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 811-21504
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Advent/Claymore Enhanced Growth & Income Fund
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(Exact name of registrant as specified in charter)
1065 Avenue of the Americas, New York, NY 10018
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(Address of principal executive offices) (Zip code)
Robert White, Treasurer
1065 Avenue of the Americas, New York, NY 10018
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 479-0675
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Date of fiscal year end: October 31
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Date of reporting period: October 31, 2009
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is as follows:
ANNUAL ADVENT/CLAYMORE ENHANCED |
REPORT | LCM
October 31, 2009 GROWTH & INCOME FUND |
Photo: bridge over a lake
Logo: ADVENT Logo: CLAYMORE(R)
CAPITAL MANAGEMENT
<page>
WWW.CLAYMORE.COM/LCM
...YOUR BRIDGE TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
ADVENT/CLAYMORE ENHANCED GROWTH & INCOME FUND
LCM |Advent/
LISTED |Claymore
NYSE |Enhanced Growth
& Income Fund
LOGO: ADVENT
Capital Management
LOGO: CLAYMORE(R)
There can be no assurance the Fund will achieve its investment objective. The
value of the Fund will fluctuate with the value of the underlying securities.
Historically, closed-end funds often trade at a discount to their net asset
value.
NOT FDIC o INSURED o NOT BANK-GUARANTEED o MAY LOSE VALUE
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.CLAYMORE.COM/LCM, you will find:
o Daily, weekly and monthly data on share prices, net asset values,
distributions, and more
o Portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and adviser contact information
Advent Capital Management and Claymore are continually 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, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
PHOTO
TRACY V. MAITLAND
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dear SHAREHOLDER |
We thank you for your investment in the Advent/Claymore Enhanced Growth &
Income Fund (the "Fund"). This report covers the Fund's performance for the
fiscal year ended October 31, 2009.
The Fund's primary investment objective is to seek current income and current
gains trading in securities, with a secondary objective of long term capital
appreciation. Under normal market conditions, the Fund invests at least 70% of
its managed assets in a diversified portfolio of equity securities and
convertible securities of U.S. and non-U.S. issuers and up to 30% of assets in
non-convertible high yield securities. Additionally, the Fund intends to engage
in a strategy of writing (selling) covered call options on at least 50% of the
securities held in the portfolio of the Fund, thus generating option writing
premiums. We seek international investment opportunities in each asset class,
with an emphasis on large multinational companies. Appreciation potential is
provided by investments in convertibles and common stock, while the allocation
to high-yield securities is primarily a source of income. The balance between
convertible securities, equities and high-yield securities and the degree to
which the Fund engages in a covered call strategy will vary from time to time
based on security valuations, interest rates, equity market volatility and
other economic and market factors. This flexibility to move among the three
asset classes is quite beneficial to the Fund's ability to balance return and
risk.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the fiscal year ending
October 31, 2009, the Fund generated a total return based on market price of
34.17% and a return of 19.74% based on NAV. As of October 31, 2009, the Fund's
market price of $10.48 represented a discount of 10.58% to NAV of $11.72. As of
October 31, 2008, the Fund's market price of $8.97 represented a discount of
17.78% to NAV of $10.91.
The Fund paid a quarterly dividend of $0.350 per share in November 2008 and
quarterly dividends of $0.264 in February, May and August 2009. The Fund's
dividend was reduced in an effort to provide greater balance between the Fund's
primary investment objective to seek current income and current gains from
trading securities and its secondary investment objective of long-term capital
appreciation along with seeking to enhance the Fund's earning power over time.
We believe that maintaining and potentially growing the Fund's net asset value
will benefit the Fund's shareholders over time. There is no guarantee of any
future distributions or that the current returns and distribution rate will be
maintained.
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 30 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 benefits of compounding returns over time. The
DRIP effectively provides an income averaging technique, which causes
shareholders to accumulate a larger number of Fund shares when the market price
is depressed than when the price is higher.
Annual Report | October 31, 2009 | 3
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | DEAR SHAREHOLDER
continued
On July 17, 2009, Claymore Group Inc., the parent of Claymore Advisors, LLC
(the "Adviser"), entered into an Agreement and Plan of Merger between and among
Claymore Group Inc., Claymore Holdings, LLC and GuggClay Acquisition, Inc.
(with the latter two entities being wholly-owned, indirect subsidiaries of
Guggenheim Partners, LLC ("Guggenheim")), whereby GuggClay Acquisition, Inc.
would merge into Claymore Group Inc., which would be the surviving entity. This
transaction was completed on October 14, 2009 (the "Effective Date"), and
resulted in a change-of-control whereby Claymore Group Inc. and its
subsidiaries, including the Adviser, became indirect, wholly-owned subsidiaries
of Guggenheim. The transaction is not expected to affect the daily operations
of the Fund or the investment management activities of the Adviser.
Under the Investment Company Act of 1940, as amended, (the "1940 Act"), the
consummation of this transaction resulted in the automatic termination of the
Fund's advisory agreement. Accordingly, on September 29, 2009, the Board of
Trustees approved an interim investment advisory agreement between the Fund and
the Adviser (the "Interim Advisory Agreement"). The Interim Advisory Agreement
took effect as of the Effective Date and will terminate upon the earlier of:
(a) 150 calendar days after the Effective Date or (b) the approval of a new
investment advisory agreement by the shareholders of the Fund. In addition, the
advisory fees earned by the Adviser pursuant to the Interim Agreement are held
in an interest-bearing escrow account with the Fund's custodian during the term
of the Interim Advisory Agreement. Other than the effective date and the
provisions set forth above regarding the advisory fees placement into an escrow
account, the terms and conditions of the Interim Advisory Agreement is
substantively identical to those of the original advisory agreement.
The Fund is managed by a team of experienced and seasoned professionals led by
myself in my capacity as Chief Investment Officer (as well as President and
Founder) of Advent Capital Management, LLC. We encourage you to read the
following Questions & Answers section, which provides more information about
the factors that impacted the Fund's performance.
We thank you for your investment in the Fund and we are honored that you have
chosen the Advent/Claymore Enhanced Growth & Income Fund as part of your
investment portfolio. For the most up-to-date information on your investment,
please visit the Fund's website at www.claymore.com/lcm.
Sincerely,
/s/ Tracy V. Maitland
Tracy V. Maitland
President and Chief Executive Officer of the Advent/Claymore Enhanced Growth &
Income Fund
December 2, 2009
4 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
QUESTIONS & ANSWERS |
Advent/Claymore Enhanced Growth & Income Fund (the "Fund") is managed by a team
of seasoned professionals at Advent Capital Management, LLC ("Advent"), led by
Tracy V. Maitland, Advent's President and Chief Investment Officer. In the
following interview, the management team discusses the equity, convertible
securities and high-yield markets and the performance of the Fund during the
fiscal year ended October 31, 2009.
1. WILL YOU REMIND US OF THIS FUND'S OBJECTIVES AND HOW YOU SEEK TO ACHIEVE
THEM?
The Fund's primary investment objective is to provide current income and
current gains from trading in securities, with a secondary objective of
long-term capital appreciation. Under normal market conditions, the Fund
invests at least 70% of its managed assets in a diversified portfolio of equity
securities and convertible securities of U.S. and non-U.S. issuers and up to
30% of its managed assets in non-convertible high yield securities.
Additionally, the Fund engages in an option strategy of writing (selling)
covered call options on at least 50% of the securities held in the portfolio of
the Fund, thus generating option writing premiums. Advent seeks international
investment opportunities in each asset class, with an emphasis on large
multinational companies. Capital appreciation potential is provided by
investments in convertibles and common stock, while the allocation to
high-yield securities is primarily a source of income.
2. PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT OVER THE LAST 12
MONTHS.
The Fund's annual report for the 2008 fiscal year discussed a financial crisis
that originated with the end of a housing boom fueled by excessively easy
credit. After the September 2008 failure of Lehman Brothers Holdings Inc., the
credit markets became so intolerant of risk that they were essentially frozen.
As fearful investors sought the protection of U.S. Treasury securities,
interest rate spreads between Treasury securities and corporate bonds widened
dramatically, and there were pronounced declines in the market values of
convertibles, high-yield bonds and other asset classes that carried any degree
of credit risk.
