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 811-21863
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Claymore/Raymond James SB-1 Equity 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
2455 Corporate West Drive, Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: August 31
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Date of reporting period: August 31, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is as follows:
ANNUAL
REPORT
August 31, 2008
Claymore/Raymond James | RYJ
SB-1 Equity Fund
RYJ | Claymore/Raymond James SB-1 Equity Fund
QUESTIONS & ANSWERS |
CHUCK R. CRAIG, CFA, PORTFOLIO MANAGER
Chuck Craig joined Claymore Securities, Inc., an affiliate of Claymore Advisors,
LLC (either entity separately, or both entities together, "Claymore") in May
2003, and is a Managing Director, Portfolio Management and Supervision. Mr.
Craig is also a Portfolio Manager for Claymore's line of exchange-traded funds.
He has more than 10 years of investment industry experience and is a CFA
charterholder. He received an M.S. degree in Financial Markets at the Illinois
Institute of Technology and a B.S. in Finance from Northern Illinois University.
Claymore Advisors, LLC is the investment adviser (the "Adviser") of the
Claymore/Raymond James SB-1 Equity Fund (the "Fund"). As Adviser, Claymore
manages the investment and reinvestment of the Fund's assets and day-to-day
activities of the Fund as delegated by the Fund's Trustees. Below, Mr. Craig
discusses the Fund's performance for the 12-month period ended August 31, 2008.
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BEFORE WE DISCUSS PERFORMANCE, WILL YOU REMIND US OF THE FUND'S INVESTMENT
OBJECTIVE?
Claymore/Raymond James SB-1 Equity Fund's investment objective is to provide
capital appreciation. The Fund seeks to achieve that objective by investing
substantially all of its net assets in the equity securities that are rated, at
the time of purchase, Buy 1" ("SB-1") by Raymond James & Associates, Inc.
("Raymond James," the Fund's Sub-Adviser).
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PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT DURING THE 12 MONTHS
ENDED AUGUST 31, 2008.
The 12-month period from August 31, 2007, through August 31, 2008, was a period
of considerable economic uncertainty and significant turmoil throughout capital
markets. In the final months of 2007, what began as a correction in the U.S.
housing market accelerated into a crisis in the sub-prime mortgage market with
profound implications for the entire U.S. economy and significant impact on
economies throughout the world. By early 2008, financial markets had become
extremely risk-averse, as demonstrated by unusually wide credit spreads, severe
dislocation in short-term credit markets, overall tightening of financial
conditions, and a highly volatile equity market. Dramatic and widely publicized
failures of several prominent financial firms during 2008 added to the general
malaise.
Although official reports indicate that the U.S. economy expanded in each of the
last four quarters, growth has been below its long-term potential in recent
months. The labor market has weakened markedly, and consumer spending has
slowed, as falling house prices, rising energy prices, and tight credit
conditions have damaged consumer sentiment and spending power. Many economists
are now forecasting that the U.S. will experience a recession during 2008.
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HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
All Fund returns cited - whether based on net asset value ("NAV") or market
price - assume the reinvestment of all distributions. For the 12-month period
ended August 31, 2008, the Fund provided a total return based on market price of
1.04% and -10.54% on an NAV basis. For NAV performance comparison purposes, the
Standard & Poor's 500 Index ("S&P 500") returned -11.14% for the same time
period. The S&P 500 is generally considered representative of the U.S. large-cap
stock market. Additionally, the S&P 400 MidCap Index returned -4.22%. The S&P
400 MidCap Index is a market-capitalization weighted index designed to represent
U.S. companies in the $1.5 billion to $5 billion capitalization range and is a
widely used measure of mid-size company U.S. stock market performance.
On August 29, 2008, the last trading day of the Fund's fiscal year, the Fund's
closing market price was $17.62, which represented a discount of 0.51% to NAV of
$17.71. On August 31, 2007, the Fund's market price closed at $19.27 and its NAV
was $21.67, reflecting a discount of 11.08%. (Note: The narrowing of the
discount is likely attributable to the Fund's announcement that it was
anticipating conversion to an ETF). This conversion took place on September 3,
2008.
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HOW IS THE PORTFOLIO CONSTRUCTED AND HOW IS IT MAINTAINED TO REPRESENT THE
SUB-ADVISER'S STRONG BUY 1 PICKS?
The Fund employs a modified equal-weighting methodology, meaning, generally, the
Fund seeks to hold each SB-1 security in equal dollar-weighted percentages
relative to the total value of the Fund's portfolio, within the constraints of
the underlying securities. Occasionally, some of the securities may exhibit
relatively low liquidity. In those cases, the Fund may take an initial position
that is less than an equal portfolio weight in order to mitigate the risk of
adversely affecting the prices of the less liquid security. At rebalancing, the
Fund seeks to bring portfolio securities to an equal portfolio weight.
While SB-1 ratings can potentially change every business day, we rebalance and
reconstitute the portfolio approximately every two weeks or twice monthly. We do
so in an effort to reduce turnover and transaction costs for the Fund. At the
time of reconstitution and rebalancing, we sell securities that are no longer
ranked SB-1, add securities not currently in the portfolio that have been
upgraded to an SB-1 ranking and adjust the portfolio in accordance with our
modified equal-weighting methodology.
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WHAT ARE SOME FACTORS THAT INFLUENCED PERFORMANCE DURING THE PERIOD?
Although portfolio securities are selected based on Raymond James rankings and
not by virtue of their market capitalization, industry or sector, some of these
factors did influence the Fund's performance.
The Fund's performance was helped by its underweight relative to the S&P 500 in
the financials sector, which was the worst performing sector in the S&P 500.
Stock selection in the financials sector also contributed to performance, as the
portfolio did not hold some of the stocks that experienced very sharp declines.
Annual Report | August 31, 2008 | 3
RYJ | Claymore/Raymond James SB-1 Equity Fund | QUESTIONS & ANSWERS continued
Also positive was an overweight position relative to the S&P 500 in the energy
sector.
Among the positions that made positive contributions to performance were two
independent oil and gas exploration and production companies, Continental
Resources, Inc. and Whiting Petroleum Corp., and JA Solar Holdings Co. Ltd., a
manufacturer of solar cells based in China (0.8%, 0.9% and 0.9% of total
investments, respectively).
Positions that detracted from performance include Avanex Corp. (0.5% of total
investments), which manufactures and markets fiber optic-based products known as
photonic processors; PAETEC Holding Corp. (not held in the portfolio at period
end), which provides integrated communications services to business customers;
and First State Bancorp (not held in the portfolio at period end), a New Mexico
bank holding company.
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PLEASE TELL US ABOUT THE FUND'S DISTRIBUTIONS.
On December 31, 2007, the Fund made a distribution of $1.84 per share. For tax
purposes, approximately $1.51 of this distribution was classified as ordinary
income with the remaining $0.33 representing realized long-term capital gains. A
substantial portion of this ordinary income relates to realized short-term
capital gains. The Fund re-balances frequently as new securities are added as
the SB-1 or others are removed. As a result, a significant portion of any
realized gain/loss would likely relate to securities held for one year or less.
Any short-term capital gain distributed by the Fund would be taxed as ordinary
income.
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WHAT CHANGES ARE PLANNED FOR THIS FUND?
The Fund's Agreement and Declaration of Trust provides that, beginning after 18
months of operations from the inception date in May 2006, if the Fund's Common
Shares close on the New York Stock Exchange ("NYSE") for 75 consecutive trading
days at a price greater than a 10% discount from NAV, the Fund will commence the
process necessary to convert into an open-end investment company.
On May 29, 2008, Claymore announced that the Fund's Board of Trustees had
approved in principle the conversion of the Fund into an exchange-traded fund
("ETF"). The reorganization of the Fund into Claymore/Raymond James SB-1 Equity
ETF ("RYJ ETF"), an ETF that is a newly created series of Claymore
Exchange-Traded Fund Trust, was approved by the Board of Trustees of both the
Fund and the Claymore Exchange-Traded Fund Trust on May 29, 2008. On August 18,
2008, Claymore announced that, pending shareholder approval, the Fund would
cease trading on the NYSE after the close of the markets on September 3, 2008,
and begin trading on NYSE Arca as RYJ ETF on September 4, 2008, under the same
ticker symbol "RYJ." This plan called for RYJ ETF to acquire substantially all
of the assets and to assume substantially all of the liabilities of the Fund, in
exchange for shares of RYJ ETF to be issued to the Fund. Under this plan, the
shares of RYJ ETF issued to the Fund were to be distributed pro rata to the
shareholders of the Fund, the aggregate net asset value of which will equal the
aggregate net asset value of the Common Shares of the Fund, less the costs of
the reorganization, on September 3, 2008. On August 28, 2008, the shareholders
of the Fund approved these changes, and the Fund began trading as an ETF on
September 4, 2008.
