UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
CLAYMORE DIVIDEND & INCOME FUND
(Names of Registrant As Specified in its Declaration of Trust)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
Logo
CLAYMORE(SM)
CLAYMORE DIVIDEND & INCOME FUND
2455 CORPORATE WEST DRIVE
LISLE, ILLINOIS 60532
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 2009
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Notice is hereby given to holders of common shares of beneficial
interest, par value $0.01 per share ("Common Shares"), and holders of Auction
Market Preferred Shares, par value $0.01 per share, liquidation preference
$25,000 per share ("Preferred Shares," and together with the Common Shares,
"Shares"), of Claymore Dividend & Income Fund (formerly Dreman/Claymore
Dividend & Income Fund) (the "Fund") that the annual meeting of shareholders of
the Fund (the "Annual Meeting") will be held at the offices of the Fund, 2455
Corporate West Drive, Lisle, Illinois 60532, on Friday, October 23, 2009, at
11:30 a.m. Central time. The Annual Meeting is being held for the following
purposes:
1. To approve a new investment advisory agreement between the Fund and
Claymore Advisors, LLC.
2. To approve an investment sub-advisory agreement among the Fund,
Claymore Advisors, LLC and Manning & Napier Advisors, Inc.
3. To elect two Trustees as Class II Trustees to serve until the Fund's
2012 annual meeting of shareholders or until their respective
successors shall have been elected and qualified.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
THIS IS A VERY IMPORTANT ANNUAL MEETING OF THE FUND. THE BOARD OF
TRUSTEES (THE "BOARD") OF THE FUND, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH TRUSTEE NOMINEE
NOMINATED BY THE BOARD AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT. IN
ADDITION, THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT AND FOR
THE APPROVAL OF THE INVESTMENT SUB-ADVISORY AGREEMENT.
The Board has fixed the close of business on July 24, 2009, as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the Annual Meeting.
It is important that your Shares be represented at the Annual Meeting
in person or by proxy. Whether or not you plan to attend the Annual Meeting, we
urge you to complete, sign, date, and return the enclosed proxy card in the
postage-paid envelope provided or record your voting instructions via telephone
or the Internet so you will be represented at the Annual Meeting. If you wish
to attend the Annual Meeting and vote in person, you will be able to do so and
your vote at the Annual Meeting will revoke any proxy you may have submitted.
Merely attending the Annual Meeting, however, will not revoke any previously
submitted proxy.
Should you have any questions regarding the Annual Meeting or about
how to vote your shares, please call our proxy information line at (866)
796-1290 Monday through Friday, 9:00 a.m. to 10:00 p.m. (Eastern Time).
By order of the Board of Trustees,
/s/ J. Thomas Futrell
J. Thomas Futrell
Chief Executive Officer
Lisle, Illinois
October 2, 2009
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED OR RECORD YOUR VOTING INSTRUCTIONS VIA TELEPHONE
OR THE INTERNET. IN ORDER TO AVOID ANY ADDITIONAL EXPENSE OF FURTHER
SOLICITATION, PLEASE MAIL YOUR PROXY CARD OR RECORD YOUR VOTING INSTRUCTIONS
PROMPTLY.
CLAYMORE DIVIDEND & INCOME FUND
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PROXY STATEMENT
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FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 2009
This proxy statement ("Proxy Statement") is furnished to holders of
common shares of beneficial interest, par value $0.01 per share ("Common
Shares"), and holders of Auction Market Preferred Shares, par value $0.01 per
share, liquidation preference $25,000 per share ("Preferred Shares," and
together with the Common Shares "Shares"), of Claymore Dividend & Income Fund
(formerly Dreman/Claymore Dividend & Income Fund) (the "Fund") in connection
with the solicitation by the Board of Trustees of the Fund (the "Board") of
proxies to be voted at the annual meeting of shareholders of the Fund to be
held on Friday, October 23, 2009, and any adjournment or postponement thereof
(the "Annual Meeting"). The Annual Meeting will be held at the offices of the
Fund, 2455 Corporate West Drive, Lisle, Illinois 60532 on October 23, 2009, at
11:30 a.m. Central time.
This Proxy Statement gives you information you need to vote on the
matters listed on the accompanying Notice of Annual Meeting of Shareholders
("Notice of Annual Meeting"). Much of the information in this Proxy Statement
is required under rules of the Securities and Exchange Commission ("SEC"). If
there is anything you don't understand, please contact us at our toll-free
number: (866) 796-1290.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE FUND'S MOST
RECENT ANNUAL REPORT AND SEMI-ANNUAL REPORT TO SHAREHOLDERS TO ANY SHAREHOLDER
UPON REQUEST. REQUESTS SHOULD BE DIRECTED TO CLAYMORE SECURITIES, INC., 2455
CORPORATE WEST DRIVE, LISLE, ILLINOIS 60532, (866) 392-3004.
The Notice of Annual Meeting, this Proxy Statement and the enclosed
proxy card are first being sent to the Fund's shareholders on or about October
5, 2009.
o WHY IS A SHAREHOLDER MEETING BEING HELD?
The Fund's Common Shares are listed on the New York Stock
Exchange (the "NYSE"), which requires the Fund to hold an annual
meeting of shareholders to elect Trustees each fiscal year.
Shareholders of the Fund are being asked to vote at the Annual
Meeting to elect two Trustees as Class II Trustees (Mr. Roman
Friedrich III and Mr. Ronald A. Nyberg are the nominees) to serve
until the Fund's 2012 annual meeting of shareholders or until
their respective successors shall have been elected and
qualified.
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o WHY ARE SHAREHOLDERS BEING ASKED TO APPROVE A NEW ADVISORY
AGREEMENT?
At the Annual Meeting, shareholders also are being asked to
approve a new investment advisory agreement between the Fund and
Claymore Advisors, LLC ("Claymore" or the "Adviser"). Claymore
Group, Inc. ("Claymore Group"), the parent of the Adviser, and
indirect wholly-owned subsidiaries of Guggenheim Partners, LLC
("Guggenheim"), have entered into an agreement and plan of merger
pursuant to which Claymore Group and its associated entities,
including the Adviser, will become indirect subsidiaries of
Guggenheim (the "Transaction"). Consummation of the Transaction
will be deemed to be an "assignment" of the investment advisory
agreement between the Fund and the Adviser (the "Current Advisory
Agreement") and will therefore result in the automatic
termination of the Current Advisory Agreement pursuant to the
Investment Company Act of 1940, as amended (the "1940 Act"). In
order for the Adviser to continue serving as the Fund's
investment adviser, a new investment advisory agreement between
the Fund and the Adviser (the "New Advisory Agreement") must be
approved by shareholders of the Fund. Shareholders are being
asked to vote at the Annual Meeting to approve the New Advisory
Agreement.
Rule 15a-4 under the 1940 Act permits the Board (including a
majority of the Independent Trustees) to approve and enter into
an interim investment advisory agreement between the Fund and the
Adviser (the "Interim Advisory Agreement"). The Board has
approved the Interim Advisory Agreement, which would become
effective upon the consummation of the Transaction if the New
Advisory Agreement has not been approved by shareholders of the
Fund prior to the consummation of the Transaction. Pursuant to
the Interim Advisory Agreement, the Adviser may serve as
investment adviser to the Fund for up to 150 days following the
consummation of the Transaction, pending receipt of shareholder
approval of the New Advisory Agreement.
o WHO IS GUGGENHEIM?
Guggenheim is a global, independent, privately held, diversified
financial services firm with more than $100 billion in assets
under supervision and 800 dedicated professionals. Headquartered
in Chicago and New York, the firm operates through offices in 20
cities in the U.S., Europe and Asia. Guggenheim operates
businesses in investment management, capital markets, wealth
management and merchant banking. Within the investment and wealth
management businesses, Guggenheim specializes in fixed income and
alternative investments, and in providing sophisticated wealth
advisory and family office services. Within capital markets,
Guggenheim
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specializes in providing debt financing and structured finance
solutions to clients. Merchant banking activities include its
portfolio of investments in funds managed by it, joint venture
business investments, and new business launch activities not
integrated into other primary operating businesses.
o WHEN IS THE TRANSACTION EXPECTED TO CLOSE?
While the closing of the Transaction remains subject to several
conditions, the Adviser anticipates that the closing of the
Transaction will occur prior to the date of the Annual Meeting.
However, there can be no assurance that the closing of the
Transaction will occur prior to such time.
o HOW WILL THE TRANSACTION AFFECT THE FUND?
Your investment in your Fund will not change as a result of the
Transaction. You will still own the same Shares in the Fund, and
the net asset value of your investment will not change as a
result of the Transaction. Further, the Transaction will not
result in any change in the Fund's investment objectives or
principal investment strategies.
o HOW DOES THE NEW ADVISORY AGREEMENT COMPARE WITH THE CURRENT
ADVISORY AGREEMENT?
The New Advisory Agreement, if approved by shareholders, will
still be with the Adviser and there will be no material
differences between the terms of the New Advisory Agreement and
the terms of the Current Advisory Agreement.
o WHY ARE SHAREHOLDERS BEING ASKED TO APPROVE A NEW INVESTMENT
SUB-ADVISORY AGREEMENT?
After considering various strategic alternatives for the Fund, on
June 17, 2009 the Board approved an investment sub-advisory
agreement among the Fund, the Adviser and Manning & Napier
Advisors, Inc. ("Manning & Napier"), dated as of June 17, 2009,
for an interim period of 150 days pending shareholder approval
(the "Initial Interim Sub-Advisory Agreement"), and the
termination of the investment sub-advisory agreement among the
Fund, the Adviser and Dreman Value Management, LLC ("DVM"), dated
as of January 27, 2004. Since that time, Manning & Napier has
served as the Fund's investment sub-advisor on an interim basis
and has been responsible for the day-to-day management of the
Fund. Pursuant to Rule 15a-4 under the 1940 Act, Manning & Napier
may act as investment sub-adviser on an interim basis for 150
days pending shareholder approval of the New Sub-Advisory
Agreement (as defined below).
The closing of the Transaction may result in the automatic
termination of the Initial Interim Sub-Advisory Agreement
pursuant to its terms.
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Therefore, the Board has approved an interim investment
sub-advisory contract among the Fund, the Adviser and Manning &
Napier (the "Subsequent Interim Sub-Advisory Agreement"), which
would become effective upon the consummation of the Transaction
if the New Sub- Advisory Agreement has not been approved by
shareholders of the Fund prior to the consummation of the
Transaction and remain in effect for the remainder of the 150 day
period commencing on the date of the Initial Interim Sub-Advisory
Agreement. The Board has also approved a sub-advisory agreement
among the Fund, the Adviser and Manning & Napier (the "New
Sub-Advisory Agreement"), which would become effective upon the
later of (i) approval by shareholders of the Fund or (ii) the
consummation of the Transaction. The Initial Interim Sub-
Advisory Agreement, the Subsequent Interim Sub-Advisory Agreement
and the New Sub-Advisory Agreement are sometimes referred to
herein collectively as the "Manning & Napier Sub-Advisory
Agreement."
In order for Manning & Napier to continue to act as investment
sub- adviser to the Fund after November 14, 2009, the New
Sub-Advisory Agreement must be approved by shareholders of the
Fund.
o WHO IS MANNING & NAPIER?
Manning & Napier has been a registered investment adviser since
1970. For more than 35 years, Manning & Napier has focused on
managing clients' investments through a variety of market
conditions, including five bear markets. The firm manages
approximately $16 billion for individuals, corporations, defined
benefit pension plans, 401(k) choice plans, Taft-Hartley
accounts, endowments, foundations and municipal retirement plans
as of December 31, 2008. It remains an employee-owned firm, with
100% of the firm owned by full-time employees.
o WILL THE FUND'S FEES FOR INVESTMENT ADVISORY OR SUB-ADVISORY
SERVICES INCREASE?
No. The total investment advisory fees, as a percentage of
assets, currently payable by your Fund will not change as a
result of the New Advisory Agreement or the Manning & Napier
Sub-Advisory Agreement. The Fund currently pays to the Adviser an
investment advisory fee at an annual rate equal to 0.85% of the
average daily value of the Fund's Managed Assets (as defined
herein). The Adviser has contractually agreed to waive
temporarily a portion of the advisory fee in an annual amount
equal to 0.08% of the average daily value of the Fund's Managed
Assets until January 27, 2011. Pursuant to the New Advisory
Agreement, the Fund will continue to pay the Adviser an
investment advisory fee at the same annual rate. Additionally,
the contractual fee waiver will continue until January 27, 2011.
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The sub-advisory fees payable to DVM and Manning & Napier are
paid by the Adviser out of the advisory fee paid by the Fund. The
sub-advisory fee rate paid to Manning & Napier is intended to
equal the sub-advisory fee rate paid to DVM (including with
respect to applicable fee waivers previously agreed to by DVM),
although the method by which the fee is calculated differs.
o WHO IS ASKING FOR YOUR VOTE?
The enclosed proxy is solicited by the Board for use at the
Annual Meeting to be held on October 23, 2009, and, if the Annual
Meeting is adjourned or postponed, at any later meetings, for the
purposes stated in the Notice of Annual Meeting.
o HOW DOES THE BOARD RECOMMEND THAT SHAREHOLDERS VOTE ON EACH
PROPOSAL?
The Board, including the Independent Trustees, unanimously
recommends that you (i) vote "FOR" the proposal to approve the
New Advisory Agreement pursuant to Proposal 1, (ii) vote "FOR"
the proposal to approve the New Sub-Advisory Agreement pursuant
to Proposal 2 and (iii) vote "FOR ALL" of the Trustee nominees of
the Board (Mr. Roman Friedrich III and Mr. Ronald A. Nyberg)
pursuant to Proposal 3.
o WILL YOUR VOTE MAKE A DIFFERENCE?
YES! This is a very important Annual Meeting of the Fund. Your
vote is important and could make a difference in the governance
of the Fund, no matter how many Shares you own.
o WHO IS ELIGIBLE TO VOTE?
Shareholders of record of the Fund at the close of business on
July 24, 2009 (the "Record Date"), are entitled to be present and
to vote at the Annual Meeting or any adjournment or postponement
thereof. Each Share is entitled to one vote.
o HOW DO YOU VOTE YOUR SHARES?
Whether or not you plan to attend the Annual Meeting, we urge you
to complete, sign, date, and return the enclosed proxy card in
the postage-paid envelope provided or record your voting
instructions via telephone or the Internet so your Shares will be
represented at the Annual Meeting. Information regarding how to
vote via telephone or the Internet is included on the enclosed
proxy card. The required control number for Internet and
telephone voting is printed on the enclosed proxy card. The
control number is used to match proxy cards with shareholders'
respective accounts and to ensure that, if multiple
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proxy cards are executed, shares are voted in accordance with the
proxy card bearing the latest date.
If you wish to attend the Annual Meeting and vote in person, you
will be able to do so. You may contact the Fund at (866) 796-1290
to obtain directions to the site of the Annual Meeting.
Shares represented by duly executed proxies will be voted in
accordance with your instructions. If you sign the proxy, but
don't fill in a vote, your Shares will be voted in accordance
with the Board's recommendation. If any other business is brought
before the Annual Meeting, your Shares will be voted at the
proxies' discretion.
Shareholders who execute proxies or record their voting
instructions via telephone or the Internet may revoke them at any
time before they are voted by filing with the Secretary of the
Fund a written notice of revocation, by delivering a duly
executed proxy bearing a later date or by attending the Annual
Meeting and voting in person. Merely attending the Annual
Meeting, however, will not revoke any previously submitted proxy.
o HOW MANY SHARES OF THE FUND WERE OUTSTANDING AS OF THE RECORD
DATE?
At the close of business on the Record Date, the Fund had
9,079,885 Common Shares outstanding and 2,600 Preferred Shares
outstanding.
6
PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENT
BACKGROUND AND THE TRANSACTION
Under the Current Advisory Agreement, the Adviser serves as the
Fund's investment adviser and is responsible for the Fund's management. The
Adviser is a wholly-owned subsidiary of Claymore Group, a privately-held
financial services company offering unique investment solutions for financial
advisors and their valued clients. Based in Lisle, Illinois, Claymore Group
entities have provided supervision, management and/or servicing on
approximately $11.3 billion in assets, as of June 30, 2009.
On July 17, 2009, Claymore Group and its parent company, Claymore
Holdings, LLC, entered into an agreement and plan of merger (the "Merger
Agreement"), subsequently amended on August 18, 2009, with two newly formed,
wholly-owned subsidiaries of Guggenheim, GuggClay Acquisition, Inc.
("Acquisition Corporation") and an intermediate holding company ("Holdings,"
Holdings and "Acquisition Corporation" being collectively referred to as the
"Acquisition Subsidiaries"), which governs the Transaction and pursuant to
which Claymore Group and its associated entities, including the Adviser, will
become indirect subsidiaries of Guggenheim. On August 18, 2009, Guggenheim also
agreed to arrange for substantial additional equity and debt financing to
Claymore Group, in an aggregate of up to approximately $37 million, conditional
upon receipt, as applicable, of the consent of Claymore Group's senior bank
lender and compliance with Canadian regulatory requirements and Claymore
Group's existing agreements with Guggenheim and financings arranged by
affiliates of Guggenheim, and which is intended to be available prior to and
regardless of whether the Transaction is consummated. Such equity financing,
which closed in September 2009, consists of approximately $11.7 million for
newly-issued common stock of Claymore Group representing, on a fully diluted
basis, 24.9% of the outstanding common stock of Claymore Group. Such debt
financing is expected to consist of up to $25 million of subordinated loans,
which is in addition to the up to $20 million of subordinated loans provided to
Claymore Group and arranged by affiliates of Guggenheim as interim financing
for working capital and for inventory purchases in connection with its
investment supervisory business (all such subordinated loans being collectively
referred to as the "Debt Financing"). The Debt Financing may be drawn upon by
Claymore Group pursuant to its terms and is due three years from the issuance
date, provided, however, that any such Debt Financing drawn upon by Claymore
Group shall become immediately due upon any material breach by Claymore Group
of the Merger Agreement if the Merger Agreement remains in effect and upon any
change of control of Claymore Group.
In the Transaction, Acquisition Corporation will merge with and into
Claymore Group, with Claymore Group being the surviving corporation. Upon the
effectiveness of the Transaction: (1) all shares of Claymore Group common stock
issued and outstanding immediately prior to the Transaction (except those held
by the Acquisition Subsidiaries or dissenting stockholders or those held in
treasury) will be cancelled and converted into the right to receive an
aggregate cash payment
7
of approximately $39 million; (2) each share of common stock held prior to the
Transaction by the Acquisition Subsidiaries or held in treasury immediately
prior to the Transaction shall be cancelled without payment and (3) all shares
of Acquisition Corporation shall be converted into common stock of Claymore
Group. As a result of the Transaction, Claymore Group will become an indirect
subsidiary of Guggenheim Partners. Immediately following the Transaction, it is
intended that the Board of Directors of Claymore Group will consist of four
persons who are presently senior executives and stockholders of Claymore Group
and one person designated by Holdings.
In the Merger Agreement, Claymore Group made customary representations
and warranties to the Acquisition Subsidiaries regarding Claymore Group and its
business, the continued accuracy of which are conditions of the obligations of
the Acquisition Subsidiaries to consummate the Transaction. Claymore Group also
agreed to comply with a number of covenants, relating primarily to its conduct
after the signing of the Merger Agreement and before the consummation of the
Transaction, the compliance with which are conditions of the obligations of the
Acquisition Subsidiaries to consummate the Transaction. The parties' obligations
to consummate the Transaction are subject to certain other conditions, all of
which must be satisfied or waived prior to the closing of the Transaction,
including regulatory approval with respect to the change in control of the
Claymore Group's broker-dealer subsidiary, consent of Claymore Group's senior
bank lender, compliance with Canadian regulatory requirements and the absence of
any material adverse change in Claymore Group's financial condition or business.
GUGGENHEIM
Guggenheim is a global, independent, privately held, diversified
financial services firm with more than $100 billion in assets under supervision
and 800 dedicated professionals. Headquartered in Chicago and New York, the firm
operates through offices in 20 cities in the U.S., Europe and Asia. Guggenheim
operates businesses in investment management, capital markets, wealth management
and merchant banking. Within the investment and wealth management businesses,
Guggenheim specializes in fixed income and alternative investments, and in
providing sophisticated wealth advisory and family office services. Within
capital markets, it specializes in providing debt financing and structured
finance solutions to clients. Merchant banking activities include its portfolio
of investments in funds managed by it, joint venture business investments, and
new business launch activities not integrated into other primary operating
businesses.
CURRENT ADVISORY AGREEMENT
The Adviser serves as the investment adviser for the Fund pursuant to
the Current Advisory Agreement. The Current Advisory Agreement is dated January
27, 2004, and was approved by the sole shareholder of the Fund on January 16,
2004. The continuation of the Current Advisory Agreement was last approved by
the Board on January 15, 2009.
8
Pursuant to the Current Advisory Agreement, the Fund pays to the
Adviser as full compensation for all services rendered by the Adviser as such,
a monthly fee in arrears at an annual rate equal to 0.85% of the Fund's average
daily Managed Assets. As used in each of the Current Advisory Agreement,
Interim Advisory Agreement and New Advisory Agreement, "Managed Assets" of the
Fund means the total assets of the Fund (including the assets attributable to
the proceeds from any financial leverage) minus the sum of the accrued
liabilities (other than the aggregate indebtedness constituting financial
leverage). Managed Assets shall include assets attributable to financial
leverage of any kind, including, without limitation, borrowing (including
through a credit facility, the issuance of debt securities or the purchase of
residual interest bonds), the issuance of preferred securities, the
reinvestment of collateral received for securities loaned in accordance with
the Fund's investment objectives and policies, and/or any other means. The
Adviser has contractually agreed to waive temporarily a portion of the advisory
fee in an annual amount equal to 0.08% of the average daily value of the Fund's
Managed Assets until January 27, 2011. The Fund paid advisory fees equal to
$9,295,300 to the Adviser during the Fund's fiscal year ended October 31,
2008.
