UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21455
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Dreman/Claymore Dividend & Income Fund
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(Exact name of registrant as specified in charter)
2455 Corporate West Drive
Lisle, IL 60532
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(Address of principal executive offices) (Zip code)
J. Thomas Futrell
2455 Corporate West Drive
Lisle, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 505-3700
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Date of fiscal year end: October 31
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Date of reporting period: October 31, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
ANNUAL
REPORT
October 31, 2008
Dreman/Claymore | DCS
Dividend & Income Fund
Photo of: Lake and trees
DREMAN VALUE MANAGEMENT, LLC
Logo: CLAYMORE(SM)
www.dremanclaymore.com
... YOUR PATH TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
DREMAN/CLAYMORE DIVIDEND & INCOME FUND
Photo of: Lake and Trees
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.DREMANCLAYMORE.COM, you will find:
o Daily, weekly and monthly data on share prices, net asset values,
distributions and more
o Monthly portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and advisor contact information
Dreman Value Management and Claymore Securities are constantly updating and
expanding shareholder information services on the Fund's website, in an ongoing
effort to provide you with the most current information about how your Fund's
assets are managed, and the results of our efforts. It is just one more small
way we are working to keep you better informed about your investment in the
Fund.
2 Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Photo of: David N. Dreman
Dear SHAREHOLDER |
This report covers the performance of the Dreman/Claymore Dividend & Income Fund
(the "Fund") for the fiscal year ended October 31, 2008. This has been an
extraordinarily difficult period for all investors, and we are disappointed to
report that the Fund performed very poorly.
The Fund's primary investment objective is to provide a high level of current
income, with a secondary objective of capital appreciation. The basis for our
security selection process comes from Dreman Value Management's contrarian value
philosophy of investing, which focuses on what we believe to be quality
companies trading at attractive valuations relative to the market. Since many of
the income-oriented securities in the portfolio are sensitive to changes in
interest rates, we frequently employ hedging techniques to help balance the
impact on return of rising or falling interest rates.
All Fund returns cited-- whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the 12-month period
ending October 31, 2008, the Fund returned -83.31% and -81.30% based on market
price and NAV, respectively. As of October 31, 2008, the Fund's market price of
$2.98 represented a discount of 24.17% to NAV of $3.93. A year earlier, at
October 31, 2007, the Fund's closing market price was $19.62 and NAV was $22.79,
representing a discount of 13.9%.
During the 12-month period ended October 31, 2008, the Fund paid four quarterly
dividends of $0.325 per share. As the value of the Fund's total assets declined,
the reduced asset base no longer provided income and dividends sufficient to
sustain the Fund's historical dividend rate. On November 3, 2008, the Fund
declared a quarterly dividend of $0.045 per share reflecting a reduction of
$0.28 per share from the Fund's previous quarterly dividend. This represented an
annualized distribution rate of 6.04% based upon the closing market price of
$2.98 on October 31, 2008.
The drop in the value of the Fund's assets made it necessary to reduce the
Fund's leverage. On September 29 and October 20, 2008, the Fund announced the
redemption of an aggregate $300 million, or approximately 71%, of its Auction
Market Preferred Shares ("AMPS"). As of the date of this letter, these
redemptions are nearly complete. Additionally, on November 26, 2008, the Fund
announced an additional redemption of $10 million of its AMPS, with these
redemptions expected to be completed by December 31, 2008.
On November 26, 2008, after the close of the Fund's fiscal year, Fitch Ratings,
one of the two rating agencies that provide credit ratings to the Fund's AMPS,
downgraded the rating assigned to the AMPS issued by the Fund to 'AA' from
'AAA'. The 'AA' rating has also been placed on Rating Watch Negative.
Annual Report | October 31, 2008 | 3
DCS | Dreman/Claymore Dividend & Income Fund | DEAR SHAREHOLDER continued
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 27 of the Fund's annual report. When shares
trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the quarterly dividend distribution in common shares of the Fund
purchased in the market at a price less than NAV. Conversely, when the market
price of the Fund's common shares is at a premium above NAV, the DRIP reinvests
participants' dividends in newly-issued common shares at NAV, subject to an IRS
limitation that the purchase price cannot be more than 5% below the market price
per share. The DRIP provides a cost-effective means to accumulate additional
shares and enjoy the potential benefits of compounding returns over time.
We provide a detailed discussion of the Fund's performance over the last six
months in the Questions & Answers section of the report. You'll find information
on the overall market environment, a discussion of which sectors and securities
contributed and detracted from the Fund's performance and a summary of our
contrarian value investment philosophy in that section, which begins on page 5
of this report.
We thank you for your continued investment in the Fund, and we sincerely hope to
report improved performance in the future. For the most up-to-date information
on your investment, please visit the Fund's website at www.dremanclaymore.com
Sincerely,
/s/ David N. Dreman
David N. Dreman
Founder, Chairman and Chief Investment Officer of Dreman Value Management, LLC
and Trustee of the Dreman/Claymore Dividend & Income Fund
December 2, 2008
4 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
QUESTIONS & ANSWERS |
David N. Dreman is primarily responsible for the day-to-day management of the
investment portfolio of the Dreman/Claymore Dividend & Income Fund (the "Fund").
Mr. Dreman is the Founder, Chairman and Chief Investment Officer of Dreman Value
Management, LLC. In the following interview he shares his thoughts on the equity
market and the performance of the Fund during its fiscal year ended October 31,
2008.
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WILL YOU REMIND US OF THIS FUND'S OBJECTIVES AND THE WAY IT IS MANAGED?
The Fund's investment objective is to provide a high level of current income,
with a secondary objective of capital appreciation.
Under normal market conditions, the Fund will invest at least 80% of its total
assets in dividend-paying or other income-producing securities, and at least 65%
of the Fund's total assets will consist of investments in dividend-paying common
and preferred stocks. The Fund's investments are focused on securities that we
believe are undervalued or inexpensive relative to other investments. Due to its
status as a non-diversified Fund, the Fund is not limited in the proportion of
its assets that may be invested in the securities of a single issuer.
Accordingly, an investment in the Fund may present greater risk than an
investment in a more diversified fund because changes in the financial condition
or market valuation of a single issuer may cause pronounced fluctuations in the
Net Asset Value ("NAV") of the Fund's shares.
The Fund may invest up to 20% of its total assets, with the percentage measured
at the time of the investment, in U.S. dollar-denominated securities of foreign
issuers. There is no minimum credit rating for preferred stocks and debt
securities in which the Fund may invest, although the Fund will not invest more
than 10% of its total assets in non-convertible fixed-income securities of below
investment-grade quality.
The basis for the process of selecting equity securities comes from Dreman Value
Management's contrarian value philosophy of investing, which is based on our
belief that consensus opinion, especially when it comes to investing, is often
wrong. We try to take advantage of market inefficiencies and investor
over-reaction to perceived negatives affecting solid companies that that we
believe are financially sound. We look for stocks that we feel are trading below
their intrinsic values, with prices that are low relative to their earnings (P/E
- the most common measure of how expensive a stock is), book value (P/B) and
cash flow (P/CF). We base our stock selection on fundamental "bottom-up"
analysis - a process of evaluation that accounts for the individual merits of
each stock. We consider our contrarian approach a defensive style of investing,
as many of the securities in which we invest are, in our opinion, undervalued in
the market. We believe that this value-oriented style of investing has good
potential to provide investors with attractive risk-adjusted returns over time
from a combination of income and capital appreciation. While our disciplined
process has generated favorable results over time, there is no guarantee that
the perceived intrinsic value we see in individual securities will be realized.
We also seek to hold positions in securities that have the potential to provide
higher levels of income; these may include stocks of utilities and income
trusts, preferred stocks and corporate bonds. In selecting these securities, we
use metrics different from our contrarian stock selection process. In selecting
securities for income, we analyze a company's free cash flow, the extent to
which cash flow covers interest obligations, the total enterprise value relative
to cash flow, and the volatility of operating margins. Since many of the
income-oriented securities in the portfolio are sensitive to changes in interest
rates, we frequently employ hedging techniques to help balance the impact on
return of rising or falling interest rates.
In evaluating the Fund's performance, and especially when comparing performance
to equity indices such as the S&P 500 and the Russell 1000(R) Value Index, it is
important to remember that this is not a typical equity fund. About a third of
the Fund's assets are in corporate bonds, convertible preferred stocks, and
preferred stocks, which are held primarily because of the high level of income
they tend to provide, while the convertible feature of the convertible preferred
stocks also adds the potential for appreciation over time. The returns of
corporate bonds and preferred stocks tend to be less volatile than those of
equities and therefore can be expected to provide lower rates of total return
than equities over the long run. (Volatility is a measure of the extent to which
the price of a financial asset fluctuates.)
Annual Report | October 31, 2008 | 5
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
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PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT OVER THE LAST YEAR.
This has been an extraordinarily challenging time for investors. Six months ago,
in the Fund's mid-year report, we said that we believed that we had experienced
the worst financial crisis since the Great Depression. Now we believe that
conditions are even worse than in 1933. Credit markets have become so intolerant
of risk that they are essentially frozen. Banks have been unable to raise
capital for several months, and they are hoarding the capital they have; they
are unwilling to lend, even to creditworthy borrowers. With businesses unable to
get financing, capital goods manufacturers, especially the U.S. auto companies,
are in major trouble. Even credit card paper, which has traditionally been rated
AAA, has seen no issuances in recent months because the institutional investors
who would normally buy this paper are unable to absorb additional investments.
The underlying cause of the crisis was the end of a housing boom fueled by
excessively easy credit. As the prices of houses have fallen below mortgage
balances, losses on mortgage-based securities have mounted, eroding the capital
of financial institutions and initiating a vicious cycle of de-leveraging. The
process began in late 2007 as a correction in the sub-prime mortgage market, but
it has intensified markedly, with profound implications for the entire U.S.
economy and related effects on global markets and economies.
In an attempt to alleviate the financial crisis, the U.S. government has taken
unprecedented actions, including instituting temporary insurance on money market
funds, expanding access by financial institutions to the Federal Reserve Board
(the "Fed"), and direct investments in some financial institutions. Some large
financial firms have been allowed to fail, while others were rescued, and
takeovers of others that were failing have been arranged. In early September,
just days after stating that Fannie Mae and Freddie Mac were financially sound
and that they had the ability to survive the financial crisis, with treasury
help if necessary, the U.S. Treasury and the Federal Housing Finance Agency (the
"FHFA") essentially confiscated these government-sponsored entities ("GSEs").
The existing management and board of directors were removed from each entity,
and they were placed into conservatorship, with the government taking a stake of
approximately 80% in each for an investment of $1 billion of capital.
In this very tough environment, markets have been extremely volatile and
essentially all asset classes had negative returns. The Standard & Poor's 500
Index, which is generally regarded as a good indicator of the broad stock
market, returned -36.10% for the 12-month period ended October 31, 2008. World
equity markets performed even worse: the MSCI World Index, which measures
performance of world equity markets, returned -41.51%.
Convertible preferred securities, which in the past have been less volatile than
straight equities, performed almost as badly: return of the Merrill Lynch All
Convertibles Index was -35.42%. A major reason for this was selling by hedge
funds, which had invested in convertible preferreds while shorting the
underlying common stocks. Unable to get the financing they had used in the past,
hedge funds had to sell convertibles into a market with little demand and prices
dropped precipitously.
In the bond market, we have seen unprecedented spreads between yields of
investment grade and high-yield corporate bonds and U.S. Treasury securities,
which are considered not to carry credit risk. High-yield securities, also
sometimes referred to as "junk bonds," generally pay a premium above the yields
of U.S. government securities or debt securities of investment grade issuers
because they are subject to greater risks than these securities. In the
high-yield market, the spread over treasuries has been in the range of 1600
basis points, compared with a previous historic wide of 1200 basis points. (100
basis points is equal to one percentage point.) For investment-grade bonds, the
spread is approximately 500 basis points, compared with a past record wide
spread of approximately 320 basis points. These spreads mean that current market
prices of bonds imply huge defaults over the next three to five years.
In this disastrous market, the only bonds with positive returns were those with
little or no credit risk: the Lehman 10-20 Year U.S. Treasury Index returned
4.13%. The Lehman Brothers
6 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
Aggregate Bond Index, which measures return of the U.S. bond market as a whole,
returned 0.30%, but the return of the Merrill Lynch High Yield Master II Index,
which measures performance of the high-yield bond market, was -25.40%. All Index
returns are for the 12-month period ended October 31, 2008.
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HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
All Fund returns cited - whether based on NAV or market price - assume the
reinvestment of all distributions. For the 12-month period ending October 31,
2008, the Fund returned -83.31% and -81.30% based on market price and NAV,
respectively. As of October 31, 2008, the Fund's market price of $2.98
represented a discount of 24.17% to NAV of $3.93. A year earlier, at October 31,
2007, the Fund's closing market price was $19.62 and NAV was $22.79.