The investment objective and principal investment strategies of the Fund and RYJ
ETF are similar, but there are some important distinctions. The Fund's
investment objective is to provide capital appreciation. In comparison, RYJ ETF
seeks investment results that correspond generally to the performance, before
RYJ ETF's fees and expenses, of an equity index called the Raymond James SB-1
Equity Index (the "SB-1 Equity Index"). The Fund utilizes an investment strategy
that is similar to the methodology of the SB-1 Equity Index to invest its
portfolio but is not required to replicate an index, as is the case with RYJ
ETF. Under normal market conditions, each of the Fund and RYJ ETF will invest
substantially all of its net assets in equity securities that are rated, at the
time of purchase, SB-1 by Raymond James analysts. The Fund's rules-based
investment process is substantially similar to the SB-1 Equity Index's stock
selection methodology.
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RYJ RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the portfolio manager 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 include forward
looking statements that involve risk and uncertainty, and there is no guarantee
that any predictions will come to pass. There can be no assurance that the Fund
will achieve its investment objective. 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. The Fund is subject to investment
risk, including the possible loss of the entire amount that you invest.
An investment in the Fund is subject to investment risk, including the possible
loss of the entire principal amount invested. An investment in the Fund is
subject to certain risks and other considerations, including, but not limited
to: Not a Complete Investment Program; Investment and Market Risk; Equity Risk;
Small-Capitalization Risk; Industry and Sector Risk; Non-U.S. Securities Risk;
REIT Risk; MLP Risk; Other Investment Company Risk; Risks Relating to Raymond
James Equity Securities Ratings; Risks Associated with Other Business Activities
of Raymond James; Investment Strategy Risk; Market Discount Risk; Portfolio
Turnover Risk; Strategic Transactions Risk; and Current Developments Risk.
4 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Fund SUMMARY | AS OF AUGUST 31, 2008 (unaudited)
FUND STATISTICS
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Share Price $17.62
Common Share Net Asset Value $17.71
Premium/Discount to NAV -0.51%
Net Assets ($000) $197,026
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TOTAL RETURNS
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(INCEPTION 5/19/06) MARKET NAV
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One Year 1.04% -10.54%
Since Inception - average annual -0.91% 0.90%
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Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.claymore.com.The investment return and principal value of an investment will
fluctuate with changes in market conditions and other factors so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
% OF TOTAL
PORTFOLIO BREAKDOWN* INVESTMENTS
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Energy 30.8%
Financials 9.7%
Consumer Discretionary 9.1%
Semiconductors 8.9%
Health Care 8.8%
Telecommunications 7.4%
Industrials 7.0%
Communications Equipment 6.5%
Software & Services 5.7%
Electronic Equipment & Instruments 3.7%
Computers & Peripherals 0.9%
Utilities 0.8%
Consumer Staples 0.7%
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* Represents broad sectors and not specific industries.
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
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Sunpower Corp. - Class A 1.0%
James River Coal Co. 1.0%
BPZ Resources, Inc. 1.0%
InterOil Corp. (Canada) 0.9%
Trina Solar Ltd. - ADR (Cayman Islands) 0.9%
JA Solar Holdings Co. Ltd. - ADR (Cayman Islands) 0.9%
Whiting Petroleum Corp. 0.9%
PetroHawk Energy Corp. 0.9%
Nvidia Corp. 0.9%
Pioneer Natural Resources Co. 0.9%
--------------------------------------------------------------------------------
Sectors and holdings are subject to change daily. For more current information,
please visit www.claymore.com. The above summaries are provided for
informational purposes only and should not be viewed as recommendations. Past
performance does not guarantee future results.
Line Chart:
SHARE PRICE & NAV PERFORMANCE
Share Price NAV
8/31/07 19.27 21.67
19.48 21.89
19.36 21.69
19.42 21.71
19.18 21.34
19.08 21.2
19.23 21.44
19.2 21.36
19.26 21.44
19.26 21.5
19.12 21.36
19.71 22.01
19.82 22.17
19.71 22.05
19.92 22.12
19.73 21.94
19.66 21.82
19.69 21.97
19.79 22.04
19.61 21.92
19.87 22.25
20.03 22.41
19.97 22.24
20.01 22.3
20.23 22.63
20.06 22.45
20.29 22.67
20.43 22.75
20.37 22.53
20.37 22.71
20.28 22.52
20.13 22.36
20.17 22.45
20.2 22.43
19.62 21.78
19.7 22
19.91 22.21
19.84 22.03
19.66 21.88
19.96 22.16
20.02 22.31
20 22.25
20.13 22.51
19.83 21.93
19.75 22.11
19.72 21.94
19.98 22.21
19.5 21.6
19.47 21.72
19.26 21.33
19.1 21.06
19.42 21.56
19.28 21.4
19 21.17
19.12 21.2
18.64 20.78
18.58 20.7
18.32 20.38
18.54 20.75
18.23 20.34
18.36 20.43
18.85 21.08
18.85 21.11
18.94 21.27
18.96 21.01
18.69 20.9
19.01 21.18
19.33 21.6
19.33 21.67
19.58 21.82
18.91 21.26
18.98 21.33
19.05 21.24
18.92 20.93
18.54 20.54
18.58 20.74
18.62 20.77
18.88 21.09
17.59 19.6
17.72 19.86
17.86 19.95
17.58 19.53
17.73 19.5
17.3 19.44
17.17 19.18
17.08 19
16.55 18.34
16.59 18.24
16.2 17.84
16.17 17.9
16.26 18.07
16.06 17.65
16.12 17.9
15.79 17.44
15.73 17.44
15.7 17.02
15.23 16.97
15.1 16.83
15.43 17.28
15.68 17.52
15.57 17.4
15.9 17.76
16.07 17.91
15.9 17.73
16.19 18.06
16.57 18.45
16.45 18.29
15.96 17.74
15.8 17.5
15.97 17.73
15.94 17.69
16.15 17.84
16.16 17.93
16.46 18.27
16.12 17.9
16.13 17.79
16.15 17.81
16.26 17.98
15.97 17.62
15.97 17.64
16.25 17.97
16.42 18.19
16.42 18.19
16.34 17.96
15.82 17.53
15.76 17.51
15.77 17.47
15.86 17.57
15.51 17.11
15.28 16.92
14.93 16.55
15.44 17.14
15.4 16.98
15.43 17.13
15.16 16.72
14.86 16.36
15.35 17.04
15.05 16.61
15.3 17
15.66 17.42
15.85 17.59
15.85 17.52
15.68 17.29
15.49 17.12
15.54 17.22
16 17.77
16.03 17.83
16.11 17.96
16.11 18.02
16.17 18.03
16.08 18.01
15.84 17.78
15.99 17.88
15.66 17.52
15.68 17.5
15.67 17.57
16.1 18.09
16.11 17.95
16.35 18.27
16.39 18.29
16.12 18
16.27 18.19
16.42 18.33
16.56 18.58
16.68 18.59
16.63 18.58
16.59 18.61
16.75 18.97
16.98 18.9
16.96 18.84
17.07 19.05
16.85 18.7
16.95 18.82
16.89 18.83
17.15 19.07
18.36 19.16
18.4 19.23
18.64 19.48
18.7 19.52
18.82 19.48
18.66 19.39
18.51 19.14
18.66 19.19
18.33 18.97
18.54 19.14
18.73 19.27
18.8 19.32
18.78 19.42
18.65 19.2
18.7 19.15
18.71 19.26
19.05 19.78
18.89 19.27
18.63 19.15
18.6 19.03
18.36 18.74
18.24 18.78
18.55 19.04
18.68 19.22
18.66 19.18
18.49 19.01
18.52 19.11
18.27 18.78
18.14 18.69
18.1 18.46
18.11 18.65
17.73 18.18
17.6 18.06
17.46 18.03
17.46 17.96
17.15 17.62
17 17.37
16.74 17.13
16.97 17.49
16.65 17.11
16.75 17.28
16.72 17.25
16.56 17.11
16.49 16.87
16.76 17.35
16.91 17.35
16.81 17.33
16.89 17.43
17.2 17.49
16.97 17.46
16.63 17.08
16.64 17.26
16.45 16.9
16.7 17.17
16.8 17.53
16.82 17.37
16.82 17.29
16.61 16.89
16.78 17.15
16.91 17.47
16.86 17.28
17.21 17.53
17.3 17.73
17.12 17.59
17.21 17.75
17.37 17.88
17.59 17.87
17.29 17.62
17.14 17.55
17.33 17.74
17.44 17.81
17.69 17.87
17.27 17.52
17.34 17.57
17.55 17.82
17.84 17.97
8/31/07 17.62 17.71
Pie Chart:
HOLDINGS BY CAPITALIZATION*
Small-cap companies 55%
Mid-cap companies 22%
Large-cap companies 22%
Cash and Other Investments 1%
* As a percentage of total investments.