The Current Advisory Agreement provides for its automatic termination
in the event of an "assignment," as defined in the 1940 Act. Once completed,
the Transaction will result in a change in control of Claymore Group and,
ultimately, its subsidiary the Adviser, which will be deemed an "assignment" of
the Current Advisory Agreement resulting in its termination. The Transaction is
not, however, expected to result in a change in the persons responsible for the
management of the Fund or in the operations of the Fund or in any changes in
the investment approach of the Adviser with respect to the management of the
Fund.
INTERIM ADVISORY AGREEMENT
Rule 15a-4 under the 1940 Act permits the Board (including a majority
of the Independent Trustees) to approve and enter into the Interim Advisory
Agreement, which would become effective upon the consummation of the Transaction
if the New Advisory Agreement has not been approved by shareholders prior to the
consummation of the Transaction. It is a condition of the Merger Agreement that
the Board approve the Interim Advisory Agreement in accordance with the
requirements of Rule 15a-4. Pursuant to the Interim Advisory Agreement and Rule
15a-4, the Adviser may serve as investment adviser to the Fund for up to 150
days following the consummation of the Transaction, pending receipt of
shareholder approval of the New Advisory Agreement.
Based upon the considerations described below under "--Board
Considerations," the Board, including the Independent Trustees, unanimously
approved the Interim Advisory Agreement on September 23, 2009. In approving the
Interim Advisory Agreement, the Board, including a majority of the Independent
Trustees, determined that the scope and quality of services to be provided to
the Fund under the Interim Advisory Agreement would be at least equivalent to
the scope and quality of services provided under the Current Advisory Agreement.
The compensation to be received by the Adviser under the
9
Interim Advisory Agreement is identical to the compensation the Adviser would
have received under the Current Advisory Agreement.
There are no material differences between the terms of the Interim
Advisory Agreement and the terms of the Current Advisory Agreement, except for
those provisions in the Interim Advisory Agreement which are necessary to comply
with the requirements of Rule 15a-4 under the 1940 Act. A form of the Interim
Advisory Agreement is attached hereto as Appendix B and the description of the
Interim Advisory Agreements is qualified in its entirety by reference to
Appendix B hereto. The provisions of the Interim Advisory Agreement required by
Rule 15a-4 under the 1940 Act include:
(i) the Interim Advisory Agreement terminates upon the earlier of the
150th day following the Closing of the Transaction or the
effectiveness of the New Advisory Agreement;
(ii) the Board or a majority of the Fund's outstanding voting securities
may terminate the Interim Advisory Agreement at any time, without the
payment of any penalty, on not more than 10 calendar days' written
notice to the Adviser;
(iii) the compensation earned by the Adviser under the Interim Advisory
Agreement will be held in an interest-bearing escrow account with the
Fund's custodian or a bank;
(iv) if a majority of the Fund's outstanding voting securities approve the
Fund's New Advisory Agreement by the end of the 150-day period, the
amount in the escrow account (including interest earned) will be paid
to the Adviser; and
(v) if a majority of the Fund's outstanding voting securities do not
approve the Fund's New Advisory Agreement, the Adviser will be paid,
out of the escrow account, the lesser of (a) any costs incurred in
performing the Interim Advisory Agreement (plus interest earned on
that amount while in escrow), or (b) the total amount in the escrow
account (plus interest earned).
NEW ADVISORY AGREEMENT
It is proposed that the Fund and the Adviser enter into the New
Advisory Agreement, to become effective upon the later of (i) the date of
shareholder approval or (ii) the consummation of the Transaction. Under Section
15(a) of the 1940 Act, the New Advisory Agreement requires the approval of (i)
the Board, including a majority of the Independent Trustees, and (ii) the
shareholders of the Fund. It is a condition of the Merger Agreement that the
Board, including a majority of the Independent Trustees, approve the New
Advisory Agreement, on terms no less favorable to the Adviser, taken as a whole,
than the Current Advisory Agreement. Approval of the New Advisory Agreement by
shareholders of the Fund is not, however, a condition to the consummation of the
Transaction. In the event that the shareholders of the Fund do not approve the
New Advisory Agreement, following the consummation of the Transaction it is
anticipated that the Adviser
10
will continue to act as the Fund's investment adviser pursuant to the Interim
Advisory Agreement for a period of up to 150 days following the consummation of
the Transaction. In such event, the Board will determine a course of action
believed by the Board to be in the best interests of the Fund and
shareholders.
Based upon the considerations described below under "--Board
Considerations," the Board, including the Independent Trustees, unanimously
approved the New Advisory Agreement on September 23, 2009.
There are no material differences between the terms of the New
Advisory Agreement and the terms of the Current Advisory Agreement, except as
noted below. A form of the New Advisory Agreement is attached hereto as Appendix
C and the description of the New Advisory Agreement is qualified in its entirety
by reference to Appendix C hereto.
Duties and Obligations. The New Advisory Agreement provides that,
subject to the direction and control of the Board, the Adviser shall (i) act as
investment adviser for and supervise and manage the investment and reinvestment
of the Fund's assets, (ii) supervise the investment program of the Fund and the
composition of its investment portfolio, and (iii) arrange for the purchase and
sale of securities and other assets held in the investment portfolio of the
Fund. The New Advisory Agreement provides that in performing its duties, the
Adviser may delegate some or all of its duties and obligations under the New
Advisory Agreement to one or more sub-investment advisers. In addition, the New
Advisory Agreement provides that the Adviser shall furnish office facilities and
equipment and clerical, bookkeeping and administrative services (other than such
services, if any, provided by the Fund's other service providers), as described
in the New Advisory Agreement, to the extent requested by the Fund. The duties
and obligations of the Adviser under the New Advisory Agreement are identical to
the duties and obligations of the Adviser under the Current Advisory Agreement.
Compensation. The New Advisory Agreement does not result in any change
in the advisory fee rate paid by the Fund. Pursuant to the New Advisory
Agreement, the Fund pays to the Adviser as full compensation for all services
rendered by the Adviser as such, a monthly fee in arrears at an annual rate
equal to 0.85% of the Fund's average daily Managed Assets. The Adviser bears all
costs and expenses of its employees and any overhead incurred in connection with
its duties under the New Advisory Agreement and bears the costs of any salaries
or trustees fees of any officers or trustees of the Fund who are affiliated
persons (as defined in the 1940 Act) of the Adviser. These provisions of the New
Advisory Agreement, including the advisory fee rates, are identical to
provisions of the Current Advisory Agreement. The Adviser has contractually
agreed to waive temporarily a portion of the advisory fee in an annual amount
equal to 0.08% of the average daily value of the Fund's Managed Assets until
January 27, 2011.
Term and Termination. Assuming approval by shareholders, the New
Advisory Agreement shall continue for an initial term of one year, provided,
however, that the Board intends to next consider the continuation of the New
11
Advisory Agreement during such one year term, and from year to year after the
initial term if approved annually (i) by the Board or the holders of a majority
of the outstanding voting securities of the Fund and (ii) by a majority of the
Trustees who are not "interested persons" of any party to the New Advisory
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. The New Advisory Agreement may be terminated (i) by the Fund
at any time, without the payment of any penalty, upon giving the Adviser 60
days' notice (which notice may be waived by the Adviser), or (ii) by the
Adviser on 60 days' written notice (which notice may be waived by the Trust).
The New Advisory Agreement will also immediately terminate in the event of its
assignment, as defined in the 1940 Act. Except with respect to the initial term
of each agreement, these provisions of the New Advisory Agreement are identical
to provisions of the Current Advisory Agreement.
Limitation of Liability. The New Advisory Agreement provides that the
Adviser will not be liable for any error of judgment or mistake of law or for
any loss suffered by the Adviser or by the Fund in connection with the
performance of the New Advisory Agreement, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
by the Adviser of its duties under the New Advisory Agreement. These provisions
of the New Advisory Agreement are identical to provisions of the Current
Advisory Agreement.
Use of the Name "Claymore." The New Advisory Agreement provides that
the Adviser has consented to the use by the Fund of the name or identifying word
"Claymore" in the name of the Fund and that the Adviser may require the Fund to
cease using "Claymore" in the name of the Fund if the Fund ceases to employ, for
any reason, the Adviser, any successor thereto or any affiliate thereof as
investment adviser of the Fund. These provisions of the New Advisory Agreement
are identical to provisions of the Current Advisory Agreement.
SECTION 15(F) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that, when a change in control
of an investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection with the change in
control as long as two conditions are met. The first condition specifies that no
"unfair burden" may be imposed on the investment company as a result of a
transaction relating to the change in control, or any express or implied terms,
conditions or understandings. The term "unfair burden," as defined in the 1940
Act, includes any arrangement during the two-year period after the change in
control transaction whereby the investment adviser (or predecessor or successor
adviser), or any interested person of any such investment adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from, or on behalf of the
investment company (other than fees
12
for bona fide principal underwriting services). The second condition specifies
that, during the three-year period immediately following consummation of the
change of control transaction, at least 75% of the investment company's board
of directors or trustees must not be "interested persons" (as defined in the
1940 Act) of the investment adviser or predecessor adviser.
Consistent with the first condition of Section 15(f), the Adviser and
the Acquisition Subsidiaries have agreed that they will use their reasonable
best efforts to ensure that there is no "unfair burden" imposed on the Fund as a
result of the Transaction. With respect to the second condition of Section
15(f), the Adviser and the Acquisition Subsidiaries have agreed that they will
use their reasonable best efforts to comply with and cause the Fund to conduct
its business to ensure that for a period of three years after the closing of the
Transaction at least 75% of the trustees of the Fund will not be "interested
persons" (as defined in the 1940 Act) of the Adviser or Guggenheim. The Fund
currently meets this condition. Therefore, the Adviser and the Acquisition
Subsidiaries represented to the Board that no unfair burden would be imposed on
the Fund as a result of the Transaction.
BOARD CONSIDERATIONS
Current Advisory Agreement
On January 15, 2009, the Board, including Independent Trustees, met
to consider the renewal of the Current Advisory Agreement. As part of its
review process, the Nominating and Governance Committee of the Board (referred
to as the "Committee" and consisting solely of the Independent Trustees) was
represented by independent legal counsel. The Board reviewed materials received
from the Adviser and independent legal counsel. The Board also had previously
received, throughout the year, Board meeting information regarding performance
and operating results of the Fund.
In preparation for their review, the Committee members communicated
with independent legal counsel regarding the nature of information to be
provided, and independent legal counsel, on behalf of the Committee, sent a
formal request for information. The Adviser provided extensive information in
response to that request as well as to a follow-up request for supplemental
information. Among other information, the Adviser provided general information
to assist the Committee in assessing the nature and quality of services
provided by the Adviser and information comparing the investment performance,
advisory fees and total expenses of the Fund to other funds, information about
the profitability from the Current Advisory Agreement to the Adviser and the
compliance program of the Adviser. As a part of its analysis, the Committee
considered other options available to the Fund, given its reduced asset size
and recent investment performance history, including a proposal to reorient the
Fund's investment strategy.
Based upon their review, the Committee concluded that it was in the
best interest of the Fund to renew the Current Advisory Agreement and,
accordingly, recommend to the Board of Trustees the renewal of the Current
Advisory Agreement. The Board subsequently approved the renewal of the Current
Advisory Agreement.
13
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.
With respect to the nature, extent and quality of services provided
by the Adviser, the Board noted that the Adviser had delegated responsibility
for the investment and reinvestment of the Fund's assets to DVM, the Fund's
sub-adviser at such time. The Board considered the Adviser's responsibility to
oversee the sub-adviser and that the Adviser has similar oversight
responsibilities for other registered funds for which it serves as investment
adviser. The Board reviewed financial information regarding the Adviser and its
parent company and considered Claymore Group's commitment of financial support
of the Adviser.
The Board also considered the secondary market support services
provided by the Adviser to the Fund and the Adviser's collaboration with the
Fund's sub-adviser on the Fund's use of leverage and in evaluating the Fund's
distribution rate. The Board considered the experience and qualifications of
the Adviser's personnel, including those personnel providing compliance
oversight and oversight of the sub-adviser's portfolio management process.
Specifically, the Board noted the ongoing oversight activities performed by the
Adviser, including on-site diligence visits and regular monitoring of
compliance with policies and procedures and with the Fund's investment
parameters as described in its prospectus and statement of additional
information. After considering these factors, the Board concluded that the
Adviser and its personnel were qualified to serve the Fund in such capacity.
The Board considered the Fund's investment performance by reviewing
the Fund's total return on a net asset value and market price basis for the
three month, six month, one year, three year and since inception (January 27,
2004) periods ended October 31, 2008, and compared it to comparable performance
of a peer group of closed-end funds (defined as funds that invest a majority of
assets in dividend paying equity securities and that may have a specific goal
of paying qualified dividend income) and to relevant benchmark indices for the
same time periods. The Board considered that the Adviser does not directly
control investment performance but had delegated such duties to DVM, the Fund's
sub-adviser at such time. The Board also considered the joint recommendation of
the Adviser and DVM to reorient the Fund's investment strategy in light of
market conditions and the Fund's recent underperformance.
The Board considered the Fund's advisory fee (which includes the
sub-advisory fee paid to the Fund's sub-adviser) and expense ratio. The Board
also considered that the Adviser and DVM had proposed to implement an advisory
fee waiver of eight basis points for a period of two years, with the proposed
fee reduction being allocated entirely to the fees received by the sub-adviser
from the Adviser under the investment sub-advisory agreement with DVM (the "Fee
Waiver"). The Board compared the fees and estimated expense ratios of the Fund
based upon various levels of asset growth to a peer group of other closed-end
funds based upon the proposed reorientation of the investment strategy.
14
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 Current
Advisory Agreement as well as the estimated direct and indirect costs the
Adviser incurs in providing the services to the Fund, including paying the
sub-advisory fee to DVM.
The Board considered the extent to which economies of scale could be
realized with respect to the management of the Fund as the Fund grows and
whether fee levels reflect a reasonable sharing of such economies of scale for
the benefit of Fund investors. Given the size of the Fund and the constraints
on its capital structure, the Board does not anticipate significant economies
of scale in the coming year.
The Board considered other benefits available to the Adviser because
of its relationship to the Fund and noted that the administrative services fees
received by the Adviser from serving as administrator provide it with
additional revenue.
Interim Advisory Agreement and New Advisory Agreement
The Board, including the Independent Trustees, approved each of the
Interim Advisory Agreement and the New Advisory Agreement. The Board reviewed
materials received from the Adviser, Guggenheim and independent legal counsel.
The Board also had previously received, throughout the year, Board meeting
information regarding performance and operating results of the Fund. In early
2009, the Adviser informed the Board that it was in discussions with Guggenheim
concerning a strategic transaction, including a potential sale of a controlling
interest in the Adviser. The Board requested and received periodic reports from
the Adviser as to the status and nature of such discussions with Guggenheim and
the Adviser's operating and financial results. In the spring of 2009, the
Adviser informed the Board that Guggenheim had arranged up to $20 million of
subordinated loans to Claymore Group as interim financing for working capital
and for inventory purchases in connection with its business of creating,
distributing and supervising unit investment trusts and other investment
products.
Following the execution of the Merger Agreement, on July 28, 2009, a
telephonic meeting was held and attended by board chairs and other
representatives of the boards of trustees of the registered investment
companies for which the Adviser acts as investment adviser, the chief executive
officer of Claymore Group and the chief executive officer of Guggenheim. Mr.
Freidrich, the chairman of the Board of the Fund, attended such meeting on
behalf of the Board. Such executive officers summarized the principal terms of
the Merger Agreement, and described the Transaction, the business plans for the
Adviser following the consummation of the Transaction and answered such
questions as were raised at the meeting. Representatives of such
Claymore-advised investment companies, including the Fund, requested additional
information regarding the Transaction, Guggenheim, the Acquisition Subsidiaries
and the impact of the Transaction on the shareholders of such investment
companies.
15
During August and September 2009, the Committee received reports from
the Adviser on the progress of the Transaction, including the Debt Financing
and additional equity financing arranged by Guggenheim. As part of its review
process, the Committee of the Board was represented by independent legal
counsel. The Committee reviewed materials received from the Adviser, Guggenheim
and independent legal counsel. The Adviser and Guggenheim provided, among other
information, information regarding the terms of the Transaction and potential
benefits to the Adviser from the Transaction. The information provided
regarding Guggenheim included (i) financial information, (ii) information
regarding senior executives of the firm, (iii) information regarding other
Guggenheim affiliated investment managers, (iv) information regarding
litigation and regulatory matters and (v) potential conflicts of interest. The
Adviser and Guggenheim also provided information regarding Guggenheim's and the
Adviser's intentions for the business, operations and personnel of the Adviser
following the Closing of the Transaction.
The Board met and discussed the Transaction and the Interim Advisory
Agreement and the New Advisory Agreement on September 11, 2009, and September
23, 2009. The Committee also met and discussed these matters on September 15,
2009. At the meeting held on September 23, 2009, representatives from the
Adviser and Guggenheim discussed the Transaction with the Committee and
answered questions from the Committee. The Committee also met in executive
session to discuss the Transaction and the information provided at the
meetings. The Committee requested additional supplemental information regarding
the Transaction and Guggenheim, which was provided by the Adviser and
Guggenheim.
The Board met in person to consider the Interim Advisory Agreement
and the New Advisory Agreement on September 23, 2009. The Committee concluded
that it was in the best interest of the Fund to approve the Interim Advisory
Agreement and the New Advisory Agreement and, accordingly, recommend to the
Board the approval of the Interim Advisory Agreement and the New Advisory
Agreement. The Board subsequently approved the Interim Advisory Agreement and
the New Advisory Agreement. The Board approved the New Advisory Agreement for a
one-year term. However, the Board also determined to consider the continuation
of the New Advisory Agreement during the course of the one-year term by
conducting a thorough review of the various information that is part of the
Board's regular annual consideration of the continuation of the Fund's advisory
agreement. In reaching the conclusion to approve the Interim Advisory Agreement
and the New Advisory Agreement for the Fund, no single factor was determinative
in the Board's analysis, but rather the Board considered a variety of factors.
16
In connection with the Board's consideration of the Interim Advisory
Agreement and the New Advisory Agreement, the Trustees considered, among other
information, the following factors, in addition to other factors noted in this
Proxy Statement:
o within the last year, the Board had engaged in a thorough review
of the various factors, including fees and performance, that are
part of the decision whether to continue an advisory agreement;
o Board approval of each Fund's New and Interim Advisory Agreement
is a condition to the closing of the Transaction;
o Claymore's statement that the manner in which the Fund's assets
are managed will not change as a result of the Transaction;
o the aggregate management fee rate payable by the Fund will not
change under the Interim Advisory Agreement or New Advisory
Agreement;
o there are no material differences between the terms of the
Interim Advisory Agreement and the New Advisory Agreement and the
terms of the Current Advisory Agreement;
o the qualifications of the Adviser's personnel who will provide
advisory and administrative services to the Fund are not expected
to change, and the key personnel who currently provide advisory
and administrative services the Fund are expected to continue to
do so after the Transaction;
o the assurance from the Adviser and Guggenheim that following the
Transaction there will not be any diminution in the nature,
quality and extent of services provided to the Fund;
o the Adviser's current financial condition;
o the impact of the Transaction on the Adviser's day-to-day
operations;
o the reputation, capabilities, experience, organizational
structure and financial resources of Guggenheim;
o the long-term business goals of Guggenheim and the Adviser with
regard to the business and operations of the Adviser;
o that Fund shareholders will not bear any costs in connection with
the Transaction, inasmuch as the Adviser and/or Guggenheim will
bear the costs, fees and expenses incurred by the Fund in
connection with the Proxy Statement attributable to Proposal 1
and any other costs of the Fund associated with the Transaction;
and
o that the Adviser and the Acquisition Subsidiaries have agreed to
refrain from imposing or seeking to impose, for a period of two
years after the Closing, any "unfair burden" (within the meaning
of Section 15(f) of 1940 Act) on the Fund.
17
Nature, Extent and Quality of Services Provided by the Adviser. The
Board noted that key investment and management personnel servicing the Fund are
expected to remain with the Adviser following the Transaction and that the
Adviser and Guggenheim intend for the Adviser to continue to attract talented
and experienced personnel and that the services provided to the Fund by the
Adviser are not expected to change. The Board also considered the Adviser's and
Guggenheim's representations to the Board that Guggenheim intends for the
Adviser to continue to operate following the closing of the Transaction in much
the same manner as it operates today, and that the impact of the Transaction on
the day-to-day operations of the Adviser would be neutral or positive. The
Board also considered Guggenheim's statement that the Adviser's compliance
policies and procedures, disaster recovery plans, information security controls
and insurance program would not change materially following consummation of the
Transaction. Based on this review, the Board concluded that the range and
quality of services provided by the Adviser to the Fund were expected to
continue under the Interim Advisory Agreement and the New Advisory Agreement at
the same or improved levels.
Advisory Fees. The Board also considered the fact that the advisory
fees payable to the Adviser would be the same under the Interim Advisory
Agreement and the New Advisory Agreement as they are under the Current Advisory
Agreement which had within the last year been determined to be reasonable. The
Board concluded that these factors supported approved of the Interim Advisory
Agreement and the New Advisory Agreement.
Performance. With respect to the performance of the Fund, the Board
considered that the Adviser had delegated responsibility for the management of
the Fund's portfolio to Manning & Napier and that Manning & Napier would
continue to manage the portfolio following the closing of the Transaction,
pending shareholder approval of the New Sub-Advisory Agreement. The Board also
noted that it had recently concluded that the Fund's performance with Manning &
Napier as sub-adviser was expected to be satisfactory. The Board concluded that
these factors supported approval of the Interim Advisory Agreement and the New
Advisory Agreement.
Profitability. Because the Adviser's fees under the Interim Advisory
Agreement and the New Advisory Agreement are the same as those assessed under
the Current Advisory Agreement, and in light of the capital infusion provided
by Guggenheim to support the Adviser's operations, the Board concluded that the
profits to be realized by the Adviser under the Interim Advisory Agreement and
the New Advisory Agreement and from other relationships between the Fund and
the Adviser, if any, were not expected to be unreasonable. The Board further
noted that, although it is not possible to predict how the Transaction may
affect the Adviser's future profitability from its relationship with the Fund,
this matter would be given further consideration on an annual basis going
forward.
18
Economies of Scale. The Board noted its prior determination that any
economies of scale were appropriately reflected in the advisory fees and
considered any potential economies of scale that may result from the
Transaction. The Board further noted Guggenheim's statement that no economies
of scale are anticipated from the Transaction. The Board concluded that any
economies of scale that can currently be identified are appropriately reflected
in the current advisory fees.