The market for convertible securities, which in the past was much less volatile
than equities, was already weak prior to the Lehman failure. Then the
convertible market, as measured by the Merrill Lynch All U.S. Convertibles
Index, which measures the performance of the domestic convertible market, lost
14.59% and 17.99%, respectively, in the months of September and October
2008--an unprecedented setback. A major reason for the severe decline was
selling by hedge funds, which had made leveraged investments in convertibles
while shorting the underlying common stocks. Having lost their prime brokerage
accounts and other sources of credit, hedge funds were forced to sell their
convertible securities at any price, regardless of fundamentals, causing prices
to drop precipitously. The return of the Merrill Lynch All U.S. Convertibles
Index was -35.73% for calendar year 2008, the worst one-year performance in the
50-plus years for which historical records are available.
This dramatic technical sell-off in convertibles created unusual interest in
convertible securities in early 2009. There was considerable purchasing by
managers of equity and bond accounts, many of which are permitted to invest in
convertibles, since convertibles are debt instruments with the option to
convert into equities. Both equity and bond markets bottomed out in March 2009,
and U.S. securities markets, including the market for convertibles, have
rallied significantly since then, resulting in positive returns for almost all
asset classes for the Fund's fiscal year ended October 31, 2009. Return of the
Merrill Lynch All U.S. Convertibles Index for the 12-month period of 37.27% was
much higher than the 9.80% return of the Standard & Poor's 500 Index, which is
generally regarded as a good indicator of the broad stock market, for the same
period. As credit spreads tightened at the same time equity prices moved up,
convertible securities benefited from both of these market trends.
After a period of extreme weakness in late 2008, the high yield bond market
experienced a dramatic recovery as investors once again embraced risk. The
return of the Merrill Lynch High Yield Master II Index, which measures
performance of the high-yield bond market, was 48.79% for the 12 months ended
October 31, 2009. This compares with a return of 13.79% for the Barclays
Capital US Aggregate Bond Index, which measures the return of the high-quality
U.S. bond market as a whole for the same 12-month period.
3. HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
For the fiscal year ended October 31, 2009, the Fund generated a total return
based on market price of 34.17% and a return of 19.74% based on NAV. As of
October 31, 2009, the Fund's market price of $10.48 represented a discount of
10.58% to NAV of $11.72. As of October 31, 2008, the Fund's market price of
$8.97 represented a discount of 17.78% to NAV of $10.91. All Fund returns
cited--whether based on net asset value ("NAV") or market price--assume the
reinvestment of all distributions.
For comparison, The CBOE S&P 500 2% OTM BuyWrite Index, which measures
performance of out-of-the-money S&P 500 Index call options, returned 11.88%
over the same period; the Fund's higher return than this index illustrates the
value of the Fund's strategy during this period, emphasizing convertible
securities over equities.
Annual Report | October 31, 2009 | 5
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
The market value and NAV of the Fund's shares fluctuate from time to time, and
the Fund's market value may be higher or lower than its NAV. The current
discount to NAV provides an opportunity for investors to purchase shares of the
Fund below the market value of the securities in the underlying portfolio. The
Adviser believes that, over the long term, the progress of the NAV will be
reflected in the market price return to shareholders.
4. HOW WAS THE FUND ALLOCATED AMONG ASSET CLASSES DURING THE OCTOBER 2009
FISCAL YEAR?
The Fund was designed to be diversified among asset classes but also to have
the flexibility to reallocate assets as necessary. Investments are allocated
globally among stocks, convertible securities and high-yield bonds.
As of October 31, 2009, the common equity position had been reduced to 8.6%,
with a corresponding increase in convertible securities. At the end of the
prior fiscal year, October 31, 2008, common stocks represented 29.0% of the
portfolio. The extreme weakness in the convertible and high yield bond markets
in the fall of 2008 provided some unusual opportunities for the Fund. The Fund
was able to invest in convertible securities of high quality companies at very
attractive prices, simultaneously increasing income and improving the
portfolio's credit quality, while also positioning the Fund to participate in
an improving equity market.
The Fund's investments in high yield bonds were also reduced, from 15.6% of the
portfolio as of October 31, 2008, to 7.4% at October 31, 2009. Rigorous credit
research is especially important in the selection of high-yield bonds for this
Fund, and Advent's proprietary credit research emphasizes cash flow and balance
sheets. Our focus is on the higher-quality segment of the high-yield bond
market, therefore, avoiding those bonds considered likely to default.
As of October 31, 2009, 82.1% of the Fund's assets are in convertibles; of
this, 61.4% is in convertible bonds and 20.7% in convertible preferreds. At the
end of the last fiscal year, October 31, 2008, convertible bonds represented
30.6% of the portfolio, and convertible preferred stocks represented 22.2%, so
that the total exposure to convertibles was 52.8% . In the first few months of
the 2009 fiscal year, more of the Fund's assets were moved into convertible
bonds, reducing the exposure to convertible preferred stock and common stock.
In terms of industry representation, health care represents the greatest
percentage of the portfolio, 27.5% as of October 31, 2009, followed by
financial services at 14.0% .
Before the beginning of the 2009 fiscal year, the position in foreign
securities was reduced because weakening world economies created concerns about
liquidity and fundamental risk in these securities. In recent months, as
economies around the world have begun to show signs of recovery, the Fund's
international representation has been increased, with additions in Europe and
non-Japan Asia. As of October 31, 2009, international investments represent
24.3% of the portfolio.
5. WHICH INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S PERFORMANCE?
As discussed above, the decision to increase the Fund's emphasis on convertible
bonds, which experienced a dramatic recovery after extreme weakness early in
the fiscal year, was a major factor in the Fund's strong performance. The
Merrill Lynch All U.S. Convertibles Index returned a remarkable 37.27% during
the Fund's fiscal year. The Fund's high-yield bonds also performed well,
reflecting strength in this segment of the market. Besides contributing to
total return, both of these asset classes provided attractive levels of
income.
In terms of individual holdings, one of the big winners was Golden Eagle Retail
Group Limited (not held in portfolio at period end), a retailer headquartered
in Hong Kong with operations in mainland China. The company differentiates
itself by focusing its sales efforts on the underserved, second-tier cities and
targeting the rapidly growing middle class demographic. Unlike many of its
competitors, Golden Eagle owns over 60% of its retail stores, which gives a
debt investor more comfort in knowing their obligations are backed with hard
assets. Golden Eagle's convertible bonds were added to the Fund's portfolio
when they were selling at a distressed price, offering a yield to maturity of
12%, with less than two years to maturity. As the Chinese economy and the
company's operations improved, the stock moved up sharply and the conversion
feature of the bonds became valuable, so that the investment provided a total
return--including both income and appreciation--of more than 100%.
6 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
Another investment that contributed importantly was Human Genome Sciences, Inc.
(0.7% of long-term investments), a commercially-focused biopharmaceutical
company. The market had modest expectations for a drug that was in clinical
trials, but Advent's research concluded that there was large upside potential
if the drug succeeded yet little downside risk from investing in the bond even
if the drug proved disappointing. The Fund invested in a convertible bond,
common stock and some options. In July 2009, the company announced positive
trials for a drug formulated to treat Lupus, which is a major disease
worldwide. This drug, the first new drug in over 50 years to show promise in
treating Lupus, means that the company has the potential for a multi-billion
dollar blockbuster drug, and the stock moved up sharply.
Also positive was another health care company, Schering-Plough Corporation (not
held in portfolio at period end). The Fund owned a mandatory convertible
preferred with a very attractive yield; this was purchased as a low-risk
income-oriented investment. When the company reached an agreement to merge with
Merck & Co., Inc. (not held in portfolio at period end), the convertible
appreciated significantly; this investment therefore contributed to income and
to total return.
6. WHICH DECISIONS HURT PERFORMANCE?
Most of the losses occurred early in fiscal 2009, before the equity, high yield
and convertibles markets began to recover. In the later months of the fiscal
year, most positions produced positive returns.
One of the biggest disappointments was a preferred issue of SLM Corp. (not held
in portfolio at period end), which had been considered reasonably secure
because the majority of its revenue was generated in originating
government-guaranteed student loans. In early 2009, legislation was proposed to
effectively nationalize the student loan business, thereby bypassing much of
SLM's business, and the preferred stock lost much of its value. Subsequently,
proposed legislation has changed multiple times, creating further uncertainty.