% OF TOTAL
ASSET ALLOCATION NET ASSETS
--------------------------------------------------------------------------------
Common Stocks 91.1%
Master Limited Partnerships 8.8%
Other Assets in excess of Liabilities 0.1%
--------------------------------------------------------------------------------
100.0%
--------------------------------------------------------------------------------
Annual Report | August 31, 2008 | 5
RYJ | Claymore/Raymond James SB-1 Equity Fund
Portfolio of INVESTMENTS | AUGUST 31, 2008
NUMBER
OF SHARES DESCRIPTION VALUE
-----------------------------------------------------------------
TOTAL INVESTMENTS - 99.9%
COMMON STOCKS - 91.1%
COMMUNICATIONS EQUIPMENT - 6.5%
144,100 ADC Telecommunications, Inc. (a) $ 1,477,025
62,600 Adtran, Inc. 1,427,280
146,278 Avanex Corp. (a) 914,237
65,100 EMS Technologies, Inc. (a) 1,529,199
36,600 Hughes Communications, Inc. (a) 1,615,890
132,000 JDS Uniphase Corp. (a) 1,341,120
57,900 KVH Industries, Inc. (a) 523,416
147,400 Motorola, Inc. 1,388,508
54,200 Nokia Corp. - ADR (Finland) 1,364,214
215,591 Orbcomm, Inc. (a) 1,241,804
-----------------------------------------------------------------
12,822,693
-----------------------------------------------------------------
COMPUTERS & PERIPHERALS - 0.9%
29,100 Concurrent Computer Corp. (a) 206,319
32,100 Hewlett-Packard Co. 1,506,132
-----------------------------------------------------------------
1,712,451
-----------------------------------------------------------------
CONSUMER DISCRETIONARY - 9.1%
10,700 Autozone, Inc. (a) 1,468,361
33,500 Best Buy Co., Inc. 1,499,795
73,100 Brinker International, Inc. 1,383,052
25,140 Dixie Group, Inc. (a) 192,321
36,500 Dollar Tree, Inc. (a) 1,400,140
53,900 Home Depot, Inc. 1,461,768
62,300 Lowe's Cos., Inc. 1,535,072
43,600 Marvel Entertainment, Inc. (a) 1,476,732
51,000 O'Reilly Automotive, Inc. (a) 1,485,120
376,200 Pier 1 Imports, Inc. (a) 1,662,804
32,500 Polaris Industries, Inc. 1,465,425
144,100 Texas Roadhouse, Inc. - Class A (a) 1,294,018
18,500 WhirlPool Corp. 1,505,160
-----------------------------------------------------------------
17,829,768
-----------------------------------------------------------------
CONSUMER STAPLES - 0.7%
37,100 CVS Caremark Corp. 1,357,860
-----------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.7%
132,300 Cogent, Inc. (a) 1,455,300
77,100 Ingram Micro, Inc. - Class A (a) 1,457,961
80,400 Jabil Circuit, Inc. 1,355,544
96,800 L-1 Identity Solutions, Inc. (a) 1,595,264
42,100 Tech Data Corp. (a) 1,437,294
-----------------------------------------------------------------
7,301,363
-----------------------------------------------------------------
NUMBER
OF SHARES DESCRIPTION VALUE
-----------------------------------------------------------------
ENERGY - 22.7%
15,600 Alpha Natural Resources, Inc. (a) $ 1,545,960
13,900 Apache Corp. 1,589,882
19,000 Baker Hughes, Inc. 1,520,190
95,600 BPZ Resources, Inc. (a) 1,883,320
32,100 Cameron International Corp. (a) 1,495,539
33,900 Chesapeake Energy Corp. 1,640,760
25,800 Comstock Resources, Inc. (a) 1,675,452
24,600 Consol Energy, Inc. 1,665,666
32,700 Continental Resources, Inc. (a) 1,640,559
23,912 Dawson Geophysical Co. (a) 1,500,000
90,600 Delta Petroleum Corp. (a) 1,627,176
13,800 Diamond Offshore Drilling, Inc. 1,516,758
29,500 Encore Acquisition Co. (a) 1,521,020
30,800 Goodrich Petroleum Corp. (a) 1,566,180
49,800 Helix Energy Solutions Group, Inc. (a) 1,532,346
57,700 InterOil Corp. (Canada) (a) 1,790,431
45,200 James River Coal Co. (a) 1,906,084
16,100 Lufkin Industries, Inc. 1,493,919
21,600 National Oilwell Varco, Inc. (a) 1,592,568
30,000 Noble Corp. (Cayman Islands) 1,508,700
19,100 Occidental Petroleum Corp. 1,515,776
49,600 PetroHawk Energy Corp. (a) 1,716,656
26,600 Pioneer Natural Resources Co. 1,680,322
25,600 Plains Exploration & Production Co. (a) 1,379,840
15,900 Schlumberger Ltd. (Netherland Antilles) 1,498,098
11,515 Transocean, Inc. (Cayman Islands) (a) 1,464,708
16,500 Walter Industries, Inc. 1,547,700
18,000 Whiting Petroleum Corp. (a) 1,732,320
-----------------------------------------------------------------
44,747,930
-----------------------------------------------------------------
FINANCIALS - 9.7%
32,000 Allstate Corp. (The) 1,444,160
37,399 American Physicians Service Group, Inc. 825,770
40,400 Argo Group International Holdings Ltd.
(Bermuda) (a) 1,518,636
66,600 Astoria Financial Corp. 1,455,210
127,539 Cardinal Financial Corp. 1,082,806
30,300 Chubb Corp. 1,454,703
129,400 CoBiz Financial, Inc. 1,388,462
142,348 First Bancorp (Puerto Rico) 1,345,189
58,600 HCC Insurance Holdings, Inc. 1,475,548
111,800 Lakeland Bancorp, Inc. 1,319,240
90,600 New York Community Bancorp, Inc. 1,493,994
80,400 Penson Worldwide, Inc. (a) 1,354,740
See notes to financial statements.
6 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund | PORTFOLIO OF INVESTMENTS
continued
NUMBER
OF SHARES DESCRIPTION VALUE
-----------------------------------------------------------------
FINANCIALS (CONTINUED)
54,600 Pinnacle Financial Partners, Inc. (a) $ 1,382,472
32,200 Reinsurance Group of America, Inc. 1,550,752
-----------------------------------------------------------------
19,091,682
-----------------------------------------------------------------
HEALTH CARE - 8.8%
96,800 Allscripts Healthcare Solutions, Inc. 1,388,112
22,900 Amedisys, Inc. (a) 1,218,738
15,200 Covance, Inc. (a) 1,433,968
23,900 Dialysis Corp. of America (a) 188,093
63,500 Eclipsys Corp. (a) 1,416,685
66,071 IMS Health, Inc. 1,468,098
21,100 Johnson & Johnson 1,486,073
30,810 Kendle International, Inc. (a) 1,523,554
25,400 McKesson Corp. 1,467,612
35,100 Pharmaceutical Product Development, Inc. 1,432,080
75,108 Phase Forward, Inc. (a) 1,451,087
38,000 Psychiatric Solutions, Inc. (a) 1,434,500
24,400 Universal Health Services, Inc. - Class B 1,507,432
-----------------------------------------------------------------
17,416,032
-----------------------------------------------------------------
INDUSTRIALS - 7.0%
109,400 Casella Waste Systems, Inc. - Class A (a) 1,456,114
27,300 Con-Way, Inc. 1,340,430
26,900 Harsco Corp. 1,416,016
99,122 JA Solar Holdings Co. Ltd. - ADR
(Cayman Islands) (a) 1,767,345
58,200 PGT, Inc. (a) 296,820
42,200 Republic Services, Inc. 1,387,114
55,300 Ryanair Holdings PLC - ADR (Ireland) (a) 1,258,628
20,000 Sunpower Corp. - Class A (a) 1,951,000
22,300 United Parcel Service, Inc. - Class B 1,429,876
39,700 Waste Connections, Inc. (a) 1,441,507
-----------------------------------------------------------------
13,744,850
-----------------------------------------------------------------
SEMICONDUCTORS - 8.9%
62,600 Altera Corp. 1,417,264
176,820 AuthenTec, Inc. (a) 1,436,663
55,200 Diodes, Inc. (a) 1,313,208
60,700 Intel Corp. 1,388,209
278,500 Micron Technology, Inc. (a) 1,180,840
65,500 National Semiconductor Corp. 1,403,665
133,350 Nvidia Corp. (a) 1,685,544
392,400 RF Micro Devices, Inc. (a) 1,522,512
154,300 Skyworks Solutions, Inc. (a) 1,496,710
57,000 Texas Instruments, Inc. 1,397,070
54,100 Trina Solar Ltd. - ADR
(Cayman Islands) (a) 1,769,070
NUMBER
OF SHARES DESCRIPTION VALUE
-----------------------------------------------------------------
SEMICONDUCTORS (CONTINUED)
55,600 Xilinx, Inc. $ 1,444,488
-----------------------------------------------------------------
17,455,243
-----------------------------------------------------------------
SOFTWARE & SERVICES - 5.7%
367,500 Art Technology Group, Inc. (a) 1,506,750
32,700 Automatic Data Processing, Inc. 1,451,226
57,000 NCI, Inc. - Class A (a) 1,527,600
83,000 Nuance Communications, Inc. (a) 1,311,400
87,300 RightNow Technologies, Inc. (a) 1,308,627
118,900 SuccessFactors, Inc. (a) 1,307,900
99,000 Switch & Data Facilities Co., Inc. (a) 1,433,520
38,200 Vocus, Inc. (a) 1,361,830
-----------------------------------------------------------------
11,208,853
-----------------------------------------------------------------
TELECOMMUNICATIONS - 7.4%
30,300 America Movil SAB de CV - ADR (Mexico) 1,556,814
34,700 American Tower Corp. - Class A (a) 1,434,151
188,100 Centennial Communications Corp. (a) 1,433,322
39,900 Crown Castle International Corp. (a) 1,492,260
31,100 Embarq Corp. 1,466,676
32,700 Leap Wireless International, Inc. (a) 1,460,382
82,700 MetroPCS Communications, Inc. (a) 1,395,149
26,500 NII Holdings, Inc. (a) 1,391,780
53,025 NTELOS Holdings Corp. 1,577,494
41,800 SBA Communications Corp. - Class A (a) 1,460,074
-----------------------------------------------------------------
14,668,102
-----------------------------------------------------------------
TOTAL COMMON STOCKS - 91.1%
(Cost $171,591,063) 179,356,827
-----------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS - 8.8%
ENERGY - 8.0%
51,700 Energy Transfer Equity LP 1,491,545
36,300 Energy Transfer Partners LP 1,615,350
51,300 Enterprise Products Partners LP 1,510,785
24,955 Hiland Holdings GP LP 556,496
59,100 Inergy LP 1,557,876
70,100 Legacy Reserves LP 1,408,309
73,600 Magellan Midstream Holdings LP 1,631,712
68,300 Targa Resources Partners LP 1,632,370
62,200 Teekay LNG Partners LP (Marshall Island) 1,415,050
89,179 Teekay Offshore Partners LP
(Marshall Island) 1,435,782
52,700 Williams Partners LP 1,598,918
-----------------------------------------------------------------
15,854,193
-----------------------------------------------------------------
UTILITIES - 0.8%
40,700 Suburban Propane Partners LP 1,560,031
-----------------------------------------------------------------
TOTAL MASTER LIMITED PARTNERSHIPS - 8.8%
(Cost $16,794,731) 17,414,224
-----------------------------------------------------------------
See notes to financial statements.