Other Benefits. The Board noted its prior determination that the
advisory fees were reasonable, taking into consideration other benefits to the
Adviser (including the receipt by Claymore of an administrative fee). The Board
also considered other benefits to the Adviser, Guggenheim and their affiliates
expected to be derived from their relationships with the Fund as a result of
the Transaction and noted that no additional benefits were reported by the
Adviser or Guggenheim as a result of the Transaction. Therefore, the Board
concluded that the advisory fees continued to be reasonable, taking into
consideration other benefits.
ADDITIONAL INFORMATION ABOUT THE ADVISER
Principal Executive Officer and Board of Managers. The Chairman and
Chief Executive Officer of the Adviser is David C. Hooten. The current members
of the board of managers of the Adviser are David C. Hooten, Michael J. Rigert,
Vice Chairman of the Adviser, Anthony J. DiLeonardi, Vice Chairman of the
Adviser, and Bruce R. Albelda, Chief Financial Officer of the Adviser. The
address of each member of the board of managers of the Adviser is 2455
Corporate West Drive, Lisle, Illinois 60532. Immediately following the
Transaction, it is intended that the Board of Directors of Claymore Group will
consist of four persons who are presently senior executives and stockholders of
Claymore Group and one person designated by Holdings.
Relationships with the Fund. David C. Hooten, Chairman and Chief
Executive Officer of the Adviser, serves as a Trustee of the Fund. No other
Trustee of the Fund is an officer, employee, director, general partner or
shareholder of the Adviser or has any material direct or indirect interest in
the Adviser any other person controlling, controlled by or under common control
with the Adviser. As a result of Mr. Hooten's position with the Adviser and his
27.44% ownership interest in Claymore Group, after giving effect to Guggenheim's
equity financing which closed in September 2009, Mr. Hooten has a material
interest in the Transaction.
Certain officers of the Fund, as identified herein under "Proposal 3:
Election of Trustees -- Executive Officers," are employees or officers of the
Adviser.
The Adviser also serves as the Fund's administrator, as described
under "Additional Information--Administrator." It is expected that the Adviser
will continue to provide administrative services to the Fund following
consummation of the Transaction.
19
SHAREHOLDER APPROVAL
With respect to Proposal 1, the New Advisory Agreement must be
approved by a vote of a majority of the outstanding voting securities of the
Fund. The "vote of a majority of the outstanding voting securities" is defined
in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting
securities of the Fund entitled to vote thereon present at the Annual Meeting
or represented by proxy, provided that the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy;
or (ii) more than 50% of the outstanding voting securities of the Fund entitled
to vote thereon. The holders of Common Shares and Preferred Shares of the Fund
will have equal voting rights (i.e. one vote per Share) and will vote as a
single class with respect to the approval of the New Advisory Agreement.
Abstentions will have the same effect as votes against Proposal 1. "Broker
non-votes" (i.e. Shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owner or the persons
entitled to vote and (ii) the broker does not have discretionary voting power
on a particular matter) will have the same effect as votes against Proposal 1.
BOARD RECOMMENDATION
The Board, including the Independent Trustees, unanimously recommends
that you vote "FOR" the approval of the New Advisory Agreement.
20
PROPOSAL 2: APPROVAL OF MANNING & NAPIER SUB-ADVISORY
AGREEMENT
INTRODUCTION
Following the deliberations and considerations described below, on
June 17, 2009, the Board approved the Initial Interim Sub-Advisory Agreement
among the Fund, the Adviser and Manning & Napier and the termination of the DVM
Sub-Advisory Agreement. Since that time, Manning & Napier has served as the
Fund's investment sub-advisor on an interim basis and has been responsible for
the day-to-day management of the Fund. Pursuant to Rule 15a-4 under the 1940
Act, Manning & Napier may act as investment sub-adviser on an interim basis for
150 days pending shareholder approval of the agreement.
The closing of the Transaction may result in the automatic
termination of the Initial Interim Sub-Advisory Agreement pursuant to its
terms. Therefore, the Board has approved the Subsequent Interim Sub-Advisory
Agreement, which would become effective upon the consummation of the
Transaction if the New Sub-Advisory Agreement has not been approved by
shareholders of the Fund prior to such date and remain in effect for the
remainder of the 150 day period commencing on the date of the Initial Interim
Sub-Advisory Agreement. The Board has also approved the New Sub-Advisory
Agreement among the Fund, the Adviser and Manning & Napier, which would become
effective upon the later of (i) approval by shareholders of the Fund or (ii)
the consummation of the Transaction.
In order for Manning & Napier to continue to act as investment
sub-adviser to the Fund after November 14, 2009, the New Sub-Advisory Agreement
must be approved by shareholders of the Fund.
ABOUT MANNING & NAPIER
Manning & Napier has been a registered investment adviser since 1970.
For more than 35 years, Manning & Napier has focused on managing clients'
investments through a variety of market conditions, including five bear
markets. The firm manages approximately $16 billion for individuals,
corporations, defined benefit pension plans, 401(k) choice plans, Taft-Hartley
accounts, endowments, foundations and municipal retirement plans as of December
31, 2008. It remains an employee-owned firm, with 100% of the firm owned by
full-time employees. The principal business address of Manning & Napier is 290
Woodcliff Drive, Fairport, NY 14450.
MANAGEMENT OF THE FUND
Manning & Napier's Senior Research Group establishes the broad
investment guidelines used in the management of the Fund. A designated Research
Team for the Fund implements those guidelines as well as monitors the
investment portfolio of the Fund. The Fund's Research Team identifies stocks
for inclusion in the portfolio in line with the Senior Research Group's
guidelines. Members of the Senior Research Group and the Fund's Research Team
include:
21
Christian Andreach | Managing Director -- Consumer Group. Mr.
Andreach, an employee-owner, is responsible for analyzing investment
opportunities within the Consumer sector. Prior to joining Manning & Napier in
1999, he worked as a financial analyst for Proctor & Gamble Co. Mr. Andreach
earned his BBA from St. Bonaventure University, received his MBA from the
University of Rochester and holds the distinction of Chartered Financial
Analyst.
Jack W. Bauer | Managing Director -- Fixed Income Group. Mr. Bauer,
an employee-owner, is responsible for the oversight of the Firm's Fixed Income
Group. Prior to joining Manning & Napier in 1990, he worked as a Fixed Income
Portfolio Manager at Chase Manhattan Bank and as an Industry Economist with the
Federal Government's Department of Energy. Mr. Bauer earned his BS in
Mathematics from St. John Fisher College, his MA in Economics from Georgetown
University and his MBA from the University of Rochester.
Jeffrey S. Coons | Co-Director of Research, Managing Director
--Quantitative Strategies Group, Executive Group Member. Mr. Coons has a broad
responsibility for the management of the Firm's Research Department. He is an
employee-owner and has over 20 years of experience at Manning & Napier. Mr.
Coons received his BA in Economics from the University of Rochester, earned his
PhD in Economics from Temple University and holds the distinction of Chartered
Financial Analyst.
Jeffrey Donlon | Managing Director -- Technology Group. Mr. Donlon,
an employee-owner, is responsible for analyzing investment opportunities within
the Technology sector. Prior to joining Manning & Napier in 1998, he worked as
an associate with the Industrial Bank of Japan Trust Company. Mr. Donlon earned
his BS in Finance from Canisius College, received his MBA from Duke University
and holds the distinction of Chartered Financial Analyst.
Brian Gambill | Managing Director -- Capital Goods and Equipment
Group. Mr Gambill, an employee-owner, is responsible for analyzing investment
opportunities within the Capital Goods & Equipment sectors, with a special
emphasis on the Energy sector. Prior to joining Manning & Napier in 1997, he
worked as an analyst for the Montana Board of Investments. Mr. Gambill earned
his BS in Finance and Economics from Montana State University and holds the
distinction of Chartered Financial Analyst.
Jeffrey Herrmann | Co-Director of Research, Managing Director
--Themes and Overviews Group, Executive Group Member. Mr. Herrman has a broad
responsibility for the management of the Firm's Research Department. Mr.
Herrman is responsible for monitoring long-term themes, trends and overviews to
improve our ability to take advantage of the opportunities offered by the
market going forward. He is an employee-owner and has been with the firm for
over 20 years. Mr. Herrman earned dual BS degrees in Chemistry and Finance from
Clarkson University and holds the distinction of Chartered Financial Analyst.
22
Brian Lester | Managing Director -- Life Sciences Group. Mr. Lester,
an employee-owner, is responsible for analyzing investment opportunities within
the Health Care sector. Prior to joining Manning & Napier in 1998 he worked at
The Sutherland Group as a research assistant. Mr. Lester earned his BS in
Agriculture, Resource and Managerial Economics from Cornell University and
holds the distinction of Chartered Financial Analyst.
Michael Magiera | Managing Director -- Real Estate Group. Mr. Magiera
is responsible for coverage of REITS and Real Estate related investments. Mike
is an employee-owner and has 20 years of experience at Manning & Napier. Mr.
Magiera earned his BBA in Finance from St. Bonaventure University, received his
MBA from the University of Rochester and holds the distinction of Chartered
Financial Analyst.
Christopher Petrosino | Senior Analyst -- Quantitative Strategies
Group. Mr. Petrosino joined Manning & Napier in 2001 and is responsible for
providing top-down quantitative research to the firm's global sector group
analysts. He earned his BA in Economics and Statistics from the University of
Rochester and MS in Statistics from the Rochester Institute of Technology. Mr.
Petrosino also holds the distinction of Chartered Financial Analyst.
Marc D. Tommasi | Managing Director -- Global Strategies Group. Mr.
Tommasi is responsible for macroeconomic overviews by country on a global
basis. Marc is an employee-owner and has over 20 years of experience at Manning
& Napier. Mr. Tommasi earned his BA in Economics and Political Science from the
University of Rochester.
Virge Trotter | Managing Director -- Services Group. Mr. Trotter, an
employee-owner, is responsible for analyzing investment opportunities within
the Financial, Utilities and Media sectors. Prior to joining Manning & Napier
in 1997, he was Vice President at Thomas White Asset Management in Chicago. Mr.
Trotter earned his BS in Electrical Engineering from Iowa State University, his
MBA in Finance from the University of Chicago, and holds the distinction of
Chartered Financial Analyst.
DVM SUB-ADVISORY AGREEMENT
DVM previously served as the Fund's investment sub-adviser pursuant
to the DVM Sub-Advisory Agreement. The DVM Sub-Advisory Agreement was approved
by the sole shareholder of the Fund on January 16, 2004, and the continuation
of DVM Sub-Advisory Agreement was most recently approved by the Board on
January 15, 2009.
Over a series of meetings described below the Board considered the
performance of the Fund and various strategic alternatives for the Fund. On
June 17, 2009, the Board approved the termination of the DVM Sub-Advisory
Agreement and the retention of Manning & Napier as investment sub-adviser. In
connection with the termination of the DVM Sub-Advisory Agreement, the name of
the Fund was changed from "Dreman/Claymore Dividend & Income Fund" to
23
"Claymore Dividend & Income Fund." Mr. David Dreman, who served as a Trustee of
the Fund from 2003-2009 and was an interested person of the Fund because of his
position as an officer of DVM and certain of its affiliates, resigned as
Trustee effective August 23, 2009.
MANNING & NAPIER SUB-ADVISORY AGREEMENT
Manning & Napier currently serves as the Fund's investment
sub-adviser on an interim basis. Pursuant to Rule 15a-4 under the 1940 Act,
Manning & Napier may act as investment sub-adviser on an interim basis for 150
days pending shareholder approval of the New Sub-Advisory Agreement. Assuming
approval by shareholders, the New Sub-Advisory Agreement shall continue for an
initial term of one year, provided, however, that the Board intends to consider
the continuation of the New Sub-Advisory Agreement during such initial one year
term, and from year to year after the initial term if approved annually (i) by
the Board or the holders of a majority of the outstanding voting securities of
the Fund and (ii) by a majority of the Trustees who are not "interested
persons" of any party to the New Sub-Advisory Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval.
Except as noted below, there are no material differences between the
terms of each of the New Sub-Advisory Agreement, the Initial Interim
Sub-Advisory Agreement and the Subsequent Interim Sub-Advisory Agreement. Where
appropriate, the Initial Interim Sub-Advisory Agreement, the Subsequent Interim
Sub-Advisory Agreement and the New Sub-Advisory Agreement are sometimes
referred to collectively as the Manning & Napier Sub-Advisory Agreement. Except
as noted below, there are no material differences between the terms of the
Manning & Napier Sub-Advisory Agreement and the terms of the DVM Sub-Advisory
Agreement. A copy of the New Sub-Advisory Agreement is attached hereto as
Appendix D and the description of the Manning & Napier Sub-Advisory Agreement
is qualified in its entirety by reference to Appendix D.
Under the terms of the Manning & Napier Sub-Advisory Agreement,
Manning & Napier performs certain of the day-to-day operations of the Fund
subject to the oversight and supervision of the Adviser and the direction and
control of the Board, which shall include at the request of the Adviser (i)
managing the investment and reinvestment of the Fund's assets in accordance
with the Fund's investment objective and policies, (ii) arranging for the
purchase and sale of securities and other assets, (iii) providing investment
research and credit analysis concerning the Fund's assets, (iv) maintaining
books and records required to support the Fund's investment operations, (v)
monitoring on a daily basis the investment activities and portfolio holdings of
the Fund and (vi) voting proxies relating to the Fund's portfolio securities in
accordance with Manning & Napier's policies and procedures. The types of
services provided by Manning & Napier pursuant to the Manning & Napier
Sub-Advisory Agreement are identical to the types of services provided by DVM
pursuant to the DVM Sub-Advisory Agreement. Voting proxies relating to the
Fund's portfolio securities in accordance with the sub-adviser's policies and
procedures was not provided for in the DVM
24
Sub-Advisory Agreement but had been separately delegated by the Board on behalf
of the Fund to DVM.
Upon approval by shareholders, the New Sub-Advisory Agreement shall
continue for an initial period of one year and from year to year after the
initial term if approved annually (i) by the Board or the holders of a majority
of the outstanding voting securities of the Fund and (ii) by a majority of the
Trustees who are not "interested persons" of any party to the Manning & Napier
Sub-Advisory Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Initial Interim Sub-Advisory Agreement
provided that it would terminate on the date 150 calendar days from the date of
the Initial Interim Sub-Advisory Agreement. The Subsequent Interim Sub-Advisory
Agreement provides that it will terminate on the earlier of (i) the date 150
calendar days from the date of the Initial Interim Sub-Advisory Agreement or
(ii) the date of the New Sub-Advisory Agreement. These provisions are identical
to the DVM Sub-Advisory Agreement, except with respect to the effective date
and initial period of the agreement and the provisions which provides for the
termination of the Initial Interim Sub-Advisory Agreement and Subsequent
Interim Sub-Advisory Agreement on the 150th calendar day as required by Rule
15a-4 under the 1940 Act.
The Manning & Napier Sub-Advisory Agreement provides that Manning &
Napier will not be liable for any error of judgment or mistake of law or for
any loss suffered in connection with the performance of the agreement, except
for a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence by Manning & Napier in the
performance of its duties or from reckless disregard by Manning & Napier of its
duties under the agreement. These provisions are identical to the DVM
Sub-Advisory Agreement. In addition, the Manning & Napier Sub-Advisory
Agreement provides that Manning & Napier shall have no liability, and shall be
indemnified and held harmless by the Fund, for any losses that are directly or
indirectly related to any action or inaction occurring or failing to occur on
before the effectiveness of the Manning & Napier Sub-Advisory Agreement by the
Fund, the Adviser or any prior sub-adviser.
The Manning & Napier Sub-Advisory Agreement provides that for the
period commencing one year following shareholder approval of the agreement and
terminating three years following shareholder approval of the agreement and
provided that Manning & Napier shall be employed as investment sub-adviser, at
the request of Manning & Napier the Fund's name will be changed to one
containing the name of Manning & Napier. In addition, if Manning & Napier
ceases to be employed as investment sub-adviser or ceases to consent to the use
of its name in the name of the Fund, the Fund will cease using the name of
Manning & Napier upon the request of Manning & Napier.
The Manning & Napier Sub-Advisory Agreement may be terminated (i) by
the Fund at any time, without the payment of any penalty, upon giving Manning &
Napier 60 days' notice (which notice may be waived by Manning &
25
Napier), or (ii) by Manning & Napier on 60 days' written notice (which notice
may be waived by the Fund). The Subsequent Interim Sub-Advisory Agreement,
however, provides that it may be terminated by the Fund at any time, without
the payment of any penalty, upon giving Manning & Napier 10 days' notice (which
notice may be waived by Manning & Napier). The Manning & Napier Sub-Advisory
Agreement will also immediately terminate in the event of its assignment, as
defined in the 1940 Act. The Manning & Napier Sub-Advisory Agreement also
provides that it will terminate automatically upon any termination of the
investment advisory agreement between the Fund and the Adviser.
SUB-ADVISORY FEE
The total management fees paid by the Fund remain unchanged as a
result of entering into the Manning & Napier Sub-Advisory Agreement. The Fund
continues to pay to the Adviser an investment advisory fee at an annual rate
equal to 0.85% of the average daily value of the Fund's Managed Assets (as
defined in the investment advisory agreement). The Adviser has contractually
agreed to waive temporarily a portion of the advisory fee in an annual amount
equal to 0.08% of the average daily value of the Fund's Managed Assets until
January 27, 2011. The Adviser previously paid to DVM and now pays to Manning &
Napier a sub-advisory fee out of the advisory fee paid by the Fund. The
sub-advisory fee rate paid to Manning & Napier is intended to equal the
sub-advisory fee rate paid to DVM (including with respect to contractual fee
waivers previously agreed to by DVM), although the method by which the fee is
calculated differs.
Pursuant to the DVM Sub-Advisory Agreement, the Adviser paid to DVM a
sub-advisory fee at a rate equal to 60% of the monthly advisory fees received
by the Adviser from the Fund (net of any waivers or reimbursements by the
Adviser and after payment by the Adviser of any asset-based or other
compensation payable to members of the underwriting syndicate or other selling
group members by the Adviser). DVM had contractually agreed to waive
temporarily a portion of the sub-advisory fee (after giving effect to the
Adviser's waiver of the advisory fee pursuant) equal to 0.08% of the average
daily value of the Fund's Managed Assets. Such waiver directly benefited the
Adviser, as the sub-advisory fee is paid by the Adviser, and indirectly
benefited the Fund, as the Adviser agreed to waive a corresponding amount of
advisory fees, as discussed above. Expressed as a percentage of the Fund's
Managed Assets, the sub-advisory fee paid to DVM equaled approximately 0.41% of
the Fund's Managed Assets before giving effect to the Adviser's and DVM's fee
waivers and approximately 0.33% after giving effect to such fee waivers.
Pursuant to the Manning & Napier Sub-Advisory Agreement, the Adviser
pays to Manning & Napier a sub-advisory fee at an annual rate equal to (i)
0.33% of the Fund's average daily Managed Assets for the initial two years
commencing on the effectiveness of the Initial Interim Sub-Advisory Agreement
and (ii) 0.42% of the Fund's average daily Managed Assets commencing on the
second anniversary of the effectiveness of the Initial Interim Sub-Advisory
Agreement. As used in the Manning & Napier Sub-Advisory Agreement, "Managed
Assets" of the Fund
26
means the total assets of the Fund (including the assets attributable to the
proceeds from any financial leverage) minus the sum of the accrued liabilities
(other than the aggregate indebtedness constituting financial leverage).
Managed Assets shall include assets attributable to financial leverage of any
kind, including, without limitation, borrowing (including through a credit
facility, the issuance of debt securities or the purchase of residual interest
bonds), the issuance of preferred securities, the reinvestment of collateral
received for securities loaned in accordance with the Fund's investment
objectives and policies, and/or any other means.
Additionally, Manning & Napier has contractually agreed to waive all
sub-advisory fees for the initial two months following the effectiveness of the
Initial Interim Sub-Advisory Agreement, provided that the New Sub-Advisory
Agreement is approved by shareholders of the Fund. Such waiver by Manning &
Napier benefits the Adviser, as the sub-advisory fee is paid by the Adviser. If
shareholders of the Fund do not approve the New Sub-Advisory Agreement, Manning
& Napier may recoup from the Adviser such waived fees.
Finally, Manning & Napier has contractually agreed to set off costs
associated with the change of the Fund's investment sub-adviser in an amount
not to exceed $50,000 against amounts owed by the Adviser to Manning & Napier
under the Manning & Napier Sub-Advisory Agreement, provided that shareholders
of the Fund approve the New Sub-Advisory Agreement. Such set off by Manning &
Napier will directly benefit the Adviser, as the sub-advisory fee is paid by
the Adviser, and will indirectly benefit the Fund, as the Adviser has agreed to
waive a corresponding amount of its advisory fees so as to pass the benefits of
such set off to the Fund.
The compensation earned by Manning & Napier under the Subsequent
Interim Sub-Advisory Agreement will be held in an interest-bearing escrow
account with the Fund's custodian or a bank. If a majority of the Fund's
outstanding voting securities approve the New Sub-Advisory Agreement by the end
of the 150-day period, the amount in the escrow account (including interest
earned) will be paid to Manning & Napier. If a majority of the Fund's
outstanding voting securities do not approve the New Sub-Advisory Agreement, the
Manning & Napier will be paid, out of the escrow account, the lesser of (a) any
costs incurred in performing the Subsequent Interim Sub-Advisory Agreement (plus
interest earned on that amount while in escrow), or (b) the total amount in the
escrow account (plus interest earned).
ADDITIONAL INFORMATION REGARDING MANNING & NAPIER
Executive Group. Manning & Napier's Executive Group, consisting of
senior executive employee-owners, assumes the function of "Chief Executive
Officer" or "Office of the President" of the firm, rather than having an
individual hold those titles. The Executive Group collectively manages the firm
according to systematic processes and disciplines that have been in place since
the firm's inception in 1970. The members of the Executive Group, each of whom
is a full-time employee of Manning & Napier, are B. Reuben Auspitz, Jeffrey S.