However, it now seems likely that SLM will retain at least the servicing
portion of the business, if not the basic loan origination operations.
Other setbacks were positions in convertible preferred issues of Citigroup (not
held in portfolio at period end) and KeyCorp (0.9% of long-term investments),
two bank holding companies that have suffered a series of write-downs and have
had to raise additional capital.
7. WHAT WAS THE IMPACT OF THE FUND'S COVERED CALL STRATEGY?
The writing of covered call options contributed to performance, particularly in
the first three months of the fiscal year, when the equity market was extremely
weak. During this period nearly every option written produced useful income, as
falling prices of the underlying securities meant that most of the options
expired worthless and the Fund kept the call option premiums. However, when the
equity market is moving up fairly steadily, which has been the case since March
2009, a covered call strategy limits the upside as equities or convertibles on
which calls are written move through the strike price.
The Fund's mandate is to write covered call options on at least 50% of the
securities held in the portfolio, generally 10% to 15% out of the money. As of
October 31, 2009, options were written against approximately 51.4% of the total
securities in the Fund, and on 76.5% of the Fund's equity positions.
The Fund's covered call overlay serves mainly to help meet distribution goals
and, to a lesser extent, to help maintain the Fund's NAV during market
setbacks. Option premiums, dividends, interest and capital appreciation are all
part of the total return. Most of the covered call writing centers on the
Fund's U.S. equity and convertible investments, because the U.S. has a broad
and deep options market, while many international companies that we find
attractive lack listed options.
Although the Fund has the ability to write calls on the entire portfolio,
covered calls are generally written on no more than 60-65% of the total
portfolio. Calls are usually written on just a portion of a position so that if
the price of the security rises substantially and the call is exercised, a
portion of the position is still maintained. Calls with varying maturities and
strike prices are tiered so that they will not all expire at the same time or
are exercised at the same price.
- --------------------------------------------------------------------------------
What is a covered call?
A call is an option (or contract) that gives its holder the right, but not the
obligation, to buy shares of the underlying security at a specified price on or
before a pre-determined expiration date. After this predetermined date, the
option and its corresponding rights expire. A covered call is when the seller
of the call option also owns the security on which the call is written. Covered
call strategies are generally used as a hedge--to limit losses by obtaining
premium income from the sale of calls, while still maintaining upside
potential.
- --------------------------------------------------------------------------------
Annual Report | October 31, 2009 | 7
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
8. WHAT IS THE CURRENT OUTLOOK FOR THE MARKETS AND THE FUND?
Advent is cautiously optimistic about the market for convertible securities and
high-yield bonds, in large part because credit spreads are still wider than the
historical norm. Upside to these historical averages would boost values of the
Fund's high-yield and convertible securities. Recent research published by
Merrill Lynch & Company indicates that convertible securities remain somewhat
undervalued, which suggests that the Fund's large allocation to convertible
securities will prove rewarding.
A key question is whether and to what degree the incipient economic recovery
will continue, a judgment that is very difficult to make. Historically, periods
of tightening credit spreads have been followed by periods of stronger economic
activity and stronger equity markets. Since credit spreads have tightened in
recent months, history would suggest further strength in the prices of equities
and convertible securities. An improving economy, both in the U.S. and
internationally, should also result in more new issues of bonds and
convertibles, as companies seek to fund their growth and to strengthen their
balance sheets.
A major advantage of this Fund is its ability to invest in multiple asset
classes, taking advantage of different opportunities and anomalies in various
markets. As the equity market rises, as it has in recent months, the equity
sensitivity of a portfolio of convertible securities increases. When the equity
market is weak, convertibles' declining sensitivity, combined with interest
income, mitigates the downside. When the equity market rises and spreads narrow
simultaneously, as they have during 2009, convertible securities benefit from
both trends.
Advent believes that, over the long term, careful security selection and asset
allocation will help the Fund's performance by providing favorable returns in
rising markets and a level of income that can help provide some protection for
overall returns during down markets.
INDEX DEFINITIONS
Indices are unmanaged and it is not possible to invest directly in any index.
The Merrill Lynch All U.S. Convertibles Index is comprised of approximately 500
issues of convertible bonds and preferred stock of all qualities
S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is
designed to measure performance of the broad domestic economy through changes
in the aggregate market value of 500 stocks representing all major industries.
Merrill Lynch High Yield Master II Index is a commonly used benchmark index for
high yield corporate bonds. It is a measure of the broad high yield market.
The Barclays Capital US Aggregate Bond Index covers the U.S.
dollar-denominated, investment-grade, fixed rate, taxable bond market of
SEC-registered securities. The Index includes bonds from the U.S. Treasury,
government-related, corporate, mortgage-backed securities (agency fixed-rate
and hybrid ARM passthroughs), asset-backed securities and collateralized
mortgage-backed securities sectors. U.S. Agency Hybrid Adjustable Rate Mortgage
(ARM) securities were added to the U.S. Aggregate Index on April 1, 2007, but
are not eligible for the Global Aggregate Index.
The CBOE S&P 500 2% OTM BuyWrite Index (BXY) uses the same methodology as the
widely accepted CBOE S&P 500 BuyWrite Index (BXM), which is designed to show
the hypothetical performance of a strategy in which an investor buys a
portfolio of the S&P 500 stocks, and also sells (or writes) covered call
options on the S&P 500 Index. The BXY is calculated using out-of-the-money S&P
500 Index (SPX) call options, rather than at-the-money SPX call options. The
BXY strategy diversifies the buy-write opportunities currently provided by the
BXM. The BXY yields lower monthly premiums in return for a greater
participation in the upside moves of the S&P 500.
8 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
LCM ADDITIONAL RISKS AND DISCLOSURE
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. The Fund is subject to investment
risk, including the possible loss of the entire amount that you invest. Past
performance does not guarantee future results.
CONVERTIBLE SECURITIES.The Fund is not limited in the percentage of its assets
that may be invested in convertible securities. Convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality. The market values of convertible securities tend
to decline as interest rates increase and, conversely, to increase as interest
rates decline. However, the convertible security's market value tends to
reflect the market price of the common stock of the issuing company when that
stock price is greater than the convertible's"conversion price," which is the
predetermined price at which the convertible security could be exchanged for
the associated stock.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible security
will respond differently to market fluctuations than a convertible security
because a synthetic convertible security is composed of two or more separate
securities, each with its own market value. In addition, if the value of the
underlying common stock or the level of the index involved in the convertible
component falls below the exercise price of the warrant or option, the warrant
or option may lose all value.
EQUITY SECURITIES 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.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES. There are significant differences
between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior or unexpected events.
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. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a 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.
LOWER GRADE SECURITIES. The Fund may invest an unlimited amount in lower grade
securities. Investing in lower grade securities (commonly known as"junk bonds")
involves additional risks, including credit risk. Credit risk is the risk that
one or more securities in the Fund's portfolio will decline in price, or fail
to pay interest or principal when due, because the issuer of the security
experiences a decline in its financial status.
FOREIGN SECURITIES AND EMERGING MARKETS RISK. Investing in non-U.S. issuers may
involve unique risks, such as currency, political, economic and market risk. In
addition, investing in emerging markets entails additional risk including, but
not limited to (1) news and events unique to a country or region, (2) smaller
market size, resulting in lack of liquidity and price volatility and (3)
certain national policies which may restrict the Fund's investment
opportunities.
ILLIQUID INVESTMENTS. The Fund may invest without limit in illiquid securities.
The Fund may also invest without limit in Rule 144A Securities. Although many
of the Rule 144A Securities in which the Fund invests may be, in the view of
the Investment Manager, liquid, if qualified institutional buyers are unwilling
to purchase these Rule 144A Securities, they may become illiquid. Illiquid
securities may be difficult to dispose of at a fair price at the times when the
Fund believes it is desirable to do so. The market price of illiquid securities
generally is more volatile than that of more liquid securities, which may
adversely affect the price that the Fund pays for or recovers upon the sale of
illiquid securities.