Annual Report | August 31, 2008 | 7
RYJ | Claymore/Raymond James SB-1 Equity Fund | PORTFOLIO OF INVESTMENTS
continued
DESCRIPTION VALUE
-----------------------------------------------------------------
TOTAL INVESTMENTS - 99.9%
(Cost $188,385,794) $196,771,051
Other Assets in excess of
Liabilities - 0.1% 254,803
-----------------------------------------------------------------
NET ASSETS - 100.0% $197,025,854
=================================================================
ADR - American Depositary Receipt
LP - Limited Partnership
(a) Non-income producing security.
Securities are classified by sectors that represent broad groupings of related
industries.
See notes to financial statements.
8 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of ASSETS AND LIABILITIES | AUGUST 31, 2008
ASSETS
Investments in securities, at value (cost $188,385,794) $196,771,051
Cash 793,340
Dividends receivable 111,155
Other assets 8,503
---------------------------------------------------------------------------------------------------------------
Total assets 197,684,049
---------------------------------------------------------------------------------------------------------------
LIABILITIES
Advisory fee payable 141,012
Administration fee payable 4,562
Accrued expenses and other liabilities 512,621
---------------------------------------------------------------------------------------------------------------
Total liabilities 658,195
---------------------------------------------------------------------------------------------------------------
NET ASSETS $197,025,854
===============================================================================================================
COMPOSITION OF NET ASSETS
Common stock, $.01 par value per share; unlimited number of shares authorized,
11,122,822 shares issued and outstanding $ 111,228
Additional paid-in capital 210,347,647
Accumulated net unrealized appreciation on investments 8,385,257
Accumulated net realized loss on investments (21,871,895)
Accumulated net investment income 53,617
---------------------------------------------------------------------------------------------------------------
NET ASSETS $197,025,854
===============================================================================================================
NET ASSET VALUE (based on 11,122,822 common shares outstanding) $ 17.71
===============================================================================================================
See notes to financial statements.
Annual Report | August 31, 2008 | 9
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of OPERATIONS | FOR THE YEAR ENDED AUGUST 31, 2008
INVESTMENT INCOME
Dividends (net of return of capital distributions received of $995,324) $ 2,378,206
Interest 8,999
---------------------------------------------------------------------------------------------------------------
Total income $ 2,387,205
---------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 1,812,665
Professional fees 131,994
Printing expenses 67,839
Fund accounting 65,195
Trustees' fees and expenses 58,086
Administration fee 57,479
Custodian fee 49,357
NYSE listing 21,228
Transfer agent fee 18,009
Insurance 16,572
Merger Cost 350,000
Miscellaneous 14,914
---------------------------------------------------------------------------------------------------------------
Total expenses 2,663,338
---------------------------------------------------------------------------------------------------------------
Net investment loss (276,133)
---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (14,537,316)
Net change in unrealized appreciation (depreciation) on investments (8,692,254)
---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (23,229,570)
---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(23,505,703)
===============================================================================================================
See notes to financial statements.
10 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Statement of CHANGES IN NET ASSETS |
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 2008 AUGUST 31, 2007
---------------------------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
Net investment loss $ (276,133) $ (567,519)
Net realized gain (loss) on investments (14,537,316) 14,886,062
Net change in unrealized appreciation (depreciation) on investments (8,692,254) 14,920,272
---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (23,505,703) 29,238,815
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net realized gain (19,421,559) (1,223,510)
---------------------------------------------------------------------------------------------------------------
Return of Capital (1,044,434) -
---------------------------------------------------------------------------------------------------------------
Total Distributions (20,465,993) (1,223,510)
---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (43,971,696) 28,015,305
NET ASSETS
Beginning of period 240,997,550 212,982,245
---------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income of $53,617 and $136,225, respectively) $197,025,854 $240,997,550
===============================================================================================================
See notes to financial statements.
Annual Report | August 31, 2008 | 11
RYJ | Claymore/Raymond James SB-1 Equity Fund
Financial HIGHLIGHTS |
FOR THE PERIOD
FOR THE FOR THE MAY 19, 2006*
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD AUGUST 31, 2008 AUGUST 31, 2007 AUGUST 31, 2006
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.67 $ 19.15 $ 19.10(b)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (0.02) (0.05) (0.00)(c)
Net realized and unrealized gain (loss) on investments (2.10) 2.68 0.09
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.12) 2.63 0.09
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net realized gain (1.75) (0.11) -
Return of Capital (0.09) - -
------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.84) (0.11) -
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.71 $ 21.67 $ 19.15
====================================================================================================================================
MARKET VALUE, END OF PERIOD $ 17.62 $ 19.27 $ 17.50
====================================================================================================================================
TOTAL INVESTMENT RETURN (D)
Net asset value -10.54% 13.78% 0.26%
Market value 1.04% 10.77% (12.50)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 197,026 $ 240,998 $ 212,982
Ratio of net expenses to average net assets 1.25% 1.09% 1.12%(e)
Ratio of net investment loss to average net assets (0.13)% (0.06)% (0.06)%(e)
Portfolio Turnover Rate 142% 166% 41%
* Commencement of investment operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Amount is less than $0.01.
(d) 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.
(e) Annualized.
See notes to financial statements.
12 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Notes to FINANCIAL STATEMENTS | AUGUST 31, 2008
Note 1 - ORGANIZATION:
Claymore/Raymond James SB-1 Equity Fund (the "Fund") was organized as a Delaware
statutory trust on March 7, 2006. The Fund is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended (the "Act").
The Fund's investment objective is to provide capital appreciation. There can be
no assurance that the Fund will achieve its investment objective. Under normal
market conditions, the Fund will invest substantially all of its net assets in
equity securities that are rated, at the time of purchase, Strong Buy 1 ("SB-1")
by analysts employed by Raymond James & Associates, Inc. ("Raymond James"). For
purposes of the Fund's investment policies, in the event a security is
downgraded by Raymond James and is no longer rated SB-1 subsequent to the
purchase of such security by the Fund, such security will be considered by the
Fund to be rated SB-1 until the next semi-monthly rebalancing and reconstitution
date following such downgrade. For as long as the word "SB-1" is in the name of
the Fund, the Fund will invest at least 80% of its net assets, plus the amount
of any borrowings for investment purposes, in equity securities rated SB-1. The
Fund's investment objective is considered fundamental and may not be changed
without the approval of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund.