Coons, Patrick Cunningham, Jeffrey Herrman and Charles H. Stamey. The address
of each member of the Executive Group is 290 Woodcliff Drive, Fairport, New
York 14450.
27
Board of Director and Principal Shareholders. The following persons
are members of the board of directors of Manning & Napier: William Manning,
Co-Founder of Manning & Napier, B. Reuben Auspitz, Executive Vice President of
Manning & Napier, and Jeffrey A. Herrmann, Managing Director of Manning &
Napier. William Manning owns ten percent or more of the outstanding voting
securities of Manning & Napier. The address of each member of the board of
director of Manning & Napier is 290 Woodcliff Drive, Fairport, New York 14450.
Other Funds Advised by Manning & Napier. Manning & Napier acts as
investment adviser with respect to one other registered investment company
having similar investment objectives as the Fund.
FUND MANAGED ASSETS ADVISORY FEE
--------------------------------------------------------------------------------
Dividend Focus Series of $1,438,833 0.45%(1)
the Manning & Napier Fund, Inc.
-----------------
(1) Manning & Napier has contractually agreed to limit its fees and reimburse
expenses to the extent necessary so that the Dividend Focus Series' total
direct fund operating expenses do not exceed 0.60% of the Dividend Focus
Series' average daily net assets. This contractual waiver will remain in
effect until at least February 28, 2010, and may be extended.
Relationships with the Fund. No officers or Trustees of the Fund is
an officer, employee, director, general partner or shareholder of Manning &
Napier or has any material direct or indirect interest in Manning & Napier or
any other person controlling, controlled by or under common control with
Manning & Napier.
No Trustee of the Fund had any material interest, direct or indirect,
in any material transactions since November 1, 2007, or in any material
proposed transactions, to which Manning & Napier, or any affiliated person of
Manning & Napier, was or is to be a party.
During the fiscal year ended October 31, 2008, the Fund paid no fees
to Manning & Napier or any affiliated person of Manning & Napier.
BOARD CONSIDERATIONS
Selection of Manning & Napier. In light of the Fund's recent
underperformance relative to peer funds and applicable benchmarks and the
significant decline in the value of the Fund's assets, the Board instructed the
Adviser to consider and evaluate various strategic alternatives for the Fund
and recommend to the Board a course of action to be considered. Among the
alternatives considered by the Adviser were liquidating the Fund, merging the
Fund into another fund, continuing to retain DVM as sub-adviser and retaining a
new sub-adviser. Over a series of meetings, the Adviser discussed with the
Board its analysis with respect to various strategic alternatives and responded
to requests from the Board, counsel to the Fund and counsel to the Independent
Trustees for additional information regarding such alternatives and the
Adviser's evaluation of such alternatives.
At a meeting held on April 1, 2009, the Adviser presented to the
Board its evaluation of various strategic alternatives and its recommendation
to the Board. The Adviser informed the Board that it had considered the Fund's
sustainability as
28
a standalone fund and concluded that the Fund had sufficient assets to continue
pursuing its investment objective as an independent closed-end fund and, based
on the Adviser's analysis of various factors, the Adviser did not believe a
liquidation or merger of the Fund would be advisable. In considering a
liquidation of the Fund, the Adviser discussed with the Board that a
liquidation would (i) deprive long-term investors who wished to remain invested
in the Fund's investment strategy the opportunity to do so, (ii) preclude the
Fund's shareholders from participating in a potential market recovery during
the liquidation and dissolution process and (iii) deprive shareholders the
opportunity to realize the benefits of the Fund's existing capital loss
carryforwards. In considering a merger of the Fund, the Adviser discussed with
the Board that a merger would pose a number of logistical challenges in
identifying and arriving at an agreement with a prospective merger partner and
cause the Fund to incur significant costs associated with facilitating a
merger. Therefore, the Adviser recommended that the Fund continue to pursue its
investment objective as an independent closed-end fund. However, in light of
the Fund's recent relative underperformance, communications received from
shareholders of the Fund and certain matters identified by DVM to the Board
related to DVM's internal advisory compliance procedures and practices, the
Adviser recommended that the DVM Sub-Advisory Agreement be terminated and a new
investment sub-adviser be hired. The Board requested that the Adviser provide
them with recommendations for proposed managers to be considered as replacement
investment sub-advisers and detailed information on the Adviser's review
process for selecting such proposed managers.
The Adviser recommended to the Board that Manning & Napier be
retained as the Fund's new investment sub-adviser. The Adviser then discussed
with the Board its process for selecting Manning & Napier. The Adviser began by
screening the universe of those domestic equity managers categorized by Zephyr
as "large value" to identify managers with public track records for investment
strategies consistent with the investment objectives of the Fund. Based on this
analysis the Adviser developed an initial pool of more than 300 managers. The
Adviser then evaluated each such manager based on several factors, including
total return performance and risk/reward metrics, placing an emphasis on
consistency in performance and performance in down markets. Based on these
evaluations, the Adviser identified the five top managers from the initial
pool. The Adviser provided the Board with a listing of these five managers
along with statistics on the historical performance and risk/reward metrics of
each such manager. The Adviser also provided comparisons of those statistics
for each such manager to those for a benchmark index, DVM and several other
large-cap value managers with whom the Adviser was familiar. The Adviser then
indicated that it had evaluated each of the five identified managers and
concluded that Manning & Napier offered the most compelling combination of
consistency in performance and downside protection in light of the Fund's
investment objective and investment strategies. The Board discussed with the
Adviser the proposed sub-advisory arrangements with Manning & Napier, including
the proposed fee structure, and the proposed transition plan for
29
the appointment of Manning & Napier, including costs associated with the
transition and the allocation of such costs.
The Board then met separately with representatives of DVM and
discussed the Fund's and DVM's historical performance and the Adviser's
recommendations and the factors considered by the Adviser in making such
recommendation. DVM discussed the fund's relative underperformance and the
factors that led to such underperformance during the year ended December 31,
2008. However, DVM noted that Fund's performance had improved considerably
during the year-to-date period ended March 31, 2009, and discussed DVM's
long-term historical performance. DVM discussed with the board progress that
had been made in rebalancing the Fund's portfolio.
Next, the Board met with representatives of Manning & Napier who
discussed the firm's history, client base, financial position and ownership
structure. The Board discussed in detail with Manning & Napier the investment
strategies and approach to be used in managing the Fund and Manning & Napier's
experience in serving as portfolio manager to funds registered under the 1940
Act and the firm's compliance program. The Board reviewed and discussed Manning
& Napier's financial statements.
The Independent Trustees then met in executive session to review the
presentations by each of the Adviser, DVM and Manning & Napier and consider
strategic alternatives for the Fund. During executive session, the Independent
Trustees met separately with representatives of the Adviser and DVM to further
discuss each firm's presentations and recommendations. The Board then adjourned
the meeting to allow the Adviser to complete its due diligence regarding the
compliance program of Manning & Napier. The Board requested that the Adviser
prepare additional information on the process of selecting Manning & Napier,
the proposed sub-advisory fee arrangements, back-tested performance results and
the proposed positioning of the Fund among its peer group. The meeting was then
adjourned to May 7, 2009.
Prior to reconvening the meeting on May 7, 2009, the Independent
Trustees again met in executive session with counsel to the Independent
Trustees to review materials provided to the Board in connection with prior
meetings and the presentations and recommendations of each of the Adviser, DVM
and Manning & Napier on April 1, 2009, and to review and discuss additional
materials provided to the Board in advance of reconvening the meeting,
including (i) the due diligence report of the Fund's Chief Compliance Officer,
(ii) back tested performance information for Manning & Napier, (iii)
performance information for the Fund compared to market benchmarks for various
periods during 2009 and (iv) written communications from investors. Upon
reconvening the meeting on May 7, 2009, the Adviser reiterated its
recommendations from April 1, 2009, and provided further information regarding
its process for selecting Manning & Napier. The Fund's Chief Compliance Officer
discussed with the board the results of the Adviser's review of Manning &
Napier's compliance program. The Board discussed the
30
investment process of Manning & Napier and its applicability to the Fund in
light of the Fund's investment objective and strategies and current investment
portfolio. The Board again met separately with representatives of DVM to
discuss the Fund's performance and DVM's investment approach. The Independent
Trustees then met in executive session to discuss the additional information
provided at the meeting.
At the meeting held on May 7, 2009, based on recommendations of the
Adviser, the Board approved a 5-for-1 reverse share split with respect to the
Fund's Common Shares, which was intended to increase the market price per
Common Share and trading volume, thereby reducing the per share transaction
costs associated with buying or selling the Fund's Common Shares in the
secondary market on the NYSE. The reverse share split became effective on June
4, 2009. The Board then adjourned the meeting to further consider the
information presented by the Adviser, DVM and Manning & Napier as well as the
effects on the Fund's performance of the continued rebalancing of the Fund's
portfolio and the reverse share-split and the Adviser's progress toward a
strategic transaction with Guggenheim.
The Board next met on June 17, 2009, and after further discussions
with representatives from the Adviser, DVM and Manning & Napier, approved the
Manning & Napier Sub-Advisory Agreement and the termination of the DVM
Sub-Advisory Agreement.
Board Approval of Manning & Napier Sub-Advisory Agreement. On June
17, 2009, the Board, including those trustees who are not interested persons as
defined by the 1940 Act (the "Independent Trustees"), considered the approval
of the Manning & Napier Sub-Advisory Agreement. As part of its review process,
the Nominating & Governance Committee of the Board (sometimes referred to as
the "Committee" and consisting solely of the Independent Trustees) was
represented by independent legal counsel. The Board reviewed materials received
from the Adviser, Manning & Napier and independent legal counsel in connection
with the Board meeting held on June 17, 2009, and in connection with Board
meetings held on April 1, 2009, and May 7, 2009.
During these meetings, the Board had considered various strategic
alternatives available to the Fund as a result of the Fund's significant
underperformance relative to broad market benchmarks and the decline in the
value of the Fund's assets. Among the alternatives considered by the Board were
the liquidation of the Fund, merging the Fund with another fund, retaining DVM
as the Fund's sub-adviser and replacing DVM with another sub-adviser. The Board
noted that, after evaluating available alternatives, the Adviser had
recommended replacing DVM with another sub-adviser as the best strategic
alternative available to the Fund. The Board also considered that the Fund has
a significant capital loss carry-forward for federal income tax purposes and
that such carry-forward is available to offset future capital gains through
October 31, 2016. The Board considered that the Adviser had identified several
concerns that had led to its recommendation to replace DVM as sub-adviser to
the Fund, including the Fund's
31
significant underperformance, increasing evidence that shareholders of the Fund
had lost confidence in DVM and certain matters identified by DVM to the Board
related to DVM's internal advisory compliance procedures and practices.
Based upon its review, the Committee concluded that it was in the
best interests of the Fund to approve the termination of the DVM Sub-Advisory
Agreement and to approve the Manning & Napier Sub-Advisory Agreement and to
recommend these actions to the Board, which the Board subsequently approved. 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.
On September 23, 2009, in connection with its consideration of the
Transaction and its approval of the Interim Advisory Agreement and New Advisory
Agreement, the Board, including the Independent Trustees, considered the
Subsequent Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement.
The Board noted that while the closing of the Transaction may result in the
automatic termination of the Initial Interim Sub-Advisory Agreement pursuant to
its terms, Manning & Napier was not involved in the Transaction and the
operations of Manning & Napier and services to be provided to the Fund by
Manning & Napier would be unaffected by the Transaction. The Board noted that
there were no material differences between the terms of the Initial Interim
Sub-Advisory Agreement, the Subsequent Interim Sub-Advisory Agreement and the
New Sub-Advisory Agreement, except with respect to those provisions required by
Rule 15a-4. The Board noted that the factors previously considered with respect
to approval of the Initial Interim Sub-Advisory Agreement continued to support
the approval of the Subsequent Interim Sub-Advisory Agreement and New
Sub-Advisory Agreement. Based upon its review, the Board concluded that it was
in the best interests of the Fund to approve the Subsequent Interim
Sub-Advisory Agreement and the New Sub-Advisory Agreement. The Board approved
the New Sub-Advisory Agreement for a one-year term. However, the Board also
determined to consider the continuation of the New Sub-Advisory Agreement
during the course of the one-year term by conducting a thorough review of the
various information that is part of the Board's regular annual consideration of
the continuation of the Fund's advisory agreements.
The Board considered the following factors, and made certain findings
and conclusions with regard thereto, for the Fund in approving the Manning &
Napier Sub-Advisory Agreement.
Nature, Quality and Extent of Services. The Board considered the
nature, quality and extent of services anticipated to be provided under the
Manning & Napier Sub-Advisory Agreement. The Board considered the reputation,
qualifications and background of Manning & Napier, investment approach of
Manning & Napier, the experience and skills of Manning & Napier's investment
personnel who would be responsible for the day-to-day management of the Fund,
and the resources made available to such personnel. In addition, the Board
considered the quantitative screening process undertaken by the Adviser in
32
identifying and recommending Manning & Napier as a replacement sub-adviser for
the Fund and the Adviser's review of Manning & Napier's compliance program.
Investment Performance. The Board reviewed the historical performance
of Manning & Napier as compared to other domestic equity managers categorized
by Zephyr as "Large Value" managers. The Board noted that, after analyzing the
performance of the universe of "Large Value" managers using a variety of
quantitative metrics, including total returns over a variety of short-term and
long-term timeframes, upside and downside market capture and annualized
standard deviation over a five-year timeframe, the Adviser determined that
Manning & Napier represented the best potential replacement for DVM as
sub-adviser to the Fund. The Board concluded, based on this information, that
investment performance with Manning & Napier as sub-adviser was expected to be
satisfactory.
Fees and Expenses. The Board considered that the subadvisory fee
proposed to be paid to Manning & Napier was intended to equal the subadvisory
fee paid to DVM, with Manning & Napier agreeing to continue fee waivers
previously agreed to by DVM, although the method by which the fee is calculated
differs. The Board considered that the subadvisory fee rate was negotiated at
arm's length between the Adviser and Manning & Napier and that the Adviser
would compensate Manning & Napier from its fees. As a result, the Board
considered that the total advisory fee to be paid by the Fund would not change.
The Board also considered that Manning & Napier had agreed to waive its
subadvisory fees for the initial two months following the effectiveness of the
Manning & Napier Sub-Advisory Agreement and to set off costs associated with
the change of the Fund's subadviser in an amount not to exceed $50,000 against
amounts owed by the Adviser to Manning & Napier under the Manning & Napier
Sub-Advisory Agreement, provided that the Fund's shareholders approve the
Manning & Napier Sub-Advisory Agreement. On the basis of the information
provided, the Board concluded that the proposed subadvisory fee schedule for
the Fund was reasonable.
Profitability. The Board concluded that Manning & Napier's
anticipated profitability would not be unreasonable. In reaching this
conclusion, the Board determined that they need not review the estimated level
of profits to Manning & Napier. They based this decision on the facts that the
proposed subadvisory fees were determined to be reasonable and that the Adviser
proposed to compensate Manning & Napier from its own fees, having negotiated
the Manning & Napier Sub-Advisory Agreement with Manning & Napier at
arm's-length.
Economies of Scale. The Board considered whether there are economies
of scale with respect to the subadvisory services proposed to be provided to
the Fund under the Manning & Napier Sub-Advisory Agreement. The Board
considered the Adviser's statement that it believes the appointment of Manning
& Napier has the potential to improve the Fund's performance, thereby
increasing the Fund's assets and spreading its fixed costs over a larger asset
base. The Board concluded that the fee schedule reflects an appropriate
recognition of economies of scale at currently anticipated asset levels.
33
Other Benefits to Manning & Napier. The Board considered other
benefits expected to be derived by Manning & Napier from its proposed
relationship with the Fund, including Manning & Napier's use of soft dollars.
Overall Conclusions. After considering various strategic options
available to the Fund, the Board determined that entering into the Manning &
Napier Sub-Advisory Agreement was in the best interests of the Fund. Based upon
all of the information considered and the conclusions reached, the Board
determined that the proposed terms of the Manning & Napier Sub-Advisory
Agreement were fair and reasonable.
SHAREHOLDER APPROVAL
With respect to Proposal 2, the New Sub-Advisory Agreement must be
approved by a vote of a majority of the outstanding voting securities of the
Fund. The "vote of a majority of the outstanding voting securities" is defined
in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting
securities of the Fund entitled to vote thereon present at the Annual Meeting
or represented by proxy, provided that the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy;
or (ii) more than 50% of the outstanding voting securities of the Fund entitled
to vote thereon. The holders of Common Shares and Preferred Shares of the Fund
will have equal voting rights (i.e. one vote per Share) and will vote as a
single class with respect to the approval of the New Sub-Advisory Agreement.
Abstentions will have the same effect as votes against Proposal 2. "Broker
non-votes" (i.e. Shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owner or the persons
entitled to vote and (ii) the broker does not have discretionary voting power
on a particular matter) will have the same effect as votes against Proposal 2.
BOARD RECOMMENDATION
The Board, including the Independent Trustees, unanimously recommends
that you vote "FOR" the approval of the New Sub-Advisory Agreement.
34
PROPOSAL 3: ELECTION OF TRUSTEES
The Fund's Common Shares are listed on the NYSE, which requires the
Fund to hold an annual meeting of shareholders to elect Trustees each fiscal
year. Shareholders of the Fund are being asked to elect two Trustee as Class II
Trustees (Mr. Roman Friedrich III and Mr. Ronald A. Nyberg are the nominees) to
serve until the Fund's 2012 annual meeting of shareholders or until their
respective successors shall have been elected and qualified.
COMPOSITION OF THE BOARD OF TRUSTEES
The Trustees of the Fund are classified into three classes: Class I
Trustees, Class II Trustees and Class III Trustees. Assuming each of the
nominees is elected at the Annual Meeting, the Board will be constituted as
follows:
CLASS I TRUSTEES
-Mr. Richard L. Crandall* and Mr. David C. Hooten* are the Class I
Trustees. It is currently anticipated that the Class I Trustees will
next stand for election at the Fund's 2011 annual meeting of
shareholders.
CLASS II TRUSTEES
-Mr. Roman Friedrich III and Mr. Ronald A. Nyberg are the Class II
Trustees. Messrs. Friedrich and Nyberg are standing for election at
the Annual Meeting. If elected, it is currently anticipated that the
Class II Trustees will next stand for election at the Fund's 2012
annual meeting of shareholders.
CLASS III TRUSTEES
-Mr. Ronald E. Toupin, Jr. is the Class III Trustee. It is currently
anticipated that the Class III Trustees will next stand for election
at the Fund's 2010 annual meeting of shareholders.
----------------
* Designated as Trustee representing holders of Preferred Shares.
Generally, the Trustees of only one class are elected at each annual
meeting of shareholders, so that the regular term of only one class of Trustees
will expire annually and any particular Trustee stands for election only once
in each three year period. Each trustee nominee elected at the annual meeting
as a Class II Trustee of the Fund will hold office until the Fund's 2012 annual
meeting of shareholders or until his successor shall have been elected and
qualified. The other Trustees of the Fund will continue to serve under their
current terms as described above. Unless authority is withheld, it is the
intention of the persons named in the proxy to vote the proxy "FOR" the
election of the trustee nominees named above. Each trustee nominee nominated by
the Board has indicated that he has consented to serve as a Trustee if elected
at the Annual Meeting. If a designated trustee nominee declines or otherwise
becomes unavailable for election, however, the proxy confers discretionary
power on the persons named therein to vote in favor of a substitute nominee or
nominees.
35
Mr. David N. Dreman resigned as a Class III Trustee effective August,
23, 2009. Mr. Dreman served as a Trustee from 2003-2009. Mr. Dreman was an
interested person of the Fund because of his position as an officer of DVM and
certain of its affiliates. Following the resignation of Mr. Dreman, the Board,
acting pursuant to the Fund's Agreement and Declaration of Trust, reduced the
number of Trustees of the Fund to five.
TRUSTEES
Certain information concerning the Trustees and officers of the Fund
is set forth in the tables below. The "interested" Trustees (as defined in
Section 2(a)(19) of the 1940 Act) are indicated below. Independent Trustees are
those who are not interested persons of the Fund, the Adviser or the
Sub-Adviser and comply with the definition of "independent."
The Fund is part of a fund complex (referred to herein as the "Fund
Complex") that consists of U.S. registered investment companies advised or
serviced by the Adviser or its affiliates. The Fund Complex is comprised of
fourteen closed-end funds, including the Fund, and thirty-four exchange-traded
funds. The Fund Complex is overseen by multiple boards of trustees.
36
TERM OF
OFFICE(2) NUMBER OF
AND PORTFOLIOS IN OTHER
POSITION(S) LENGTH FUND COMPLEX DIRECTORSHIPS
NAME, ADDRESS(1) HELD WITH OF TIME PRINCIPAL OCCUPATION OVERSEEN BY HELD BY
AND AGE FUND SERVED DURING THE PAST FIVE YEARS TRUSTEE TRUSTEE
---------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
Richard L. Trustee Trustee Managing Partner of Aspen Partners, LLC 1 Non-Executive
Crandall* since 2004 (2003-Present). Chairman of Enterprise Chairman of the
Year of birth: 1943 Software Roundtable (1994-Present). Board, Novell,
Formerly, Director and Special Advisor Inc.; Director,
of GIGA Information Group (1995-2003); Diebold, Inc.
Chairman of GIGA Information Group
(2002-2003); Founder, Chairman and
CEO of Comshare, Inc. (1966-1994).
Roman Trustee Trustee Founder of Roman Friedrich & Company, 1 Director of GFM
Friedrich III(3) since 2003 which specializes in the provision of financial Resources Ltd.,
Year of birth 1946 advisory services to corporations in the Zincore Metals
resource sector (1998-present). Formerly, Inc. and
Managing Director of TD Securities Electrum
(1996-1998); Managing Director of Capital Corp.
Lancaster Financial Ltd. (1990-1996);
Managing Director of Burns Fry Ltd.
(1980-1984); President of Chase Manhattan
Bank (Canada) Ltd. (1975-1977).
Ronald A. Trustee Trustee Partner of Nyberg & Cassioppi, LLC, 46 None.
Nyberg(3) since 2003 a law firm specializing in Corporate Law,
Year of birth: 1953 Estate Planning and Business Transactions
(2000-present). Formerly, Executive Vice
President, General Counsel and Corporate
Secretary of Van Kampen Investments
(1982-1999).