The market value of the Fund's shares fluctuates from time to time, and it may
be higher or lower than the Fund's NAV. The current discount to NAV may provide
an opportunity for suitable investors to purchase shares of the Fund at prices
below the market value of the securities in the underlying portfolio. We believe
that, over the long term, the progress of the NAV will be reflected in the
market price return to shareholders.
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WHICH TRENDS OR INVESTMENT DECISIONS HAD THE GREATEST IMPACT ON THE FUND'S
PERFORMANCE OVER THE LAST 12 MONTHS?
The Fund has traditionally had three major return engines -- high
dividend-paying equities owned mainly for their dividends, equities selected for
overall return potential, and high-yield bonds. We have also included in the
portfolio some convertible preferred stocks, which offer yields comparable to
those of high-yield bonds, along with the potential for capital appreciation if
the underlying common stock performs well. Over the past year, and particularly
over the last three months, all of these asset classes have performed very
poorly, as discussed in the market section above.
Like most closed-end funds, the Fund utilizes leverage as part of its investment
strategy. The purpose of leverage is to finance the purchase of additional
securities that provide income and potentially greater appreciation potential to
common shareholders than could be achieved from a portfolio that is not
leveraged. Leverage tends to work well in most markets; it generally contributes
to return whenever the total return of the portfolio's investments is less than
the cost of leverage. However, when leveraged investments fall in price,
leverage can magnify the negative return, and this was the case during the last
year.
The equity portion of the portfolio, which represented 62.8% of long-term
investments as of October 31, 2008, was down more than the overall market during
the Fund's fiscal year ended October 31, 2008 in large part because the
portfolio has a significant concentration in financials, which performed poorly.
We have considered the financial sector appropriate for the Fund because of the
high dividends traditionally paid by many of the stocks in the sector. However,
this positioning detracted from performance during this period as the entire
financial sector has experienced a crisis that began with problems with
sub-prime mortgages. Furthermore, it is important to understand that some of the
Fund's holdings that are classified as equity positions are energy trusts that
are selected mainly for their high dividends, rather than for total return; in
the recent down market, these securities tend to trade more like debt securities
than like common stocks.
Among the Fund's holdings, the greatest detractors by far were Fannie Mae and
Freddie Mac. The Fund had a significant position in Fannie Mae common stock (not
held in portfolio at period end) and positions in several preferred issues of
both Fannie Mae (1.7% of long-term investments) and Freddie Mac (0.7% of
long-term investments). The percentages of holdings as of October 31, 2008,
understate the importance of these issues to the performance of the portfolio
because these securities have lost nearly all their value. As of the end of
August 2008, Fannie Mae common stock represented approximately 1% of the value
of the portfolio, and its preferred shares represented approximately 9% of the
portfolio. As discussed above, in early September 2008, the U.S. government took
over these GSEs, causing the value of the common stocks to decline almost 90% in
a single day; the prices of the convertible preferred issues of these entities
experienced similar precipitous drops.
Annual Report | October 31, 2008 | 7
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
Another important negative was a position in the common stock and several
preferred issues of Washington Mutual, Inc. (less than 0.1% of long-term
investments). In late September regulators seized Washington Mutual, the
country's largest savings and loan institution, and arranged to sell most of its
operations to JPMorgan Chase.
High-yield bonds represented 9.2% of long-term investments as of October 31,
2008, and the value of the Fund's high-yield bond holdings was down
approximately 50% over the past 12 months. High- yield bonds provided income,
but total returns on all issues in the portfolio were negative as prices dropped
in a very thin market with very wide spreads and scarcely any new issues.
We normally comment on positions that made positive contributions to
performance, but over this period, it is very hard to find any bright points.
Several of the Fund's energy holdings moved up during the first half of the
fiscal year, but they retreated along with the entire energy sector in recent
months. Positions that were down less than the market include Canadian income
trusts, such as Fairborne Energy Trust (not held in portfolio at period end) and
BP Prudhoe Bay Royalty Trust (1.0% of long-term investments). Income trusts are
publicly traded entities whose interests in oil or gas fields are traded on
securities exchanges like shares of corporate stock. Due to their structure, the
income generated by these trusts is often treated as qualified dividend income.
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HOW DOES THE FUND IMPLEMENT ITS LEVERAGE STRATEGY?
The Fund's leverage has been achieved through the issuance of Auction Market
Preferred Shares ("AMPS"). AMPS holders receive a dividend that is reset
typically every seven or 28 days, depending on the series. On September 29 and
October 20, 2008, the Fund announced the redemption of an aggregate $300
million, or approximately 71%, of its AMPS. As of the date of this letter, these
redemptions are nearly complete. Additionally, on November 26, 2008, the Fund
announced an additional redemption of $10 million of its AMPS, with these
redemptions expected to be completed by December 31, 2008. This deleveraging
step was necessary because of the drop in value of the Fund's assets.
The broad auction-rate preferred securities market has experienced considerable
disruption in the past several months, resulting in failed auctions on nearly
all auction-rate preferred shares, including AMPS such as those issued by the
Fund. Provisions in the offering documents of the Fund's AMPS provide a
mechanism to set a maximum rate in the event of a failed auction; thus,
investors in the remaining AMPS will continue to be entitled to receive payment
for holding these AMPS. This maximum rate is determined based upon a multiple of
or a spread to LIBOR--whichever is greater.
The Fund has five series of AMPS, three that auction each week and two that
auction every 28 days. The auctions for the Fund's AMPS have failed since
mid-February 2008, as have auctions of most AMPS. The established maximum rates
during this period were based upon a spread of 125 basis points over the
applicable LIBOR rates, with the maximum rates ranging from 3.27% to 6.15%. From
mid-October and into November, LIBOR declined dramatically. As a result, recent
maximum rates have been below 2.50%.
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YOU HAVE PREVIOUSLY CHARACTERIZED YOUR CONTRARIAN INVESTMENT PHILOSOPHY AS A
DEFENSIVE STRATEGY. WHY DID IT NOT PROVE TO BE DEFENSIVE OVER THIS PERIOD?
It is important to understand that the Fund's contrarian investment philosophy
applies only to the equity portion of the Fund. As discussed above, this Fund
has a portfolio consisting of several asset classes, with common stocks selected
mainly for total return, and preferred stock and high- yield bonds selected
mainly for their ability to provide income. Income-oriented securities are
selected mainly on the basis of their ability to generate the cash necessary to
meet their interest and other obligations, and they may be of lower credit
quality than the portfolio's straight equity holdings.
With our contrarian philosophy, a major way we seek to add value in the equity
portion of the portfolio is to take advantage of the over-reactions of investors
to bad news, selectively buying, in our opinion, attractive equities, preferreds
and bonds on weakness. This well-established strategy of buying stocks that
carry low P/Es because they are out of favor has a long history of success in a
variety of market conditions. But market conditions in the last few
8 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
months are truly unprecedented, and it is hard to imagine any investment
approach, other than holding only cash equivalents or Treasury securities, that
would have been defensive over this period.
Certainly some of our specific choices, particularly the investments in
securities of Fannie Mae, were very unfortunate. We have followed Fannie Mae and
Freddie Mac for a long time, meeting with management and continuously evaluating
their business models. Our conclusion from independent analysis was that that
these companies had the financial power to continue on their own, and this
belief was supported by statements made by the Secretary of the Treasury just
days before they were seized.
A further issue is the Fund's leverage. The mathematics of leverage is that it
generally enhances performance when holdings increase in price, but it also
magnifies a drop in the value of holdings, and that is what happened during this
period.
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PLEASE TELL US ABOUT THE FUND'S DIVIDEND POLICY AND DISTRIBUTIONS DURING THE
PERIOD.
During the 12-month period ended October 31, 2008, the Fund paid four quarterly
dividends of $0.325 each.
As the value of the Fund's total assets declined, the reduced asset base no
longer provided income and dividends sufficient to sustain the Fund's historical
dividend rate. On November 2, 2008, the Fund declared a quarterly dividend of
$0.045 per share, reflecting a reduction of $0.28 per share from the Fund's most
recent quarterly dividend. This lower distribution amount represents an
annualized distribution rate of 6.04% based upon the closing market price of
$2.98 on October 31, 2008.
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WHAT IS YOUR OUTLOOK FOR THE MARKETS IN THE COMING MONTHS, AND HOW HAVE YOU
POSITIONED THE FUND IN LIGHT OF THIS OUTLOOK?
We remain very concerned about the financial markets and the economy, which are
really in uncharted waters; many of the structures to which we have been
accustomed have ceased to exist. If corporations are unable to secure the
financing they need to run their businesses, we must question all the measures
we have traditionally used to analyze the value of debt and equity securities.
We have recently sold a number of equity and fixed-income positions in
connection with maintaining certain asset coverage ratios of the Fund's AMPS. We
have reduced our energy and financial holdings and have also sold some
tobacco-related holdings. To the extent the Fund has additional cash to invest
subject to asset coverage requirements and other restrictions, we will continue
to seek opportunities to purchase select companies trading at significant
discounts to what we believe is their underlying value.
While forecasting the future is hazardous even at the best of times, we believe
the Fund is currently holding many securities that are undervalued as a result
of the market downturn and current panic. We will attempt to address the panic
opportunistically as we have in the past by realigning the portfolio to take
advantage of significant opportunities.
We continue to have confidence in the validity of our contrarian philosophy over
the long term. When the market begins its recovery, we believe the combination
of stock selection and leverage working in our favor may provide the potential
to grow the FundNAV and share price.
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DCS RISKS AND OTHER CONSIDERATIONS
The views expressed in this report reflect those of the Portfolio Managers and
Claymore only through the report period as stated on the cover. These views are
subject to change at any time, based on market and other conditions and should
not be construed as a recommendation of any kind. The material may also contain
forward-looking statements that involve risk and uncertainty, and there is no
guarantee they will come to pass. There can be no assurance that the Fund will
achieve its investment objectives. The value of the Fund will fluctuate with the
value of the underlying securities. Historically, closed-end funds often trade
at a discount to their net asset value. Past performance does not guarantee
future results.
Not a Complete Investment Program. The Fund is intended for investors seeking a
high level of current income and capital appreciation over the long term. The
Fund is not meant to provide a vehicle for those who wish to play short-term
swings in the stock market. An investment in the Common Shares of the Fund
should not be considered a complete investment program. Each Common Shareholder
should take into account the Fund's investment objectives as well as the Common
Shareholder's other investments when considering an investment in the Fund.
EQUITY RISK. Substantially all of the Fund's assets will be invested in common
stocks and preferred equity securities, and therefore a principal risk of
investing in the Fund is equity risk. Equity risk is the risk that securities
held by the Fund will fall due to general market or economic conditions,
perceptions regarding the industries in which the issuers of securities held by
the Fund participate, and the particular circumstances and performance of
particular companies whose securities the Fund holds.
Annual Report | October 31, 2008 | 9
DCS | Dreman/Claymore Dividend & Income Fund | QUESTIONS & ANSWERS continued
PREFERRED SECURITIES RISK. There are special risks associated with investing in
preferred securities, including: Deferral. Preferred securities may include
provisions that permit the issuer, at its discretion, to defer distributions for
a stated period without any adverse consequences to the issuer. Non-Cumulative
Dividends. Some preferred stocks are non-cumulative, meaning that the dividends
do not accumulate and need not ever be paid. Subordination. Preferred securities
are subordinated to bonds and other debt instruments in a company's capital
structure in terms of priority to corporate income and liquidation payments, and
therefore will be subject to greater credit risk than more senior debt
instruments. Liquidity. Preferred securities may be substantially less liquid
than many other securities, such as common stocks or U.S. government securities.
Limited Voting Rights. Generally, preferred security holders (such as the Fund)
have no voting rights with respect to the issuing company unless preferred
dividends have been in arrears for a specified number of periods, at which time
the preferred security holders may have the right to elect a number of directors
to the issuer's board. Special Redemption Rights. In certain varying
circumstances, an issuer of preferred securities may redeem the securities prior
to a specified date.
INCOME RISK. The income Common Shareholders receive from the Fund is based
primarily on the dividends and interest it earns from its investments, which can
vary widely over the short- and long term. If prevailing market interest rates
drop, distribution rates of the Fund's portfolio holdings of preferred
securities and debt securities may decline which then may adversely affect the
Fund's distributions on Common Shares as well. The Fund's income also would
likely be affected adversely when prevailing short-term interest rates increase
and the Fund is utilizing Financial Leverage.