The Fund's Declaration of Trust provides that (beginning after 18 months from
the date of the Prospectus) if the Fund's Common Shares close on the New York
Stock Exchange ("NYSE") for 75 consecutive trading days at a price that is a 10%
or greater discount from the net asset value of the Fund's Common Shares, the
Fund will commence promptly the process necessary to convert the Fund into an
open-end investment company. The Fund's Declaration of Trust provides that in
such event a special meeting of shareholders of the Fund would be convened and
that the Fund would automatically be converted to an open-end fund unless a
majority of the outstanding voting securities of the Fund affirmatively vote to
maintain the Fund's status as a closed-end fund.
In accordance with the terms of the Agreement and Plan of Reorganization (the
"Plan") adopted by the Fund's Board of Trustees on May 29, 2008 and approved by
the Fund's shareholders on August 28, 2008, the Fund has been reorganized with
and into Claymore/Raymond James SB-1 Equity ETF (the "RYJ ETF"), an
exchange-traded fund. Pursuant to the Plan, the shares of the Fund ceased
trading on the NYSE on Wednesday, September 3, 2008, and RYJ ETF began trading
on NYSE Arca on Thursday, September 4, 2008 under the ticker symbol "RYJ," the
same ticker symbol previously used by the Fund. The assets of the Fund were
transferred to, and the liabilities of the Fund were assumed by, RYJ ETF in
exchange for shares of RYJ ETF on a one share for one share basis. RYJ ETF
shares have been distributed to the Fund's shareholders, on a tax-free basis for
federal income tax purposes, and the Fund has been terminated.
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 the significant accounting policies followed by
the Fund.
(a) VALUATION OF INVESTMENTS
The Fund values securities listed on an exchange 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 at
the last available bid price 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. Short-term securities with maturities of 60 days or less at
time of purchase are valued at amortized cost, which approximates market value.
(b) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
The Fund records the character of dividends received from MLPs based on
estimates made at the time such distributions are received. These estimates are
based upon a historical review of information available from each MLP and other
industry sources. The Fund's characterization of the estimates may subsequently
be revised based on information received from MLPs after their tax reporting
periods conclude.
(c) DISTRIBUTIONS
The Fund intends to pay substantially all of its net investment income to Common
Shareholders at least annually. In addition, the Fund intends to distribute any
capital gains to Common Shareholders at least annually. To the extent that the
Fund realizes net investment income, including short-term capital gains, on a
more frequent basis, the Fund may make more frequent distributions to its Common
Shareholders.
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 provides a continuous
investment program for the Fund's portfolio; executes recommendations for the
purchase and sale of securities; furnishes offices, necessary facilities and
equipment; provides administrative services to the Fund; oversees the activities
of Raymond James (the Fund's "Sub-Adviser"); provides personnel, including
certain officers required for its administrative management; and pays the
compensation of all officers and Trustees of the Fund who are its affiliates.
As compensation for its services, the Fund pays the Adviser a fee, payable
monthly, in an annual amount equal to 0.85% of the Fund's average daily Managed
Assets. "Managed Assets" of the Fund means the total assets of the Fund,
including the assets attributable to the proceeds from any borrowings or other
forms of financial leverage, minus liabilities, other than liabilities related
to any financial leverage.
Pursuant to a Sub-Advisory Agreement between the Fund, the Adviser, and the
Sub-Adviser, the Sub-Adviser, under the supervision of the Adviser and Fund's
Board of Trustees, provides investment research, including the determination and
dissemination of the securities rated SB-1 by Raymond James; may provide certain
facilities and personnel, including certain officers required for its
administrative management; and pays the compensation of all officers and
Trustees of the Fund who are its affiliates. As compensation for its services,
the Adviser pays the Sub-Adviser a fee, payable monthly, in an annual amount
equal to 0.35% of the Fund's average daily Managed Assets.
Under a separate Fund Administration agreement, the Adviser provides fund
administration services to the Fund. As compensation for services performed
under the Administration Agreement, the Adviser receives an administration fee
payable monthly at the annual rate set forth below as a percentage of the
average daily net assets of the fund. For the year ended August 31, 2008, the
Fund recognized expenses of approximately $57,500 for these services.
Annual Report | August 31, 2008 | 13
RYJ | Claymore/Raymond James SB-1 Equity Fund | NOTES TO FINANCIAL STATEMENTS
continued
NET 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%
--------------------------------------------------------------------------------
The Bank of New York Mellon ("BNY") acts as the Fund's accounting agent,
custodian and transfer agent. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund's securities and cash. As
custodian, BNY is responsible for the custody of the Fund's assets. As transfer
agent, BNY is responsible for performing transfer agency services for the Fund.
Certain officers and trustees of the Fund are also officers and directors of the
Adviser. The Fund does not compensate its officers or trustees who are officers
or directors of the Adviser.
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.
At August 31, 2008 the following reclassifications were made to the capital
accounts of the Fund, to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulations, which are
primarily due to the differences between book and tax treatment of investments
in real estate investment trusts, investments in partnerships and net investment
losses. Net investment income, net realized gains and net assets were not
affected by these changes.
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME/(LOSS) GAIN/(LOSS) PAID IN CAPITAL
--------------------------------------------------------------------------------
$193,525 $158,727 $(352,252)
--------------------------------------------------------------------------------
Information on the components of investments as of August 31, 2008 is as
follows:
UNDISTRIBUTED
NET TAX UNDISTRIBUTED LONG-TERM
COST OF UNREALIZED ORDINARY GAINS/
INVESTMENTS GROSS TAX GROSS TAX DEPRECIATION INCOME/ ACCUMULATED
FOR UNREALIZED UNREALIZED ON ACCUMULATED CAPITAL AND
TAX PURPOSES APPRECIATION DEPRECIATION INVESTMENTS ORDINARY LOSS OTHER LOSS
---------------------------------------------------------------------------------------------------------
$197,723,435 $17,077,891 $(18,030,275) $(952,384) -- $(12,480,637)
---------------------------------------------------------------------------------------------------------
The differences between book basis and tax basis unrealized appreciation/
(depreciation) is attributable to the tax deferral of losses on wash sales and
tax adjustments related to master limited partnerships and real estate
investment trusts.
Distributions paid to shareholders during the tax years ended August 31, 2008
and 2007 were characterized as follows for tax purposes:
ORDINARY LONG-TERM RETURN TOTAL
INCOME CAPITAL GAIN OF CAPITAL DISTRIBUTIONS
--------------------------------------------------------------------------------
2008 $14,760,956 $4,660,603 $1,044,434 $20,465,993
--------------------------------------------------------------------------------
2007 $1,223,510 $ - $ - $1,223,510
--------------------------------------------------------------------------------
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the year ended August 31, 2008, the Fund incurred and will
elect to defer $12,480,637 as post-October losses.
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 Fund'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 a 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 to the
financial statements as of August 31, 2008. There is no tax liability resulting
from unrecognized tax expenses relating to uncertain income tax positions taken
or expected to be taken on the tax return for the fiscal year-end August 31,
2008. The Fund is also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax expenses will significantly
change in twelve months.
FIN 48 requires the Fund to analyze all open tax years. Open tax years are those
years that are open for examination by the relevant income taxing authority. As
of August 31, 2008, open Federal and state income tax years include the tax
years for 2006, 2007 and 2008. The Fund has no examination in progress.
Note 5 - INVESTMENTS IN SECURITIES:
For the year ended August 31, 2008, the cost of purchases and proceeds from
sales of investments, other than short-term securities, were $305,069,343 and
$325,791,591, respectively.
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 11,122,822 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue any shares during the years ended
August 31, 2008 and 2007.
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 September 2006, the FASB issued Statement of Financial Accounting Standards
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 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. As of August 31, 2008, the Fund does not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosure will be required about the inputs used to develop
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
14 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
CLAYMORE/RAYMOND JAMES SB-1 EQUITY FUND
We have audited the accompanying statement of assets and liabilities of
Claymore/Raymond James SB-1 Equity Fund (the "Fund"), including the portfolio of
investments, as of August 31, 2008, and the related statements of operation for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the two
years in the period then ended and for the period from May 19, 2006
(commencement of investment operations) through August 31, 2006. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of August 31, 2008, by correspondence with the custodian. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Claymore/Raymond James SB-1 Equity Fund at August 31, 2008, and the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and financial highlights for each of
the two years in the period then ended and from May 19, 2006 (commencement of
investment operations) through August 31, 2006, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
October 22, 2008
Annual Report | August 31, 2008 | 15
RYJ | Claymore/Raymond James SB-1 Equity Fund
Supplemental INFORMATIONl (unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $1,686,322 was received to the Fund
through August 31, 2008. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders, $1,668,227 of investment income qualifies for the
dividends received deduction.
The Fund hereby designates $4,660,603 distributions as long-term capital gains
according to IRC Section 852 (b)(3)(C).
In January 2009, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in the
calendar year 2007.