Ronald E. Trustee Trustee Retired. Formerly, Vice President Manager 43 None.
Toupin, Jr. since 2003 Manager and Portfolio Manager of Nuveen
Year of birth: 1958 Asset Management (1998-1999), Vice
President of Nuveen Investment Advisor
Corporation (1992-1999), Vice President
and Manager of Nuveen Unit Investment
Trusts (1991-1999) and Assistant Vice
President and Portfolio Manager of Nuveen
Unit Investment Trusts (1988-1999), each of
John Nuveen & Company, Inc. (1982-1999).
INTERESTED TRUSTEES:
David C. Hootent + * Trustee Trustee Chairman of the Board of Directors and Chief 1 None.
Year of birth: 1962 since 2008 Executive Officer (2001-present) of Claymore
Group Inc. and its predecessor companies.
---------------
+ "Interested person" of the Fund as defined in the 1940 Act. Mr. Hooten is
an interested person of the Fund because he is an officer of the Adviser
and certain of its affiliates.
* Designated as Trustee representing holders of the Fund's Preferred Shares.
(1) The business address of each Trustee of the Fund is 2455 Corporate West
Drive, Lisle, Illinois 60532, unless otherwise noted.
(2) Each Trustee is generally expected to serve a three year term concurrent
with the class of Trustees for which he serves.
(3) Nominee for election as a Trustee at the Annual Meeting.
37
EXECUTIVE OFFICERS
The following information relates to the executive officers of the
Fund who are not Trustees. The Fund's officers receive no compensation from the
Fund but may also be officers or employees of the Adviser, the Sub-Adviser or
affiliates of the Adviser or the Sub-Adviser and may receive compensation in
such capacities.
TERM OF
OFFICE(2) AND
LENGTH
NAME, ADDRESS(1) OF TIME PRINCIPAL OCCUPATION DURING
AND AGE TITLE SERVED THE PAST FIVE YEARS
--------------------------------------------------------------------------------------------
J. Thomas Futrell Chief Since 2008 Senior Managing Director, Chief Investment
Year of birth: 1955 Executive Officer (2008-present) of Claymore Advisors,
Officer LLC and Claymore Securities, Inc.; Chief
Executive Officer of certain funds in the Fund
Complex. Formerly, Managing Director in
charge of Research (2000-2007) for Nuveen
Asset Management.
Kevin M. Robinson Chief Since 2008 Senior Managing Director, General Counsel
Year of birth: 1959 Legal and Corporate Secretary (2007-present) of
Officer Claymore Advisors, LLC and Claymore
and Securities, Inc.; Chief Legal Officer of certain
Secretary funds in the Fund Complex. Formerly,
Associate General Counsel (2000-2007) of
NYSE Euronext, Inc. Formerly, Archipelago
Holdings, Inc. Senior Managing Director and
Associate General Counsel (1997-2000) of
ABN Amro Inc. Formerly, Senior Counsel in
the Enforcement Division (1989-1997) of the
U.S. Securities and Exchange Commission.
Steven M. Hill Chief Since 2004 Senior Managing Director of Claymore
Year of birth: 1964 Financial Advisors, LLC and Claymore Securities, Inc.
Officer, (2005- present). Formerly, Chief Financial
Chief Officer (2005-2006) Claymore Group Inc.
Accounting Managing Director of Claymore Advisors, LLC
Officer and and Claymore Securities, Inc. (2003-2005).
Treasurer Previously, Treasurer of Henderson Global
Funds and Operations Manager for Henderson
Global Investors (NA) Inc., (2002-2003);
Managing Director, FrontPoint Partners LLC
(2001- 2002); Vice President, Nuveen
Investments (1999-2001); Chief Financial
Officer, Skyline Asset Management LP, (1999);
Vice President, Van Kampen Investments and
Assistant Treasurer, Van Kampen mutual funds
(1989-1999).
Bruce Saxon Chief Since 2006 Vice President - Fund Compliance Officer of
Year of birth: 1957 Compliance Claymore Securities, Inc. (Feb. 2006-present).
Officer Chief Compliance Officer of certain funds in
the Fund Complex. Chief Compliance
Officer/Assistant Secretary of Harris
Investment Management, Inc. (2003-2006).
Director-Compliance of Harrisdirect LLC
(1999-2003).
38
TERM OF
OFFICE(2) AND
LENGTH
NAME, ADDRESS(1) OF TIME PRINCIPAL OCCUPATION DURING
AND AGE TITLE SERVED THE PAST FIVE YEARS
------------------------------------------------------------------------------------------
James Howley Assistant Since 2007 Vice President, Fund Administration of
Year of birth: 1972 Treasurer Claymore Securities, Inc. (2004-present).
Assistant Treasurer of certain funds in the
Fund Complex. Previously, Manager, Mutual
Fund Administration of Van Kampen
Investments, Inc.
Donald P. Swade Assistant Since 2008 Vice President, Fund Administration (2006-
Year of birth: 1972 Treasurer present) of Claymore Advisors, LLC and
Claymore Securities, Inc.; Assistant Treasurer
of certain funds in the Fund Complex.
Formerly, Manager-Mutual Fund Financial
Administration (2003-2006) for Morgan
Stanley/Van Kampen Investments.
Mark J. Furjanic Assistant Since 2008 Vice President, Fund Administration-Tax
Year of birth: 1959 Treasurer (2005-present) of Claymore Advisors, LLC and
Claymore Securities, Inc.; Assistant Treasurer
of certain funds in the Fund Complex.
Formerly, Senior Manager (1999-2005) for
Ernst & Young LLP
Mark E. Mathiasen Assistant Since 2008 Vice President; Assistant General Counsel of
Year of birth: 1978 Secretary Claymore Securities, Inc. (2007-present).
Secretary of certain funds in the Fund
Complex. Previously, Law Clerk, Idaho State
Courts (2003-2006).
Melissa J. Nguyen Assistant Since 2006 Vice President, Assistant General Counsel of
Year of birth: 1978 Secretary Claymore Group, Inc. (2005-present).
Secretary of certain funds in the Fund
Complex. Formerly, Associate, Vedder Price
P.C. (2003-2005).
---------------
(1) The business address of each officer of the Fund is 2455 Corporate West
Drive, Lisle, Illinois 60532, unless otherwise noted.
(2) Officers serve at the pleasure of the Board and until his or her successor
is appointed and qualified or until his or her earlier resignation or
removal.
BOARD COMMITTEES
The Trustees have determined that the efficient conduct of the
Trustees' affairs makes it desirable to delegate responsibility for certain
specific matters to committees of the Board. The committees meet as often as
necessary, either in conjunction with regular meetings of the Board or
otherwise. The committees of the Board are the Audit Committee and the
Nominating and Governance Committee.
Audit Committee. The Board has an Audit Committee, which is composed
of Richard L. Crandall, Roman Friedrich III, Ronald A. Nyberg and Ronald E.
Toupin, Jr.
The Audit Committee is charged with selecting an independent
registered public accounting firm for the Fund and reviewing accounting matters
with the Fund's independent registered public accounting firm. Each member of
the Audit
39
Committee is an Independent Trustee as defined above and also meets the
additional independence requirements for audit committee members as defined by
the NYSE.
The Audit Committee is governed by a written charter, the most recent
version of which was approved by the Board on October 13, 2006 (the "Audit
Committee Charter"). In accordance with proxy rules promulgated by the SEC, a
fund's audit committee charter is required to be filed at least once every
three years as an exhibit to a fund's proxy statement. The Fund's Audit
Committee Charter was attached as Appendix A to the Fund's 2007 proxy
statement.
The Audit Committee presents the following report on behalf of the
Fund:
The Audit Committee has performed the following functions: (i) the
Audit Committee reviewed and discussed the audited financial
statements of the Fund with management of the Fund, (ii) the Audit
Committee discussed with the Fund's independent registered public
accounting firm the matters required to be discussed by the Statement
on Auditing Standards No. 61, (iii) the Audit Committee received the
written disclosures and the letter from the Fund's independent
registered public accounting firm required by Independence Standards
Board Standard No. 1 and has discussed with the Fund's independent
registered public accounting firm the independence of the Fund's
independent registered public accounting firm and (iv) the Audit
Committee recommended to the Board of Trustees of the Fund that the
financial statements be included in the Fund's Annual Report for the
past fiscal year.
Nominating and Governance Committee. The Board has a Nominating and
Governance Committee, which is composed of Richard L. Crandall, Roman Friedrich
III, Ronald A. Nyberg and Ronald E. Toupin, Jr., each of whom is an Independent
Trustee as defined above and is "independent" as defined by NYSE listing
standards.
The Nominating and Governance Committee is governed by a written
charter, the most recent version of which was approved by the Board on December
9, 2008 (the "Nominating and Governance Committee Charter"). In accordance with
proxy rules promulgated by the SEC, a fund's nominating committee charter is
required to be filed at least once every three years as an exhibit to a fund's
proxy statement. The Fund's Nominating and Governance Committee Charter is
attached as Appendix A hereto.
The Nominating and Governance Committee (i) evaluates and recommends
all candidates for election or appointment as members of the Board and
recommends the appointment of members and chairs of each committee of the
Board, (ii) reviews policy matters affecting the operation of the Board and
committees of the Board, (iii) periodically evaluates the effectiveness of the
Board and committees of the Board and (iv) oversees the contract review
process, including review of the Fund's advisory agreements and other contracts
with affiliated service providers. In considering Trustee nominee candidates,
the
40
Nominating and Governance Committee requires that Trustee candidates have a
college degree or equivalent business experience and may take into account a
wide variety of factors in considering Trustee candidates, including (but not
limited to): availability and commitment of a candidate to attend meetings and
perform the responsibilities of a Trustee, relevant experience, educational
background, financial expertise, the candidate's ability, judgment and
expertise and overall diversity of the Board's composition. The Nominating and
Governance Committee may consider candidates recommended by various sources,
including (but not limited to): such Fund's Trustees, officers, investment
advisers and shareholders. The Nominating and Governance Committee will not
nominate a person for election to the Board as a Trustee after such person has
reached the age of seventy-two (72), unless such person is an "interested
person" of such Fund as defined in the 1940 Act. The Nominating and Governance
Committee may, but is not required to, retain a third party search firm to
identify potential candidates.
A Trustee candidate must (i) be prepared to submit written answers to
a questionnaire seeking professional and personal information that will assist
the Nominating and Governance Committee to evaluate the candidate and to
determine, among other matters, whether the candidate would qualify as a
Trustee who is not an "interested person" of the registrant as such term is
defined under the 1940 Act; (ii) be prepared to submit character references and
agree to appropriate background checks; and (iii) be prepared to meet with one
or more members of the Nominating and Governance Committee at a time and
location convenient to those Nominating and Governance Committee members in
order to discuss the nominee's qualifications.
The Nominating and Governance Committee will consider Trustee
candidates recommended by the Fund's shareholders. The Nominating and
Governance Committee will consider and evaluate Trustee nominee candidates
properly submitted by shareholders on the same basis as it considers and
evaluates candidates recommended by other sources. To have a candidate
considered by the Nominating and Governance Committee, a shareholder must
submit the recommendation in writing and must include the information required
by the "Procedures for Shareholders to Submit Nominee Candidates" that are set
forth as Appendix B to the Nominating and Governance Committee Charter, which
is attached as Appendix A hereto. Shareholder recommendations must be sent to
the Fund's Secretary, c/o Claymore Advisors, LLC, 2455 Corporate West Drive,
Lisle, Illinois 60532.
The nominees for election at the Annual Meeting currently serve as
Trustees and were unanimously nominated by the Board of Trustees and the
Nominating and Governance Committee.
SHAREHOLDER COMMUNICATIONS
Shareholders and other interested parties may contact the Board or
any Trustee by mail. To communicate with the Board or any Trustee,
correspondence should be addressed to the Board of Trustees or the Trustee with
whom you wish
41
to communicate by either name or title. All such correspondence should be sent
c/o the Fund's Secretary, c/o Claymore Advisors, LLC, 2455 Corporate West
Drive, Lisle, Illinois 60532.
TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES
As of July 24, 2009, each Trustee beneficially owned equity
securities of the Fund and other funds in the Fund Complex overseen by the
Trustee in the dollar range amounts as specified below:
AGGREGATE DOLLAR RANGE OF
DOLLAR RANGE OF EQUITY EQUITY SECURITIES OVERSEEN BY
NAME OF TRUSTEE SECURITIES IN THE FUND TRUSTEE IN THE FUND COMPLEX
--------------------------------------------------------------------------------
Independent Trustees:
Richard L. Crandall None None
Roman Friedrich III $1 - $10,000 $1 - $10,000
Ronald A. Nyberg $1 - $10,000 Over $100,000
Ronald E. Toupin, Jr. None None
Interested Trustee
David C. Hooten None None
As of July 24, 2009, each Trustee and the Trustees and officers of
the Fund as a group owned less than 1% of the outstanding Shares of the Fund.
BOARD MEETINGS
During the Fund's fiscal year ended October 31, 2008, the Board held
eleven meetings, the Audit Committee held four meetings, the Nominating and
Governance Committee held five meetings and the Executive Committee held no
meetings.
Each Trustee attended at least 75% of the meetings of the Board (and
any committee thereof on which he serves) held during the Fund's fiscal year
ended October 31, 2008. It is the Fund's policy to encourage Trustees to attend
annual meetings of shareholders.
TRUSTEE COMPENSATION
The Fund pays an annual retainer and fee per meeting attended to each
Trustee who is not affiliated with the Adviser, a Sub-Adviser or their
respective affiliates and pays an additional annual fee to the chairman of the
Board and the chairman of any committee of the Board. The following table
provides information regarding the compensation of the Fund's Trustees for the
Fund's fiscal year ended
42
October 31, 2008. The Fund does not accrue or pay retirement or pension
benefits to Trustees as of the date of this proxy statement.
COMPENSATION TOTAL COMPENSATION
NAME OF TRUSTEE(1) FROM THE FUND FROM THE FUND COMPLEX
---------------------------------------------------------------------
Richard L. Crandall $42,500 $42,500
Roman Friedrich III $45,500 $45,500
Ronald A. Nyberg $44,000 $390,688
Ronald E. Toupin, Jr. $45,500 $319,563
---------------
(1) Trustees not eligible for compensation are not included in the above table.
SHAREHOLDER APPROVAL
With respect to Proposal 3, the affirmative vote of a majority of the
Shares present in person or represented by proxy and entitled to vote on the
matter at the Annual Meeting at which a quorum is present is necessary to
approve the proposal. The holders of Common Shares and the holders of Preferred
Shares will have equal voting rights (i.e. one vote per Share) and will vote
together as a single class with respect to Proposal 3. Votes withheld will have
the same effect as votes against Proposal 3. "Broker non-votes" (i.e. Shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owner or the persons entitled to vote and (ii) the broker
does not have discretionary voting power on a particular matter) will have no
effect on the outcome of the vote on Proposal 3.
BOARD RECOMMENDATION
The Board, including the Independent Trustees, unanimously recommends
that you vote "FOR ALL" of the nominees for the Board of Trustees listed in the
Proxy Statement.
43
ADDITIONAL INFORMATION
FURTHER INFORMATION ABOUT VOTING AND THE ANNUAL MEETING
Whether or not you plan to attend the Annual Meeting, we urge you to
complete, sign, date, and return the enclosed proxy card in the postage-paid
envelope provided or record your voting instructions via telephone or the
Internet so your Shares will be represented at the Annual Meeting. Information
regarding how to vote via telephone or the Internet is included on the enclosed
proxy card. The required control number for Internet and telephone voting is
printed on the enclosed proxy card. The control number is used to match proxy
cards with shareholders' respective accounts and to ensure that, if multiple
proxy cards are executed, shares are voted in accordance with the proxy card
bearing the latest date.
If you wish to attend the Annual Meeting and vote in person, you will
be able to do so. You may contact the Fund at (866) 392-3004 to obtain
directions to the site of the Annual Meeting.
The Agreement and Declaration of Trust of the Fund requires the
presence of a quorum for each matter to be acted upon at the Annual Meeting.
The holders of a majority of the Shares outstanding, present in person or
represented by proxy, constitute a quorum for each Proposal. Votes withheld and
broker non-votes will be counted as present for quorum purposes.
All properly executed proxies received prior to the Annual Meeting
will be voted at the Annual Meeting in accordance with the instructions marked
thereon or otherwise as provided therein. IF NO SPECIFICATION IS MADE ON A
PROXY CARD, IT WILL BE VOTED FOR THE PROPOSALS SPECIFIED ON THE PROXY CARD.
Shareholders who execute proxies or record their voting instructions
via telephone or the Internet may revoke them at any time before they are voted
by filing with the Secretary of the Fund a written notice of revocation, by
delivering a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person. Merely attending the Annual Meeting,
however, will not revoke any previously submitted proxy.
If you hold Shares in more than one account, you will receive a proxy
card for each account. To ensure that all of your Shares are voted, please
sign, date and return the proxy card for each account. To ensure shareholders
have the Fund's latest proxy information and material to vote, the Board may
conduct additional mailings prior to the date of the Annual Meeting, each of
which will include a proxy card regardless of whether you have previously
voted. Only your latest dated proxy card will be counted.
The Board has fixed the close of business on July 24, 2009, as the
Record Date for the determination of shareholders of the Fund entitled to
notice of, and to vote at, the Annual Meeting. Shareholders of the Fund as of
the close of business on the Record Date will be entitled to one vote on each
matter to be voted on by the Fund for each Share held and a fractional vote
with respect to fractional Shares with no cumulative voting rights.
44
ADVISER AND SUB-ADVISER
Claymore Advisors, LLC, a wholly-owned subsidiary of Claymore Group
Inc., acts as the Fund's investment adviser. As of June 30, 2009, Claymore
entities have provided supervision, management and/or servicing on
approximately $11.3 billion in assets through closed-end funds, unit investment
trusts and exchange-traded funds. Claymore is located at 2455 Corporate West
Drive, Lisle, Illinois 60532.
Manning & Napier Advisors, Inc. currently acts as the Fund's
investment sub-adviser on an interim basis as permitted pursuant to Rule 15a-4
under the 1940 Act. Shareholder approval of the Manning & Napier Sub-Advisory
Agreement is being sought at the Annual Meeting to allow Manning & Napier to
continue to serve as the Fund's investment sub-adviser. Manning & Napier has
been a registered investment adviser since 1970. For more than 35 years,
Manning & Napier has focused on managing clients' investments through a variety
of market conditions, including five bear markets. The firm manages
approximately $16 billion for individuals, corporations, defined benefit
pension plans, 401(k) choice plans, Taft-Hartley accounts, endowments,
foundations and municipal retirement plans as of December 31, 2008. It remains
an employee-owned firm, with 100% of the firm owned by full-time employees.
ADMINISTRATOR
Claymore Advisors, LLC, located at 2455 Corporate West Drive, Lisle,
Illinois 60532, serves as the Fund's administrator. During the fiscal year
ended October 31, 2008, the Fund paid to Claymore Advisors, LLC administration
fees equal to approximately $195,534. It is expected that Claymore Advisors,
LLC will continue to provide administrative services to the Fund following
consummation of the Transaction.
AFFILIATED BROKERS
During the fiscal year ended October 31, 2008, the Fund paid no
commissions to affiliated brokers.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP ("E&Y") has been selected as the independent
registered public accounting firm for the Fund by the Audit Committee of the
Fund and approved by a majority of the Fund's Board, including a majority of
the Independent Trustees, to audit the accounts of the Fund for and during the
Fund's current fiscal year. The Fund does not know of any direct or indirect
financial interest of E&Y in the Fund.
Representatives of E&Y will be available to attend the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to answer questions.
45
AUDIT FEES
The aggregate fees billed to the Fund by E&Y for professional
services rendered for the audit of the Fund's annual financial statements for
the Fund's fiscal year ended October 31, 2008, were approximately $37,000 and
for the Fund's fiscal year ended October 31, 2007, were approximately $37,000.
AUDIT-RELATED FEES
The aggregate fees billed by E&Y and approved by the Audit Committee
of the Fund for assurance and related services reasonably related to the
performance of the audit of the Fund's annual financial statements (such fees
relate to services rendered, and out of pocket expenses incurred, in connection
with the Fund's registration statements, comfort letters and consents) for the
Fund's fiscal year ended October 31, 2008, were approximately $16,300 and for
the Fund's fiscal year ended October 31, 2007, were $6,000. E&Y did not perform
any other assurance and related services that were required to be approved by
the Fund's Audit Committee for such periods.
TAX FEES
The aggregate fees billed by E&Y and approved by the Audit Committee
of the Fund for professional services rendered for tax compliance, tax advice,
and tax planning (such fees relate to tax services provided by E&Y in
connection with the Fund's excise tax calculations and review of the Fund's tax
returns) for the Fund's fiscal year ended October 31, 2008, were approximately
$6,000 and for the Fund's fiscal year ended October 31, 2007, were
approximately $6,000. E&Y did not perform any other tax compliance or tax
planning services or render any tax advice that were required to be approved by
the Fund's Audit Committee for such periods.
ALL OTHER FEES
Other than those services described above, E&Y did not perform any
other services on behalf of the Fund for the Fund's fiscal year ended October
31, 2008, and for the Fund's fiscal year ended October 31, 2007.
AGGREGATE NON-AUDIT FEES
The aggregate non-audit fees billed by E&Y for services rendered to
the Fund, the Adviser and any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund (not
including a sub-adviser whose primary role is portfolio management and is
sub-contracted with or overseen by another investment adviser) that directly
related to the operations and financial reporting of the Fund for the Fund's
fiscal year ended October 31, 2008, were approximately $22,300 and for the
Fund's fiscal year ended October 31, 2007, were approximately $12,000.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
As noted above, the Audit Committee is governed by the Audit
Committee Charter, which was attached as Appendix A to the Fund's 2007 proxy
statement, which includes Pre-Approval Policies and Procedures in Section IV
of
46
such Charter. Specifically, sections IV.C.2 and IV.C.3 of the Audit Committee
Charter contain the 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-prohibited 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.
The Audit Committee has pre-approved all audit and non-audit services
provided by E&Y to the Fund, and all non-audit services provided by E&Y to the
Adviser, or any entity controlling, controlled by, or under common control with
the Adviser that provides ongoing services to the Fund that are related to the
operations of the Fund.