"VALUE INVESTING" RISK. The Fund focuses its investments on dividend paying or
other income producing securities that the Investment Manager believes are
undervalued or inexpensive relative to other investments. These types of
securities may present risks in addition to the general risks associated with
investing in securities. These securities generally are selected on the basis of
an issuer's fundamentals relative to current market price. Such securities are
subject to the risk of misestimation of certain fundamental factors. In
addition, during certain time periods market dynamics may strongly favor
"growth" securities of issuers that do not display strong fundamentals relative
to market price based upon positive price momentum and other factors.
Disciplined adherence to a '" investment mandate during such periods can result
in significant underperformance relative to overall market indices and other
managed investment vehicles that pursue growth style investments and/or flexible
style mandates.
INTEREST RATE RISK. Interest rate risk is the risk that fixed income securities
such as preferred and debt securities will decline in value because of changes
in market interest rates. When market interest rates rise, the market value of
such securities generally will fall. The Fund's investment in such securities
means that the net asset value and market price of the Common Shares will tend
to decline if market interest rates rise. During periods of declining interest
rates, the issuer of a security may exercise its option to prepay principal
earlier than scheduled, forcing the Fund to reinvest in lower yielding
securities. In addition, the Fund is subject to call or prepayment risk and
extension risk.
INFLATION RISK. Inflation risk is the risk that the value of assets or income
from investments will be worth less in the future as inflation decreases the
value of money. As inflation increases, the real value of the Common Shares and
distributions thereon can decline. In addition, during any periods of rising
inflation, the interest or dividend rates payable by the Fund on any Financial
Leverage the Fund may have issued would likely increase, which would tend to
further reduce returns to holders of Common Shares.
LOWER GRADE SECURITIES. There is no minimum credit rating for preferred stocks
and debt securities in which the Fund may invest, although the Fund will not
invest more than 10% of its total assets in non-convertible fixed-income
securities of below investment grade quality, which are commonly referred to as
"junk bonds." Securities of below investment grade quality are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal when due and therefore involve a greater risk of default and are
commonly referred to as "junk bonds".
FOREIGN SECURITIES. The Fund may invest up to 15% of its total assets in foreign
securities denominated in U.S. dollars. Investing in securities of foreign
companies (or foreign governments) may involve certain risks and opportunities
not typically associated with investing in domestic companies.
DERIVATIVES RISK. The Fund may participate in certain derivative transactions,
such as futures contracts, options or swap transactions. Such transactions
entail certain execution, market, liquidity, hedging and tax risks.
Participation in these markets involves investment risks and transaction costs
to which the Fund would not be subject absent the use of these strategies. If
the Investment Manager's prediction of movements in the direction of the
securities and interest rate markets is inaccurate, the consequences to the Fund
may leave the Fund in a worse position than if it had not used such strategies.
ILLIQUID SECURITIES RISK. The Fund may invest in securities for which there is
no readily available trading market or that are otherwise illiquid. It may be
difficult to sell such securities at a price representing the fair value and,
where registration of such securities is required, a considerable period may
elapse between a decision to sell the securities and the time when the Fund
would be permitted to sell.
FUND DISTRIBUTION RISK. Pursuant to its distribution policy, the Fund intends to
make regular quarterly distributions on its Common Shares. In order to make such
distributions, the Fund may have to sell a portion of its investment portfolio
at a time when independent investment judgment may not dictate such action.
RISKS OF INVESTING IN AMPS. There also risks associated with investing in
Auction Market Preferred Shares or AMPS. The AMPS are redeemable, in whole or in
part, at the option of the Fund on any dividend payment date for the AMPS, and
will be subject to mandatory redemption in certain circumstances. The AMPS will
not be listed on an exchange. You may only buy or sell AMPS through an order
placed at an auction with or through a broker-dealer that has entered into an
agreement with the auction agent and the Fund or in a secondary market
maintained by certain broker-dealers. These broker-dealers are not required to
maintain this market, and it may not provide you with liquidity. Visit Preferred
Share Daily Rates for more Fund information and additional risk on investing in
AMPS.
In addition to the risks described above, the Fund is also subject to: Market
Discount Risk, Industry Concentration Risk, Other Investment Companies Risk,
Non-Diversified Status Risk, Financial Leverage Risk, Management Risk,
Dependence on Key Personnel Risk, Current Developments Risk, Anti-Takeover
Provisions, and Market Disruption Risk. Please see www.claymore.com /dcs for a
more detailed discussion about Fund risks and considerations.
10 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Fund SUMMARY | AS OF OCTOBER 31, 2008 (unaudited)
FUND STATISTICS
-------------------------------------------------------
Share Price $2.98
Common Share Net Asset Value $3.93
Premium/(Discount) to NAV -24.17%
Net Assets Applicable to Common Shares ($000) $178,223
-------------------------------------------------------
TOTAL RETURNS
-------------------------------------------------------
(INCEPTION 1/27/04) MARKET NAV
-------------------------------------------------------
Six Months -79.52% -76.95%
One Year -83.31% -81.30%
Three Year - average annual -41.09% -38.59%
Since Inception - average annual -28.20% -23.70%
-------------------------------------------------------
% OF LONG-TERM
SECTOR BREAKDOWN* INVESTMENTS
-------------------------------------------------------
Energy 51.1%
Financials 35.7%
Consumer Staples 4.5%
Industrials 2.6%
Investment Companies 1.7%
Consumer Discretionary 1.7%
Utilities 1.2%
Health Care 0.5%
Telecommunications 0.3%
Other 0.7%
-------------------------------------------------------
% OF LONG-TERM
INDUSTRY BREAKDOWN INVESTMENTS
-------------------------------------------------------
Oil & Gas 51.1%
Diversified Financial Services 14.5%
Insurance 10.9%
Commercial Banks 5.9%
Investment Companies 2.5%
Tobacco 2.4%
Food 2.1%
Thrifts & Mortgage Finance 1.2%
Electric Utilities 1.2%
Health Care 0.9%
Auto Manufacturers 0.8%
Diversified Telecommunication 0.3%
Real Estate & Real Estate Investment Trusts 0.1%
Other 6.1%
-------------------------------------------------------
Past performance does not guarantee future results.All portfolio data is subject
to change daily. For more current information, please visit
www.claymore.com/dcs. The above summaries are provided for informational
purposes only and should not be viewed as recommendations.
* Securities are classified by sectors that represent broad groupings of
related industries
Line Chart:
SHARE PRICE & NAV PERFORMANCE
10/31/07 Share Price NAV
19.62 22.79
19.15 22.04
18.94 21.75
18.67 21.51
18.84 22.02
18.32 20.78
17.94 20.76
17.56 20.55
17.33 20.12
17.5 20.6
17.6 20.44
17.22 19.62
16.91 19.52
16.24 18.79
15.69 17.86
15.1 17.31
15.27 17.89
14.5 17.03
14.63 17.3
15.1 18.14
15.06 18.29
15.79 19.32
16.14 19.12
16.05 18.71
16.25 19.08
16.51 19.65
16.51 19.52
16.65 19.65
16.18 18.67
15.86 18.46
15.83 18.7
15.74 18.32
15.37 18.12
15.51 18.22
15.36 18.25
15.07 18.35
15.44 18.65
15.93 18.9
16.12 18.97
15.95 18.75
15.82 18.7
15.8 18.72
15.95 18.58
16.08 18.62
15.79 18.14
15.64 18.2
15.52 17.83
15.65 17.99
15.81 18.22
15.81 18.33
16.16 18.52
15.94 18.15
16 18.02
15.8 17.33
15.39 17.02
15.17 16.93
15.66 17.45
15.71 17.8
15.42 17.61
15.94 18.1
16.29 18.4
16.3 18.4
16.48 18.76
16.81 19.17
16.66 18.82
16.5 18.11
16.47 17.81
16.52 18.09
16.22 17.97
16.15 17.86
16.12 17.98
15.85 17.85
15.9 17.69
15.76 17.71
15.4 17.72
15.33 18
15.1 17.72
15.19 17.88
15.52 18.17
15.84 18.28
15.73 18.23
15.72 18.1
15.52 17.48
15.45 17.27
15.35 17.16
15.59 17.32
15.36 16.69
15.15 16.6
14.48 15.94
14.81 16.81
14.6 16.43
14.28 16.59
14.3 16.17
13.65 15.44
14.12 16.45
13.72 16.08
14.19 16.65
14.6 16.96
14.78 17.17
14.78 16.98
14.78 16.78
14.28 16.51
14.37 16.45
14.73 17.09
14.87 17.16
14.94 17.18
14.64 17.06
14.81 17.36
14.79 17.21
14.77 16.99
14.73 16.95
14.43 16.64
14.19 16.62
14.22 16.88
14.48 17.45
14.78 17.64
15.26 17.99
15.31 17.88
15.36 17.51
15 17.33
15.06 17.86
15.41 18.19
15.58 18.13
15.42 17.92
15.35 17.85
15.57 18.04
15.65 18.19
15.59 18.18
15.77 18.64
15.72 18.29
15.88 18.19
15.58 18.09
15.77 18.13
15.43 17.95
15.56 18.05
15.69 18.34
15.77 18.46
15.87 18.3
15.74 18.31
15.53 18.05
15.57 18.16
15.35 17.84
15.58 17.62
15.34 17.71
15.57 17.66
15.62 17.57
15.41 17.55
15.29 17.24
15.04 17.05
15.09 17.58
14.89 17.07
14.74 16.71
14.53 16.59
14.29 16.47
14.33 16.63
14.69 16.7
14.5 16.85
14.28 16.76
14.11 16.63
14.17 16.48
14.05 16.08
13.77 15.95
13.69 15.8
13.59 15.85
13.18 15.23
12.9 15.12
12.7 15
12.68 15.09
12.5 14.73
12.46 14.54
11.85 13.74
12.17 14.12
11.84 13.64
11.48 13.25
10.83 12.53
10.27 12.01
9.59 11.02
9.9 11.58
10.37 12.07
10.37 12.78
10.82 13.1
11.21 13.24
11.42 13.39
11.04 12.57
10.86 12.5
10.49 12.08
10.94 12.54
11.08 13.08
11.09 12.7
11.04 12.74
10.98 12.55
11.09 12.93
11.1 12.89
10.87 12.32
10.79 12.31
10.59 12.37
10.6 12.09
10.09 11.7
10.13 11.79
10.14 11.75
9.83 11.08
9.49 10.88
9.15 10.73
9.23 10.86
9.33 10.9
9.05 10.75
9.35 10.96
9.62 11.29
10.09 11.76
10.08 11.7
10.28 11.53
10.13 11.53
9.94 10.91
9.84 11.14
9.06 9.37
7.72 8.46
6.94 8.47
6.89 8.61
6.94 8.77
6.36 7.67
6.05 7.65
5.02 6.99
5.37 7.76
6.55 8.87
6.5 8.56
6.32 8.21
6.4 8.02
6.57 8.19
6.27 7.89
5.29 6.34
5.21 6.66
5.15 6.8
4.92 6.19
4.81 5.98
4.33 5.16
3.76 4.38
3.23 3.9
2.55 3.13
2.1 2.77
2.6 3.5
2.77 4.01
2.37 3.33
2.54 3.52
2.65 3.61
2.89 4.08
3.03 3.89
2.75 3.32
2.62 3.36
2.52 3.12
2.4 2.78
2.48 3.23
2.63 3.47
2.78 3.66
10/31/08 2.98 3.92
Pie Chart:
PORTFOLIO COMPOSITION (% of Total Investments)
Asset Class
Common Stocks 39.3%
Short-Term Investments 37.3%
Preferred Stocks 14.0%
Corporate Bonds 5.8%
Convertible Preferred Stocks 1.8%
Investment Companies 1.1%
Exchange Traded Funds 0.5%
Limited Partnership 0.1%
Call Options Purchased 0.1%
% OF LONG-TERM
TOP TEN ISSUERS INVESTMENTS
-------------------------------------------------------
Devon Energy Corp. 8.0%
Crescent Point Energy Trust 7.5%
ConocoPhillips 5.3%
Apache Corp. 5.0%
Anadarko Petroleum Corp. 4.9%
Prudential PLC 4.1%
Bonavista Energy Trust 4.0%
Bank of America Corp. 3.8%
Penn West Energy Trust 3.6%
ARC Energy Trust 3.1%
-------------------------------------------------------
Annual Report | October 31, 2008 | 11
DCS | Dreman/Claymore Dividend & Income Fund
Portfolio of INVESTMENTS | OCTOBER 31, 2008
