SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
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CHICAGO, ILLINOIS 60606-1720
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October 5, 2009
Mr. Richard Pfordte
Ms. Kimberly Browning
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: Claymore Dividend & Income Fund
Preliminary Proxy Statement
--------------------------------------------
Dear Sir and Madam:
Thank you for your telephonic comments regarding the Preliminary Proxy
Statement (the "Preliminary Proxy Statement") of Claymore Dividend & Income
Fund, filed with the Securities and Exchange Commission (the "Commission") on
September 15, 2009 pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the General Rules and Regulations of
the Commission promulgated thereunder (the "General Rules and Regulations"). On
behalf of the Fund, we have summarized your comments to the best of our
understanding, below which we have provided responses to those comments. Where
changes were necessary in response to your comments, they are reflected in the
Fund's Definitive Proxy Statement (the "Definitive Proxy Statement"), which will
be filed pursuant to Section 14(a) and the General Rules and Regulations on or
about October 5, 2009.
1. IN THE Q&A SECTION OF THE PROXY STATEMENT, ADD A QUESTION AND ANSWER
REGARDING THE ANTICIPATED TIMING OF THE CONSUMMATION OF THE TRANSACTION.
The Fund has added a question and answer to state that the Adviser
anticipates that the Transaction will close prior to the date of the Annual
Meeting.
2. WITH RESPECT TO THE DESCRIPTIONS OF THE CURRENT ADVISORY AGREEMENT AND
NEW ADVISORY AGREEMENT, REVISE DISCLOSURE THROUGHOUT THE PROXY STATEMENT TO
STATE THAT THERE ARE "NO MATERIAL DIFFERENCES" BETWEEN SUCH AGREEMENTS, INSTEAD
OF THAT SUCH AGREEMENTS ARE "SUBSTANTIALLY SIMILAR" OR "SUBSTANTIALLY
IDENTICAL."
Securities and Exchange Commission
October 5, 2009
Page 2
The Fund has made the requested revisions throughout the Proxy Statement
where applicable.
3. WITH RESPECT TO THE DESCRIPTIONS OF THE DVM SUB-ADVISORY AGREEMENT AND
MANNING & NAPIER SUB-ADVISORY AGREEMENT, REVISE DISCLOSURE THROUGHOUT THE PROXY
STATEMENT TO STATE THAT THERE ARE "NO MATERIAL DIFFERENCES" BETWEEN SUCH
AGREEMENTS, INSTEAD OF THAT SUCH AGREEMENTS ARE "SUBSTANTIALLY SIMILAR" OR
"SUBSTANTIALLY IDENTICAL."
The Fund has made the requested revisions throughout the Proxy Statement
where applicable.
4. WITH RESPECT TO THE FEE WAIVERS BY DVM AND MANNING & NAPIER, ADD
DISCLOSURE THROUGHOUT THE DOCUMENT WHERE APPROPRIATE THAT FEE WAIVERS BY A
SUB-ADVISER BENEFIT THE ADVISER BECAUSE THE SUB-ADVISORY FEE IS PAID BY THE
ADVISER, AND WHETHER SUCH WAIVERS WILL INDIRECTLY BENEFIT THE FUND.
The Fund has added the requested disclosure throughout the
Proxy Statement where applicable.
5. WITH RESPECT TO VOLUNTARY FEE WAIVERS, ADD DISCLOSURE THROUGHOUT THE
DOCUMENT WHERE APPROPRIATE THAT SUCH FEE WAIVERS MAY BE TERMINATED AT ANY TIME.
The Fund notes that the waiver of a portion of the advisory
fee by the Adviser until January 27, 2011 was mischaracterized as a voluntary
waiver in the Preliminary Proxy Statement. Such waiver is in fact a contractual
waiver which may not be terminated by the Adviser at any time. The Fund has
revised disclosure throughout the Proxy Statement to accurately describe this
waiver.
6. UNDER "PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENT -- BACKGROUND
AND THE TRANSACTION" DISCLOSURE STATES THAT THE TRANSACTION INVOLVES CLAYMORE
GROUP. CONFIRM THAT THE FUND IS NOT A PARTY TO THE TRANSACTION.
Claymore Group is a defined term referring to Claymore Group Inc., the
parent of the Fund's investment adviser, Claymore Advisors, LLC. The Fund itself
is not a party to the Transaction.