None of the services described above for the Fund's fiscal years
ended December 31, 2008, and December 31, 2007, were approved by the Audit
Committee pursuant to the pre-approval exception under Rule 2-01(c)(7)(i)(C) of
Regulation S-X promulgated by the SEC.
47
PRINCIPAL SHAREHOLDERS
As of the Record Date, to the knowledge of the Fund, no person
beneficially owned more than 5% of the voting securities of any class of
securities of the Fund, except as listed below:
CLASS OF SHARE PERCENTAGE
SHAREHOLDER NAME AND ADDRESS SHARES HOLDINGS OWNED
----------------------------------------------------------------------------
Bank of American Corporation Preferred 1,539 59.19%(1)
100 N. Tryon St. Fl 25
Bank of America Corporate Center
Charlotte, NC 28255
Bulldog Investors, Phillip Common 927,965 10.22%(2)
Goldstein and Andrew Dakos
60 Heritage Drive
Pleasantville, NY 10570
First Trust Portfolios L.P. Common 457,978 5.04%(3)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
---------------
(1) Based on information obtained from a Form 13G/A filed with the SEC on June
10, 2009.
(2) Based on information obtained from a Form 13D/A filed with the SEC on June
30, 2009.
(3) Based on information obtained from a Form 13G filed with the SEC on January
30, 2009.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 30(h) of the 1940 Act require the Fund's officers
and Trustees, certain officers of the Fund's investment adviser, affiliated
persons of the investment adviser, and persons who beneficially own more than
ten percent of the Fund's Shares to file certain reports of ownership ("Section
16 filings") with the SEC and the New York Stock Exchange. Based upon the
Fund's review of the copies of such forms effecting the Section 16 filings
received by it, the Fund believes that for the Fund's fiscal year ended October
31, 2008, all filings applicable to such persons were completed and filed in a
timely manner.
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of shareholders and
to safeguarding their non-public personal information. The following
information is provided to help you understand what personal information the
Fund collects, how the Fund protects that information and why, in certain
cases, the Fund 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
48
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
its shareholders to employees of the Adviser 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.
DEADLINE FOR SHAREHOLDER PROPOSALS
The Fund's Amended and Restated By-Laws (the "By-Laws") require
compliance with certain procedures for a shareholder to properly make a
nomination for election as a Trustee or to propose other business for the Fund.
If a shareholder who is entitled to do so under the Fund's By-Laws wishes to
nominate a person or persons for election as a Trustee or propose other
business for the Fund, that shareholder must provide a written notice to the
Secretary of the Fund at the Fund's principal executive offices.
The notice must set forth: (a) as to each person whom the shareholder
proposes to nominate for election as a Trustee (i) all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Trustees in an election contest, or is otherwise required, in each
case pursuant to and in accordance with Regulation 14A under the Exchange Act
and (ii) such person's written consent to being named as a nominee and to
serving as a Trustee if elected; (b) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the text of the proposal or
business (including the text of any resolutions proposed for consideration),
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the shareholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such shareholder, as they appear
on the Fund's books, and of such beneficial owner, (ii) the class or series and
number of Shares which are owned beneficially and of record by such shareholder
and such beneficial owner, (iii) a description of any agreement, arrangement or
understanding with respect to the nomination or proposal between or among such
shareholder and such beneficial owner, any of their respective affiliates or
associates, and any others acting in concert with any of the foregoing, (iv) a
description of any agreement, arrangement or understanding (including any
derivative or short positions, profit interests, options, warrants, stock
appreciation or similar rights, hedging transactions, and borrowed or loaned
shares) that has been entered into as of the date of the shareholder's notice
by, or on behalf of, such shareholder and such beneficial owners, the effect or
intent of which is to mitigate loss to, manage risk or benefit of share price
changes for, or increase or decrease the voting power of, such shareholder or
such beneficial owner, with respect to Shares of the Fund, (v) a representation
that the shareholder is a holder of record of Shares of the Fund entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting
to propose such business or nomination, and (vi)
49
a representation whether the shareholder or the beneficial owner, if any,
intends or is part of a group which intends (a) to deliver a proxy statement
and/or form of proxy to holders of at least the percentage of the Fund's
outstanding Shares required to approve or adopt the proposal or elect the
nominee and/or (b) otherwise to solicit proxies from shareholders in support of
such proposal or nomination. The Fund may require any proposed nominee to
furnish such other information as it may reasonably require to determine the
eligibility of such proposed nominee to serve as a Trustee of the Fund.
To be timely, the notice must be delivered to the Secretary of the
Fund at the Fund's principal executive offices not later than the close of
business on the ninetieth (90th) day, nor earlier than the close of business on
the one hundred twentieth (120th) day, prior to the first anniversary of the
preceding year's annual meeting (provided, however, that in the event that the
date of the annual meeting is more than thirty (30) days before or more than
seventy (70) days after such anniversary date, notice by the shareholder must
be so delivered not earlier than the close of business on the one hundred
twentieth (120th) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such annual
meeting or the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Fund).
The foregoing description of the procedures for a shareholder
properly to make a nomination for election as a Trustee or to propose other
business for the Fund is only a summary and is not complete. A copy of the
Fund's By-Laws, which includes the provisions regarding the requirements for
shareholder nominations and proposals, may be obtained by writing to the
Secretary of the Fund at 2455 Corporate West Drive, Lisle, Illinois 60532. Any
shareholder considering making a nomination or other proposal should carefully
review and comply with those provisions of the Fund's By-Laws.
The Fund's 2010 annual meeting of shareholders is currently expected
to be held on or about September 22, 2010.
Shareholder proposals intended for inclusion in the Fund's proxy
statement in connection with the Fund's 2010 annual meeting of shareholders
pursuant to Rule 14a-8 under the Exchange Act must be received by the Fund at
the Fund's principal executive offices by April 24, 2010. Proposals made
outside of Rule 14a-8 under the Exchange Act must be submitted, in accordance
with the notice requirements of the Fund's By-Laws, not earlier than the close
of business on May 25, 2010 nor later than the close of business on June 24,
2010 (which is also the date after which shareholder nominations and proposals
made outside of Rule 14a-8 under the Exchange Act would not be considered
"timely" within the meaning of Rule 14a-4(c) under the Exchange Act).
EXPENSES OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Fund, except as
noted below. The costs associated with Proposal 1 will be borne by Claymore
and/or Guggenheim. Manning & Napier has agreed to set off costs associated with
the
50
change of the Fund's investment sub-adviser in an amount not to exceed $50,000,
which costs may include costs associated with the solicitation of proxies by
the Fund, against amounts owed by the Adviser to Manning & Napier under the
Manning & Napier Sub-Advisory Agreement, provided that shareholders of the Fund
approve the Manning & Napier Sub-Advisory Agreement. Such set off by Manning &
Napier will directly benefit the Adviser, as the sub-advisory fee is paid by
the Adviser, and will indirectly benefit the Fund, as the Adviser has agreed to
waive a corresponding amount of its advisory fees so as to pass the benefits of
such set off to the Fund.
Certain officers of the Fund and certain officers and employees of
Claymore or its affiliates (none of whom will receive additional compensation
therefore), may solicit proxies by telephone, mail, e-mail and personal
interviews. Brokerage houses, banks and other fiduciaries may be requested to
forward proxy solicitation material to their principals to obtain authorization
for the execution of proxies, and will be reimbursed by the Fund for such
out-of-pocket expenses. The Fund has retained The Altman Group, Inc. ("The
Altman Group") as its proxy solicitor and will pay a project management fee as
well as fees charged on a per call basis and certain other expenses. Management
of the Fund estimates that the fees payable to The Altman Group will be
approximately $60,000 (of which $30,000 will be borne by the Fund).
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING TO BE HELD ON OCTOBER 23, 2009
This Proxy Statement is available on the Internet at
www.proxyonline.com/docs/claymoredcs2009.pdf.
OTHER MATTERS
The Fund received communications from a shareholder, Mr. Phillip
Goldstein, on behalf of Bulldog Investors, notifying the Fund of its intent to
(i) nominate candidates for election as Trustees of the Fund, (ii) to bring a
proposal to request the Board take action to afford shareholders an opportunity
to realize net asset value and (iii) solicit votes against the approval of the
New Advisory Agreement and Manning & Napier Sub-Advisory Agreement. The Fund
announced on September 14, 2009 its intention to conduct an in-kind tender
offer to purchase up to 40%-45% of the Fund's outstanding Common Shares. The
Fund engaged in discussions with Mr. Goldstein, pursuant to which he informed
the Fund that he no longer intends to pursue the above referenced proxy
solicitation. The costs to the Fund of conducting the proposed tender offer are
estimated to be approximately $200,000.
The management of the Fund knows of no other matters which are to be
brought before the Annual Meeting. However, if any other matters not now known
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed form of proxy to vote such proxy in accordance with their
judgment on such matters.
51
In the event a quorum is present at the Annual Meeting but sufficient
votes to approve any of the Proposals are not received, proxies (including
broker non-votes) would vote in favor of one or more adjournments of the Annual
Meeting with respect to such Proposal(s) to permit further solicitation of
proxies, provided they determine that such an adjournment and additional
solicitation is reasonable and in the interest of shareholders based on a
consideration of all relevant factors, including the nature of the relevant
proposal, the percentage of votes then cast, the percentage of negative votes
then cast, the nature of the proposed solicitation activities and the nature of
the reasons for such further solicitation.
Very truly yours,
/s/ J. Thomas Futrell
J. THOMAS FUTRELL
CHIEF EXECUTIVE OFFICER
October 2, 2009
52
APPENDIX A
CLAYMORE FUNDS
Nominating and Governance Committee Charter
PURPOSES AND ORGANIZATION
The purpose of Nominating and Governance Committee (the "Committee")
of the Board of Trustees (the "Board") of each of the registered investment
companies listed in Appendix A hereto (the "Trust(s)") is to review matters
pertaining to the composition, committees, and operations of the Board. Members
of the Committee may not be "interested persons" of the Trust, as such term is
defined in the Investment Company Act of 1940, as amended ("Interested
Persons").1 The Committee shall have the following duties and powers:
(1) To evaluate and recommend all candidates for election or
appointment as members of the Board and recommend the appointment
of members and chairs of each Board Committee.
(2) To review policy matters affecting the operation of the Board and
Board committees and make such recommendations to the Board as
deemed appropriate by the Committee.
(3) To evaluate periodically the effectiveness of the Board and Board
Committees and make such recommendations to the Board as deemed
appropriate by the Committee.
(4) To oversee the contract review process, including the review of
the Trust's investment advisory agreements and contracts with
other affiliated service providers.
The Committee shall receive appropriate funding as determined by the
Committee to carry out its responsibilities and shall have the authority to
retain experts, consultants or legal counsel as the Committee deems
appropriate.
The Committee shall meet annually (or more frequently, if needed) and
be empowered to hold special meetings, as circumstances require. Any action of
the Committee shall be taken by the affirmative vote of a majority of the
members. Any action of the Committee may be taken without a meeting if at least
a majority of the members of the Committee consent thereto in writing.
QUALIFICATIONS FOR TRUSTEE NOMINEES
The Committee requires that Trustee candidates have a college degree
or equivalent business experience. The Committee may take into account a wide
variety of factors in considering Trustee candidates, including (but not
limited to): (i) availability and commitment of a candidate to attend meetings
and perform his or
----------------
1 As contemplated by certain rules under the Investment Company Act of 1940,
as amended, the selection and nomination of candidates for election as
members of the Board who are not Interested Persons shall be made by the
incumbent members of the Board who are not Interested Persons.
A--1
her responsibilities on the Board, (ii) relevant industry and related
experience, (iii) educational background, (iv) financial expertise, (v) an
assessment of the candidate's ability, judgment and expertise and (v) overall
diversity of the Board's composition.
Following an initial evaluation by the Committee, a nominee must: (i)
be prepared to submit written answers to a questionnaire seeking professional
and personal information that will assist the Committee to evaluate the
candidate and to determine, among other matters, whether the candidate would be
an Independent Trustee under the 1940 Act or otherwise have material
relationships with key service providers to the Fund; (ii) be prepared to
submit character references and agree to appropriate background checks; and
(iii) be prepared to meet with one or more members of the Committee at a time
and location convenient to those Committee members in order to discuss the
nominee's qualifications.
IDENTIFICATION OF NOMINEES
In identifying potential nominees for the Board, the Committee may
consider candidates recommended by one or more of the following sources: (i)
the Trust's current Trustees, (ii) the Trust's officers, (iii) the Trust's
investment adviser(s), (iv) the Trust's shareholders (see below) and (v) any
other source the Committee deems to be appropriate. The Committee may, but is
not required to, retain a third party search firm at the expense of the Trust
to identify potential candidates. The Committee will not nominate a person for
election to the Board as a Trustee (unless such person is an "interested
person," as defined by the Investment Company Act of 1940) after such person
has reached the age of seventy-two (72).
CONSIDERATION OF CANDIDATES RECOMMENDED BY SHAREHOLDERS
The Committee will consider and evaluate nominee candidates properly
submitted by shareholders on the same basis as it considers and evaluates
candidates recommended by other sources. Appendix B to this Charter, as it may
be amended from time to time by the Committee, sets forth procedures that must
be followed by shareholders to properly submit a nominee candidate to the
Committee (recommendations not properly submitted in accordance with Appendix B
will not be considered by the Committee).
A--2
APPENDIX A
Claymore Dividend & Income Fund
Fiduciary/Claymore MLP Opportunity Fund
Madison/Claymore Covered Call and Equity Strategy Fund
Old Mutual/Claymore Long-Short Fund
TS&W/Claymore Tax-Advantaged Balanced Fund
Claymore/Guggenheim Strategic Opportunities Fund
Claymore Exchange-Traded Fund Trust
Claymore Exchange-Traded Fund Trust 2
Claymore Exchange-Traded Fund Trust 3
A--3
APPENDIX B
PROCEDURES FOR SHAREHOLDERS TO SUBMIT NOMINEE CANDIDATES
--------------------------------------------------------
A Trust shareholder must follow the following procedures in order to properly
submit a nominee recommendation for the Committee's consideration.
1. The shareholder must submit any such recommendation (a "Shareholder
Recommendation") in writing to the Trust, to the attention of the
Secretary, at the Address of the principal executive offices of the
Trust.
2. The Shareholder Recommendation must be delivered to or mailed and
received at the principal executive offices of the Trust not less than
one hundred and twenty (120) calendar days nor more than one hundred
and fifty (150) calendar days prior to the date of the Board or
shareholder meeting at which the nominee would be elected.
3. The Shareholder Recommendation must include: (i) a statement in
writing setting forth (A) the name, age, date of birth, business
address, residence address and citizenship of the person recommended
by the shareholder (the "candidate"); (B) the class or series and
number of all shares of the Trust owned of record or beneficially by
the candidate, as reported to such shareholder by the candidate; (C)
any other information regarding the candidate called for with respect
to director nominees by paragraphs (a), (d), (e), (f) of Item 401 of
Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101 (Schedule
14A) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), adopted by the Securities and Exchange Commission (or
the corresponding provisions of any regulation or rule subsequently
adopted by the Securities and Exchange Commission or any successor
agency applicable to the Trust); (D) any other information regarding
the candidate that would be required to be disclosed if the candidate
were a nominee in a proxy statement or other filing required to be
made in connection with solicitation of proxies for election of
Trustees or directors pursuant to Section 14 of the Exchange Act and
the rules and regulations promulgated thereunder; and (E) whether the
recommending shareholder believes that the candidate is or will be an
"interested person" of the Trust (as defined in the Investment Company
Act of 1940, as amended) and, if not an "interested person,"
information regarding the candidate that will be sufficient for the
Trust to make such determination; (ii) the written and signed consent
of the candidate to be named as a nominee and to serve as a Trustee if
elected; (iii) the recommending shareholder's name as it appears on
the Trust's books; (iv) the class or series and number of all shares
of the Trust owned beneficially and of record by the recommending
shareholder; and (v) a description of all arrangements or
understandings between the recommending shareholder and the candidate
and any other persons (including their names) pursuant to which the
recommendation
A--4
is being made by the recommending shareholder. In addition, the
Committee may require the candidate to furnish such other information
as it may reasonably require or deem necessary to determine the
eligibility of such candidate to serve on the Board.
A--5
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX B
INTERIM INVESTMENT ADVISORY AGREEMENT
-------------------------------------
THIS INTERIM INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated
as of [o], 2009, between Claymore Dividend & Income Fund, a Delaware statutory
trust (the "Trust"), and Claymore Advisors, LLC, a Delaware limited liability
company (the "Adviser").
WHEREAS, the Adviser has agreed to furnish investment advisory
services to the Trust, a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor has acted as investment advisor to the Trust
pursuant to an Advisory Agreement between the Trust and the Adviser dated
January 27, 2004 (the "Prior Agreement");
WHEREAS, the Prior Agreement was approved in accordance with the
provisions of the 1940 Act;
WHEREAS, the Prior Agreement was terminated as a result of its
"assignment" (as that term is defined in the 1940 Act);
WHEREAS, this Agreement is being entered into in reliance upon Rule
15a-4 under the 1940 Act;
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Adviser is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. IN GENERAL. The Adviser agrees, all as more fully set forth
herein, to act as investment adviser to the Trust with respect to the
investment of the Trust's assets and to supervise and arrange for the
day-to-day operations of the Trust and the purchase of securities for and the
sale of securities held in the investment portfolio of the Trust.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO INVESTMENT
OF ASSETS OF THE TRUST. Subject to the succeeding provisions of this section
and subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Trust's assets and, in connection therewith,
have complete discretion in purchasing and selling securities and other assets
for the Trust and in voting, exercising consents and exercising all other
rights appertaining to such securities and other assets on behalf of the Trust;
(ii) supervise the investment program of the Trust and the composition of its
B--1
investment portfolio; and (iii) arrange, subject to the provisions of paragraph
4 hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Trust. In performing its duties under this Section
2, the Adviser may delegate some or all of its duties and obligations under
this Agreement to one or more sub-investment advisers; provided, however, that
any such delegation shall be pursuant to an agreement with terms agreed upon by
the Trust and approved in a manner consistent with the 1940 Act and provided,
further, that no such delegation shall relieve the Adviser from its duties and
obligations of management and supervision of the management of the Trust's
assets pursuant to this Agreement and to applicable law.
3. DUTIES AND OBLIGATIONS OF ADVISER WITH RESPECT TO THE
ADMINISTRATION OF THE TRUST. The Adviser also agrees to furnish office
facilities and equipment and clerical, bookkeeping and administrative services
(other than such services, if any, provided by the Trust's Custodian, Transfer
Agent, Administrator and Dividend Disbursing Agent and other service providers)
for the Trust. To the extent requested by the Trust, the Adviser agrees to
provide the following administrative services:
(a) Oversee the determination and publication of the Trust's net asset
value in accordance with the Trust's policy as adopted from time to
time by the Board of Trustees;
(b) Oversee the maintenance by the Trust's Custodian and Transfer
Agent and Dividend Disbursing Agent of certain books and records of
the Trust as required under Rule 31a-1(b)(4) of the 1940 Act and
maintain (or oversee maintenance by the Trust's Administrator or such
other persons as approved by the Board of Trustees) such other books
and records required by law or for the proper operation of the Trust;
(c) Oversee the preparation and filing of the Trust's federal, state
and local income tax returns and any other required tax returns;
(d) Review the appropriateness of and arrange for payment of the
Trust's expenses;
(e) Prepare (or oversee the preparation) for review and approval by
officers of the Trust financial information for the Trust's
semi-annual and annual reports, proxy statements and other
communications with shareholders required or otherwise to be sent to
Trust shareholders, and arrange for the printing and dissemination of
such reports and communications to shareholders;
(f) Prepare (or oversee the preparation) for review by an officer of
the Trust the Trust's periodic financial reports required to be filed
with the Securities and Exchange Commission ("SEC") on Form N-SAR,
N-CSR and such other reports, forms and filings, as may be mutually
agreed upon;
B--2
(g) Prepare reports relating to the business and affairs of the Trust
as may be mutually agreed upon and not otherwise appropriately
prepared by the Trust's Custodian, counsel or auditors;
(h) Prepare (or oversee the preparation of) such information and
reports as may be required by any stock exchange or exchanges on which
the Trust's shares are listed;
(i) Make such reports and recommendations to the Board of Trustees
concerning the performance of the independent accountants as the Board
of Trustees may reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board of Trustees
concerning the performance and fees of the Trust's Custodian, Transfer
Agent, Administrator and Dividend Disbursing Agent as the Board of
Trustees may reasonably request or deems appropriate;
(k) Oversee and review calculations of fees paid to the Trust's
service providers;
(l) Oversee the Trust's portfolio and perform necessary calculations
as required under Section 18 of the 1940 Act;
(m) Consult with the Trust's officers, independent accountants, legal
counsel, Custodian, Administrator or other accounting agent, Transfer
Agent and Dividend Disbursing Agent in establishing the accounting
policies of the Trust and monitor financial and shareholder accounting
services;
(n) Review implementation of any share purchase programs authorized by
the Board of Trustees;
(o) Determine the amounts available for distribution as dividends and
distributions to be paid by the Trust to its shareholders; prepare and
arrange for the printing of dividend notices to shareholders; and
provide the Trust's Dividend Disbursing Agent and Custodian with such
information as is required for such parties to effect the payment of
dividends and distributions and to implement the Trust's dividend
reinvestment plan;
(p) Prepare such information and reports as may be required by any
banks from which the Trust borrows funds;
(q) Provide such assistance to the Custodian and the Trust's counsel
and auditors as generally may be required to properly carry on the
business and operations of the Trust;
(r) Assist in the preparation and filing of Forms 3, 4, and 5 pursuant
to Section 16 of the Securities Exchange Act of 1934, as amended, and
Section 30(f) of the 1940 Act for the officers and trustees of the
Trust, such filings to be based on information provided by those
persons;
B--3
(s) Respond to or refer to the Trust's officers or Transfer Agent,
shareholder (including any potential shareholder) inquiries relating
to the Trust; and
(t) Supervise any other aspects of the Trust's administration as may
be agreed to by the Trust and the Adviser.