NUMBER
OF SHARES VALUE
---------------------------------------------------------------------
TOTAL INVESTMENTS - 302.8%
COMMON STOCKS - 118.8%
CONSUMER DISCRETIONARY - 0.9%
123,700 Regal Entertainment Group - Class A $ 1,588,308
---------------------------------------------------------------------
CONSUMER STAPLES - 4.6%
152,500 Altria Group, Inc. 2,926,475
304,497 Vector Group Ltd. 5,191,674
---------------------------------------------------------------------
8,118,149
---------------------------------------------------------------------
ENERGY - 95.6%
469,882 Anadarko Petroleum Corp. 16,586,835
207,100 Apache Corp. 17,050,543
698,500 ARC Energy Trust (Canada) 10,593,694
127,500 Baytex Energy Trust (Canada) 2,205,750
776,300 Bonavista Energy Trust (Canada) 13,738,056
40,969 BP Prudhoe Bay Royalty Trust 3,379,533
346,300 ConocoPhillips (f) 18,014,526
1,098,700 Crescent Point Energy Trust (Canada) 25,441,564
337,000 Devon Energy Corp. (d) (f) 27,249,820
100,000 DHT Maritime, Inc. (Marshall Islands) 526,000
342,700 Enerplus Resources Fund (Canada) 9,153,517
546,828 Harvest Energy Trust (Canada) 5,369,851
68,900 NAL Oil & Gas Trust (Canada) 559,637
310,800 Pengrowth Energy Trust - Class A (Canada) 3,484,068
691,000 Penn West Energy Trust (Canada) 12,341,260
93,294 San Juan Basin Royalty Trust 3,456,543
43,200 Vermilion Energy Trust (Canada) 1,071,667
48,900 Williams Coal Seam Gas Trust 403,425
---------------------------------------------------------------------
170,626,289
---------------------------------------------------------------------
FINANCIALS - 13.8%
150,775 Apollo Investment Corp. 1,987,214
540,000 Bank of America Corp. (d) 13,051,800
250,000 Cypress Shapridge Investments, Inc. -
REIT (a) (c) 2,500,000
68,600 Hartford Financial Services Group, Inc. 707,952
279,459 Regions Financial Corp. 3,099,200
75,400 U.S. Bancorp 2,247,674
127,700 Wachovia Corp. 818,557
2,090,015 Washington Mutual, Inc. (d) 129,581
69,800 W.P. Stewart & Co. Ltd. (Bermuda) (e) 53,048
---------------------------------------------------------------------
24,595,026
---------------------------------------------------------------------
INDUSTRIALS - 3.4%
333,900 Contrans Income Fund (Canada) 1,869,560
56,800 Eagle Bulk Shipping, Inc. (Marshall Island) 566,296
145,000 General Electric Co. 2,828,950
104,900 New Flyer Industries, Inc. (Canada) 848,565
---------------------------------------------------------------------
6,113,371
---------------------------------------------------------------------
NUMBER
OF SHARES VALUE
---------------------------------------------------------------------
TELECOMMUNICATIONS - 0.5%
97,000 Alaska Communications Systems Group, Inc. $ 905,980
---------------------------------------------------------------------
TOTAL COMMON STOCKS - 118.8%
(Cost $272,442,456) 211,947,123
---------------------------------------------------------------------
PREFERRED STOCKS - 42.6%
CONSUMER DISCRETIONARY - 0.5%
81,250 Red Lion Hotels Capital Trust, 9.500% (d) 877,500
---------------------------------------------------------------------
CONSUMER STAPLES - 4.1%
140,000 Dairy Farmers of America, 7.875% (a) (d) 7,227,500
---------------------------------------------------------------------
FINANCIALS - 36.6%
35,500 AEGON N.V., 6.875% (Netherlands) 381,625
12,600 Arch Capital Group, Ltd., 7.875%
(Bermuda) (d) 227,556
20,000 Aspen Insurance Holdings Ltd., 7.401%
(Bermuda) (b) (d) 260,000
218,100 Axis Capital Holdings Ltd., Series A,
7.250% (Bermuda) (d) 3,555,030
50,000 Axis Capital Holdings Ltd., Series B,
7.500% (Bermuda) (b) (d) 4,150,000
10,000,000 Barclays Bank PLC, 8.550%
(United Kingdom) (a) (b) (d) 7,727,380
11,000,000 CA Preferred Funding Trust, 7.000% (d) 6,788,969
189,300 Chevy Chase Bank, Series C, 8.000% (d) 3,182,606
60,000 CIT Group, Inc., Series A, 6.350% (d) 516,000
412,000 Endurance Specialty Holdings, Ltd.,
7.750% (Bermuda) (d) 6,484,880
1,060,000 Fannie Mae, 6.750% 1,325,000
1,500,000 Fannie Mae, 8.250% (b) (d) (f) 3,150,000
200,000 Fannie Mae, Series E, 5.100% (d) 606,260
80,000 Fannie Mae, Series O, 7.000% (b) (d) 242,504
280,000 Fannie Mae, Series P, 4.500% (b) (d) 350,000
48,700 Franklin Bank Corp., Series A, 7.500% (d) 19,480
100,000 Freddie Mac, Series O, 5.810% (d) 178,000
25,000 Freddie Mac, Series T, 6.420% (d) 56,250
2,000,000 Lloyds TSB Bank PLC, 6.900%
(United Kingdom) (d) 1,205,266
80,000 LTC Properties, Inc. - REIT, Series F,
8.000% (d) 1,600,000
150,000 Merrill Lynch & Co., Inc. 6.700% (d) 2,398,500
245,000 Odyssey Re Holdings Corp., Series A,
8.125% (d) 4,581,500
152,100 Odyssey Re Holdings Corp., Series B,
7.752% (b) (d) 2,129,400
31,000,000 Prudential PLC, 6.500%
(United Kingdom) (d) 13,974,304
577,400 Scottish Re Group Ltd., 7.250%
(Cayman Islands) (b) (d) 209,307
---------------------------------------------------------------------
65,299,817
---------------------------------------------------------------------
UTILITIES - 1.4%
72,000 Alabama Power Co., 5.300% (d) 1,393,200
50,000 PPL Electric Utilities Corp., 6.250% (d) 1,190,625
---------------------------------------------------------------------
2,583,825
---------------------------------------------------------------------
TOTAL PREFERRED STOCKS - 42.6%
(Cost $223,827,564) 75,988,642
---------------------------------------------------------------------
See notes to financial statements.
12 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
PORTFOLIO OF INVESTMENTS continued
NUMBER
OF SHARES VALUE
---------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 5.4%
FINANCIALS - 5.4%
225,000 CIT Group, Inc. 8.750% (d) $ 4,808,250
505 Fannie Mae, 5.375% (d) 2,651,250
1,500,000 Fannie Mae, Series 08-1, 8.750% 2,070,000
11,000,000 Washington Mutual Preferred Funding LLC,
6.895% (a) (d) (e) 68,750
---------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $142,556,889) 9,598,250
---------------------------------------------------------------------
INVESTMENT COMPANIES - 3.2%
28,400 Cohen & Steers REIT and Preferred
Income Fund 233,164
205,100 Evergreen Income Advantage Fund 1,281,875
187,600 Hyperion Brookfield Total Return Fund, Inc 947,380
179,600 Nuveen Multi-Strategy Income and Growth
Fund 2 898,000
48,400 Nuveen Quality Preferred Income Fund II 275,880
226,700 Pioneer High Income Trust 2,051,635
---------------------------------------------------------------------
TOTAL INVESTMENT COMPANIES
(Cost $12,976,333) 5,687,934
---------------------------------------------------------------------
OPTIONAL
PRINCIPAL AMOUNT CALL PROVISIONS
---------------------------------------------------------------------
CORPORATE BONDS - 17.6%
CONSUMER DISCRETIONARY - 1.8%
$3,000,000 Ford Motor Co.,CCC, 7.450%,
7/16/31 (d) N/A 960,000
3,000,000 General Motors Corp.,CCC+,
8.375%, 7/15/33 (d) N/A 990,000
2,000,000 Hertz Corp. (The),B, 10.500%,
1/01/16 (d) 1/01/11 @ 105 1,245,000
---------------------------------------------------------------------
3,195,000
---------------------------------------------------------------------
ENERGY - 1.0%
2,371,000 Compton Petroleum Finance
Corp.,B, 7.625%,
12/01/13 (Canada) 12/01/09 @ 104 1,387,035
500,000 Connacher Oil and Gas Ltd.,
BB+, 10.250%, 1
2/15/15 (Canada) (a) (d) 12/15/11 @ 105 352,500
---------------------------------------------------------------------
1,739,535
---------------------------------------------------------------------
FINANCIALS - 10.2%
1,600,000 DJO Finance Corp.,B, 10.875%,
11/15/14 11/15/11 @ 105 1,296,000
3,000,000 Ford Motor Credit Co.,B-,
7.375%, 2/1/11 (d) N/A 1,867,572
13,354,000 Old Mutual Capital
Funding LP,NR, 8.000%,
5/29/49 (Channel Islands) (d) N/A 7,478,240
2,000,000 Preferred Term Securities
XI Ltd., NR Subordinate
Income Notes 19.000%, 9/24/33
(a) (b) (d) N/A 1,118,000
3,000,000 Preferred Term Securities
XIX Ltd., NR Subordinate
Income Notes 13.500%, 12/22/35
(a) (b) N/A 1,668,000
2,000,000 Preferred Term Securities
XX Ltd., NR Subordinate
Income Notes 14.000%, 3/22/38
(a) (b) (d) N/A 18,000
2,000,000 Preferred Term Securities
XXI Ltd., NR Subordinate
Income Notes 15.000%, 3/22/38 (b) N/A -
5,400,000 RBS Capital Trust, Series B,A,
6.800%, 12/29/49 (d) N/A 2,889,000
3,250,000 Royal Bank Of Scotland Group PLC,
BBB+, 7.648%, 8/29/49
(United Kingdom) (b) (d) 9/30/31 @ 100 1,794,458
---------------------------------------------------------------------
18,129,270
---------------------------------------------------------------------
PRINCIPAL OPTIONAL
AMOUNT CALL PROVISIONS VALUE
---------------------------------------------------------------------
HEALTH CARE - 0.9%
$ 1,900,000 Community Health Systems Inc,B,
8.875%, 7/15/15 (d) 7/15/11 @ 104 $ 1,600,750
---------------------------------------------------------------------
INDUSTRIALS - 1.6%
1,500,000 Casella Waste Systems, Inc.,B,
9.750%, 2/01/13 12/11/08 @ 105 1,327,500
2,000,000 Crown Cork & Seal Co., Inc.,B,
8.000%, 4/15/23 (d) 12/11/08 @ 102 1,490,000
---------------------------------------------------------------------
2,817,500
---------------------------------------------------------------------
RETAIL - 1.2%
1,900,000 Rite Aid Corp.,CCC, 8.625%,
3/01/15 (d) 3/01/11 @ 104 684,000
2,000,000 Neiman-Marcus Group, Inc.,B+,
9.000%, 10/15/15 (d) 10/15/10 @ 105 1,380,000
---------------------------------------------------------------------
2,064,000
---------------------------------------------------------------------
UTILITIES - 0.9%
2,000,000 Texas Competitive Electric
Holdings Co. LLC,CCC,
10.25%, 11/1/15 (a) (d) 11/01/11 @ 105 1,535,000
---------------------------------------------------------------------
TOTAL CORPORATE BONDS - 17.6%
(Cost $57,297,814) 31,081,055
---------------------------------------------------------------------
NUMBER
OF SHARES
---------------------------------------------------------------------
EXCHANGE-TRADED FUNDS - 1.5%
FINANCIALS - 1.5%
172,300 Financial Select Sector SPDR Fund (d)
(Cost $4,547,993) 2,675,819
---------------------------------------------------------------------
LIMITED PARTNERSHIP - 0.2%
REAL ESTATE - 0.2%
400,000 Kodiak Funding, LP (c)
(Cost $3,570,000) 400,000
---------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 113.4%
202,069,417 Dreyfus Money Market Bond Fund (g)
(Cost $202,069,417) 202,069,417
---------------------------------------------------------------------
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) CALL OPTIONS PURCHASED(e) DATE PRICE VALUE
------------------------------------------------------------------------------------------
CALL OPTIONS PURCHASED - 0.1%
4,000 Financial Select Sector SPDR Fund January 2009 $ 30.00 $ 24,000
44,000 Financial Select Sector SPDR Fund January 2009 33.00 176,000
------------------------------------------------------------------------------------------
TOTAL CALL OPTIONS PURCHASED
(Cost $14,839,584) 200,000
------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 302.8%
(Cost $934,128,050) 539,648,240
Liabilities in excess of Other Assets - (99.7%) (177,721,285)
Total Options Written (Premiums received
$15,628,765) - (33.0%) (58,703,680)
Preferred Shares, at Liquidation Value -
(-70.1% of Net Assets Applicable to Common Shares
or -23.2% of Total Investments) (125,000,000)
------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES - 100.0% $178,223,275
==========================================================================================
See notes to financial statements.
