfolio management and other key personnel. The
Board concluded that the Sub-Adviser had personnel qualified to provide the
services under the Subadvisory Agreement. In addition, the Board noted that the
Sub-Adviser had managed the Fund's portfolio in compliance with the Fund's
investment requirements and was addressing issues raised in connection with its
compliance program.
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 indices
for periods ended October 31, 2008. The Board considered the Sub-Adviser's
representation that recent
24 | SemiAnnual Report | April 30, 2009
DCS | Claymore Dividend & Income Fund | SUPPLEMENTAL INFORMATION (unaudited)
continued
underperformance was primarily due to the severe impact of the current financial
crisis on the Fund's significant holdings of securities in the financial
services and energy sectors and the negative impact of the Fund's leverage. The
Board considered that, in response to market conditions and the Fund's
underperformance, the Adviser and Sub-Adviser were recommending that the Fund
reorient its investment strategies to emphasize investing in undervalued equity
securities, so as to better position the Fund to provide value to shareholders
utilizing the Sub-Adviser's traditional contrarian investment style and to
benefit from any market recovery. In evaluating this recommendation, the Board
considered the Sub-Adviser's successful long-term performance record produced by
its contrarian value investment philosophy, which historically has produced
superior investment returns following periods of financial crisis. Based upon
these and other factors, the Board concluded that the Sub-Adviser is capable of
implementing the Fund's proposed modified investment strategy, given the
Sub-Adviser's contrarian style of investing and long-term track record.
The Board reviewed the subadvisory fee to be paid by the Adviser to the
Sub-Adviser, including the proposed implementation of the Fee Waiver.
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.
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. Given the size of the Fund and the
constraints on its capital structure, the Board does not anticipate significant
economies of scale.
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.
OVERALL CONCLUSIONS
After considering options available to address the current investment
underperformance, the Board determined that the continuation of the Advisory
Agreements, with the proposed reorientation of investment strategy and the Fee
Waiver, was in the best interests of the Fund. 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, taking into
consideration the costs of services to be provided and profit realized,
economies of scale and other benefits available to the Adviser and Sub-Adviser.
SemiAnnual Report | April 30, 2009 | 25
DCS | Claymore Dividend & Income Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Richard L. Crandall
David N. Dreman*
Roman Friedrich III,
Chairman
David C. Hooten*
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
J.Thomas Futrell
Chief Executive Officer
Kevin Robinson
Chief Legal Officer
Steven M. Hill
Chief Accounting Officer, Chief
Financial Officer and Treasurer
Bruce Saxon
Chief Compliance Officer
E. Clifton Hoover
Vice President
Mark E. Mathiasen
Assistant Secretary
Melissa J. Nguyen
Assistant Secretary
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
* The Fund's Board of Trustees approved the termination of Dreman Value
Management's investment sub-advisory agreement with the Fund. See Note 9 on page
20 for more details.
PRIVACY PRINCIPLES OF 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 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 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 (866)392-3004.
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 (866)392-3004, by visiting
Claymore's website at www.claymore.com/dcs or by accessing the Fund's Form N-PX
on the U.S. Securities and Exchange Commission's ("SEC") website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC 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 www.sec.gov or by visiting Claymore's website at
www.claymore.com/dcs. The Fund's Form N-Q may also be viewed and copied at the
SEC's Public Reference Room in Washington, DC; information on the operation of
the Public Reference Room may be obtained by calling (800) SEC-0330.
NOTICE TO SHAREHOLDERS
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund from time to time may purchase
shares of its common and preferred stock in the open market or in private
transactions.
SemiAnnual Report | April 30, 2009 | 27
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
(06/09)
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
artwork: DCS LISTED NYSE(R)
DCS-SAR-0409
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.
(a) Not applicable for a semi-annual reporting period.
(b) On June 17, 2009, the registrant announced that its Board of Trustees had
approved the appointment of a new investment sub-adviser, Manning & Napier
Advisors, Inc. ("Manning & Napier"), and provided notice of termination to
Dreman Value Management, LLC as investment sub-adviser to the registrant.
Manning & Napier's Senior Research Group establishes the broad investment
guidelines used in the management of the registrant's investment portfolio. A
designated research team (the "Research Team") implements those guidelines as
well as monitors the registrant's investment portfolio. The Research Team
identifies stocks for inclusion in the registrant's investment portfolio in line
with the Senior Research Group's guidelines. No specific member of the Research
Team is required to approve security purchases and sales. The members of the
Research Team are as follows
-------------------------------- ---------------- -----------------------------------------------------------------
NAME SINCE PROFESSIONAL EXPERIENCE
-------------------------------- ---------------- -----------------------------------------------------------------
Christian A. Andreach, 2009 Mr. Andreach joined Manning & Napier in 1999 and has been a
Managing Director - Consumer member of the Senior Research group since 2002.