7. UNDER "PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENT - CURRENT ADVISORY
AGREEMENT" DEFINE OR CROSS REFERENCE TO A DEFINITION OF "MANAGED ASSETS."
The Fund has added the definition of "Managed Assets."
8. ADD DISCLOSURE TO STATE WHETHER THE DEFINITION OF "MANAGED ASSETS" IS
THE SAME UNDER THE CURRENT ADVISORY AGREEMENT AND THE NEW ADVISORY AGREEMENT.
Securities and Exchange Commission
October 5, 2009
Page 3
The Fund has added disclosure to clarify that the definition of Managed
Assets is the same under the Current Advisory Agreement, the Interim Advisory
Agreement and the New Advisory Agreement.
9. IN DEFINING "MANAGED ASSETS" DISCLOSE WHETHER "FINANCIAL LEVERAGE," AS
SUCH TERM IS USED IN THE DEFINITION OF MANAGED ASSETS, INCLUDES ALL FORMS OF
LEVERAGE.
The Fund has added disclosure to clarify that Managed Assets shall include
assets attributable to financial leverage of any kind, including, without
limitation, borrowing (including through a credit facility, the issuance of debt
securities or the purchase of residual interest bonds), the issuance of
preferred securities, the reinvestment of collateral received for securities
loaned in accordance with the Fund's investment objectives and policies, and/or
any other means.
10. UNDER "PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENT -- SECTION 15(F)
OF THE 1940 ACT," AFFIRMATIVELY STATE THAT THE BOARD HAS CONCLUDED NO UNFAIR
BURDEN WOULD BE IMPOSED ON THE FUND AS A RESULT OF THE TRANSACTION.
The Fund has added disclosure that the Adviser and Guggenheim entities
represented to the Board that no unfair burden would be imposed on the Fund as a
result of the Transaction. While the agreement between Claymore and Guggenheim
that they would use reasonable best efforts to ensure that there is no unfair
burden imposed on the Fund and their representation to the Board that no unfair
burden would be imposed on the Fund were important factors in the Board's
decision to approve the New Advisory Agreement, the Fund respectfully submits
that Section 15(f) does not require the Board to make a specific finding that no
unfair burden would be imposed. Instead, Section 15(f) operates as a safe harbor
for investment advisers to investment companies in connection with the receipt
of benefits by an investment adviser from a sale of securities or other interest
in such investment adviser resulting in assignment of an investment advisory
contract. The availability of this safe harbor depends not upon any finding by
the Fund's Board but upon a factual determination that the conditions of the
Section have in fact been met, including that no undue burden has been imposed
on the Fund.
11. CONFIRM SUPPLEMENTALLY THAT THE FUND DOES NOT UTILIZE AFFILIATED
BROKERAGE.
The Fund discloses under "Additional Information--Affiliated Brokers" that
during the fiscal year ended October 31, 2008, the Fund paid no commissions to
affiliated brokers. The Fund does not utilize any brokers affiliated with the
Adviser, Guggenheim or Manning & Napier.
12. UNDER "PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENTS -- BOARD
CONSIDERATIONS--CURRENT ADVISORY AGREEMENT" REVISE DISCLOSURE TO CLARIFY WHAT IS
MEANT BY THE STATEMENT THAT THE BOARD "CONSIDERED THE PARENT COMPANY'S GUARANTY
OF THE ADVISER'S OBLIGATIONS UNDER THE CURRENT ADVISORY AGREEMENT."
Securities and Exchange Commission
October 5, 2009
Page 4
The Fund has revised disclosure to state that the Board "considered the
parent company's commitment of financial support with respect to the Adviser."
13. UNDER "PROPOSAL 2: APPROVAL OF MANNING & NAPIER SUB-ADVISORY
AGREEMENT--SUB ADVISORY FEE" EXPLAIN WHAT IS MEANT BY THE STATEMENT "NET OF ANY
WAIVERS OR REIMBURSEMENTS BY THE FUND."
The DVM sub-advisory fee was equal to a fixed percentage of the advisory
fee received by the Adviser from the Fund after giving effect to, among other
things, waivers of fees or reimbursements of expenses of the Fund by the
Adviser. The relevant disclosure has been revised to clarify this arrangement.