Annual Report | October 31, 2008 | 13
DCS | Dreman/Claymore Dividend & Income Fund |
PORTFOLIO OF INVESTMENTS continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) PUT OPTIONS WRITTEN(e) DATE PRICE VALUE
------------------------------------------------------------------------------------------
40,208 Financial Select Sector
SPDR Fund January 2009 $ 30.00 $ 58,703,680
-----------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Premiums received $15,628,765) $ 58,703,680
==========================================================================================
LP - Limited Partnership
REIT - Real Estate Investment Trust
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
2008, these securities amounted to 12.2% of net assets applicable to common
shares.
(b) Floating or variable rate security.
(c) Security is valued in accordance with Fair Valuation procedures established
in good faith by the Board of Trustees. The total market value of such
securities is $2,900,000 which represents 1.6% of Net Assets Applicable to
Common Shares.
(d) All or a portion of this security position represents cover for outstanding
options written.
(e) Non-income producing security.
(f) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(g) $180,086,962 of this money market fund has been physically segregated in
connection with the redemption of preferred shares.
Ratings (unaudited) shown are per Standard & Poor's; securities classified NR
are not rated by Standard & Poor's.
All percentages shown in the Portfolio of Investments are based on Net Assets
Applicable to Common Shares unless otherwise noted.
See notes to financial statements.
14 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Statement of ASSETS AND LIABILITIES | OCTOBER 31, 2008
ASSETS
Investments in securities, at value (cost $754,041,088) $359,561,278
Restricted short term investments (cost $180,086,962) 180,086,962
Dividends and interest receivable 3,081,876
Receivable for securities sold 226,635
Receivable for variation margin 15,478
Other assets 19,092
--------------------------------------------------------------------------------------------------------------
Total assets 542,991,321
--------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for auction rate preferred shares redeemed (7,200 shares at liquidation preference) 180,000,000
Written option, at value (premiums received of $15,628,765) 58,703,680
Dividends payable - preferred shares 417,293
Advisory fee payable 295,253
Administrative fee payable 7,663
Due to custodian 329
Accrued expenses and other liabilities 343,828
--------------------------------------------------------------------------------------------------------------
Total liabilities 239,768,046
--------------------------------------------------------------------------------------------------------------
PREFERRED SHARES, AT REDEMPTION VALUE
Auction Market Preferred Shares $.01 par value per share; 5,000 authorized,
issued and outstanding at $25,000 per share liquidation preference 125,000,000
--------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $178,223,275
==============================================================================================================
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
Common stock, $.01 par value per share; unlimited number of shares authorized,
45,399,424 shares issued and outstanding $ 453,994
Additional paid-in capital 843,184,328
Accumulated net unrealized depreciation on investments, currency, options,
and futures transactions (434,849,184)
Accumulated net realized loss on investments, futures, options, currency,
and swap transactions (230,370,447)
Accumulated net investment loss (195,416)
--------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $178,223,275
==============================================================================================================
NET ASSET VALUE APPLICABLE TO COMMON SHAREHOLDERS
(based on 45,399,424 common shares outstanding) $ 3.93
==============================================================================================================
See notes to financial statements.
Annual Report | October 31, 2008 | 15
DCS | Dreman/Claymore Dividend & Income Fund
Statement of OPERATIONS | FOR THE YEAR ENDED OCTOBER 31, 2008
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $2,230,826) $ 57,527,610
Interest (net of foreign withholding taxes of $348,877) 15,733,250
---------------------------------------------------------------------------------------------------------------
Total income $ 73,260,860
---------------------------------------------------------------------------------------------------------------
EXPENSES
Advisory fee 9,295,300
Auction agent fee-preferred shares 1,090,010
Professional fees 271,252
Custodian fee 269,232
Administrative fee 195,534
Fund accounting 189,363
Trustees' fees and expenses 186,319
Printing expenses 185,475
Insurance expense 52,066
NYSE listing 35,901
Miscellaneous 16,648
Transfer agent fee 15,328
Rating agency fee 14,671
---------------------------------------------------------------------------------------------------------------
Total expenses 11,817,099
---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 61,443,761
---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES AND SWAP
TRANSACTIONS Net realized gain (loss) on:
Options 8,234,924
Investments (227,688,969)
Swaps (4,080,919)
Futures (10,752,316)
Foreign currency transactions (9,669)
Net change in unrealized appreciation (depreciation) on:
Futures 2,705,311
Foreign currency translations (966)
Options (55,863,339)
Swaps (155,809)
Investments (552,483,785)
---------------------------------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS, FUTURES, OPTIONS, AND SWAP TRANSACTIONS (840,095,537)
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHARES FROM
Net investment income (18,702,569)
---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $(797,354,345)
===============================================================================================================
See notes to financial statements.
16 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Statements of CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS |
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2008 OCTOBER 31, 2007
-----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS
Net investment income $ 61,443,761 $ 69,743,712
Net realized gain (loss) on investments, futures, options, currency,
and swap transactions (234,296,949) 5,361,408
Net change in unrealized depreciation on investments,
futures, currency, options, and swap transactions (605,798,588) (44,064,690)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM
Net investment income (18,702,569) (22,730,366)
-----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from operations (797,354,345) 8,310,064
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (42,775,963) (59,019,251)
Return of capital (16,243,288) --
-----------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (59,019,251) (59,019,251)
-----------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to common shareholders (856,373,596) (50,709,187)
NET ASSETS
Beginning of period 1,034,596,871 1,085,306,058
-----------------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net investment
income of ($195,416) and $2,536,910, respectively.) $ 178,223,275 $1,034,596,871
=================================================================================================================
See notes to financial statements.
Annual Report | October 31, 2008 | 17
DCS | Dreman/Claymore Dividend & Income Fund
Financial HIGHLIGHTS |
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE JANUARY 27, 2004*
PER SHARE OPERATING PERFORMANCE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FOR A COMMON SHARE OUTSTANDING THROUGHOUT THE PERIOD OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2008 2007 2006 2005 2004
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.79 $ 23.91 $ 20.62 $ 18.89 $ 19.10 (b)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 1.35 1.54 1.42 1.20 0.86
Net realized and unrealized gain (loss) on investments,
futures and swap transactions (18.50) (0.86) 3.61 2.11 (0.18)
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (common share equivalent basis) (0.41) (0.50) (0.44) (0.28)(g) (0.09)
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (17.56) 0.18 4.59 3.03 0.59
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (0.94) (1.30) (1.30) (1.30) (0.65)
Return of capital (0.36) -- -- 0.00 (f) --
------------------------------------------------------------------------------------------------------------------------------------
Total distributions to Common Shareholders (1.30) (1.30) (1.30) (1.30) (0.65)
------------------------------------------------------------------------------------------------------------------------------------
COMMON AND PREFERRED SHARES' OFFERING EXPENSES
CHARGED TO PAID-IN-CAPITAL -- -- -- -- (0.15)
====================================================================================================================================
NET ASSET VALUE, END OF PERIOD $ 3.93 $ 22.79 $ 23.91 $ 20.62 $ 18.89
====================================================================================================================================
MARKET VALUE, END OF PERIOD $ 2.98 $ 19.62 $ 21.61 $ 18.20 $ 17.88
====================================================================================================================================
TOTAL INVESTMENT RETURN (c)
Net asset value (81.30)% 0.67% 23.05% 16.24% 2.47%
Market value (83.31)% (3.53)% 26.97% 8.97% (7.33)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, applicable to common shareholders,
end of period (thousands) $ 178,223 $1,034,597 $1,085,306 $ 936,010 $ 857,388
Preferred Shares, at liquidation value ($25,000
per share liquidation preference) (thousands) $ 125,000 $ 425,000 $ 425,000 $ 425,000 $ 425,000
Preferred Shares asset coverage per share $ 60,645 $ 85,859 $ 88,842 $ 80,059 $ 75,435
Ratios to Average Net Assets applicable to Common Shares:
Total expenses, including interest expense 1.76%(h) 1.42%(h) 1.47% 1.50% 1.53%(d)
Interest expense -- -- -- -- 0.07%(d)
Net investment income, prior to effect of dividends
to preferred shares 9.15% 6.47% 6.41% 5.82% 6.20%(d)
Net investment income, after effect of dividends
to preferred shares 6.36% 4.36% 4.40% 4.45% 5.57%(d)
Ratios to Average Managed Assets: (e)
Total expenses, including interest expense 1.08%(h) 1.02%(h) 1.03% 1.03% 1.05%(d)
Interest expense -- -- -- -- 0.05%(d)
Net investment income, prior to effect of dividends
to preferred shares 5.62% 4.64% 4.50% 4.00% 4.28%(d)
Portfolio turnover 68% 57% 25% 17% 6%
* Commencement of operations.
(a) Based on average shares outstanding during the period.
(b) Before deduction of offering expenses charged to capital.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(d) Annualized.
(e) Managed assets is equal to net assets applicable to common shareholders
plus outstanding leverage, such as the liquidation value of preferred
shares.
(f) Amount is less than $.01.
(g) Distributions partially from return of capital.
(h) Expense ratio does not reflect fees and expenses incurred indirectly by the
Fund as a result of its investments in shares of other investment
companies. If these fees were included in the expense ratio, the net impact
to the expense ratio would be approximately 0.02% for the years ended
October 31,2008 and October 31, 2007. The impact to the expense ratio as a
result of investments in other investment companies was not required prior
to 2007. As a result, the impact has not been disclosed for the years prior
to 2007.
See notes to financial statements.
18 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Notes to FINANCIAL STATEMENTS | OCTOBER 31, 2008
Note 1 - ORGANIZATION:
Dreman/Claymore Dividend & Income Fund (the "Fund") was organized as a Delaware
statutory trust on October 20, 2003. The Fund is registered as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended.
The Fund's primary investment objective is to provide a high level of current
income, with a secondary objective of capital appreciation. The Fund will pursue
its investment objectives by investing its assets primarily in dividend-paying
common and preferred stocks. There can be no assurance that the Fund will
achieve its investment objectives. The Fund's investment objectives are
considered fundamental and may not be changed without shareholder approval.
Note 2 - ACCOUNTING POLICIES:
The preparation of the financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund.
(A) VALUATION OF INVESTMENTS
The Fund values equity securities at the last reported sale price on the
principal exchange or in the principal OTC market in which such securities are
traded, as of the close of regular trading on the NYSE on the day the securities
are being valued or, if there are no sales, at the mean between the last
available bid and asked prices on that day. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Debt securities are valued by
independent pricing services or dealers using the mean of the closing bid and
asked prices for such securities or, if such prices are not available, at prices
for securities of comparable maturity, quality and type. For those securities
where quotations or prices are not available, valuations are determined in
accordance with procedures established in good faith by the Board of Trustees.
Futures contracts are valued using the settlement price established each day on
the exchange on which they are traded. Interest rate swaps are valued at closing
prices for such contracts established by the exchange or dealer market on which
they are traded. Exchange traded options are valued at the mean between the bid
and asked prices on the principal exchange on which it is traded. Short-term
securities with maturities of 60 days or less at time of purchase are valued at
amortized cost, which approximates market value.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
(C) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates or to manage the duration of
its portfolio. The swaps are valued at current market value and any unrealized
gain or loss is included in the Statement of Operations. The Fund accrues for
the interim payments on swap contracts on a daily basis, with the net amount
recorded within unrealized appreciation/depreciation of swap contracts on the
Statement of Assets and Liabilities. Once the interim payments are settled in
cash, the net amount is recorded as realized gain/loss on swaps, in addition to
realized gain/loss recorded upon the termination of swap contracts on the
Statement of Operations. During the period that the swap agreement is open, the
Fund may be subject to risk from the potential inability of the counterparty to
meet the terms of the agreement. The swaps involve elements of both market and
credit risk in excess of the amounts reflected on the Statement of Assets and
Liabilities. As of October 31, 2008 there were no swap agreements outstanding.
(D) FUTURES
A futures contract is an agreement to buy or sell a financial instrument at a
particular price on a stipulated future date. Upon entering into a futures
contract, the Fund is required to make an initial margin deposit established by
the exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the counterparty an amount of cash equal
to the daily fluctuation in the value of the contract. Such receipt or payment
is known as the variation margin and is recorded by the Fund as unrealized
appreciation or depreciation. The Fund bears the market risk that arises from
the change in the value of these financial instruments.