All services are to be furnished through the medium of any directors, officers
or employees of the Adviser or its affiliates as the Adviser deems appropriate
in order to fulfill its obligations hereunder. The Trust will reimburse the
Adviser or its affiliates for all out-of- pocket expenses incurred by them in
connection with the performance of the administrative services described in
this paragraph 3.
4. COVENANTS. In the performance of its duties under this Agreement,
the Adviser:
(a) shall at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended, and all applicable Rules
and Regulations of the Securities and Exchange Commission (the "SEC");
(ii) any other applicable provision of law; (iii) the provisions of
the Agreement and Declaration of Trust, as amended and restated, and
By-Laws of the Trust, as such documents are amended from time to time;
(iv) the investment objectives and policies of the Trust as set forth
in its Registration Statement on Form N-2; and (v) any policies and
determinations of the Board of Trustees of the Trust;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph,
in placing orders with brokers and dealers, the Adviser will attempt
to obtain the best price and the most favorable execution of its
orders. In placing orders, the Adviser will consider the experience
and skill of the firm's securities traders as well as the firm's
financial responsibility and administrative efficiency. Consistent
with this obligation, the Adviser may select brokers on the basis of
the research, statistical and pricing services they provide to the
Trust and other clients of the Adviser. Information and research
received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Adviser hereunder. A
commission paid to such brokers may be higher than that which another
qualified broker would have charged for effecting the same
transaction, provided that the Adviser determines in good faith that
such commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Trust and its other
clients and that the total commissions paid by the Trust will be
reasonable in relation to the benefits to the Trust over the
long-term. In no instance, however, will the Trust's securities be
purchased from or sold to the Adviser, or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable
law; and
B--4
(c) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use
such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
5. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent
the Adviser or any officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Adviser or any of its officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the Adviser
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under
the 1940 Act.
7. AGENCY CROSS TRANSACTIONS. From time to time, the Adviser or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients (each an "Account") securities which the
Adviser's investment advisory clients wish to sell, and to sell for certain of
their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Adviser or the affiliated broker
or dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from one or
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Adviser is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Adviser's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act of 1940, as amended, which permits the Adviser or its affiliates
to participate on behalf of an Account in agency cross transactions if the
advisory client has given written consent in advance. By execution of this
Agreement, the Trust authorizes the Adviser or its affiliates to
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participate in agency cross transactions involving an Account. The Trust may
revoke its consent at any time by written notice to the Adviser.
8. EXPENSES. During the term of this Agreement, the Adviser will bear
all costs and expenses of its employees and any overhead incurred in connection
with its duties hereunder and shall bear the costs of any salaries or trustees
fees of any officers or trustees of the Trust who are affiliated persons (as
defined in the 1940 Act) of the Adviser.
9. COMPENSATION OF THE ADVISER. (a) The Trust agrees to pay to the
Adviser and the Adviser agrees to accept as full compensation for all services
rendered by the Adviser as such, a monthly fee (the "Investment Advisory Fee")
in arrears at an annual rate equal to 0.85% of the average daily value of the
Trust's Managed Assets. "Managed Assets" means the total assets of the Trust
(including the assets attributable to the proceeds from any financial leverage)
minus the sum of the accrued liabilities (other than the aggregate indebtedness
constituting financial leverage). The liquidation preference of any preferred
shares of the Trust, if any, constituting financial leverage shall not be
considered a liability of the Trust. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
(b) For purposes of this Agreement, the total assets of the Trust
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
(c) The compensation earned by the Adviser under this Section 9 shall
be held in an interest bearing escrow account with the Trust's custodian. If a
majority of the Trust's outstanding voting securities (as such term is used in
the 1940 Act) approves a new advisory agreement with the Adviser prior to the
expiration of the term of this Agreement, the amount in the escrow account
(including any interest earned) shall be paid to the Adviser. If a majority of
the Trust's outstanding voting securities do not approve a new advisory
agreement with the Adviser prior to the expiration of the term of this
Agreement, the Adviser shall be paid, out of the escrow account, the lesser of
(i) the Adviser's costs incurred in providing the services under this Agreement
(including any interest earned on that amount while in escrow); or (ii) the
total amount in the escrow account (including any interest earned).
10. LIMITATION ON LIABILITY. (a) The Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by Adviser or
by the Trust in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
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(b) The Trust may, but shall not be required to, make advance payments
to the Adviser in connection with the expenses of the Adviser in defending any
action with respect to which damages or equitable relief might be sought against
the Adviser under this Section (which payments shall be reimbursed to the Trust
by the Adviser as provided below) if the Trust receives (i) a written
affirmation of the Adviser's good faith belief that the standard of conduct
necessary for the limitation of liability in this Section has been met and (ii)
a written undertaking to reimburse the Trust whether or not the Adviser shall be
deemed to have liability under this Section, such reimbursement to be due upon
(1) a final decision on the merits by a court or other body before whom the
proceeding was brought as to whether or not the Adviser is liable under this
Section or (2) in the absence of such a decision, upon the request of the
Adviser for reimbursement by a majority vote of a quorum consisting of trustees
of the Trust who are neither "interested persons" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act) nor parties to the proceeding ("Disinterested
Non-Party Trustees"). In addition, at least one of the following conditions must
be met: (A) the Adviser shall provide a security for such Adviser undertaking,
(B) the Trust shall be insured against losses arising by reason of any lawful
advance, or (C) a majority of a quorum of the Disinterested Non-Party Trustees
of the Trust or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Adviser ultimately
will be found not to be liable under this Section.
11. DURATION AND TERMINATION. This Agreement shall become effective
as of the date hereof and shall continue on an interim basis (unless terminated
as set forth below) until the earlier of (i) 150 calendar days from the date
hereof or such later date as may be consistent with the 1940 Act, rules and
regulations thereunder or exemptive relief or interpretive positions of the
Staff of the SEC or (ii) the date of a new advisory agreement between the Trust
and the Adviser, if any, that has been approved by a majority of the Trust's
outstanding voting securities at the time outstanding and entitled to vote.
Notwithstanding the foregoing, this Agreement may be terminated by the Trust at
any time, without the payment of any penalty, upon giving the Adviser 10 days'
notice (which notice may be waived by the Adviser), provided that such
termination by the Trust shall be directed or approved by the vote of a
majority of the Trustees of the Trust in office at the time or by the vote of
the holders of a majority of the voting securities of the Trust at the time
outstanding and entitled to vote, or by the Adviser on 60 days' written notice
(which notice may be waived by the Trust). This Agreement will also immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings of such terms in the 1940 Act.)
13. NOTICES. Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the
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date actually received or on the fourth day after the postmark if such notice
is mailed first class postage prepaid.
14. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware for contracts to be per
formed entirely therein without reference to choice of law principles thereof
and in accordance with the applicable provisions of the 1940 Act.
16. USE OF THE NAME CLAYMORE. The Adviser has consented to the use by
the Trust of the name or identifying word "Claymore" in the name of the Trust.
Such consent is conditioned upon the employment of the Adviser as the
investment adviser to the Trust. The name or identifying word "Claymore" may be
used from time to time in other connections and for other purposes by the
Adviser and any of its affiliates. The Adviser may require the Trust to cease
using "Claymore" in the name of the Trust if the Trust ceases to employ, for
any reason, the Adviser, any successor thereto or any affiliate thereof as
investment adviser of the Trust.
17. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
18. COUNTERPARTS. This Agreement may be executed in counterparts by
the parties hereto, each of which shall constitute an original counterpart, and
all of which, together, shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
CLAYMORE DIVIDEND & INCOME FUND
By: ________________________
Name:
Title:
CLAYMORE ADVISORS, LLC
By: ________________________
Name:
Title:
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APPENDIX C
INVESTMENT ADVISORY AGREEMENT
-----------------------------
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as of
[o], 2009, between Claymore Dividend & Income Fund, a Delaware statutory trust
(the "Trust"), and Claymore Advisors, LLC, a Delaware limited liability company
(the "Adviser").
WHEREAS, the Adviser has agreed to furnish investment advisory
services to the Trust, a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Adviser is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. IN GENERAL. The Adviser agrees, all as more fully set forth
herein, to act as investment adviser to the Trust with respect to the
investment of the Trust's assets and to supervise and arrange for the
day-to-day operations of the Trust and the purchase of securities for and the
sale of securities held in the investment portfolio of the Trust.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO INVESTMENT
OF ASSETS OF THE TRUST. Subject to the succeeding provisions of this section
and subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Trust's assets and, in connection therewith,
have complete discretion in purchasing and selling securities and other assets
for the Trust and in voting, exercising consents and exercising all other
rights appertaining to such securities and other assets on behalf of the Trust;
(ii) supervise the investment program of the Trust and the composition of its
investment portfolio; and (iii) arrange, subject to the provisions of paragraph
4 hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Trust. In performing its duties under this Section
2, the Adviser may delegate some or all of its duties and obligations under
this Agreement to one or more sub-investment advisers; provided, however, that
any such delegation shall be pursuant to an agreement with terms agreed upon by
the Trust and approved in a manner consistent with the 1940 Act and provided,
further, that no such delegation shall relieve the Adviser from its duties and
obligations of management and supervision of the management of the Trust's
assets pursuant to this Agreement and to applicable law.
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3. DUTIES AND OBLIGATIONS OF ADVISER WITH RESPECT TO THE
ADMINISTRATION OF THE TRUST. The Adviser also agrees to furnish office
facilities and equipment and clerical, bookkeeping and administrative services
(other than such services, if any, provided by the Trust's Custodian, Transfer
Agent, Administrator and Dividend Disbursing Agent and other service providers)
for the Trust. To the extent requested by the Trust, the Adviser agrees to
provide the following administrative services:
(a) Oversee the determination and publication of the Trust's net asset
value in accordance with the Trust's policy as adopted from time to
time by the Board of Trustees;
(b) Oversee the maintenance by the Trust's Custodian and Transfer
Agent and Dividend Disbursing Agent of certain books and records of
the Trust as required under Rule 31a-1(b)(4) of the 1940 Act and
maintain (or oversee maintenance by the Trust's Administrator or such
other persons as approved by the Board of Trustees) such other books
and records required by law or for the proper operation of the Trust;
(c) Oversee the preparation and filing of the Trust's federal, state
and local income tax returns and any other required tax returns;
(d) Review the appropriateness of and arrange for payment of the
Trust's expenses;
(e) Prepare (or oversee the preparation) for review and approval by
officers of the Trust financial information for the Trust's
semi-annual and annual reports, proxy statements and other
communications with shareholders required or otherwise to be sent to
Trust shareholders, and arrange for the printing and dissemination of
such reports and communications to shareholders;
(f) Prepare (or oversee the preparation) for review by an officer of
the Trust the Trust's periodic financial reports required to be filed
with the Securities and Exchange Commission ("SEC") on Form N-SAR,
N-CSR and such other reports, forms and filings, as may be mutually
agreed upon;
(g) Prepare reports relating to the business and affairs of the Trust
as may be mutually agreed upon and not otherwise appropriately
prepared by the Trust's Custodian, counsel or auditors;
(h) Prepare (or oversee the preparation of) such information and
reports as may be required by any stock exchange or exchanges on which
the Trust's shares are listed;
(i) Make such reports and recommendations to the Board of Trustees
concerning the performance of the independent accountants as the Board
of Trustees may reasonably request or deems appropriate;
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(j) Make such reports and recommendations to the Board of Trustees
concerning the performance and fees of the Trust's Custodian, Transfer
Agent, Administrator and Dividend Disbursing Agent as the Board of
Trustees may reasonably request or deems appropriate;
(k) Oversee and review calculations of fees paid to the Trust's
service providers;
(l) Oversee the Trust's portfolio and perform necessary calculations
as required under Section 18 of the 1940 Act;
(m) Consult with the Trust's officers, independent accountants, legal
counsel, Custodian, Administrator or other accounting agent, Transfer
Agent and Dividend Disbursing Agent in establishing the accounting
policies of the Trust and monitor financial and shareholder accounting
services;
(n) Review implementation of any share purchase programs authorized by
the Board of Trustees;
(o) Determine the amounts available for distribution as dividends and
distributions to be paid by the Trust to its shareholders; prepare and
arrange for the printing of dividend notices to shareholders; and
provide the Trust's Dividend Disbursing Agent and Custodian with such
information as is required for such parties to effect the payment of
dividends and distributions and to implement the Trust's dividend
reinvestment plan;
(p) Prepare such information and reports as may be required by any
banks from which the Trust borrows funds;
(q) Provide such assistance to the Custodian and the Trust's counsel
and auditors as generally may be required to properly carry on the
business and operations of the Trust;
(r) Assist in the preparation and filing of Forms 3, 4, and 5 pursuant
to Section 16 of the Securities Exchange Act of 1934, as amended, and
Section 30(f) of the 1940 Act for the officers and trustees of the
Trust, such filings to be based on information provided by those
persons;
(s) Respond to or refer to the Trust's officers or Transfer Agent,
shareholder (including any potential shareholder) inquiries relating
to the Trust; and
(t) Supervise any other aspects of the Trust's administration as may
be agreed to by the Trust and the Adviser.
All services are to be furnished through the medium of any directors, officers
or employees of the Adviser or its affiliates as the Adviser deems appropriate
in order to fulfill its obligations hereunder. The Trust will reimburse the
Adviser or its affiliates for all out-of- pocket expenses incurred by them in
connection with the performance of the administrative services described in
this paragraph 3.
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4. COVENANTS. In the performance of its duties under this Agreement,
the Adviser:
(a) shall at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended, and all applicable Rules
and Regulations of the Securities and Exchange Commission (the "SEC");
(ii) any other applicable provision of law; (iii) the provisions of
the Agreement and Declaration of Trust, as amended and restated, and
By-Laws of the Trust, as such documents are amended from time to time;
(iv) the investment objectives and policies of the Trust as set forth
in its Registration Statement on Form N-2; and (v) any policies and
determinations of the Board of Trustees of the Trust;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph,
in placing orders with brokers and dealers, the Adviser will attempt
to obtain the best price and the most favorable execution of its
orders. In placing orders, the Adviser will consider the experience
and skill of the firm's securities traders as well as the firm's
financial responsibility and administrative efficiency. Consistent
with this obligation, the Adviser may select brokers on the basis of
the research, statistical and pricing services they provide to the
Trust and other clients of the Adviser. Information and research
received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Adviser hereunder. A
commission paid to such brokers may be higher than that which another
qualified broker would have charged for effecting the same
transaction, provided that the Adviser determines in good faith that
such commission is reasonable in terms either of the transaction or
the overall responsibility of the Adviser to the Trust and its other
clients and that the total commissions paid by the Trust will be
reasonable in relation to the benefits to the Trust over the
long-term. In no instance, however, will the Trust's securities be
purchased from or sold to the Adviser, or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable
law; and
(c) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use
such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Adviser may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
C--4
5. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent
the Adviser or any officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Adviser or any of its officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the Adviser
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under
the 1940 Act.
7. AGENCY CROSS TRANSACTIONS. From time to time, the Adviser or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients (each an "Account") securities which the
Adviser's investment advisory clients wish to sell, and to sell for certain of
their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Adviser or the affiliated broker
or dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from one or
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Adviser is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Adviser's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act of 1940, as amended, which permits the Adviser or its affiliates
to participate on behalf of an Account in agency cross transactions if the
advisory client has given written consent in advance. By execution of this
Agreement, the Trust authorizes the Adviser or its affiliates to participate in
agency cross transactions involving an Account. The Trust may revoke its
consent at any time by written notice to the Adviser.
8. EXPENSES. During the term of this Agreement, the Adviser will bear
all costs and expenses of its employees and any overhead incurred in connection
with its duties hereunder and shall bear the costs of any salaries or trustees
fees of any officers or trustees of the Trust who are affiliated persons (as
defined in the 1940 Act) of the Adviser.
9. COMPENSATION OF THE ADVISER. (a) The Trust agrees to pay to the
Adviser and the Adviser agrees to accept as full compensation for all services
rendered by the Adviser as such, a monthly fee (the "Investment Advisory Fee")
in
C--5
arrears at an annual rate equal to 0.85% of the average daily value of the
Trust's Managed Assets. "Managed Assets" means the total assets of the Trust
(including the assets attributable to the proceeds from any financial leverage)
minus the sum of the accrued liabilities (other than the aggregate indebtedness
constituting financial leverage). The liquidation preference of any preferred
shares of the Trust, if any, constituting financial leverage shall not be
considered a liability of the Trust. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
(b) For purposes of this Agreement, the total assets of the Trust
shall be calculated pursuant to the procedures adopted by resolutions of the
Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
10. LIMITATION ON LIABILITY. (a) The Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by Adviser or
by the Trust in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
(b) The Trust may, but shall not be required to, make advance
payments to the Adviser in connection with the expenses of the Adviser in
defending any action with respect to which damages or equitable relief might be
sought against the Adviser under this Section (which payments shall be
reimbursed to the Trust by the Adviser as provided below) if the Trust receives
(i) a written affirmation of the Adviser's good faith belief that the standard
of conduct necessary for the limitation of liability in this Section has been
met and (ii) a written undertaking to reimburse the Trust whether or not the
Adviser shall be deemed to have liability under this Section, such
reimbursement to be due upon (1) a final decision on the merits by a court or
other body before whom the proceeding was brought as to whether or not the
Adviser is liable under this Section or (2) in the absence of such a decision,
upon the request of the Adviser for reimbursement by a majority vote of a
quorum consisting of trustees of the Trust who are neither "interested persons"
of the Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to
the proceeding ("Disinterested Non-Party Trustees"). In addition, at least one
of the following conditions must be met: (A) the Adviser shall provide a
security for such Adviser undertaking, (B) the Trust shall be insured against
losses arising by reason of any lawful advance, or (C) a majority of a quorum
of the Disinterested Non-Party Trustees of the Trust or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Adviser ultimately will be found not to be liable under
this Section.
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11. DURATION AND TERMINATION. This Agreement shall become effective
as of the date hereof and, unless sooner terminated with respect to the Trust
as provided herein, shall continue in effect for a period of one year.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to the Trust for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (a) the vote of
a majority of the Trust's Board of Trustees or the vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote, and (b) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Trust at
any time, without the payment of any penalty, upon giving the Adviser 60 days'
notice (which notice may be waived by the Adviser), provided that such
termination by the Trust shall be directed or approved by the vote of a
majority of the Trustees of the Trust in office at the time or by the vote of
the holders of a majority of the voting securities of the Trust at the time
outstanding and entitled to vote, or by the Adviser on 60 days' written notice
(which notice may be waived by the Trust). This Agreement will also immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings of such terms in the 1940 Act.)
13. NOTICES. Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the postmark
if such notice is mailed first class postage prepaid.
14. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware for contracts to be per
formed entirely therein without reference to choice of law principles thereof
and in accordance with the applicable provisions of the 1940 Act.
16. USE OF THE NAME CLAYMORE. The Adviser has consented to the use by
the Trust of the name or identifying word "Claymore" in the name of the Trust.
Such consent is conditioned upon the employment of the Adviser as the
investment adviser to the Trust. The name or identifying word "Claymore" may be
used from time to time in other connections and for other purposes by the
Adviser and any of its affiliates. The Adviser may require the Trust to cease
using "Claymore" in the name of the Trust if the Trust ceases to employ, for
any reason,
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the Adviser, any successor thereto or any affiliate thereof as investment
adviser of the Trust.
17. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
18. COUNTERPARTS. This Agreement may be executed in counterparts by
the parties hereto, each of which shall constitute an original counterpart, and
all of which, together, shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
CLAYMORE DIVIDEND & INCOME FUND
By: _______________________
Name:
Title:
CLAYMORE ADVISORS, LLC
By: _______________________
Name:
Title:
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APPENDIX D
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agreement") dated as of
the [o] day of [o], 2009, among Claymore Dividend & Income Fund, a Delaware
statutory trust (the "Trust"), Claymore Advisors, LLC, a Delaware limited
liability company (the "Investment Adviser"), and Manning & Napier Advisors,
Inc., a New York corporation (the "Investment Sub-Adviser").
WHEREAS, the Investment Adviser has agreed to furnish investment
management and advisory services to the Trust, a closed-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act") with respect to the Trust Assets (defined below);
WHEREAS, the investment advisory agreement between the Investment
Adviser and the Trust (such agreement or the most recent successor agreement
between such parties relating to advisory services to the Trust is referred to
herein as the "Investment Advisory Agreement") contemplates that the Investment
Adviser may sub-contract investment advisory services with respect to the Trust
to a sub-adviser(s) pursuant to a sub-advisory agreement(s) agreeable to the
Trust and approved in accordance with the provisions of the 1940 Act;
WHEREAS, the Investment Adviser wishes to retain the Investment
Sub-Adviser to provide certain sub-advisory services;
WHEREAS, the Investment Sub-Adviser is a registered investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act");
WHEREAS, the Investment Sub-Adviser has acted as investment
sub-adviser to the Trust pursuant to (i) an Investment Sub-Advisory Agreement
among the Trust, the Investment Adviser and the Investment Sub-Adviser, dated
June 17, 2009, and approved by the Board of Trustees of the Trust for an
initial interim period of 150 days pursuant to Rule 15a-4 under the 1940 Act
(the "Initial Interim Sub-Advisory Agreement"); and (ii) an Interim Investment
Sub-Advisory Agreement, dated September [o], 2009, and approved by the Board of
Trustees of the Trust for an interim period ending on the date 150 days after
the date of the Initial Interim Sub-Advisory Agreement pursuant to Rule 15a-4
under the 1940 Act (the "Subsequent Interim Sub-Advisory Agreement"); and
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Investment Sub-Adviser is willing to
furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. APPOINTMENT. The Investment Adviser hereby appoints the Investment
Sub-Adviser to act as a sub-adviser with investment discretion with
D--1
respect to the Trust as set forth in this Agreement and the Investment
Sub-Adviser accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.