In addition to the risks described above, the Fund is also subject to: Interest
Rate Risk, Credit Risk, Call Risk, Currency Risks, Management Risk, Strategic
Transactions, Anti-Takeover Provisions, and Market Disruption Risk. Please see
www.claymore.com/lcm for a more detailed discussion about Fund risks and
considerations.
Annual Report | October 31, 2009 | 9
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Fund SUMMARY | AS OF OCTOBER 31, 2009 (unaudited)
FUND STATISTICS
- ---------------------------------------------------------
Share Price $10.48
Common Share Net Asset Value $11.72
Premium/Discount to NAV -10.58%
Net Assets ($000) $159,370
- ---------------------------------------------------------
TOTAL RETURNS
- ---------------------------------------------------------
(INCEPTION 1/31/05) MARKET NAV
- ---------------------------------------------------------
One Year 34.17% 19.74%
Three Year - average annual -8.16% -7.11%
Since Inception - average annual -3.79% -1.64%
- ---------------------------------------------------------
% OF LONG TERM
TOP TEN INDUSTRIES INVESTMENTS
- ---------------------------------------------------------
Pharmaceuticals 11.9%
Biotechnology 6.6%
Telecommunications 6.3%
Insurance 5.6%
Semiconductors 4.9%
Mining 4.9%
Oil and Gas 4.9%
Banks 4.2%
Healthcare - Products 4.2%
Healthcare - Services 3.5%
- ---------------------------------------------------------
% OF LONG TERM
TOP TEN ISSUERS INVESTMENTS
- ---------------------------------------------------------
Amgen, Inc. 2.4%
Teva Pharmaceutical Finance LLC 2.4%
Danaher Corp. 2.0%
Hologic, Inc. 2.0%
Mylan, Inc. 2.0%
Vale Capital Ltd. 1.9%
Symantec Corp. 1.8%
Lucent Technologies Capital Trust I 1.7%
Actelion Finance SCA 1.6%
XL Capital Ltd. 1.5%
- ---------------------------------------------------------
Past performance does not guarantee future results. All portfolio data is
subject to change daily. For more current information, please visit
www.claymore.com/lcm. The above summaries are provided for informational
purposes only and should not be viewed as recommendations.
Line Chart
SHARE PRICE & NAV PERFORMANCE
Share Price NAV
10/31/2008 $8.97 $10.93
9 11
9.26 11.35
9.02 11.09
8.6 10.76
8.84 10.9
8.7 10.84
8.5 10.66
7.78 10.01
8.08 10.28
7.9 10.1
7.66 9.93
7.41 9.9
7.01 9.6
6.6 9.19
6.65 9.36
7.05 9.69
7.12 9.78
7.4 9.95
7.36 9.97
6.9 9.59
7.14 9.68
7.24 9.68
7.01 9.55
7 9.6
7.3 9.79
7.13 9.76
7.21 9.82
7.01 9.72
7.03 9.79
6.94 9.74
7.25 9.94
7.24 10.01
7.3 9.98
7.4 10.07
7.4 10
7.5 9.98
7.61 10.01
7.7 10.03
7.75 10.04
7.96 10.14
8.11 10.21
8.44 10.32
8.51 10.41
8.73 10.51
8.63 10.45
8.74 10.47
8.61 10.43
8.61 10.36
8.63 10.39
8.61 10.26
8.56 10.22
8.72 10.26
8.54 10.06
8.71 10.18
8.62 10.12
8.57 10.14
8.55 10.2
8.6 10.25
8.88 10.4
8.59 10.31
8.58 10.22
8.64 10.15
8.74 10.23
8.65 10.23
8.83 10.33
9 10.38
9.02 10.41
8.73 10.26
8.44 10.03
8.34 10.04
8.29 10.03
7.96 9.82
7.98 9.85
7.82 9.83
7.54 9.78
7.08 9.69
7.47 9.78
7.62 9.76
7.6 9.68
7.62 9.6
7.05 9.39
6.97 9.36
7.2 9.44
6.74 9.33
6.67 9.31
6.57 9.28
7.04 9.45
7.17 9.46
7.44 9.56
7.43 9.62
7.43 9.58
7.59 9.63
7.76 9.7
7.65 9.74
7.4 9.71
7.75 9.96
7.63 9.89
7.7 9.92
7.85 10
7.72 9.93
7.53 9.77
7.67 9.87
7.8 9.91
8.03 10.1
8.07 10.1
7.94 10.08
7.77 10.02
7.9 10.09
8.19 10.28
8.24 10.28
8.09 10.24
8.11 10.27
8.32 10.37
8.37 10.35
8.06 10.14
8.16 10.24
8.2 10.21
8 10.27
8.32 10.41
8.29 10.34
8.36 10.3
8.47 10.43
4/30/2009 8.47 10.44
8.5 10.47
8.69 10.67
8.59 10.67
8.72 10.73
8.61 10.68
8.88 10.83
8.74 10.76
8.77 10.74
8.17 10.27
8.23 10.32
8.12 10.29
8.32 10.38
8.41 10.44
8.42 10.48
8.34 10.41
8.35 10.41
8.45 10.53
8.31 10.52
8.55 10.58
8.66 10.72
8.86 10.8
8.95 10.86
8.86 10.77
8.98 10.87
9.05 10.83
8.93 10.8
9.01 10.89
9.02 10.9
9.09 10.99
9.08 10.96
8.93 10.81
8.88 10.72
8.81 10.68
8.89 10.69
8.95 10.76
8.76 10.55
8.75 10.55
8.8 10.64
8.95 10.74
8.98 10.77
9.12 10.79
9.07 10.76
9.12 10.8
8.97 10.68
8.95 10.62
8.85 10.57
8.85 10.51
8.87 10.58
8.84 10.57
8.96 10.65
9.05 10.71
9.11 10.88
9.33 10.98
9.33 11
9.64 11.15
9.55 11.19
9.61 11.21
9.7 11.35
9.94 11.42
10.08 11.44
10.02 11.41
9.97 11.38
10.03 11.44
10.18 11.5
10.5 11.64
10.6 11.66
10.52 11.66
10.48 11.65
10.6 11.67
10.53 11.66
10.66 11.6
10.26 11.38
10.33 11.47
10 11.41
9.74 11.25
9.99 11.31
10.28 11.35
10.23 11.4
10.33 11.5
10.4 11.53
10.41 11.55
10.44 11.53
10.34 11.57
10.45 11.59
10.57 11.55
10.43 11.43
10.47 11.43
10.44 11.49
10.33 11.56
10.46 11.66
10.65 11.71
10.89 11.81
10.87 11.83
10.84 11.89
10.97 11.92
11.08 12.01
10.95 11.97
11.1 11.97
11.01 11.95
10.93 12.02
11.04 11.98
10.91 11.88
10.81 11.84
10.98 11.94
10.93 11.93
10.82 11.94
10.76 11.74
10.61 11.69
10.71 11.79
10.83 11.89
10.88 11.92
11.13 12
11.01 12.04
11.24 12.07
11.14 12.07
11.15 12.2
11.14 12.22
11.2 12.15
11.28 12.23
11.3 12.17
11.16 12.17
11.18 12.18
11.11 12.09
10.93 11.99
10.96 11.91
10.5 11.73
10.65 11.85
10/31/2009 10.48 11.72
PORTFOLIO COMPOSITION (% of Total Investments)
Pie Chart
ASSET CLASS
- ----------------------------------
Convertible Bonds 61.4%
Convertible Preferred Stocks 20.7%
Common Stocks 8.6%
Corporate Bonds 7.4%
Exchange-Traded Funds 1.2%
Put Options Purchased 0.6%
Call Options Purchased 0.1%
10 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Portfolio of INVESTMENTS | OCTOBER 31, 2009
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 90.3%
CONVERTIBLE BONDS -- 55.8%
AEROSPACE AND DEFENSE -- 1.0%
$ 1,500,000 Alliant Techsystems, Inc., BB-
2.75%, 2/15/24 $ 1,578,750
- -----------------------------------------------------------------------------------------
AGRICULTURE -- 1.2%
CNY 15,000,000 China Green Holdings Ltd., Ser. CGHL, NR
0.00%, 10/29/10 (Bermuda) (c ) 1,933,350
- -----------------------------------------------------------------------------------------
AUTO MANUFACTURERS -- 1.5%
$ 900,000 Ford Motor Co., CCC
4.25%, 12/15/36 (a) 883,125
$ 1,600,000 Navistar International Corp., B
3.00%, 10/15/14 (a) 1,506,000
- -----------------------------------------------------------------------------------------
2,389,125
- -----------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 5.6%
$ 3,000,000 Amgen, Inc., A+
0.375%, 2/1/13 (a) 2,951,250
$ 2,500,000 Amylin Pharmaceuticals, Inc., NR
3.00%, 6/15/14 1,900,000
$ 1,250,000 Gilead Sciences, Inc., NR
0.50%, 5/1/11 (a) 1,470,312
$ 750,000 Human Genome Sciences, Inc., NR
2.25%, 10/15/11 1,059,375
$ 1,350,000 Life Technologies Corp., BB+
3.25%, 6/15/25 (a) 1,560,937
- -----------------------------------------------------------------------------------------
8,941,874
- -----------------------------------------------------------------------------------------
CHEMICALS -- 1.2%
$ 730,000 Shengda Tech, Inc., NR
6.00%, 6/1/18 (China) (e) 676,163
HK$ 7,750,000 Sinofert Holdings Ltd., NR
0.00%, 8/7/11 (Bermuda) 1,259,959
- -----------------------------------------------------------------------------------------
1,936,122
- -----------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.3%
$ 500,000 Coinstar, Inc., BB
4.00%, 9/1/14 (a) 528,125
- -----------------------------------------------------------------------------------------
COMPUTERS -- 1.8%
Euro 2,000,000 Cap Gemini SA, BBB-
3.50%, 1/1/14 (France) 1,271,780
$ 1,500,000 Maxtor Corp./Seagate Technology, B
2.375%, 8/15/12 (Cayman Islands) (a) 1,535,625