RESULT OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on August 28, 2008.
Common shareholders voted on the Agreement and Plan of Reorganization between
the Fund and Claymore/Raymond James SB-1 Equity ETF and the election of Class II
Trustees.
1) With regard to the approval of the Agreement and Plan of Reorganization
between the Fund and Claymore/Raymond James SB-1 Equity ETF:
# OF SHARES
--------------------------------------------------------------------------------
In Favor: 6,460,015
Against: 11,724
Abstain: 23,251
Broker Non-Votes: 3,799,015
--------------------------------------------------------------------------------
2) With regard to the election of the following Trustees by common shareholders
of the Fund:
# OF SHARES # OF SHARES
IN FAVOR WITHHELD
--------------------------------------------------------------------------------
Ronald A. Nyberg 9,289,332 1,004,673
Ronald E. Toupin, Jr. 9,289,932 1,004,073
--------------------------------------------------------------------------------
The other Trustees of the Fund whose terms did not expire in 2008 are Randall C.
Barnes and Nicholas Dalmaso.
TRUSTEES
The Trustees of the Claymore/Raymond James SB-1 Equity Fund and their principal
occupations during the past five years:
NUMBER OF
NAME, ADDRESS*, YEAR OF TERM 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:
------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes Since 2006 Private Investor (2001-present). Formerly, 43 None
Year of Birth: 1951 Senior Vice President and Treasurer,
Trustee PepsiCo, Inc.(1993-1997), President, Pizza
Hut International (1991-1993) and Senior
Vice President, Strategic Planning and New
Business Development (1987-1990) of PepsiCo,
Inc. (1987-1997).
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2006 Partner of Nyberg & Cassioppi, LLC, a law 46 None
Year of Birth: 1953 firm specializing in corporate law, estate
Trustee planning and business transactions
(2000-present). Formerly, Executive Vice
President, General Counsel and Corporate
Secretary of Van Kampen Investments
(1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2006 Retired. Formerly, Vice President, Manager 43 None
Year of Birth: 1958 and Portfolio Manager of Nuveen Asset
Trustee Management (1998-1999), Vice President of
Nuveen Investment Advisory Corp.
(1992-1999), Vice President and Manager of
Nuveen Unit Investment Trusts (1991-1999),
and Assistant Vice President and Portfolio
Manager of Nuveen Unit Investment Trusts
(1988-1999), each of John Nuveen & Co., Inc.
(1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso+ Since 2006 Attorney. Formerly, Senior Managing Director 46 None
Year of Birth: 1965 and Chief Administrative Officer (2007-2008)
Trustee and General Counsel (2001-2007) of Claymore
Advisors, LLC and Claymore Securities, Inc.
Formerly, Assistant General Counsel, John
Nuveen and Co., Inc. (1999-2000). Former
Vice President and Associate General Counsel
of Van Kampen Investments, Inc. (1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
* 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
two-year term concurrent with the class of Trustees for which he serves.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
+ Mr. Dalmaso is an "interested person" (as defined in Section 2(a) (19) of
the 1940 Act) of the Fund because of his former position as an officer of,
and his equity ownership in, the Adviser and certain of its affiliates.
16 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
OFFICERS
The officers of the Claymore/Raymond James SB-1 Equity 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, Chief Investment Officer of Claymore
Year of birth: 1955 Advisors, LLC and Claymore Securities, Inc. (2008-present).;
Chief Executive Officer Chief Executive Officer of certain funds in the Fund Complex.
Formerly, Managing Director in charge of Research for Nuveen
Asset Management (2000-2007).
-------------------------------------------------------------------------------------------------------------------------------
Kevin M. Robinson Since 2008 Senior Managing Director, General Counsel and Corporate Secretary
Year of birth: 1959 of Claymore Advisors, LLC and Claymore Securities, Inc.
Chief Legal Officer (2007-present); Chief Legal Officer of certain funds in the Fund
Complex. Formerly, Associate General Counsel of NYSE Euronext,
Inc. (2000- 2007). Formerly, Archipelago Holdings, Inc. Senior
Managing Director and Associate General Counsel of ABN Amro Inc.
(1997-2000). Formerly, Senior Counsel in the Enforcement Division
of the U.S. Securities and Exchange Commission (1989-1997).
-------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2006 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of Birth: 1964 Securities, Inc. (2005-present). Formerly, Chief Financial
Chief Financial Officer, Chief Officer (2005-2006) of Claymore Group Inc. Managing Director of
Accounting Officer and Treasurer Claymore Advisors, LLC and Claymore Securities, Inc. (2003-2005).
Formerly, Treasurer of Henderson Global Funds and Operations
Manager of Henderson Global Investors (NA) Inc. (2002-2003);
Managing Director, FrontPoint Partners LLC (2001-2002); Vice
President, Nuveen Investments (1999-2001).
-------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore Advisors, LLC
Year of Birth: 1957 (2006-present). Formerly, Chief Compliance Officer/Assistant
Chief Compliance Officer Secretary of Harris Investment Management, Inc. (2003-2006).
Director-Compliance of Harrisdirect LLC (1999-2003).
-------------------------------------------------------------------------------------------------------------------------------
Mark E. Mathiasen Since 2008 Assistant Vice President; Assistant General Counsel of Claymore
Year of birth: 1978 Securities, Inc. (2007-present). Secretary of certain funds in
Secretary 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.
Annual Report | August 31, 2008 | 17
RYJ | Claymore/Raymond James SB-1 Equity Fund
Dividend Reinvestment PLAN | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York Mellon, P.O. Box 463, East Syracuse,
New York 13057-0463; Attention: Shareholder Services Department, Phone Number:
(866) 488-3559.
18 | Annual Report | August 31, 2008
RYJ | Claymore/Raymond James SB-1 Equity Fund
Investment Advisory Agreement and Investment Sub-Advisory Agreement: CONTRACT
RE-APPROVAL | (unaudited)
On April 21, 2008, the Board of Trustees (the "Board") of the Claymore/Raymond
James SB-1 Equity Fund (the "Fund"), including the Independent Trustees (those
trustees who are not "interested persons" as defined by the Investment Company
Act of 1940, as amended (the "1940 Act")), on the recommendation of the
Nominating and Governance Committee (referred to as the "Committee" and
consisting solely of those trustees who are not "interested persons" as defined
by the 1940 Act) of the Board of the Fund renewed: (1) the investment advisory
agreement ("Investment Advisory Agreement") between the Fund and Claymore
Advisors, LLC ("Adviser") and (2) the investment sub-advisory agreement
("Sub-Advisory Agreement") among the Adviser, the Fund and Raymond James &
Associates, Inc. ("Sub-Adviser"). (The Investment Advisory Agreement and the
Sub-Advisory Agreement are together referred to as the "Advisory Agreements.")
As part of its review process, the Committee was represented by independent
legal counsel. The Board and the Committee reviewed materials received from the
Adviser, the Sub-Adviser and independent legal counsel. The Board also had
previously received quarterly Board meeting information regarding performance
and operating results of the Fund.
In preparation for its review, the Committee communicated with independent legal
counsel regarding the nature of information to be provided, and independent
legal counsel, on behalf of the Committee, sent a formal request for information
and a supplemental request for information to the Adviser and Sub-Adviser. In
addition, the Committee asked the Adviser and the Sub-Adviser to explore the
feasibility of converting the Fund into an open-end exchange-traded fund
("ETF"). The Adviser and the Sub-Adviser provided extensive information in
response to the requests. 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, information
comparing the investment performance, advisory fees and total expenses of the
Fund to other funds and information about the profitability from the Advisory
Agreements to each of the Adviser and the Sub-Adviser.
Based upon their review, the Board and the Committee concluded that it was in
the best interests of the Fund to renew each of the Advisory Agreements. In
addition, on May 8, 2008, the Board approved in principle the conversion of the
Fund to an ETF. 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 manages the day-to-day investment of
the Fund's assets consistent with the Fund's investment objective to provide
capital appreciation, which the Adviser seeks to achieve by investing
substantially all of the Fund's net assets in equity securities that are rated,
at the time of purchase, Strong Buy 1 ("SB-1") by the Sub-Adviser's research
analysts. The Board also considered the secondary market support provided by the
Adviser to the Fund, including the Adviser's efforts to educate investment
professionals about the Fund and other funds sponsored by the 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 considered the experience and
qualifications of the Adviser's personnel, including those personnel providing
portfolio management and compliance oversight. Specifically, the Board noted the
ongoing activities performed by the Adviser, including monitoring of compliance
with policies and procedures and with the Fund's investment policies. After
considering these factors, the Board concluded that the Adviser and its
personnel were qualified to serve the Fund.