At October 31, 2008, the following futures contracts were outstanding:
SHORT NUMBER OF EXPIRATION ORIGINAL VALUE AT UNREALIZED
CONTRACTS CONTRACTS MONTH VALUE OCTOBER 31, 2008 APPRECIATION
------------------------------------------------------------------------------------------
S&P 500(CME) 38 December-08 $11,894,661 $9,189,350 $2,705,311
------------------------------------------------------------------------------------------
Annual Report | October 31, 2008 | 19
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS continued
(E) OPTIONS
The Fund may purchase or sell (write) options on securities and securities
indices which are listed on a national securities exchange or in the
over-the-counter ("OTC") market as a means of achieving additional return or of
hedging the value of the Fund's portfolio. An option on a security is a contract
that gives the holder of the option, in return for a premium, the right to buy
from (in the case of a call) or sell to (in the case of a put) the writer of the
option the security underlying the option at a specified exercise or "strike"
price. The writer of an option on a security has an obligation upon exercise of
the option to deliver the underlying security upon payment of the exercise price
(in the case of a call) or to pay the exercise price upon delivery of the
underlying security (in the case of a put). There are several risks associated
with transactions in options on securities. As the writer of a covered call
option, the Fund forgoes, during the option's life, the opportunity to profit
from increases in the market value of the security covering the call option
above the sum of the premium and the strike price of the call but has retained
the risk of loss should the price of the underlying security decline. A writer
of a put option is exposed to the risk of loss if fair value of the underlying
securities declines, but profits only to the extent of the premium received if
the underlying security increases in value. The writer of an option has no
control over the time when it may be required to fill its obligation as writer
of the option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation under
the option and must deliver the underlying security at the exercise price.
(F) DISTRIBUTIONS
The Fund intends to declare quarterly dividends to common shareholders at a
fixed rate per common share based on its projected performance, which rate may
be adjusted from time to time. Accordingly, for U.S. generally accepted
accounting principles, the Fund may declare and pay dividends in excess of its
net investment income on the Statement of Operations. However, the ultimate
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles. Permanent differences relating to the difference between book and
tax characterization of distributions have been reclassed on the Statements of
Assets and Liabilities.
(G) CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the bid and asked price of the respective exchange
rates on the last day of the period. Purchases and sales of investments
denominated in foreign currencies are translated at the exchange rate on the
date of the transaction.
Foreign exchange gain or loss resulting from holding of a foreign currency,
expiration of a currency exchange contract, difference in the exchange rates
between the trade date and settlement date of an investment purchased or sold,
and the difference between dividends actually received compared to the amount
shown in a Fund's accounting records on the date of receipt are included as net
realized gains or losses on foreign currency forwards and currency transactions
in the Fund's Statement of Operations.
Foreign exchange gain or loss on assets and liabilities, other than investments,
are included in unrealized appreciation (depreciation) on foreign currency
transactions.
Note 3 - INVESTMENT ADVISORY AGREEMENT, SUB-ADVISORY AGREEMENT AND OTHER
AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC (the "Adviser"), the Adviser will furnish offices,
necessary facilities and equipment, provide administrative services, oversee the
activities of Dreman Value Management, LLC (the "Investment Manager"), provide
personnel including certain officers required for the Fund's administrative
management and compensate all officers and trustees of the Fund who are its
affiliates. As compensation for these services, the Fund will pay the Adviser a
fee, payable monthly, in an amount equal to 0.85% of the Fund's average managed
assets (net assets applicable to common shareholders plus any assets
attributable to financial leverage).
The Adviser has entered into a Sub-Advisory Agreement with the Investment
Manager. Pursuant to the terms of this agreement, the Investment Manager, under
the supervision of the Fund's Board of Trustees and the Adviser, will provide a
continuous investment program for the Fund's portfolio; provide investment
research and make and execute recommendations for the purchase and sale of
securities; and provide certain facilities and personnel, including officers
required for the Fund's administrative management, and compensation of all
officers and trustees of the Fund who are its affiliate. For these services, the
Adviser has agreed to pay the Investment Manager an aggregate amount equal to
60% of the investment advisory fees paid to the Adviser by the Fund, net of any
additional compensation payments to underwriters of the common share offering.
Under a separate Fund Administration agreement, the Adviser provides fund
administration services to the Fund.
The Adviser receives a fund administration fee payable monthly at the annual
rate set forth below as a percentage of the average daily managed assets of the
Fund.
MANAGED ASSETS RATE
-----------------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
-----------------------------------------------------------------------
For the year ended October 31, 2008 the Fund recognized expenses of
approximately $195,534 for these services.
20 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS continued
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting
agent, and transfer agent. As custodian, BNY is responsible for the custody of
the Fund's assets. As accounting agent BNY is responsible for maintaining the
books and records of the Fund's securities and cash. As transfer agent, BNY is
responsible for performing transfer agency services for the Fund.
Note 4 - FEDERAL INCOME TAXES:
The Fund intends to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing substantially all of its ordinary income and long-term
capital gains, if any, during each calendar year, the Fund intends not to be
subject to U.S. federal excise tax.
Due to inherent differences in the recognition of income, expenses, and realized
gains/losses under U.S. generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified on the Statement of Assets
and Liabilities. A permanent book and tax difference relating to a distribution
of capital gains for tax purposes in the amount of $542,270 was reclassified
from accumulated net investment loss to accumulated net realized loss. A
permanent book and tax difference relating to the distributions received from
real estate investment trusts, royalty trusts, partnerships, and trust preferred
securities totaling $2,101,887 was reclassified from accumulated net investment
loss to accumulated net realized loss. A permanent book and tax difference
relating to losses on foreign currency transactions in the amount of $9,669 was
reclassified from accumulated net realized loss to accumulated net investment
loss. A permanent book and tax difference relating to the nondeductible losses
from a limited partnership totaling $242,650 was reclassified from accumulated
net investment loss to additional paid-in capital. Finally, a permanent book and
tax difference in the amount of $1,370,919 relating to the payments on the swap
agreement was reclassified from accumulated net investment loss to accumulated
net realized loss.
Information on the components of net assets on a tax basis as of October 31,
2008 is as follows:
NET TAX UNDISTRIBUTED UNDISTRIBUTED
NET TAX UNREALIZED ORDINARY LONG-TERM
COST OF GROSS TAX GROSS TAX UNREALIZED DEPRECIATION ON INCOME/ GAINS/
INVESTMENTS UNREALIZED UNREALIZED DEPRECIATION ON DERIVATIVES AND (ACCUMULATED) (ACCUMULATED)
FOR TAX PURPOSES APPRECIATION DEPRECIATION INVESTMENTS FOREIGN CURRENCY ORDINARY LOSS) CAPITAL LOSS)
------------------------------------------------------------------------------------------------------------------------
$933,255,763 $36,151,040 $(429,758,563) $(393,607,523) $(43,074,685) $(417,293) $(228,315,546)
------------------------------------------------------------------------------------------------------------------------
The difference between book and tax basis unrealized appreciation/(depreciation)
is attributable to the tax deferral of losses on wash sales, income
reclassifications from real estate investment trusts, royalty trusts,
partnerships and investments in preferred securities.
At October 31, 2008, for federal income tax purposes, the Fund had a capital
loss carryforward of $228,315,546 available to offset possible future capital
gains. The capital loss carryforward is set to expire on October 31, 2016.
For the years ended October 31, 2008 and 2007, the tax character of
distributions paid to common and preferred shareholders as reflected in the
statement of changes in net assets was as follows:
DISTRIBUTIONS PAID FROM: 2008 2007
--------------------------------------------------------------------------
Capital gain - common shares $ 377,304* $ 8,831,953*
Capital gain - preferred shares 164,966* 3,392,877*
Ordinary income - common shares 42,398,659 50,187,298
Ordinary income - preferred shares 18,537,603 19,337,489
Return of capital - common shares 16,243,288 --
--------------------------------------------------------------------------
$77,721,820 $ 81,749,617
--------------------------------------------------------------------------
*The Fund hereby designates these distributions as long term capital gains
according to IRC Section 852(b)(3)(C).
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No.48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Company's tax returns to determine whether the tax
positions are "more likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet a more-likely-than-not threshold
would be recorded as a tax expense in the current year. Management has evaluated
the implications of FIN 48 and has determined it does not have any impact on the
financial statements as of October 31, 2008. Tax years 2005, 2006, and 2007 are
still subject to examination by major jurisdictions.
Note 5 - INVESTMENTS IN SECURITIES:
For the year ended October 31, 2008, the cost of purchases and proceeds from
sales of investments, excluding options and short-term securities, were
$754,405,684 and $967,647,031, respectively.
Annual Report | October 31, 2008 | 21
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS continued
Transactions in written option contracts during the year ended October 31, 2008
were as follows:
NUMBER OF CONTRACTS PREMIUMS RECEIVED
-------------------------------------------------------------------------------------------
Options outstanding, beginning of year 69,186 $ 13,938,788
Options written during the period 66,130 25,801,854
Options expired during the period (33,250) (8,234,924)
Options assigned during the period (61,858) (15,876,953)
-------------------------------------------------------------------------------------------
Options outstanding, end of period 40,208 $ 15,628,765
-------------------------------------------------------------------------------------------
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and 45,399,424 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue any shares during the years ended
October 31, 2008 and 2007.
PREFERRED SHARES
On March 23, 2004, the Fund issued 3,400 shares of Preferred Shares Series M7,
3,400 shares of Preferred Shares Series T28, 3,400 shares of Preferred Shares
Series W7, 3,400 shares of Preferred Shares Series TH28 and 3,400 shares of
Preferred Shares Series F7 each with a net asset and liquidation value of
$25,000 per share plus accrued dividends. Bank of New York Mellon is the auction
agent and provides administrative, transfer agency, and dividend distribution
services for the preferred shares. Dividends are accumulated daily at an annual
rate set through auction procedures.
The broad auction-rate preferred securities market, including the Fund's Auction
Market Preferred Shares ("AMPS"), has experienced considerable disruption in the
past several months. The result has been failed auctions on nearly all
auction-rate preferred shares, including the Fund's AMPS.A failed auction is not
a default, nor does it require the redemption of the Fund's AMPS. Provisions in
the offering documents of the Fund's AMPS provide a mechanism to set a maximum
rate in the event of a failed auction. This maximum rate is LIBOR + 1.25% or
LIBOR x 125%, whichever is greater.
On September 29, 2008 the Fund announced the redemption of $150 million of
preferred shares. On October 20, 2008, the Fund announced an additional
redemption of $150 million of preferred shares. As of October 31, 2008, $120
million of these preferred shares were redeemed. The remaining $180 million of
these preferred shares were scheduled to be redeemed on the following dates:
NUMBER OF
SHARES AMOUNT REDEMPTION
SERIES REDEEMED REDEEMED DATE
------------------------------------------------------------------------
M7 1,200 $30,000,000 November 12, 2008
T28 1,200 $30,000,000 November 5, 2008
T28 1,200 $30,000,000 December 3, 2008
W7 1,200 $30,000,000 November 13, 2008
TH28 1,200 $30,000,000 November 21, 2008
F7 1,200 $30,000,000 November 10, 2008
Dividends are accumulated daily at an annual rate set through auction
procedures.
For the year ended October 31, 2008, the annualized dividend rates ranged from:
HIGH LOW AT OCTOBER 31, 2008
-----------------------------------------------------------------------------
Series M7 5.94% 3.39% 3.39%
Series T28 5.70% 3.68% 5.39%
Series W7 6.00% 3.27% 3.27%
Series TH28 6.15% 3.70% 4.51%
Series F7 5.94% 3.41% 3.41%
The Fund is subject to certain limitations and restrictions while AMPS are
outstanding. Failure to comply with these limitations and restrictions could
preclude the Fund from declaring any dividends or distributions to common
shareholders or repurchasing common shares and/or could trigger the mandatory
redemption of AMPS at their liquidation value.
AMPS, which are entitled to one vote per share, generally vote with the common
stock but vote separately as a class to elect Class I Trustees and on any
matters affecting the rights of the AMPS.
22 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund |
NOTES TO FINANCIAL STATEMENTS continued
Note 7 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would require
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
Note 8 - ACCOUNTING PRONOUNCEMENTS:
In September 2006, the FASB released Statement of Financial Accounting Standards
No. 157; "Fair Value Measurements" ("FAS 157").This standard clarifies the
definition of fair value for financial reporting, establishes a framework for
measuring fair value and requires additional disclosures about the use of fair
value measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. As of October 31, 2008, the Fund does not believe the adoption of
FAS 157 will impact the amounts reported in the financial statements, however,
additional disclosure will be required about the inputs used to develop
measurements of fair value and the effect of certain of the measurements
reported in the statement of operations for a fiscal period.
In March 2008, the FASB issued SFAS No.161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivatives instruments and related hedge fund
items are accounted for, and c) how derivative instruments and related hedge
items affect a fund's financial position, results of operations and cash flows.
SFAS No.161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. As of October 31, 2008,
management does not believe the adoption of SFAS No.161 will impact the
financial statement amounts; however, additional footnote disclosures may be
required about the use of derivative instruments and hedging items.
Note 9 - SUBSEQUENT EVENT:
On November 1, 2008, the Board of Trustees declared a quarterly dividend of
$0.045 per common share. This dividend was payable on November 28, 2008 to
shareholders of record on November 14, 2008.