- -----------------------------------------------------------------------------------------
2,807,405
- -----------------------------------------------------------------------------------------
CONSUMER DURABLES AND APPAREL -- 0.6%
CHF 840,000 Swatch Group Finance SA, NR
2.625%, 10/15/10 (Luxembourg) 881,621
- -----------------------------------------------------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 1.1%
CNY 10,400,000 China High Speed Transmission Equipment Group Co., Ltd.,
Ser. CHIS, NR 0.00%, 5/14/11 (Cayman Islands) (c ) 1,702,230
- -----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
ELECTRONICS -- 1.3%
JPY160,000,000 Toshiba Corp., BBB
0.00%, 7/21/11 (Japan) $ 2,026,777
- -----------------------------------------------------------------------------------------
ENTERTAINMENT -- 0.5%
$ 675,000 International Game Technology, BBB
3.25%, 5/1/14 (a)(e) 794,812
- -----------------------------------------------------------------------------------------
HEALTHCARE -- PRODUCTS -- 3.3%
$ 1,400,000 Beckman Coulter, Inc., BBB
2.50%, 12/15/36 (a) 1,583,750
$ 3,200,000 Hologic, Inc., BB-
2.00%, 12/15/37 (a)(f) 2,596,000
$ 1,000,000 NuVasive, Inc., NR
2.25%, 3/15/13 (a)(e) 1,043,750
- -----------------------------------------------------------------------------------------
5,223,500
- -----------------------------------------------------------------------------------------
HEALTHCARE -- SERVICES -- 0.9%
$ 1,700,000 LifePoint Hospitals, Inc., B
3.50%, 5/15/14 (a) 1,521,500
- -----------------------------------------------------------------------------------------
INSURANCE -- 0.7%
$ 1,000,000 Old Republic International Corp., BBB+
8.00%, 5/15/12 1,128,750
- -----------------------------------------------------------------------------------------
INTERNET -- 2.8%
$ 2,125,000 Symantec Corp., NR
1.00%, 6/15/13 (a) 2,366,719
$ 2,500,000 Verisign, Inc., NR
3.25%, 8/15/37 (a) 2,121,875
- -----------------------------------------------------------------------------------------
4,488,594
- -----------------------------------------------------------------------------------------
IRON/STEEL -- 2.6%
$ 1,500,000 ArcelorMittal, BBB
5.00%, 5/15/14 (Luxembourg) (a) 2,040,000
$ 2,000,000 Steel Dynamics, Inc., BB+
5.125%, 6/15/14 (a) 2,162,500
- -----------------------------------------------------------------------------------------
4,202,500
- -----------------------------------------------------------------------------------------
MINING -- 3.0%
$ 1,450,000 AngloGold Ashanti Holdings Finance PLC, NR
3.50%, 5/22/14 (Isle of Man) (a)(e) 1,580,500
$ 1,500,000 Newmont Mining Corp., BBB+
1.25%, 7/15/14 (a) 1,785,000
$ 1,300,000 Xstrata Capital Corp. AVV, Ser. XTA, BBB
4.00%, 8/14/17 (Aruba) 1,496,430
- -----------------------------------------------------------------------------------------
4,861,930
- -----------------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 2.9%
$ 2,850,000 Danaher Corp., A+
0.00%, 1/22/21 (a) 2,864,250
$ 1,300,000 Eastman Kodak Co., NR
7.00%, 4/1/17 (e) 1,054,624
$ 1,025,000 Trinity Industries, Inc., BB-
3.875%, 6/1/36 (a) 752,094
- -----------------------------------------------------------------------------------------
4,670,968
- -----------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | October 31, 2009 | 11
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
continued
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
OIL AND GAS -- 1.7%
$ 1,150,000 Chesapeake Energy Corp., BB
2.25%, 12/15/38 $ 859,625
$ 1,700,000 Goodrich Petroleum Corp., NR
5.00%, 10/1/29 1,804,125
- -----------------------------------------------------------------------------------------
2,663,750
- -----------------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 2.6%
$ 1,150,000 Cameron International Corp., BBB+
2.50%, 6/15/26 (a) 1,436,062
$ 1,075,000 Core Laboratories LP, NR
0.25%, 10/31/11 (Netherlands) (a) 1,288,656
$ 850,000 Schlumberger Ltd., Ser. B, A+
2.125%, 6/1/23 (Netherlands Antilles) (a) 1,354,688
- -----------------------------------------------------------------------------------------
4,079,406
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.9%
CHF 2,145,000 Actelion Finance SCA, NR
0.00%, 11/22/11 (Luxembourg) 2,336,878
$ 1,350,000 Allergan, Inc., NR
1.50%, 4/1/26 1,508,625
$ 1,150,000 Biovail Corp., NR
5.375%, 8/1/14 (Canada) (e) 1,315,312
$ 725,000 Cephalon, Inc., Ser. B, NR
0.00%, 6/15/33 (a) 768,500
$ 2,000,000 King Pharmaceuticals, Inc., BB
1.25%, 4/1/26 1,710,000
$ 3,000,000 Teva Pharmaceutical Finance LLC, Ser. C, BBB+
0.25%, 2/1/26 (Israel) (a) 3,401,250
- -----------------------------------------------------------------------------------------
11,040,565
- -----------------------------------------------------------------------------------------
REAL ESTATE -- 1.8%
CNY 10,000,000 Country Garden Holdings Co., BB-
2.50%, 2/22/13 (Cayman Islands) (c) 1,425,954
$ 1,617,000 Forest City Enterprises, Inc., B-
5.00%, 10/15/16 (e) 1,477,534
- -----------------------------------------------------------------------------------------
2,903,488
- -----------------------------------------------------------------------------------------
REITS -- 0.6%
$ 700,000 China Overseas Finance Investment Cayman Ltd., Ser. COLI, NR
0.00%, 5/14/14 (Cayman Islands) 887,769
- -----------------------------------------------------------------------------------------
RETAIL -- 0.8%
$ 1,250,000 Sonic Automotive, Inc., CCC-
5.00%, 10/1/29 (a) 1,228,125
- -----------------------------------------------------------------------------------------
SEMICONDUCTORS -- 3.1%
$ 750,000 Intel Corp., A-
3.25%, 8/1/39 (a)(e) 808,125
$ 2,000,000 ON Semiconductor Corp., B+
2.625%, 12/15/26 (a) 1,895,000
$ 1,023,000 Verigy Ltd., NR
5.25%, 7/15/14 (Singapore) (a)(e) 1,063,920
$ 1,500,000 Xilinx, Inc., BB
3.125%, 3/15/37 (a) 1,248,750
- -----------------------------------------------------------------------------------------
5,015,795
- -----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
SOFTWARE -- 0.6%
$ 756,000 Take-Two Interactive Software, Inc., NR
4.375%, 6/1/14 (a) $ 948,780
- -----------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.8%
$ 1,700,000 Ciena Corp., B+
0.25%, 5/1/13 1,298,375
$ 1,500,000 CommScope, Inc., B
3.25%, 7/1/15 (a) 1,801,875
JPY138,000,000 Softbank Corp., BB
1.75%, 3/31/14 (Japan) 1,883,345
$ 1,000,000 Virgin Media, Inc., B-
6.50%, 11/15/16 (a)(e) 1,057,500
- -----------------------------------------------------------------------------------------
6,041,095
- -----------------------------------------------------------------------------------------
TRANSPORTATION -- 0.7%
$ 1,200,000 Thoresen Thai Agencies PCL, NR
2.50%, 9/24/12 (Thailand) 1,175,270
- -----------------------------------------------------------------------------------------
UTILITY -- 0.9%
Euro 1,000,000 International Power Jersey Ltd., BB-
3.25%, 7/20/13 (Jersey) 1,364,792
- -----------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS -- 55.8%
(Cost 82,007,695) 88,966,768
- -----------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 18.8%
AGRICULTURE -- 0.7%
26,850 Archer-Daniels-Midland Co., 6.25%, 2011 (a) 1,147,838
- -----------------------------------------------------------------------------------------