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 and since inception periods ended February 29, 2008. The
Board noted that the Adviser was responsible for investing and reinvesting the
Fund's net assets using a modified equal-weighting methodology to invest in the
stocks rated SB-1 by the Sub-Adviser's research analysts (the "SB-1 List"). The
Board then compared the Fund's investment performance to the performance of the
Sub-Adviser's SB-1 daily and SB-1 bi-weekly model portfolios (the "Model
Portfolios"). Because of the unique nature of the Fund, the Board concluded that
the performance of other closed-end funds did not provide meaningful comparisons
for purposes of considering the Fund's investment performance. With respect to
the Fund's performance relative to the Model Portfolios, the Board concluded
that the Adviser had satisfactorily tracked the Model Portfolios. The Board
noted that the Fund's investment results were consistent with overall market
conditions.
With respect to the Fund's market price performance, the Board noted that, like
many other closed-end funds in the current market environment, the Fund's shares
were trading at a discount. The Board considered that the Fund's share price
discount was within the range of the discounts of the other closed-end funds
that follow a rules-based methodology provided for comparison purposes by the
Adviser (the "Comparison Funds"). The Board also considered the provisions in
the Fund's governing documents which provide that, beginning eighteen months
after the Fund's initial public offering (which would be November 2007), if the
Fund's common shares close on the New York Stock Exchange for seventy-five
consecutive trading days at a price that is a 10% or greater discount from the
Fund's net asset value per share, the Fund will commence promptly the process
necessary to convert the Fund into an open-end investment company. The Board
noted that, since November 2007, the Fund's common shares generally have traded
at discounts less than and slightly greater than 10% from net asset value. The
Board considered that, while this automatic conversion feature has been
successful to an extent in limiting the discount at which shares of the Fund
have traded, the Fund's Board of Trustees has regularly discussed the discount
to net asset value at which the Fund's shares, and shares of closed-end funds in
general, have traded.
Given the above factors, the Board concluded that the Adviser's performance was
satisfactory.
The Board compared the Fund's advisory and sub-advisory fees and expense ratio
to the Comparison Funds and to the advisory fee that the Adviser charges to
other closed-end funds for which it serves as adviser. The Board also reviewed
the mean and median advisory fees and expense ratios of the Comparison Funds.
The Board noted that the Fund's expense ratio
Annual Report | August 31, 2008 | 19
RYJ | Claymore/Raymond James SB-1 Equity Fund | INVESTMENT ADVISORY AGREEMENT
AND INVESTMENT SUB-ADVISORY AGREEMENT: CONTRACT RE-APPROVAL (unaudited)
continued
was within the range of the expense ratios of the Comparison Funds and lower
than the estimated expense ratio disclosed in the Fund's initial offering
prospectus. The Board also considered that the combined advisory and
sub-advisory fees were within the range of those of the Comparison Funds and
concluded that the Fund's advisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Adviser from its relationship to the Fund, the Board reviewed information
regarding the revenues the Adviser received under the Investment Advisory
Agreement as well as the estimated allocated direct and indirect costs the
Adviser incurred in providing the services to the Fund and concluded that the
Adviser's profitability was not unreasonable.
The Board considered the extent to which economies of scale could be realized
with respect to the management of the Fund as the Fund grows and whether fee
levels reflected a reasonable sharing of such economies of scale for the benefit
of Fund investors. The Board considered the Adviser's statement that, by design,
closed-end funds' assets remain relatively fixed and therefore economies of
scale in such funds are not typically obtained through growth in assets,
although the Adviser has increased assets under management as a result of new
product offerings and has experienced related economies in its servicing,
information technology and operations functions. The Adviser has, however, also
increased staff and upgraded systems and the Adviser anticipates neither
economies of scale nor increased costs of services to the Fund. Accordingly, the
Board concluded that fee levels were appropriate.
The Board considered other benefits available to the Adviser because of its
relationship with the Fund and noted that the administrative services fees
received by the Adviser from serving as administrator provide it with additional
revenue but concluded that the advisory fee was reasonable taking into account
any benefits from such administration agreement. The Board also considered the
Adviser's statement that it does not participate in any soft dollar
arrangements. In reaching the conclusion that the advisory fee was reasonable,
the Board also considered the Adviser's statement that it benefited from its
association with the Sub-Adviser because the Adviser's relationship with the
Sub-Adviser could lead to the launch of additional products in the future.
SUB-ADVISORY AGREEMENT
With respect to the nature, extent and quality of services provided by the
Sub-Adviser, the Board considered that that the Adviser manages the investment
and reinvestment of the Fund's assets and that the Sub-Adviser's primary
responsibility under the Sub-Advisory Agreement is to regularly provide the
Adviser with the SB-1 List. The Board concluded that the Sub-Adviser was
qualified to provide the services under the Sub-Advisory Agreement.
In considering investment performance, the Board compared the performance of the
Fund to that of the Standard & Poor's 500 Index, the Standard & Poor's Mid-Cap
400 Index and the Russell 2000 Growth Index (collectively, the "Indices") for
the three month, six month, one year and since inception periods ended February
29, 2008. The Board noted that the Fund had underperformed each of the Indices
since inception, but that the Fund's performance had improved relative to the
Indices over the last one year, six month and three month periods. The Board
also considered that the stock market was generally down during the periods
being reviewed and noted the Sub-Adviser's statement that, historically, over
the long term SB-1-rated securities have outperformed relevant benchmarks. Given
these factors, the Board concluded that the Sub-Adviser's investment performance
met expectations.
The Board reviewed the subadvisory fee paid by the Fund to the Sub-Adviser and
noted the Sub-Adviser's statement that it does not provide comparable services
to any other clients. The Board considered that the combined advisory and
sub-advisory fees were within the range of those of the Comparison Funds and
concluded that the subadvisory fee was reasonable.
With respect to the costs of services to be provided and profits realized by the
Sub-Adviser from its relationship to the Fund, the Board considered that the
Adviser paid the Sub-Adviser, an unaffiliated third party, from the advisory fee
and the Sub-Adviser's statement that given the nature of the services it
provided, that calculation of profitability was not possible. Therefore, the
Board concluded that the Sub-Adviser's profitability was not unreasonable.
The Board reviewed the extent to which economies of scale with respect to the
sub-advisory services provided to the Fund would be realized as the Fund grows
and whether fee levels reflect a reasonable sharing of such economies of scale
for the benefit of Fund investors. The Board considered the Sub-Adviser's
statement that, because the Sub-Adviser does not provide similar services to any
other client, the Sub-Adviser does not expect to achieve any economies of scale
with respect to the Fund. Given this statement, the Board concluded that the
Fund was unlikely to realize any significant economies of scale with respect to
the sub-advisory services.
The Board considered other benefits available to the Sub-Adviser because of its
relationship to the Fund and noted that the shareholder support services fee
that the Sub-Adviser receives under the underwriting agreement for the initial
offering of the Fund provided it with additional revenue, but concluded that the
sub-advisory fee was reasonable considering any benefits from this arrangement.
OVERALL CONCLUSIONS
Based upon all of the information considered and the conclusions reached, the
Board determined that the terms of each Advisory Agreement continue to be fair
and reasonable and that the continuation of each Advisory Agreement is in the
best interests of the Fund.
20 | Annual Report | August 31, 2008
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RYJ | Claymore/Raymond James SB-1 Equity Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Randall C. Barnes
Nicholas Dalmaso*
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, because of his former position as an
officer of, and his equity ownership in, the Adviser and certain of its
affiliates.
OFFICERS
J. Thomas Futrell
Chief Executive Officer
Kevin M. Robinson
Chief Legal Officer
Steven M. Hill
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Mark E. Mathiasen
Secretary
Bruce Saxon
Chief Compliance Officer
INVESTMENT ADVISER AND ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
INVESTMENT SUB-ADVISER
Raymond James & Associates, Inc.
St. Petersburg, Florida
ACCOUNTING AGENT,
CUSTODIAN AND
TRANSFER AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF CLAYMORE/RAYMOND JAMES SB-1 EQUITY 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/RAYMOND JAMES SB-1 EQUITY 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 Custodian and Transfer Agent:
The Bank of New York Mellon, 111 Sanders Creek Parkway, East Syracuse, New
York 13057 (800) 701-8178
This report is sent to shareholders of Claymore/Raymond James SB-1 Equity 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.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may from time to time purchase its shares of
common stock in the open market.
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) 889-3830.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (866) 889-3830
or by accessing the Fund's Form N-PX on the SEC's website at www.sec.gov or
www.claymore.com.
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 www.claymore.com. 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 or at www.sec.gov.
Annual Report | August 31, 2008 | 23
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
RYJ
LISTED
NYSE
RYJ-AR-0808
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) During the period covered by the shareholder report presented in Item
1, the Code of Ethics was not amended.
(d) The registrant has not granted a waiver or an implicit waiver to its
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions from a provision of its Code of Ethics during the period
covered by this report.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has at least one audit
committee financial expert serving on its audit committee, Ronald E. Toupin, Jr.
Mr. Toupin is an independent Trustee for purposes of this Item 3 of Form N-CSR.