14. WITH RESPECT TO THE SUB-ADVISORY FEE, EXPLAIN SUPPLEMENTALLY WHETHER
THE FACT THAT THE DVM SUB-ADVISORY FEE WAS CALCULATED AS A PERCENTAGE OF MONTHLY
FEES RECEIVED BY THE ADVISER WHEREAS THE MANNING & NAPIER SUB-ADVISORY FEE IS
CALCULATED AS A PERCENTAGE OF THE FUND'S AVERAGE DAILY MANAGED ASSETS COULD
RESULT IN A DIFFERENCE BETWEEN SUCH FEES DUE TO THE DIFFERENT PERIODS OVER WHICH
SUCH FEES ARE CALCULATED AND WHETHER ADDITIONAL DISCLOSURE IS REQUIRED IN THE
PROXY STATEMENT.
As disclosed in the Proxy Statement, "the sub-advisory fee rate paid to
Manning & Napier is intended to equal the sub-advisory fee rate paid to DVM...
although the method by which the fee is calculated differs." The DVM
sub-advisory fee was calculated as a fixed percentage of the monthly advisory
fees received by the Adviser. The advisory fee received by the Adviser was, and
continues to be, calculated based on the average daily Managed Assets of the
Fund. Therefore, as the DVM fee was a fixed percentage of the total pool of
advisory fees received by the advisory in a given month and such advisory fee
was based on the average daily Managed Assets of the Fund, the DVM fee was
indirectly based on the average daily Managed Assets of the Fund. The Manning &
Napier sub-advisory fee is expressed as a percentage of average daily Managed
Assets of the Fund. Therefore, with respect to both the DVM fee and the Manning
& Napier Fee, the fee was ultimately determined by the average daily Managed
Assets of the Fund (directly for Manning & Napier and indirectly for DVM).
Therefore, the Fund respectfully submits that further disclosure is not required
in the Proxy Statement.
15. EXPLAIN SUPPLEMENTALLY THE ALLOCATION OF COSTS ASSOCIATED WITH THE
PROXY STATEMENT.
The costs associated with the preparation and mailing of a proxy statement
and solicitation of votes for a shareholder meeting are ordinarily a regular
operating expense of the Fund. However, because Proposal 1 is required only
because of the change in control of the Adviser, the Adviser and/or Guggenheim
have agreed to pay the costs associated with Proposal 1. Thus, the increased
costs (including legal fees, printing costs, mailing costs and solicitation
costs) that are incurred as a result of the inclusion of Proposal 1 in the
Fund's proxy statement will be allocated to the Adviser and/or Guggenheim. The
amount of such costs will be determined based on a comparison of (i) the costs
of the Proxy Statement, (ii)
Securities and Exchange Commission
October 5, 2009
Page 5
the costs of previous proxy statements for regular annual meetings of the Fund
and (iii) the costs of proxy statements of other funds in the fund complex
obtaining approval of new advisory agreements in connection with the change of
control of the Adviser as well as an analysis of the incremental costs
attributable to Proposal 1. Such amount will be agreed upon by the Adviser and
the Board, on behalf of the Fund.
All other costs associated with the preparation and mailing of the Proxy
Statement and solicitation of shareholder votes not attributable to Proposal 1
will be borne by the Fund. Costs associated with the retention of a new
sub-adviser approved by the Fund's Board and with the annual election of
trustees (Proposals 2 and 3, respectively) are expenses of the Fund. However,
pursuant to the Manning & Napier Sub-Advisory Agreement, Manning & Napier has
agreed to set off costs associated with the change of the Fund's sub-adviser,
which costs may include costs associated with the Proxy Statement thereby
reducing the total expenses ultimately borne by the Fund. This set off provision
is discussed in further detail below.
16. UNDER "PROPOSAL 2: APPROVAL OF MANNING & NAPIER SUB-ADVISORY
AGREEMENT--SUB ADVISORY FEE" DISCLOSE WHO BENEFITS FROM MANNING & NAPIER'S
AGREEMENT TO SET OFF COSTS ASSOCIATED WITH THE CHANGE OF THE FUND'S INVESTMENT
SUB-ADVISER IN AN AMOUNT NOT TO EXCEED $50,000 AGAINST AMOUNTS OWED BY THE
ADVISER TO MANNING & NAPIER UNDER THE MANNING & NAPIER SUB-ADVISORY AGREEMENT."