BANKS -- 2.8%
13,750 Fifth Third Bancorp, Ser. G, 8.50%, 2049 1,560,625
16,226 Keycorp, Ser. A, 7.75%, 2049 1,315,929
1,715 Wells Fargo & Co., Ser. L, 7.50%, 2049 (a) 1,534,925
- -----------------------------------------------------------------------------------------
4,411,479
- -----------------------------------------------------------------------------------------
ELECTRIC -- 2.1%
30,000 FPL Group, Inc., 8.375%, 2012 (a) 1,462,500
31,050 Great Plains Energy, Inc., 12.00%, 2042 1,918,890
- -----------------------------------------------------------------------------------------
3,381,390
- -----------------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.1%
155,600 2009 Dole Food Automatic Common Exchange Security Trust,
7.00%, 2012 (e) 1,823,632
- -----------------------------------------------------------------------------------------
HEALTHCARE -- SERVICES -- 1.2%
56,000 Omnicare Capital Trust II, Ser. B, 4.00%, 2033 (a) 1,922,480
- -----------------------------------------------------------------------------------------
INSURANCE -- 1.8%
9,500 Assured Guaranty Ltd., 8.50%, 2014 (Bermuda) (a) 684,000
86,775 XL Capital Ltd., 10.75%, 2011 (Cayman Islands) (a) 2,225,779
- -----------------------------------------------------------------------------------------
2,909,779
- -----------------------------------------------------------------------------------------
MINING -- 2.7%
15,000 Freeport-McMoRan Copper & Gold, Inc., 6.75%, 2010 (a) 1,605,000
55,450 Vale Capital Ltd., Ser. RIO, 5.50%, 2010 (Cayman Islands) (a) 2,719,823
- -----------------------------------------------------------------------------------------
4,324,823
- -----------------------------------------------------------------------------------------
See notes to financial statements.
12 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
continued
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------------------
OIL & GAS -- 0.9%
9,588 Whiting Petroleum Corp., 6.25%, 2049 (a) $ 1,459,965
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.8%
2,735 Mylan, Inc., 6.50%, 2010 (a) 2,817,050
- -----------------------------------------------------------------------------------------
PIPELINES -- 0.9%
1,650 El Paso Corp., 4.99%, 2049 (a) 1,442,100
- -----------------------------------------------------------------------------------------
REITS -- 0.6%
15,000 Simon Property Group, Inc., Ser. I, 6.00%, 2049 (a) 885,000
- -----------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 1.6%
3,367 Lucent Technologies Capital Trust I, 7.75%, 2017 (France) (a) 2,474,745
- -----------------------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
1,000 Kansas City Southern, 5.125%, 2049 (a) 949,944
- -----------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS -- 18.8%
(Cost $25,550,144) 29,950,225
- -----------------------------------------------------------------------------------------
COMMON STOCKS -- 7.8%
AGRICULTURE -- 1.0%
20,100 Lorillard, Inc. (a) 1,562,172
- -----------------------------------------------------------------------------------------
BANKS -- 1.0%
110,000 Bank of America Corp. 1,603,800
- -----------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.3%
10,000 Amgen, Inc. (a)(b) 537,300
- -----------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.1%
5,000 Coinstar, Inc. (b) 158,700
- -----------------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 0.5%
17,500 Fluor Corp. (a) 777,350
- -----------------------------------------------------------------------------------------
HEALTHCARE -- PRODUCTS -- 0.5%
16,500 Hologic, Inc. (a)(b) 243,870
15,000 NuVasive, Inc. (a)(b) 544,350
- -----------------------------------------------------------------------------------------
788,220
- -----------------------------------------------------------------------------------------
INTERNET -- 0.1%
10,000 Symantec Corp. (a)(b) 175,800
- -----------------------------------------------------------------------------------------
MINING -- 0.3%
15,000 Barrick Gold Corp. (Canada) 538,950
- -----------------------------------------------------------------------------------------
OIL & GAS -- 1.8%
7,500 Chesapeake Energy Corp. 183,750
60,000 Frontier Oil Corp. (a) 831,600
5,000 Goodrich Petroleum Corp. (a)(b) 128,350
95,000 Valero Energy Corp. (a) 1,719,500
- -----------------------------------------------------------------------------------------
2,863,200
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.9%
115,500 Isis Pharmaceuticals, Inc. (a)(b) 1,463,385
- -----------------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.3%
60,000 Intel Corp. (a) 1,146,600
47,500 Verigy Ltd. (Singapore) (a)(b) 467,400
17,500 Xilinx, Inc. (a) 380,625
- -----------------------------------------------------------------------------------------
1,994,625
- -----------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCKS -- 7.8%
(Cost $13,310,960) $ 12,463,502
- -----------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------
CORPORATE BONDS -- 6.8%
DIVERSIFIED FINANCIAL SERVICES -- 1.0%
$ 1,350,000 Capital One Capital V, BB
10.25%, 8/15/39 1,540,661
- -----------------------------------------------------------------------------------------
HEALTHCARE - SERVICES -- 1.0%
$ 1,000,000 Apria Healthcare Group, Inc., BB+
11.25%, 11/1/14 (e) 1,082,500
$ 500,000 HCA, Inc., BB-
9.25%, 11/15/16 522,500
- -----------------------------------------------------------------------------------------
1,605,000
- -----------------------------------------------------------------------------------------
HOME BUILDERS -- 0.2%
$ 300,000 K Hovnanian Enterprises, Inc., CCC+
10.625%, 10/15/16 (e) 298,500
- -----------------------------------------------------------------------------------------
INSURANCE -- 2.5%
$ 1,000,000 AXA SA, BBB+
6.379%, 12/14/36 (France) (d)(e) 847,500
$ 1,850,000 Liberty Mutual Group, Inc., BB
10.75%, 6/15/58 (d)(e) 1,942,500
$ 1,000,000 Metlife, Inc., BBB
10.75%, 8/1/39 1,211,904
- -----------------------------------------------------------------------------------------
4,001,904
- -----------------------------------------------------------------------------------------
MEDIA -- 0.6%
$ 500,000 Univision Communications, Inc., B-
12.00%, 7/1/14 (e) 540,625
$ 400,000 UPC Holding BV, B-
9.875%, 4/15/18 (Netherlands) (e) 423,000
- -----------------------------------------------------------------------------------------
963,625
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS -- 1.2%
$ 1,665,000 Axcan Intermediate Holdings, Inc., B
12.75%, 3/1/16 1,823,175
- -----------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.3%
$ 500,000 NII Capital Corp., BB-
10.00%, 8/15/16 (e) 527,500
- -----------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS -- 6.8%
(Cost $9,522,500) 10,760,365
- -----------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.1%
70,000 Industrial Select Sector SPDR Fund (a) 1,768,900
- -----------------------------------------------------------------------------------------
(Cost $1,876,502)
- -----------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS -- 90.3%
(Cost $132,267,801) 143,909,760
- -----------------------------------------------------------------------------------------
See notes to financial statements.