Mr. Toupin qualifies as an audit committee financial expert by virtue of his
experience obtained as a portfolio manager and research analyst, which included
review and analysis of offering documents and audited and un-audited financial
statements using GAAP to show accounting estimates, accruals and reserves.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as amended, as a result of being designated or identified as an
audit committee financial expert. The designation or identification of a person
as an audit committee financial expert does not impose on such person any
duties, obligations, or liabilities that are greater than the duties,
obligations, and liability imposed on such person as a member of the audit
committee and Board of Trustees in the absence of such designation or
identification. The designation or identification of a person as an audit
committee financial expert does not affect the duties, obligations or liability
of any other member of the audit committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees: the aggregate fees billed for each of the last two fiscal years
for professional services rendered by the principal accountant for the audit of
the registrant's annual financial statements or services that are normally
provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years were $32,000 and
$30,000 for the fiscal years ending August 31, 2008 and August 31, 2007,
respectively.
(b) Audit-Related Fees: the aggregate fees billed for in each of the last two
fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph 4(a), including agreed
upon procedures reports performed for rating agencies and the issuance of
comfort letter, were $0 and $0 for the fiscal years ending August 31, 2008 and
August 31, 2007, respectively.
(c) Tax Fees: the aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice and tax planning, including federal, state and local income tax
return preparation and related advice and determination of taxable income and
miscellaneous tax advice were $6,000 and $5,000 for the fiscal years ending
August 31, 2008 and August 31, 2007, respectively.
(d) All Other Fees: the aggregate fees billed for both fiscal years ending
August 31, 2008 and August 31, 2007 for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item were $0.
(e) Audit Committee Pre-Approval Policies and Procedures.
(1) The registrant's audit committee reviews, and in its sole discretion,
pre-approves, pursuant to written pre-approval procedures (A) all engagements
for audit and non-audit services to be provided by the principal accountant to
the registrant and (B) all engagements for non-audit services to be provided by
the principal accountant (1) to the registrant's investment adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and (2) to any entity
controlling, controlled by or under common control with the registrant's
investment adviser that provides ongoing services to the registrant; but in the
case of the services described in subsection (B)(1) or (2), only if the
engagement relates directly to the operations and financial reporting of the
registrant; provided that such pre-approval need not be obtained in
circumstances in which the pre-approval requirement is waived under rules
promulgated by the Securities and Exchange Commission or New York Stock Exchange
listing standards. Sections IV.C.2 and IV.C.3 of the Audit Committee's revised
Audit Committee Charter contain the Audit Committee's Pre-Approval Policies and
Procedures and such sections are included below.
IV.C.2 Pre-approve any engagement of the independent auditors to provide any
non-prohibited services to the Trust, including the fees and other
compensation to be paid to the independent auditors (unless an
exception is available under Rule 2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval of services to the Fund for non-prohibited services up to
$10,000. All such delegated pre-approvals shall be presented to the
Audit Committee no later than the next Audit Committee meeting.
IV.C.3 Pre-approve any engagement of the independent auditors, including the
fees and other compensation to be paid to the independent auditors, to
provide any non-audit services to the Adviser (or any "control
affiliate" of the Adviser providing ongoing services to the Trust), if
the engagement relates directly to the operations and financial
reporting of the Trust (unless an exception is available under Rule
2-01 of Regulation S-X).
(a) The Chairman or any member of the Audit Committee may grant the
pre-approval for non-audit services to the Adviser up to $10,000.
All such delegated pre-approvals shall be presented to the Audit
Committee no later than the next Audit Committee meeting.
(2) None of the services described in each of Items 4(b) through (d) were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) The percentage of hours expended on the principal accountant's engagement to
audit the registrant's financial statements for the most recent fiscal year
attributable to work performed by persons other than the principal accountant's
full-time, permanent employees was 0%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser and/or
any entity controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant (not including a sub-adviser
whose role is primarily portfolio management and is sub-contracted with or
overseen by another investment adviser) that directly related to the operations
and financial reporting of the registrant for each of the last two fiscal years,
ending August 31, 2008 and August 31, 2007, of the registrant were $0.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT.
The registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended. The audit committee of the registrant is composed of: Ronald A.
Nyberg; Ronald E. Toupin, Jr.; and Randall C. Barnes.
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.
The Board of Trustees of the registrant has delegated the voting of proxies
relating to its voting securities to its investment adviser, Claymore Advisors,
LLC (the "Adviser"). The Proxy Voting Policies and Procedures of the Adviser
(the "Proxy Voting Policies") are included as an Exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) Portfolio Manager. As of August 31, 2008, Chuck Craig, Managing Director,
Research and Development, of Claymore Securities, Inc., serves as portfolio
manager for the registrant and is responsible for the day-to-day management of
the registrant's portfolio. He has been associated with the registrant since May
2003. Prior to joining Claymore, Mr. Craig worked for four years at First Trust
Portfolios, L.P. as an equity research analyst and portfolio manager within the
Equity Strategy Research Group.
(a)(2)(i-iii) Other Accounts Managed by the Portfolio Manager. As of August 31,
2008, Chuck Craig managed the following other accounts:
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Type of Account Number of Accounts Total Assets in the Number of Accounts Total Assets in the
Accounts Charged Performance Accounts Charged
Fees Performance Fees
-------------------------------------------------------------------------------------------------------------
Registered investment 510* $6,749,001,725 0 0
companies
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Other pooled 0 0 0 0
investment
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Other accounts 0 0 0 0
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* Included in this amount are 478 unit investment trusts (valued at
$4,675,533,242), for which Mr. Craig provides day-to-day supervision.
(a)(2)(iv) Potential Conflicts of Interest. Actual or apparent conflicts of
interest may arise when a portfolio manager has day-to-day management
responsibilities with respect to more than one fund or other account. More
specifically, portfolio managers who manage multiple funds and/or other accounts
may be presented with one or more of the following potential conflicts.
The management of multiple funds and/or other accounts may result in a portfolio
manager devoting unequal time and attention to the management of each fund
and/or other account. The Investment Adviser seeks to manage such competing
interests for the time and attention of a portfolio manager by having the
portfolio manager focus on a particular investment discipline. Most other
accounts managed by a portfolio manager are managed using the same investment
models that are used in connection with the management of the registrant.
If a portfolio manager identifies a limited investment opportunity which may be
suitable for more than one fund or other account, a fund may not be able to take
full advantage of the opportunity due to an allocation of filled purchase or
sale orders across all eligible funds and other accounts. To deal with these
situations, the Investment Adviser has adopted procedures for allocating
portfolio transactions across multiple accounts.
The Investment Adviser determines which broker to use to execute each order,
consistent with its duty to seek best execution of the transaction. However,
with respect to certain other accounts (such as mutual funds for which the
Investment Adviser acts as adviser, other pooled investment vehicles that are
not registered mutual funds, and other accounts managed for organizations and
individuals), the Investment Adviser may be limited by the client with respect
to the selection of brokers or may be instructed to direct trades through a
particular broker. In these cases, trades for a fund in a particular security
may be placed separately from, rather than aggregated with, such other accounts.
Having separate transactions with respect to a security may temporarily affect
the market price of the security for the execution of the transaction, or both,
to the possible detriment of the registrant or other account(s) involved.
The Investment Adviser has adopted certain compliance procedures which are
designed to address these types of conflicts. However, there is no guarantee
that such procedures will detect each and every situation in which a conflict
arises.
(a)(3) Portfolio Manager Compensation. The portfolio manager's compensation
consists of the following elements:
Base salary: The portfolio manager is paid a fixed base salary by the Investment
Adviser which is set at a level determined to be appropriate based upon the
individual's experience and responsibilities.
Annual bonus: The portfolio manager is eligible for a discretionary annual
bonus. There is no policy regarding, or agreement with, the portfolio manager to
receive bonuses or any other compensation in connection with the performance of
any of the accounts managed by the portfolio manager. The portfolio manager also
participates in benefit plans and programs generally available to all employees
of the Investment Adviser.
(a)(4) Securities Ownership of the Portfolio Manager. As of August 31, 2008, Mr.
Craig owned between $1-$10,000 in shares of the registrant.
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
No purchases were made by or on behalf of the registrant or any "affiliated
purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act, of shares or
other units of any class of the registrant's equity securities that is
registered by the registrant pursuant to Section 12 of the Exchange Act.
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 as required by Rule
30a-3(b) under the Investment Company Act of 1940, 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 second fiscal quarter of the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics for Chief Executive and Senior Financial Officer.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Rule 30a-2 of the Investment Company Act of 1940.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies and Procedures.
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/Raymond James SB-1 Equity Fund
By: /s/ J. Thomas Futrell
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J. Thomas Futrell
Chief Executive Officer
Date: November 7, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below 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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J. Thomas Futrell
Chief Executive Officer
Date: November 7, 2008
By: /s/ Steven M. Hill
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Steven M. Hill
Chief Financial Officer, Chief Accounting Officer and Treasurer
Date: November 7, 2008