Jack W. Bauer, Managing 2009 Mr. Bauer joined Manning & Napier in 1990 and has been a member
Director - Fixed Income of the Senior Research Group since 1992.
Jeffrey S. Coons, Co-Director 2009 Mr. Coons rejoined Manning & Napier in 1993 and has been a
of Research, Managing Director - member of the Senior Research Group since 1993. Mr. Coons is a
Quantitative Strategies, member of the Fund's Research Team.
Executive Group Member
Jeffrey Donlon, Managing 2009 Mr. Donlon joined Manning & Napier in 1998 and has been a
Director - Technology member of the Senior Research Group since 2004.
Brian Gambill, Managing 2009 Mr. Gambill joined Manning & Napier in 1997 and has been a
Director - Capital Goods member of the Senior Research Group since 2002.
Jeffrey Herrmann, Co-Director 2009 Mr. Herrmann joined Manning & Napier in 1986 and has been a
of Research, Managing Director - member of the Senior Research Group since 1992.
Themes and Overviews,
Executive Group Member
Brian Lester, Managing 2009 Mr. Lester joined Manning & Napier in 1998 and has been
Director - Life Sciences a member of the Senior Research Group since 2009.
Michael Magiera, Managing 2009 Mr. Magiera joined Manning & Napier in 1988 and has been
Director - Real Estate a member of the Senior Research Group since 1992.
Christopher Petrosino, Senior 2009 Mr. Petrosino joined Manning & Napier in 2001. Mr.
Analyst - Quantitative Petrosino is a member of the Fund's Research Team.
Strategies Group
Marc D. Tommasi, Managing 2009 Mr. Tommasi joined Manning & Napier in 1986 and has been a
Director - Global Strategies member of the Senior Research Group since 1992.
Virge Trotter, Managing 2009 Mr. Trotter joined Manning & Napier in 1997 and has been
Director - Services a member of the Senior Research Group since 2009.
-------------------------------- ---------------- -----------------------------------------------------------------
Other accounts managed. Manning & Napier does not manage any performance based
fee accounts. The following summarizes information regarding each of the other
accounts managed by the Research Team as of May 31, 2009:
-------------------------------------------------- ------------------------------ --------------------------------------
NAME NUMBER OF ACCOUNTS TOTAL ASSETS
-------------------------------------------------- ------------------------------ --------------------------------------
MUTUAL FUNDS: (Manning & Napier Fund, Inc.(1)) 25 $ 4,397,670,849
-------------------------------------------------- ------------------------------ --------------------------------------
COLLECTIVE INVESTMENT TRUST FUNDS ("CIT"): 19 $ 1,662,347,654
-------------------------------------------------- ------------------------------ --------------------------------------
SEPARATE ACCOUNTS: 8,254 $13,055,160,069
-------------------------------------------------- ------------------------------ --------------------------------------
Conflicts of Interest. Manning & Napier does not see any current or foreseeable
conflicts of interest related to this account at this time. All freely traded
accounts are blocked together, with a computer-generated randomizer used to
determine the sequence in which orders are filled.
Compensation Structure. Each analyst on the Research Team earns a base salary
and is eligible for a bonus. Bonuses are based on either recommended securities'
performance or the overall performance of the investment portfolio relative to
stated benchmarks, and can represent the bulk of compensation over time.
Performance-based bonuses are generally calculated over rolling one, two and
three year periods with benchmarks relevant to the mandate (e.g., S&P 500 Index
for US Equity portfolios, Barclays Aggregate Index for US Fixed Income
portfolios) used as hurdles to establish a bonus rate. All members of the
research team are also eligible to receive equity ownership in the firm, based
on their individual performance, tenure and leadership.
---------------
(1) The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors,
Inc. ("MNA"). Manning & Napier Investor Services, Inc., an affiliate of
MNA, is the distributor of the Fund shares.
Securities ownership. As of 5/31/2009, there are no members of the Research Team
who are invested in the Claymore Dividend & Income Fund.
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) 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 9, 2009
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 9, 2009
By: /s/ Steven M. Hill
-----------------------------------------------------------------------
Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: July 9, 2009