Annual Report | October 31, 2009 | 13
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) OPTIONS PURCHASED(B) DATE PRICE VALUE
- ------------------------------------------------------------------------------------------------
CALL OPTIONS PURCHASED -- 0.1%
403 CBOE SPX Volatility Index (a) December 2009 $ 32.50 $ 64,480
- ------------------------------------------------------------------------------------------------
PUT OPTIONS PURCHASED -- 0.5%
1,200 Powershares QQQ November 2009 40.00 88,800
2,700 Powershares QQQ November 2009 41.00 297,000
800 SPDR Trust Series 1 November 2009 104.00 220,800
700 SPDR Trust Series 1 November 2009 105.00 224,000
- ------------------------------------------------------------------------------------------------
830,600
- ------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED -- 0.6%
(Cost $476,421) 895,080
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 90.9%
(Cost $132,744,222) 144,804,840
Other assets in excess of liabilities -- 9.2% 14,739,412
Total Options Written
(Premiums received $290,564) -- (0.1%) (174,485)
- ------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $159,369,767
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
AVV - Aruba Exempt Company
BV - Limited Liability Company
LLC - Limited Liability Company
LP - Limited Partnership
PCL - Public Company Limited
PLC - Public Limited Company
SA - Corporation
SCA - Limited Partnership
(a) All or a portion of this security position represents cover (directly or
through conversion rights) for outstanding options written.
(b) Non-income producing security.
(c) The reference entity is denominated in Chinese Yuan, but traded in U. S.
dollars.
(d) Variable rate or floating rate security. The rate shown is as of October
31, 2009.
(e) 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,
2009, these securities amounted to 11.5% of net assets.
(f) Security is a "step up" bond where the coupon increases or steps up at a
predetermined date.
Ratings shown are per Standard & Poor's. Securities classified as NR are not
rated by Standard & Poors.
See notes to financial statements.
14 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE MARKET
PER CONTRACT) CALL OPTIONS WRITTEN(A) DATE PRICE VALUE
- -------------------------------------------------------------------------------------------
40 Allergan, Inc. December 2009 $60.00 $ 4,600
50 Amgen, Inc. November 2009 57.50 2,750
50 Amgen, Inc. December 2009 60.00 3,150
50 AngloGold Ashanti Holdings Finance PLC November 2009 50.00 250
25 ArcelorMittal November 2009 44.00 250
100 Archer-Daniels-Midland Co. November 2009 31.00 6,000
100 Assured Guaranty Ltd. November 2009 22.50 1,000
50 Assured Guaranty Ltd. December 2009 20.00 2,750
30 Beckman Coulter, Inc. November 2009 75.00 450
35 Cameron International Corp. December 2009 42.50 2,275
50 Cephalon, Inc. November 2009 60.00 2,250
25 Coinstar, Inc. December 2009 40.00 438
25 CommScope, Inc. November 2009 35.00 250
35 Core Laboratories LP December 2009 114.25 5,250
25 Danaher Corp. November 2009 75.00 375
20 El Paso Corp. December 2009 12.00 300
50 Fluor Corp. November 2009 55.00 750
15 Ford Motor Co. December 2009 9.00 195
100 FPL Group, Inc. November 2009 60.00 500
75 Freeport-McMoRan Copper & Gold, Inc. November 2009 85.00 4,200
50 Frontier Oil Corp. November 2009 17.50 250
75 Gilead Sciences, Inc. November 2009 49.00 600
50 Goodrich Petroleum Corp. November 2009 30.00 1,250
65 Hologic, Inc. November 2009 17.50 812
75 Industrial Select Sector SPDR Fund December 2009 28.00 1,725
100 Intel Corp. December 2009 21.00 2,200
25 International Game Technology November 2009 20.00 750
100 Isis Pharmaceuticals, Inc. November 2009 15.00 2,000
100 Isis Pharmaceuticals, Inc. December 2009 15.00 3,000
50 Kansas City Southern November 2009 30.00 250
25 Life Technologies Corp. November 2009 50.00 1,250
10 LifePoint Hospitals, Inc. December 2009 35.00 125
50 Lorillard, Inc. November 2009 80.00 5,250
50 Lucent Technologies Capital Trust November 2009 5.00 250
20 Maxtor Corp./Seagate Technology November 2009 17.00 100
75 Mylan, Inc. November 2009 18.00 750
25 Navistar International Corp. December 2009 40.00 1,625
50 Newmont Mining Corp. December 2009 55.00 1,250
20 NuVasive, Inc. December 2009 40.00 1,900
10 Omnicare Capital Trust II November 2009 25.00 200
10 ON Semiconductor Corp. November 2009 9.00 50
50 Schlumberger Ltd. November 2009 70.00 1,750
40 Simon Property Group, Inc. November 2009 80.00 480
25 Sonic Automotive, Inc. November 2009 15.00 250
50 Steel Dynamics, Inc. December 2009 18.00 375
100 Symantec Corp. November 2009 17.00 9,500
25 Take-Two Interactive Software, Inc. December 2009 12.50 1,250
CONTRACTS
(100 SHARES EXPIRATION EXERCISE MARKET
PER CONTRACT) CALL OPTIONS WRITTEN(A) DATE PRICE VALUE
- -------------------------------------------------------------------------------------------
100 Teva Pharmaceutical Finance LLC November 2009 $55.00 $ 1,100
20 Trinity Industries, Inc. November 2009 20.00 200
75 Vale Capital Ltd. November 2009 29.00 2,400
250 Valero Energy Corp. January 2010 25.00 3,250
175 Verigy Ltd. December 2009 12.50 2,625
100 VeriSign, Inc. November 2009 25.00 3,000
25 Virgin Media, Inc. December 2009 15.00 1,500
50 Wells Fargo & Co. December 2009 31.00 3,500
50 Whiting Petroleum Corp. November 2009 70.00 550
50 Xilinx, Inc. December 2009 24.00 1,750
100 XL Capital Ltd. November 2009 20.00 1,000
- -------------------------------------------------------------------------------------------
TOTAL VALUE OF CALL OPTIONS WRITTEN
(Premiums received $200,913) $ 98,050
- -------------------------------------------------------------------------------------------
PUT OPTIONS WRITTEN(A)
403 CBOE SPX Volatility Index December 2009 25.00 58,435
300 Industrial Select Sector SPDR Fund November 2009 25.00 18,000
- -------------------------------------------------------------------------------------------
TOTAL VALUE OF PUT OPTIONS WRITTEN
(Premiums received $89,651) 76,435
- -------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Premiums received $290,564) $ 174,485
- -------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
(a) Non-income producing security.
See notes to financial statements.
Annual Report | October 31, 2009 | 15
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Statement of ASSETS AND LIABILITIES | OCTOBER 31, 2009
ASSETS
Investments, at value (cost $132,744,222) $ 144,804,840
Receivable for securities sold 8,105,638
Cash & Cash Equivalents 6,097,009
Dividends and interest receivable 1,234,919
Foreign currency, at value (cost $445,672) 501,262
Tax Reclaims receivable 81,346
Unrealized appreciation on foreign exchange currency contracts 2,012
Other assets 39,459
- -----------------------------------------------------------------------------------------
Total assets 160,866,485
- -----------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 991,946
Options written, at value (premiums received of $290,564) 174,485
Investment Management fee payable 70,734
Investment Advisory fee payable 67,961
Unrealized depreciation on foreign exchange currency contracts 20,179
Administrative fee payable 3,738
Accrued expenses and other liabilities 167,675
- -----------------------------------------------------------------------------------------
Total liabilities 1,496,718
- -----------------------------------------------------------------------------------------
NET ASSETS $ 159,369,767
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Common stock, $0.001 par value per share; unlimited number of shares
authorized, 13,603,025 shares issued and outstanding $ 13,603
Additional paid-in capital 243,316,208
Accumulated net realized loss on investments, options, swaps and
foreign currency transactions (96,163,246)
Accumulated net unrealized appreciation on investments, options and
foreign currency translation 12,223,143
Distributions in excess of net investment income (19,941
- -----------------------------------------------------------------------------------------
NET ASSETS $ 159,369,767
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
NET ASSET VALUE
(based on 13,603,025 common shares outstanding) $ 11.72
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
See notes to financial statements.