On November 26, 2008 the Fund announced the redemption of the following AMPS:
NUMBER OF
SHARES AMOUNT REDEMPTION
SERIES REDEEMED REDEEMED DATE
-----------------------------------------------------------------------
M7 80 $2,000,000 December 16, 2008
T28 80 $2,000,000 December 31, 2008
W7 80 $2,000,000 December 18, 2008
TH28 80 $2,000,000 December 19, 2008
F7 80 $2,000,000 December 15, 2008
This redemption is in addition to those discussed in Note 6.
On November 26, 2008 Fitch Ratings downgraded the rating of the Fund's AMPS to
'AA' from 'AAA'.
Annual Report | October 31, 2008 | 23
DCS | Dreman/Claymore Dividend & Income Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
DREMAN/CLAYMORE DIVIDEND & INCOME FUND
We have audited the accompanying statement of assets and liabilities of
Dreman/Claymore Dividend & Income Fund (the "Fund"), including the portfolio of
investments, as of October 31, 2008, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
four years in the period then ended and for the period from January 27, 2004
(commencement of operations) through October 31, 2004. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2008, by correspondence with the Fund's
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreman/Claymore Dividend & Income Fund as of October 31, 2008, and the results
of its operations for the year in the period then ended, the changes in its net
assets for each of the two years in the period then ended, and financial
highlights for each of the four years in the period then ended and for the
period from January 27, 2004 (commencement of operations) through October 31,
2004, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
December 22, 2008
24 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Supplemental INFORMATION | (unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $54,845,876 was received by the Fund
through October 31, 2008. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders, $35,832,713 of investment income qualifies for the
dividends-received deduction.
In January 2009, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in the
calendar year 2008.
RESULT OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on September 24, 2008.
Common and preferred shareholders voted on the election of Trustees.
With regard to the election of the following Trustees by common and preferred
shareholders of the Fund:
# OF SHARES # OF SHARES
IN FAVOR WITHHELD
----------------------------------------------------------------
Richard L. Crandall 12,736 2,313
David C. Hooten 12,734 2,312
The other Trustees of the Fund whose terms did not expire in 2008 are David N.
Dreman, Roman Friedrich III, Ronald A. Nyberg and Ronald E. Toupin, Jr.
TRUSTEES
The Trustees of the Dreman/Claymore Dividend & Income Fund and their principal
occupations during the past five years:
NUMBER OF
NAME, ADDRESS*, YEAR OF TERM OF OFFICE** PRINCIPAL OCCUPATIONS DURING FUNDS IN THE
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND FUND COMPLEX*** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Richard L. Crandall Since 2004 Managing Partner of Aspen Partners, LLC 1 Chairman, Novell,
Year of birth: 1944 since 2003, Founding Co-Partner of Arbor Inc.,and Pelstar, LLC
Trustee Venture Partners, LLC since 2000, and Director, Diebold,
Chairman of Enterprise Software Roundtable Inc. and iTRACS Corp.
since 1994. Formerly, Director and Special
Advisor of GIGA Information Group
(1995-2003) and Chairman of GIGA Information
Group (2002-2003), Founder and ex-Chairman
and CEO of Comshare, Inc. (1966-1994).
------------------------------------------------------------------------------------------------------------------------------------
Roman Friedrich III Since 2004 Founder of Roman Friedrich & Company, 1 Director, StrataGold
Year of birth: 1946 which specializes in the provision of Corp.; Gateway Gold
Trustee financial advisory services to Corp. and GFM
corporations in the resource sector. Resources Ltd.
Previously, Managing Director at TD
Securities. Managing Director Lancaster
Financial Ltd.; Wood Gundy; Burns Fry
Ltd.; President, Chase Manhattan Bank
(Canada) Ltd.
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Partner of Nyberg & Cassioppi, LLC, a 46 None
Year of birth: 1953 law firm specializing in corporate law,
Trustee estate planning and business
transactions from 2000-present.
Formerly, Executive Vice President,
General Counsel and Corporate Secretary
of Van Kampen Investments (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Formerly, Vice President, Manager and 43 None
Year of birth: 1958 Portfolio Manager of Nuveen Asset
Trustee Management (1998-1999), Vice President
of Nuveen Investment Advisory Corp.
(1992-1999), Vice President and Manager
of Nuveen Unit Investment Trusts
(1991-1999), and Assistant Vice
President and Portfolio Manager of
Nuveen Unit Investment Trusts
(1988-1999), each of John Nuveen &
Company, Inc. (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
David N. Dreman+ Since 2004 Founder, Chairman and Chief Investment 1 Trustee, The Institute
Harborside Financial Center Officer of Dreman Value Management, LLC, of Behavioral Finance,
Plaza 10, Suite 800 an investment advisory firm with Jazz Aspen, and
Jersey City, NJ 07311-4037 approximately $9.5 billion under University of
Year of birth: 1936 management, in various mutual funds Manitoba.
Trustee including several branded under the
Scudder-Dreman name; annuity products;
institutional accounts, including
pension, foundation and endowment funds;
and SMAs for high net-worth individuals.
Author of several books including
Contrarian Investment Strategies: The
Next Generation and Psychology and
the Stock Market. Forbes columnist
for 25 years and co-editor of the
academic journal, The Journal of
Behavioral Finance.
------------------------------------------------------------------------------------------------------------------------------------
David C. Hooten++ Since 2008 Chairman of the Board of Directors and 1 None
Year of birth: 1962 Chief Executive Officer (2001-present)
Trustee of Claymore Group Inc. and its
predecessor Companies.
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Trustees unless otherwise noted: 2455 Corporate West Drive,
Lisle, IL 60532
** After a Trustee's initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
-Messrs. Friedrich and Nyberg, as Class I Trustees, are expected to stand
for re-election at the Fund's 2009 annual meeting of the shareholders.
-Messrs. Dreman and Toupin, as Class II Trustees, are expected to stand for
re-election at the Fund's 2010 annual meeting of the shareholders.
-Messrs. Crandall and Hooten, as Class III Trustees, are expected to stand
for re-election at the Fund's 2011 annual meeting of shareholders.
*** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
+ Mr. Dreman is an "interested person" (as defined in section 2(a)(19) of the
1940 Act) of the Fund because of his position as an officer of Dreman Value
Management, LLC, the Fund's Investment Manager.
++ Mr. Hooten is an "interested person" (as defined in section 2(a)(19) of the
1940 Act) of the Fund because he is an officer of the Adviser and certain
of its affiliates.
Annual Report | October 31, 2008 | 25
DCS | Dreman/Claymore Dividend & Income Fund |
SUPPLEMENTAL INFORMATION (unaudited) continued
OFFICERS
The officers of the Dreman/Claymore Dividend & Income Fund and their principal
occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell Effective Senior Managing Director and Chief Investment Officer of Claymore
Year of birth: 1955 June 5, 2008 Advisors, LLC and Claymore Securities Inc. (2008-Present).
Chief Executive Officer Formerly, Managing Director of Research, Nuveen Asset Management
(2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Kevin Robinson Effective Senior Managing Director and General Counsel of Claymore
Year of birth: 1959 June 5, 2008 Advisors, LLC and Claymore Group, Inc. (2007-present). Formerly,
Chief Legal Officer Associate General Counsel and Assistant Corporate Secretary of
NYSE Euronext, Inc. (2000-2007).
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2004 Senior Managing Director of Claymore Advisors, LLC and Claymore
Year of birth: 1964 Securities, Inc. (2005-present). Formerly, Chief Financial
Chief Accounting Officer, Officer of Claymore Group Inc. (2005-2006); Managing Director of
Chief Financial Officer Claymore Advisors, LLC and Claymore Securities, Inc. (2003-2005).
and Treasurer Treasurer of Henderson Global Funds and Operations Manager for
Henderson Global Investors (NA) Inc., (2002-2003). Managing
Director, FrontPoint Partners LLC (2001-2002).
------------------------------------------------------------------------------------------------------------------------------------
Bruce Saxon Since 2006 Vice President, Fund Compliance Officer of Claymore Advisors, LLC
Year of birth: 1957 (2006 to present). Chief Compliance Officer/Assistant Secretary
Chief Compliance Officer of Harris Investment Management, Inc. (2003-2006). Director-
Compliance of Harrisdirect LLC (1999-2003
------------------------------------------------------------------------------------------------------------------------------------
Matt Patterson Since 2006 Vice President, of Claymore Advisors, LLC (2006-present).
Year of birth: 1971 Previously, Securities Counsel, Caterpillar, Inc., (2004-2006);
Secretary Associate, Skadden, Arps, Slate, Meagher & Flom, LLP (2002-2004).
------------------------------------------------------------------------------------------------------------------------------------
E. Clifton Hoover Since 2006 Co-Chief Investment Officer and Managing Director of Dreman Value
Year of birth: 1957 Management, LLC (2006 to present). Managing Director and Portfolio
Vice President Manager of NFJ Investment Group (1997-2006)
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers: 2455 Corporate West Drive, Lisle, IL 60532
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
26 | Annual Report | October 31, 2008
DCS | Dreman/Claymore Dividend & Income Fund
Dividend Reinvestment PLAN | (unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by The Bank of New York Mellon (the
"Plan Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York Mellon, P.O. Box 463, East Syracuse,
New York 13057-0463; Attention: Shareholder Services Department, Phone Number:
(866) 488-3559.
Annual Report | October 31, 2008 | 27
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DCS | Dreman/Claymore Dividend & Income Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Richard L. Crandall
David N. Dreman*
Roman Friedrich III,
Chairman
Dave Hooten*
Ronald A. Nyberg
Ronald E. Toupin, Jr.
* Trustee is an "interested person" of the Fund as defined in the Investment
Company Act of 1940, as amended.
OFFICERS
J.Thomas Futrell
Chief Executive Officer
(Effective June 5, 2008)
Kevin Robinson
Chief Legal Officer
(Effective June 5, 2008)
Steven M. Hill
Chief Accounting Officer, Chief
Financial Officer and Treasurer
Bruce Saxon
Chief Compliance Officer
Matthew J. Patterson
Secretary
E. Clifton Hoover
Vice President
INVESTMENT MANAGER
Dreman Value Management, LLC
Aspen, Colorado
INVESTMENT ADVISER AND
ADMINISTRATOR
Claymore Advisors, LLC
Lisle, Illinois
CUSTODIAN AND TRANSFER AGENT
The Bank of New York Mellon
New York, New York
PREFERRED STOCK - DIVIDEND PAYING AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Chicago, Illinois
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, Illinois
PRIVACY PRINCIPLES OF DREMAN/CLAYMORE DIVIDEND & INCOME FUND FOR SHAREHOLDERS
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we may share information
with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone except as permitted by law or as is necessary in order to
service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about the
shareholders to Claymore Advisors, LLC employees with a legitimate business need
for the information. The Fund maintains physical, electronic and procedural
safeguards designed to protect the non-public personal information of its
shareholders.
QUESTIONS CONCERNING YOUR SHARES OF DREMAN/CLAYMORE DIVIDEND & INCOME FUND?
o If your shares are held in a Brokerage Account, contact your Broker.
o If you have physical possession of your shares in certificate form,
contact the Fund's Custodian and Transfer Agent: The Bank of New York
Mellon, 101 Barclay 11W, New York, New York 10286 (866) 488-3559
This report is sent to shareholders of Dreman/Claymore Dividend & Income Fund
for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (800) 345-7999.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling (800) 345-7999 or by
accessing the Fund's Form N-PX on the SEC's website at www.sec.gov or
www.claymore.com.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC website at www.sec.gov or www.claymore.com. The Fund's Form
N-Q may also be viewed and copied at the SEC's Public Reference Room in
Washington, DC; information on the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330 or at www.sec.gov.
In October 2008, the Fund submitted a CEO annual certification to the New York
Stock Exchange ("NYSE") in which the Fund's principal executive officer
certified that he was not aware, as of the date of the certification, of any
violation by the Fund of the NYSE's Corporate Governance listing standards. In
addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and
related Securities and Exchange Commission ("SEC") rules, the Fund's principal
executive and principal financial officers have made quarterly certifications,
included in filings with the SEC on Forms N-CSR and N-Q, relating to, among
other things, the Fund's disclosure controls and procedures and internal control
over financial reporting.
Annual Report | October 31, 2008 | 31
DCS | Dreman/Claymore Dividend & Income Fund
About the FUND MANAGER |
DREMAN VALUE MANAGEMENT, LLC
Dreman Value Management, LLC is an independently-owned investment management
firm that was founded by David N. Dreman in 1997, and its predecessor firms date
back to 1977. As of October 31, 2008, the firm had approximately $9.5 billion in
assets under management, primarily across institutional accounts and various
investment companies. Independently owned, the firm is a value-oriented
contrarian equity manager and places its primary emphasis on common stocks with
growing dividends and avoiding concept stocks without justifiable valuations.