2. SERVICES OF THE INVESTMENT SUB-ADVISER. Subject to the succeeding
provisions of this section, the oversight and supervision of the Investment
Adviser and the direction and control of the Trust's Board of Trustees, the
Investment Sub-Adviser will perform certain of the day-to-day operations of the
Trust which may include one or more of the following services at the request of
the Investment Adviser: (i) managing the investment and reinvestment of the
Trust Assets in accordance with the investment policies of the Trust; (ii)
arranging, subject to the provisions of paragraph 3 hereof, for the purchase
and sale of securities and other assets for the Trust; (iii) providing
investment research and credit analysis concerning the Trust Assets; (v)
placing orders for purchases and sales of Trust Assets, (vi) maintaining the
books and records as are required to support Trust investment operations, (vii)
monitoring on a daily basis the investment activities and portfolio holdings
relating to the Trust and (vii) voting proxies relating to the Trust's
portfolio securities in accordance with the proxy voting policies and
procedures of the Investment Sub-Adviser. At the request of the Investment
Adviser, the Investment Sub-Adviser will also, subject to the oversight and
supervision of the Investment Adviser and the direction and control of the
Trust's Board of Trustees, consult with the Investment Adviser as to the
investment policies and practices of the Trust, including (but not limited to)
the use by the Trust of financial leverage and elements (e.g., form, amount and
costs) relating to such financial leverage and the utilization by the Trust of
any interest rate or other hedging or risk management transactions in
connection therewith, and will perform any of the services described in the
Investment Advisory Agreement. In addition, the Investment Sub-Adviser will
keep the Trust and the Investment Adviser informed of developments materially
affecting the Trust and shall, on its own initiative, furnish to the Trust all
information relevant to such developments. The Investment Sub-Adviser will
periodically communicate to the Investment Adviser, at such times as the
Investment Adviser may direct, information concerning the purchase and sale of
securities for the Trust, including: (i) the name of the issuer, (ii) the
amount of the purchase or sale, (iii) the name of the broker or dealer, if any,
through which the purchase or sale is effected, (iv) the CUSIP number of the
instrument, if any, and (v) such other information as the Investment Adviser
may reasonably require for purposes of fulfilling its obligations to the Trust
under the Investment Advisory Agreement. The Investment Sub-Adviser will
provide the services rendered by it under this Agreement in accordance with the
Trust's investment objective, policies and restrictions (as currently in effect
and as they may be amended or supplemented from time to time) as stated in the
Trust's Prospectus filed with the SEC as part of the Trust's Registration
Statement on Form N-2 and the resolutions of the Trust's Board of Trustees.
3. DUTIES OF THE INVESTMENT ADVISER. The Investment Adviser shall
continue to have the responsibility for all services to be provided to
D--2
the Trust pursuant to the Investment Advisory Agreement, including oversight
and supervision of the Investment Sub-Adviser hereunder, as set forth in, and
subject to the terms of, the Investment Advisory Agreement.
4. COVENANTS. In the performance of its duties under this Agreement,
the Investment Sub-Adviser:
(a) shall at all times comply and act in accordance with: (i) the
provisions of the 1940 Act and the Advisers Act and all applicable Rules and
Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust and By-Laws of the Trust, as such documents are amended
from time to time; (iv) the investment objectives, policies and restrictions of
the Trust as set forth in the Trust's Prospectus filed with the SEC as part of
the Trust's Registration Statement on Form N-2; and (v) any policies,
determinations and/or resolutions of the Board of Trustees of the Trust or the
Investment Adviser;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph, in placing
orders with brokers and dealers, the Investment Sub-Adviser will obtain the
best price and the most favorable execution of its orders. In placing orders,
the Investment Sub-Adviser will consider the experience and skill of the firm's
securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Investment
Sub-Adviser may select brokers on the basis of the research, statistical and
pricing services they provide to the Trust and other clients of the Investment
Adviser or the Investment Sub-Adviser, as the case may be. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Investment Sub-Adviser hereunder.
A commission paid to such brokers may be higher than that which another
qualified broker would have charged for effecting the same transaction,
provided that the Investment Sub-Adviser determines in good faith that such
commission is reasonable in terms either of the transaction or the overall
responsibility of the Investment Adviser and the Investment Sub-Adviser to the
Trust and their other clients and that the total commissions paid by the Trust
will be reasonable in relation to the benefits to the Trust over the long-term.
In no instance, however, will the Trust's securities be purchased from or sold
to the Investment Adviser, the Investment Sub-Adviser or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable law;
(c) will maintain books and records with respect to the Trust's
securities transactions and render to the Investment Adviser and the Trust's
Board of Trustees such periodic and special reports as they may request; and
(d) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust, and the Trust's
prior, current or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder.
D--3
4. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent
the Investment Sub-Adviser or any officer, employee or other affiliate thereof
from acting as investment adviser for any other person, firm or corporation, or
from engaging in any other lawful activity, and shall not in any way limit or
restrict the Investment Sub-Adviser or any of its officers, employees or agents
from buying, selling or trading any securities for their own accounts or for
the accounts of others for whom it or they may be acting; provided, however,
that the Investment Sub-Adviser will not undertake any activities which will
adversely affect the performance of its obligations under this Agreement.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Sub-Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request, provided that the Investment Sub-Advisor shall be allowed to
maintain copies of any such records to the extent required by the 1940 Act and
the Investment Advisers Act of 1940, as amended. The Investment Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940
Act.
6. AGENCY CROSS TRANSACTIONS. From time to time, the Investment
Sub-Adviser or brokers or dealers affiliated with the Investment Sub-Adviser
may find themselves in a position to buy for certain of their brokerage clients
(each an "Account") securities which the Investment Sub-Adviser's investment
advisory clients wish to sell, and to sell for certain of their brokerage
clients securities which advisory clients wish to buy. Where one of the parties
is an advisory client, the Investment Sub-Adviser or the affiliated broker or
dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from both
parties to the transaction without the advisory client's consent. This is
because in a situation where a Investment Sub-Adviser is making the investment
decision (as opposed to a brokerage client who makes his own investment
decisions), and the Investment Sub-Adviser or an affiliate is receiving
commissions from one or both sides of the transaction, there is a potential
conflicting division of loyalties and responsibilities on the Investment
Sub-Adviser's part regarding the advisory client. The SEC has adopted a rule
under the Advisers Act which permits an Investment Sub-Adviser or its
affiliates to participate on behalf of an Account in agency cross transactions
if the advisory client has given written consent in advance. By execution of
this Agreement, the Trust authorizes the Investment Sub-Adviser or its
affiliates to participate in agency cross transactions involving an Account,
consistent with any policies and procedures that may be adopted by the Board of
Trustees of the Trust. The Trust may revoke its consent at any time by written
notice to the Investment Sub-Adviser.
7. EXPENSES. During the term of this Agreement, the Investment
Sub-Adviser will bear all costs and expenses of its employees and any overhead
incurred by the Investment Sub-Adviser in connection with their duties
hereunder
D--4
and shall bear the costs of any salaries or trustees, fees of any officers or
trustees of the Trust who are affiliated persons (as defined in the 1940 Act)
of the Investment Sub-Adviser.
8. COMPENSATION.
(a) The Investment Adviser agrees to pay to the Investment Sub-Adviser
and the Investment Sub-Adviser agrees to accept as full compensation for all
services rendered by the Investment Sub-Adviser as such, a monthly fee (the
"Investment Management Fee") payable in arrears at an annual rate equal to (i)
for the period ending two years after the date of the effectiveness of the
Initial Interim Sub-Advisory Agreement, an amount equal to 0.33% and (ii)
commencing on the second anniversary of the date of the effectiveness of the
Initial Interim Sub-Advisory Agreement, an amount equal to 0.42%, each
calculated using the average daily value of the Trust's Managed Assets. "Managed
Assets" means the total assets of the Trust (including the assets attributable
to the proceeds from any financial leverage) minus the sum of the accrued
liabilities (other than the aggregate indebtedness constituting financial
leverage). The liquidation preference of any preferred shares of the Trust, if
any, constituting financial leverage shall not be considered a liability of the
Trust. For any period less than a month during which this Agreement is in
effect, the fee shall be prorated according to the proportion which such period
bears to a full month of 28, 29, 30 or 31 days, as the case may be. Investment
Sub-Adviser has agreed to waive fees owed to it for the period ending two months
after the date of the Initial Interim Sub-Advisory Agreement, subject to the
approval by the Trust's voting securities holders of this Agreement, as
described below. In addition, Investment Sub-Adviser agrees to have the costs
associated with the change of Trust sub-advisers, not to exceed $50,000, set off
against amounts owed to Investment Sub-Adviser, provided that the Trust's
voting-securities holders approve this Agreement.
(b) For purposes of this Agreement, the total assets of the Trust
shall be calculated in the same manner as set forth in the Investment Advisory
Agreement.
9. CERTAIN INFORMATION. The Investment Sub-Adviser shall promptly
notify the Investment Adviser in writing of the occurrence of any of the
following events: (a) the Investment Sub-Adviser failing to be registered as an
investment adviser under the Advisers Act, (b) the Investment Sub-Adviser
having been served or otherwise have notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public
board or body, involving the affairs of the Trust, (c) the occurrence of any
change in control of the Investment Sub-Adviser or any parent of the Investment
Sub-Adviser within the meaning of the 1940 Act, or (d) the occurrence of any
material adverse change in the business or financial position of the Investment
Sub-Adviser, that in the reasonable judgment of the Investment Sub-Adviser,
could materially impact the ability of the Investment Sub-Adviser to perform
services hereunder.
D--5
10. LIMITATION ON LIABILITY.
(a) The Investment Sub-Adviser will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Investment
Sub-Adviser, the Investment Adviser or by the Trust in connection with the
performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties under this Agreement. In addition, the Investment Sub-Adviser shall have
no liability, and shall be indemnified and held harmless by the Trust, for any
losses that are directly or indirectly related to any action or inaction
occurring or failing to occur on or before the effectiveness of this Agreement
of, the Trust, the Investment Adviser or any prior sub-adviser.
(b) The Trust may, but shall not be required to, make advance
payments to the Investment Sub-Adviser in connection with the expenses of the
Investment Sub-Adviser in defending any action with respect to which damages or
equitable relief might be sought against the Investment Sub-Adviser under this
Section (which payments shall be reimbursed to the Trust by the Investment
Sub-Adviser as provided below) if the Trust receives (i) a written affirmation
of the Investment Sub-Adviser's good faith belief that the standard of conduct
necessary for the limitation of liability in this Section has been met and (ii)
a written undertaking to reimburse the Trust whether or not the Investment
Sub-Adviser shall be deemed to have liability under this Section, such
reimbursement to be due upon (1) a final decision on the merits by a court or
other body before whom the proceeding was brought as to whether or not the
Investment Sub-Adviser is liable under this Section or (2) in the absence of
such a decision, upon the request of the Investment Sub-Adviser for
reimbursement by a majority vote of a quorum consisting of trustees of the
Trust who are neither "interested persons" of the Trust (as defined in Section
2(a)(19) of the 1940 Act) nor parties to the proceeding ("Disinterested
Non-Party Trustees"). In addition, at least one of the following conditions
must be met: (A) the Investment Sub-Adviser shall provide a security for such
Investment Sub-Adviser undertaking, (B) the Trust shall be insured against
losses arising by reason of any lawful advance, or (C) a majority of a quorum
of the Disinterested Non-Party Trustees of the Trust or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is reason
to believe that the Investment Sub-Adviser ultimately will be found not to be
liable under this Section.
11. DURATION AND TERMINATION. This Agreement shall become effective
as of the date hereof and shall continue (unless terminated automatically as
set forth below) in effect for a period of one year. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to the Trust
for successive periods of 12 months, provided such continuance is specifically
approved at least annually by both (a) the vote of a majority of the Trust's
Board of Trustees or a vote of a majority of the outstanding voting securities
of the Trust at the time
D--6
outstanding and entitled to vote and (b) by the vote of a majority of the
Trustees, who are not parties to this Agreement or interested persons (as such
term is defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust, without the payment
of any penalty, upon giving the Investment Sub-Adviser 60 days' notice (which
notice may be waived by the Investment Sub-Adviser), provided that such
termination by the Trust shall be directed or approved by the vote of a
majority of the Trustees of the Trust in office at the time or by the vote of
the holders of a majority of the voting securities of the Trust at the time
outstanding and entitled to vote, or by the Investment Sub-Adviser on 60 days'
written notice (which notice may be waived by the Trust), and will terminate
automatically upon any termination of the Investment Advisory Agreement between
the Trust and the Investment Adviser. This Agreement will also immediately
terminate in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested person" and
"assignment" shall have the same meanings of such terms in the 1940 Act.)
12. NOTICES. Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the postmark
if such notice is mailed first class postage prepaid.
13. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware for contracts to be
performed entirely therein without reference to choice of law principles
thereof and in accordance with the applicable provisions of the 1940 Act.
15. USE OF THE NAME MANNING & NAPIER. For the period commencing one
year following approval by the Trust's voting securities holders of this
Agreement and terminating three years following approval by the Trust's voting
securities holders of this Agreement, upon written notice of the Investment
Sub-Adviser, the Trust's name shall be changed to use the name of Investment
Sub-Adviser or identifying word "Manning & Napier" in the name of the Trust
without further action of the Trust, other than any notice or other ministerial
filings required under applicable law. Such notice shall be conditioned upon
the employment of the Investment Sub-Adviser as the investment sub-adviser to
the Trust. The names or identifying words "Manning & Napier" may be used from
time to time in other connections and for other purposes by the Investment
Sub-Adviser and any of its affiliates. To the extent Investment Sub-Adviser
consents to
D--7
the use of its name in the Trust, the Investment Sub-Adviser may require the
Trust to cease using or "Manning & Napier" in the name of the Trust if the
Trust or the Investment Adviser ceases to employ, for any reason, the
Investment Sub-Adviser, any successor thereto or any affiliate thereof as
investment sub-adviser of the Trust. Notwithstanding the foregoing, the
Investment Adviser may use the Investment Sub-Adviser's name in certain
marketing materials used provided that the Investment Sub-Adviser has approved
in writing such material.
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or other wise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
17. COUNTERPARTS. This Agreement may be executed in counterparts by
the parties hereto, each of which shall constitute an original counterpart, and
all of which, together, shall constitute one Agreement.
D--8
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day
and year first above written.
CLAYMORE ADVISORS, LLC
By: ______________________
MANNING & NAPIER ADVISORS, INC.
By: ______________________
CLAYMORE DIVIDEND & INCOME FUND
By: ______________________
D--9
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
CLAYMORE PROXY CARD FOR
CLAYMORE(SM)
CLAYMORE DIVIDEND & INCOME FUND
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - OCTOBER 23, 2009
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
COMMON
The annual meeting of shareholders of Claymore Dividend & Income Fund (the
"Fund") will be held at the offices of the Fund, 2455 Corporate West Drive,
Lisle, Illinois, 60532, on Friday, October 23, 2009 at 11:30 A.M., Central Time
(the "Annual Meeting"). The undersigned hereby appoints each of Mark E.
Mathiasen and Kevin M. Robinson, or their respective designees, with full power
of substitution and revocation, as proxies to represent and to vote all shares
of the undersigned at the Annual Meeting and all adjournments thereof, with all
powers the undersigned would possess if personally present, upon the matters
specified on the reverse side.
--------------------- QUESTIONS ABOUT THIS PROXY? Should you have any
| | questions about the proxy materials or regarding how
| | to vote your shares, please contact our proxy
| | information line TOLL-FREE AT 1-866-796-1290.
| | Representatives are available Monday through Friday
--------------------- 9:00 a.m. to 10:00 p.m. Eastern Time.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE CLAYMORE
DIVIDEND & INCOME FUND SHAREHOLDER MEETING TO BE HELD ON OCTOBER 23, 2009
THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE AT:
WWW.PROXYONLINE.COM/DOCS/CLAYMOREDCS2009.PDF
--------------------------------------------------------------------------------
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
CLAYMORE DIVIDEND & INCOME FUND
Proxy for Annual Meeting of Shareholders -- October 23, 2009
PLEASE SEE THE INSTRUCTIONS BELOW IF YOU WISH TO VOTE BY PHONE, MAIL OR VIA THE
INTERNET.
CALL: To vote your proxy by phone, call toll-free 1-866-796-1290 and
provide the representative with the control number found on the
reverse side of this proxy card. Representatives are available
to take your voting instructions Monday through Friday 9:00 a.m.
to 10:00 p.m. Eastern Time.
LOG-ON: To vote via the Internet, go to WWW.PROXYONLINE.COM and enter
the control number found on the reverse side of this proxy card.
MAIL: To vote your proxy by mail, check the appropriate voting box on
the reverse side of this proxy card, sign and date the card and
return it in the enclosed postage-paid envelope. IF CONVENIENT,
PLEASE UTILIZE ONE OF THE TWO VOTING OPTIONS ABOVE SO THAT YOUR
VOTE WILL BE RECEIVED BEFORE OCTOBER 23RD.
NOTE: Please sign here exactly as your name appears in the records of the Fund
and date. If the shares are held jointly, each holder should sign. When signing
as an attorney, executor, administrator, trustee, guardian, officer of a
corporation or other entity or in any other representative capacity, please give
the full title under signature(s).
--------------------------------------------------------------------------------
Shareholder sign here Date
--------------------------------------------------------------------------------
Joint owner sign here Date
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT.
CLAYMORE DIVIDEND & INCOME FUND
CONTROL NUMBER
123456789123
WE NEED YOUR PROXY VOTE AS SOON AS POSSIBLE.
YOUR PROMPT ATTENTION WILL HELP TO
AVOID THE EXPENSE OF FURTHER SOLICITATION.
Remember to SIGN AND DATE THE REVERSE SIDE before mailing in your vote. This
proxy card is valid only when signed and dated.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
INDICATED AS TO THE PROPOSAL, THE PROXIES SHALL VOTE FOR SUCH PROPOSAL. THE
PROXIES MAY VOTE AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
--------------------------------------------------------------------------------
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
TO VOTE, MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: |X|
FOR AGAINST ABSTAIN
1. To approve a new investment advisory agreement between the Fund and
Claymore Advisors, LLC. | | | | | |
2. To approve an investment sub-advisory agreement among the Fund, Claymore
Advisors, LLC and Manning & Napier Advisors, Inc. | | | | | |
3. To elect two Trustees as Class II Trustees to serve until the Fund's 2012
annual meeting of shareholders or until their respective successors shall have
been elected and qualified. FOR WITHHOLD
Mr. Roman Friedrich III | | | |
Mr. Ronald A. Nyberg | | | |
THANK YOU FOR VOTING
CLAYMORE LOGO
PROXY CARD FOR
CLAYMORE DIVIDEND & INCOME FUND
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - OCTOBER 23, 2009
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
PREFERRED
The annual meeting of shareholders of Claymore Dividend & Income Fund (the
"Fund") will be held at the offices of the Fund, 2455 Corporate West Drive,
Lisle, Illinois, 60532, on Friday, October 23, 2009 at 11:30 A.M., Central Time
(the "Annual Meeting"). The undersigned hereby appoints each of Mark E.
Mathiasen and Kevin M. Robinson, or their respective designees, with full power
of substitution and revocation, as proxies to represent and to vote all shares
of the undersigned at the Annual Meeting and all adjournments thereof, with all
powers the undersigned would possess if personally present, upon the matters
specified on the reverse side.
--------------------- QUESTIONS ABOUT THIS PROXY? Should you have any
| | questions about the proxy materials or regarding how
| | to vote your shares, please contact our proxy
| | information line TOLL-FREE AT 1-866-796-1290.
| | Representatives are available Monday through
--------------------- Friday 9:00 a.m. to 10:00 p.m. Eastern Time.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE CLAYMORE
DIVIDEND & INCOME FUND SHAREHOLDER MEETING TO BE HELD ON OCTOBER 23, 2009
THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE AT:
WWW.PROXYONLINE.COM/DOCS/CLAYMOREDCS2009.PDF
--------------------------------------------------------------------------------
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
CLAYMORE DIVIDEND & INCOME FUND
Proxy for Annual Meeting of Shareholders -- October 23, 2009
PLEASE SEE THE INSTRUCTIONS BELOW IF YOU WISH TO VOTE BY PHONE, MAIL OR VIA THE
INTERNET.
CALL: To vote your proxy by phone, call toll-free 1-866-796-1290 and
provide the representative with the control number found on the
reverse side of this proxy card. Representatives are available
to take your voting instructions Monday through Friday 9:00 a.m.
to 10:00 p.m. Eastern Time.
LOG-ON: To vote via the Internet, go to WWW.PROXYONLINE.COM and enter
the control number found on the reverse side of this proxy card.
MAIL: To vote your proxy by mail, check the appropriate voting box on
the reverse side of this proxy card, sign and date the card and
return it in the enclosed postage-paid envelope. IF CONVENIENT,
PLEASE UTILIZE ONE OF THE TWO VOTING OPTIONS ABOVE SO THAT YOUR
VOTE WILL BE RECEIVED BEFORE OCTOBER 23RD.
NOTE: Please sign here exactly as your name appears in the records of the Fund
and date. If the shares are held jointly, each holder should sign. When signing
as an attorney, executor, administrator, trustee, guardian, officer of a
corporation or other entity or in any other representative capacity, please give
the full title under signature(s).
--------------------------------------------------------------------------------
Shareholder sign here Date
--------------------------------------------------------------------------------
Joint owner sign here Date
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT.
CLAYMORE DIVIDEND & INCOME FUND
CONTROL NUMBER
123456789123
WE NEED YOUR PROXY VOTE AS SOON AS POSSIBLE. YOUR
PROMPT ATTENTION WILL HELP TO AVOID THE EXPENSE OF
FURTHER SOLICITATION.
Remember to SIGN AND DATE THE REVERSE SIDE before mailing in your vote. This
proxy card is valid only when signed and dated.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
INDICATED AS TO THE PROPOSAL, THE PROXIES SHALL VOTE FOR SUCH PROPOSAL. THE
PROXIES MAY VOTE AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
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PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
TO VOTE, MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: |X|
FOR AGAINST ABSTAIN
1. To approve a new investment advisory agreement between the Fund and
Claymore Advisors, LLC. | | | | | |
2. To approve an investment sub-advisory agreement among the Fund, Claymore
Advisors, LLC and Manning & Napier Advisors, Inc. | | | | | |
3. To elect two Trustees as Class II Trustees to serve until the Fund's 2012
annual meeting of shareholders or until their respective successors shall have
been elected and qualified. FOR WITHHOLD
Mr. Roman Friedrich III | | | |
Mr. Ronald A. Nyberg | | | |
THANK YOU FOR VOTING