The Fund has added disclosure to clarify that the set off of costs will
indirectly benefit the Fund because the Adviser, who is the direct beneficiary
of such set off as the sub-advisory fee is paid by the Adviser, has agreed to
waive an amount of its advisory fee equal to the amount of the sub-advisory fee
set off by Manning & Napier.
17. PLEASE DISCUSS SUPPLEMENTALLY SUCH SET OFF BY MANNING & NAPIER AND
WHETHER IT RAISES CONCERNS UNDER THE 1940 ACT OR GENERAL PRINCIPLES OF FIDUCIARY
DUTIES.
Manning & Napier has, in effect, agreed to waive a portion of its
sub-advisory fees in an amount equal to the costs associated with the change of
the Fund's investment sub-adviser in an amount not to exceed $50,000 provided
that shareholders approve Manning & Napier as sub-adviser. Such set off of will
indirectly benefit the Fund because the Adviser, who is the direct beneficiary
of such set off as the sub-advisory fee is paid by the Adviser, has agreed to
waive an amount of its advisory fee equal to the amount of the sub-advisory fee
set off by Manning & Napier. Such set off is contingent on shareholders
approving a sub-advisory agreement with Manning & Napier. Absent shareholder
approval, Manning & Napier will not be able to continue serving as the Fund's
investment sub-advisory and receiving sub-advisory fees against which set
amounts would be set off.
While this fee reduction may influence shareholders to vote in favor of
approval of the Manning & Napier Sub-Advisory Agreement, the Fund does not
believe that such an arrangement violates the 1940 Act or the general fiduciary
duties of an investment adviser to an investment
Securities and Exchange Commission
October 5, 2009
Page 6
adviser. The amount of the advisory fee, including contractual waivers or
reimbursements of fund expenses, is of particular relevance for a board and
shareholders in deciding whether to approve a given advisory contract. In fact,
one of the reasons the 1940 Act requires advisory contracts to be approved by
boards of trustees and shareholders is to encourage boards of trustees to
negotiate fee rates and to allow the market to act as a check on fees charged by
advisers. In hiring Manning & Napier, the Board and the Adviser did exactly that
in negotiating certain waivers, set offs and reductions in the fee to be charged
by Manning & Napier intended to ensure that shareholders are not adversely
affected by the Fund's decision to change sub-advisers. The structure of the
sub-advisory fee to be charged by Manning & Napier was disclosed to and
considered by the Board and is thoroughly disclosed in the Proxy Statement.
Shareholders will vote for or against the sub-advisory contract with Manning &
Napier based on the totality of the information provided, including the
sub-advisory fee (taking into account the base fee and applicable waivers and
set offs).
18. WITH RESPECT TO TELEPHONE AND INTERNET VOTING, ADD DISCLOSURE WITH
REGARD TO (I) SECURITY PROCEDURES AND (II) WHETHER SHAREHOLDERS WHO HAVE VOTED
BY PHONE OR INTERNET CAN REVOKE THEIR VOTES, INCLUDING BY ATTENDING THE MEETING
AND VOTING IN PERSON.
The Fund has added the requested disclosure.
* * * * *
The adequacy and accuracy of disclosure in the filing is the responsibility
of the Fund. The Fund acknowledges that comments of the staff of the Commission
acting pursuant to delegated authority in reviewing the filing or changes to
disclosure in response to such comments do not foreclose the Commission from
taking any action with respect to the filing. The Fund acknowledges that
comments of the staff of the Commission acting pursuant to delegated authority
in reviewing the filing or changes to disclosure in response to such comments
may not be asserted as a defense in any proceeding which may be brought by the
Commission or any person under the United States federal securities laws with
respect to this matter. The Fund acknowledges that comments of the staff of the
Commission acting pursuant to delegated authority in reviewing the filing or
changes to disclosure in response to such comments does not relieve the Fund
from its full responsibility for the adequacy and accuracy of the disclosures in
the filing.
Should you have any additional comments or concerns, please do not hesitate
to contact me at (312) 407-0570.
Sincerely,
/s/ Thomas A. Hale
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Thomas A. Hale