INVESTMENT PHILOSOPHY
Dreman Value Management is one of the pioneers of contrarian value investing.
Our investment philosophy is based on a disciplined, low P/E approach to stock
selection.
o We invest in undervalued companies that exhibit strong fundamentals,
above-market dividend yields and historic earnings growth, which our
analysis indicates will persist.
o Our strategy is to own strong, fundamentally sound companies and to avoid
speculative stocks or potential bankruptcies.
o We believe that the markets are not perfectly efficient and that, in
particular, behavioral finance plays a considerable role in investor
actions and over-reactions and subsequently in stock price movements.
INVESTMENT PROCESS
Our research studies, numerous academic papers and our long-term performance
record show that out-of-favor stocks (those with low P/E ratios) consistently
and predictably outperform the market.
o Screen for stocks with below market P/E ratios.
o Further refine candidates by applying additional value screens.
o Fundamental analysis is applied to remaining candidates.
o Stocks that pass all the screens and analysis are recommended to the
Investment Committee for approval.
CLAYMORE SECURITIES, INC.
2455 Corporate West Drive
Lisle, IL 60532
Member FINRA/SIPC 07/08
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE
DCS
LISTED
NYSE
DCS-AR-1031
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) No information need be disclosed pursuant to this paragraph.
(c) During the period covered by the annual report, the Code of Ethics was not
amended.
(d) The registrant has not granted a waiver or an implicit waiver to its
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions
from a provision of its Code of Ethics during the period covered by this
report.
(e) Not applicable.
(f) (1) The registrant's Code of Ethics is attached hereto as an exhibit.
(2) Not applicable.
(3) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that it has at least one audit
committee financial expert serving on its audit committee, Ronald E. Toupin, Jr.
Mr. Toupin is an "independent" Trustee. Mr. Toupin qualifies as an audit
committee financial expert by virtue of his experience obtained as a portfolio
manager and research analyst, which included review and analysis of offering
documents and audited and un-audited financial statements using GAAP to show
accounting estimates, accruals and reserves.
(Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Trustees in the absence of such designation or identification.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
a). Audit Fees: the aggregate fees billed for the fiscal year 2008, for
professional services rendered by the principal accountant for the audit
were $39,000. The aggregate fees billed for fiscal year 2007 for
professional services rendered by the principal accountant were $37,000.
b). Audit-Related Fees: the aggregate fees billed for the fiscal year 2008, for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this item
were $16,300. These amounts represent costs associated with the audit of
the registrants preferred share asset test. The Audit-Related Fees for 2007
were $6,000.
c). Tax Fees: the aggregate fees billed for the fiscal year 2008, for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning were $6,000. The Tax Fees for 2007
were $6,000.
d). All Other Fees: the aggregate fees billed for the fiscal year 2008, for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) and (c) of this Item were $0. The Other
Audit Fees for 2007 were $0.
The registrant's principal accountant did not bill fees for services not
included in Items 4(b), (c) or (d) above that required approval by the
registrant's audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X during the registrant's last two fiscal years.
(e) (1) Audit Committee Pre-Approval Policies and Procedures: the Fund's Audit
Committee has adopted written policies relating to the pre-approval of
the audit and non-audit services performed by the Fund's independent
auditors. Unless a type of service to be provided by the independent
auditors has received general pre-approval, it requires specific
pre-approval by the Audit Committee. Under the policies, on an annual
basis, the Fund's Audit Committee reviews and pre-approves the
services to be provided by the independent auditors. In addition, the
Audit Committee pre-approves any permitted non-audit services to be
provided by the independent auditors to the registrant's investment
adviser or any entity controlling, controlled by, or under common
control with the adviser if such services relate directly to the
operations and financial reporting of the Fund. The Audit Committee
has delegated pre-approval authority to the Audit Committee
Chairperson or any member of the Audit Committee for non-prohibited
services up to $10,000. All such delegated pre-approvals must be
presented to the Audit Committee no later than the next Audit
Committee meeting.
(2) None of the services described in each of Items 4(b) through (d) were
approved by the registrant's audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) The percentage of hours expended on the principal accountant's engagement
to audit the Fund's financial statements for the most recent fiscal year
attributable to work performed by persons other than the principal
accountant's full-time, permanent employees was 0%.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser
and/or any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant (not including
a sub-adviser whose role is primarily portfolio management and is
sub-contracted with or overseen by another investment adviser) that
directly related to the operations and financial reporting of the
registrant for the fiscal year 2008 were $22,300. The non-audit fees for
the fiscal year 2007 were $12,000.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934. The audit committee of the registrant is comprised
of: Richard L. Crandall, Roman Friedrich III, Ronald A. Nyberg and Ronald
E. Toupin, Jr.
(b) Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has delegated the voting of proxies relating to its voting
securities to its investment sub-adviser, Dreman Value Management, LLC (the
"Sub-Adviser"). The Sub-Adviser's Proxy Voting Policies and Procedures are
included as an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) David N. Dreman and the portfolio management team are responsible for
the day-to-day management of the registrant's portfolio. The following
provides information regarding the portfolio managers as of October
31st, 2008:
-------------------------------- ---------------- -----------------------------------------------------------------
NAME SINCE PROFESSIONAL EXPERIENCE
-------------------------------- ---------------- -----------------------------------------------------------------
David N. Dreman Since 2004 Founder, Chairman and Chief Investment Officer of Dreman Value
(inception) Management, LLC ("DVM"), an investment advisery firm with
approximately $9.5 billion under management, in various mutual
funds including several branded under the DWS Dreman name;
annuity products; institutional accounts, including pension,
foundation and endowment funds; and SMAs for high net-worth
individuals. Author of several books including Contrarian
Investment Strategies: The Next Generation and Psychology and the
Stock Market. Forbes columnist for 25 years and co-editor of the
academic journal, The Journal of Behavioral Finance.
-------------------------------- ---------------- -----------------------------------------------------------------
-------------------------------- ---------------- -----------------------------------------------------------------
E. Clifton Hoover, Jr. 2006 Co-Chief Investment Officer and Managing Director of Dreman
Value Management, LLC. Over 20 years of investment
experience. Managing Director and Portfolio Manager at NJF
Investment Group since 1997, prior to joining DVM. Mr. Hoover
has a Masters in Finance from Texas Tech University and also
holds a Chartered Financial Analyst designation.
-------------------------------- ---------------- -----------------------------------------------------------------
Gary Herbert 2007 Portfolio Manager of High Yield and Leveraged Loan products at
DVM. Over 16 years of investment experience in the fixed
income area. Mr. Herbert was an Executive Director of the
Investment Management Group and Portfolio Manager and Analyst
at Morgan Stanley since 1999, prior to joining DVM. Mr.
Herbert has a MBA from Columbia University and also holds a
Chartered Financial Analyst designation.
-------------------------------- ---------------- -----------------------------------------------------------------
(a) (2) (i-iii) Other accounts managed. Dreman Value Management, LLC does not
manage any performance based fee accounts. The following
summarizes information regarding each of the other accounts
managed by the Portfolio Manager as of October 31st, 2008:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
# OF # OF # OF
NAME ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
David N. Dreman 20 $ 7.63 billion 7 $ 181 million 145 $ 1.22 billion
E. Clifton Hoover Jr. 16 $ 7.48 billion 0 $ 0 126 $ 1.09 billion
Gary Herbert 1 $ 653.7 million 0 $ 0 0 $ 0
(a) (2) (iv) Conflicts of Interest. If another account of the Portfolio
Manager has investment objectives and policies that are
similar to those of the Registrant, the Portfolio Manager
will allocate orders pro-rata among the Registrant and such
other accounts, or, if the Portfolio Manager deviates from
this policy, the Portfolio Manager will allocate orders such
that all accounts (including the Registrant) receive fair
and equitable treatment.
(a) (3) Compensation Structure. The salary of the Portfolio Manager is fixed.
The bonus of the Portfolio Manager is 100% discretionary. The bonus is
determined by senior management at Dreman Value Management, LLC.
Portfolio Manager Compensation
The compensation plan is comprised of both a fixed component and a
variable component. The variable component is determined by assessing
the investment professional's performance measured utilizing both
quantitative and qualitative factors.
The Sub-Adviser's investment professionals are each paid a fixed base
salary that is determined based on their job function and
responsibilities. The base salary is deemed to be competitive with the
marketplace and specifically with salaries in the financial services
industry by utilizing various salary surveys compiled for the
financial services industry specifically investment advisory firms.
The variable component of the Sub-Adviser's compensation plan which
takes the form of a cash bonus combined with employee retention bonus
units payable over time is designed to reward and retain investment
professionals including portfolio managers and research analysts for
their contributions to the Fund's performance relative to its
benchmark.
Investment professionals may also receive equity in the form of units
or fractional units of membership interest in the Sub-Adviser or they
may receive employee retention bonus units which enable them to
participate in the growth of the firm. Investment professionals also
participate in the Sub-Adviser's profit sharing plan, a defined
contribution plan that allows the Sub-Adviser to contribute up to
twenty percent of an employee's total compensation, subject to various
regulatory limitations, to each employee's profit sharing account. The
Sub-Adviser maintains both a qualified and non-qualified profit
sharing plan which benefits employees of the firm including both
portfolio managers and research analysts. Contributions to the
Sub-Adviser's profit sharing plan vest over a specified term. Finally
all employees of the Sub-Adviser including investment professionals
receive additional fringe benefits in the form of subsidized medical,
dental, vision, group-term, and life insurance coverage.
The basis for determining the variable component of an investment
professional's total compensation is determined through a subjective
process which evaluates an investment
professional performance against several quantitative and qualitative
factors including the following:
Quantitative factors:
(i) Relative ranking of the Fund's performance against its peers in
the one, three and five year pre-tax investment performance
categories. The Fund's performance is evaluated against peers in
its fund category and performance is ranked from one to four on a
declining scale depending on the quartile in which the portfolio
manager's absolute performance falls. The portfolio manager is
rewarded on a graduated scale for outperforming relative to his
peers.
(ii) Relative performance of the Fund's performance against the
pre-determined indices for the product strategy against which the
Fund's performance is measured. The portfolio manager is rewarded
on a graduated scale for outperforming relative to the Fund's
benchmark index.
(iii) Performance of the Fund's portfolio measured through attribution
analysis models which analyzes the portfolio manager's
contribution from both an asset allocation or sector allocation
perspective and security selection perspective. This factor
evaluates how the investment professional performs in linking
performance with the client's investment objective including
investment parameters and risk and return objectives. This
factor may include some qualitative characteristics.
Qualitative factors:
(i) Ability to work well with other members of the investment
professional team and mentor junior members.
(ii) Contributions to the organizational overall success with new
product strategies.
(iii) Other factors such as contributing to the team in a
leadership role and by being responsive to requests for
assistance.
(a) (4) Securities ownership. The following table discloses the dollar range
of equity securities of the Fund beneficially owned by the Dreman
Value Management, LLC Portfolio Manager as of October 31st, 2008:
DOLLAR RANGE OF EQUITY
NAME OF PORTFOLIO MANAGER SECURITIES IN FUND
David N. Dreman Over $1,000,000
E. Clifton Hoover Jr. None
Gary Herbert None
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 9, 2008, the registrant's Board of Trustees (the "Board") approved a
revised written charter (the "Nominating and Governance Committee Charter") for
its nominating and governance committee (the "Nominating and Governance
Committee") that contains changes to the procedures by which shareholders may
recommend nominees to the Board.
Under the Nominating and Governance Charter, the previously existing procedures
by which shareholders may recommend nominees to the Board, as described in the
registrant's proxy statement filed with the Securities and Exchange Commission
on August 20, 2008, remain in effect. In addition to these previously existing
procedures, the Nominating and Governance Charter includes a new requirement
that following the submission by a shareholder of a Trustee candidate
recommendation, 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 Investment Company Act of 1940; (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.
A copy of the Nominating and Governance Committee Charter will be filed with the
Securities and Exchange Commission as an appendix to the registrant's 2009 proxy
statement.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940)
within 90 days of this filing and have concluded based on such evaluation,
that the registrant's disclosure controls and procedures were effective as
of that date in ensuring that information required to be disclosed by the
registrant in this Form N-CSR was recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the registrant's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics for Chief Executive and Financial Officer.
(a) (2) Certifications of principal executive officer and principal financial
officer pursuant to Rule30a-2 of the Investment Company Act of 1940.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies and Procedures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Dreman/Claymore Dividend & Income Fund
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By: /s/ J. Thomas Futrell
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Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: January 9, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ J. Thomas Futrell
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Name: J. Thomas Futrell
Title: Chief Executive Officer
Date: January 9, 2009
By: /s/ Steven M. Hill
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Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: January 9, 2009