16 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Statement of OPERATIONS | FOR THE YEAR ENDED OCTOBER 31, 2009
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $1,970) $ 4,728,202
Dividends (net of foreign withholding taxes of $55,202) 2,663,022
- -------------------------------------------------------------------------------------------------------
Total income $ 7,391,224
- -------------------------------------------------------------------------------------------------------
EXPENSES
Investment Management fee 739,126
Investment Advisory fee 710,140
Professional fees 184,708
Trustees'fees and expenses 148,918
Custodian fee 48,560
Printing expense 54,892
Fund accounting 56,401
Administration fee 39,855
Insurance 22,205
Transfer agent fee 18,996
NYSE listing fee 20,469
Miscellaneous 13,348
- -------------------------------------------------------------------------------------------------------
Total expenses 2,057,618
- -------------------------------------------------------------------------------------------------------
Net investment income 5,333,606
- -------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS,
SWAPS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments (49,110,555)
Options 2,273,573
Swaps (628,654)
Foreign currency transactions 7,092
Change in net unrealized appreciation (depreciation) on:
Investments 67,535,260
Options 1,048,325
Foreign currency translation 63,081
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments, options, swaps
and foreign currency transactions 21,188,122
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $26,521,728
=======================================================================================================
See notes to financial statements.
Annual Report | October 31, 2009 | 17
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Statement of CHANGES IN NET ASSETS|
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2009 OCTOBER 31, 2008
- ----------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS FROM OPERATIONS
Net investment income $ 5,333,606 $ 6,418,113
Net realized loss on investments, options, swaps and foreign currency transactions (47,458,544) (44,668,243)
Net change in unrealized appreciation (depreciation) on investments, options and
foreign currency translation 68,646,666 (64,890,514)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 26,521,728 (103,140,644)
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM
Net investment income (9,090,807) (12,263,004)
Return of Capital (6,443,848) (9,501,836)
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to common shareholders (15,534,655) (21,764,840)
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 10,987,073 (124,905,484)
NET ASSETS
Beginning of year 148,382,694 273,288,178
- ----------------------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net investment income and accumulated
undistributed net investment income of $(19,941) and $602,737, respectively) $ 159,369,767 $ 148,382,694
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
18 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Financial HIGHLIGHTS |
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE JANUARY 31, 2005*
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
OCTOBER 31, 2009 OCTOBER 31, 2008 OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.91 $ 20.09 $ 19.41 $ 18.51 $ 19.10(a)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) 0.39 0.47 0.44 0.58 0.47
Net realized and unrealized gain (loss)
on investments,options, swaps and
foreign currency transactions 1.56 (8.05) 1.84 1.92 (0.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.95 (7.58) 2.28 2.50 0.25
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON SHARES' OFFERING EXPENSES
CHARGED TO PAID-IN CAPITAL -- -- -- -- (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
Net investment income (0.67) (0.90) (1.60) (1.60) (0.80)
Return of capital (0.47) (0.70) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to Common Shareholders (1.14) (1.60) (1.60) (1.60) (0.80)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.72 $ 10.91 $ 20.09 $ 19.41 $ 18.51
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 10.48 $ 8.97 $ 17.46 $ 18.78 $ 16.83
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (C)
Net asset value 19.74% -40.37% 12.24% 14.11% 1.12%
Market value 34.17% -42.88% 1.08% 22.20% -12.08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 159,370 $ 148,383 $ 273,288 $ 263,648 $ 251,349
Ratio of net expenses to average net assets 1.42% 1.34% 1.26% 1.29% 1.38%(d)
Ratio of net investment income to average
net assets 3.68% 2.91% 2.21% 3.09% 3.37%(d)
Portfolio turnover rate 236% 192% 181% 415% 246%
* Commencement of investment operations.
(a) Before deduction of offering expenses charged to capital.
(b) Based on average shares outstanding during the period.
(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.
See notes to financial statements.
Annual Report | October 31, 2009 | 19
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Notes to FINANCIAL STATEMENTS | OCTOBER 31, 2009
Note 1 -- ORGANIZATION:
Advent/Claymore Enhanced Growth & Income Fund (the "Fund") was organized as a
Delaware statutory trust on January 30, 2004. The Fund is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended.
The Fund's primary investment objective is to provide current income and
current gains from trading in securities, with a secondary objective of
long-term capital appreciation. The Fund will pursue its investment objectives
by investing its assets in dividend and interest paying equity securities,
convertible securities and non-convertible high-yield securities. Also, in
pursuit of the Fund's primary investment objective, the Fund intends to engage
in an option strategy of writing (selling) covered call options on at least 50%
of the securities held in the portfolio.
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.
In June 2009, the Financial Accounting Standards Board ("FASB") established the
FASB Accounting Standards Codification(TM) ("ASC") as the single source of
authoritative accounting principles reorganized by the FASB in preparation of
financial statements in conformity with U.S. generally accepted accounting
principles ("GAAP"). The ASC superseded existing non-grandfathered, non-U.S.
Securities and Exchange Commission ("SEC") accounting and reporting standards.
The ASC did not change GAAP but rather organized it into a hierarchy where all
guidance with the ASC carried an equal level of authority. The ASC became
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. The implementation of the ASC did not have a material
effect on the Fund's financial statements.
The following is a summary of significant accounting policies followed by the
Fund.
(A) VALUATION OF INVESTMENTS
Equity securities listed on an exchange are valued at the last reported sale
price on the primary exchange on which they are traded. Equity securities
traded on an exchange for which there are no transactions on a given day are
valued at the mean of the closing bid and asked prices. Securities traded on
NASDAQ are valued at the NASDAQ Official Closing Price. Equity securities not
listed on a securities exchange or NASDAQ are valued at the mean of the closing
bid and asked prices. Debt securities are valued by independent pricing
services or dealers using the closing bid prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type. Futures contracts are valued using the settlement price
established each day on the exchange on which they are traded. Exchange-traded
options are valued at the closing price, if traded that day. If not traded,
they are valued at the mean of the bid and asked prices on the primary exchange
on which they are traded. Short-term securities with remaining maturities of 60
days or less are valued at amortized cost, which approximates market value.
For those securities where quotations or prices are not available, the
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Valuations in accordance with these procedures
are intended to reflect each security's (or asset's) "fair value". Such "fair
value" is the amount that the Fund might reasonably expect to receive for the
security (or asset) upon its current sale. Each such determination should be
based on a consideration of all relevant factors, which are likely to vary from
one pricing context to another. Examples of such factors may include, but are
not limited to: (i) the type of security, (ii) the initial cost of the
security, (iii) the existence of any contractual restrictions on the security's
disposition, (iv) the price and extent of public trading in similar securities
of the issuer or of comparable companies, (v) quotations or evaluated prices
from broker-dealers and/or pricing services, (vi) information obtained from the
issuer, analysts, and/or the appropriate stock exchange (for exchange traded
securities), (vii) an analysis of the company's financial statements, and
(viii) an evaluation of the forces that influence the issuer and the market(s)
in which the security is purchased and sold (e.g. the existence of pending
merger activity, public offerings or tender offers that might affect the value
of the security). There are no securities fair valued in accordance with such
procedures established by the Board of Trustees at October 31, 2009.
GAAP requires disclosure of fair valuation measurements as of each measurement
date. In compliance with GAAP, the Fund follows a fair value hierarchy that
distinguishes between market data obtained from independent sources (observable
inputs) and the Fund's own market assumptions (unobservable inputs). These
inputs are used in determining the value of the Fund's investments and
summarized in the following fair value hierarchy:
Level 1 -- quoted prices in active markets for identical securities
Level 2 -- quoted prices in inactive markets or other significant observable
inputs (e.g. quoted prices for similar securities; interest rates; prepayment
speed; credit risk; yield curves)
Level 3 -- significant unobservable inputs (e.g. discounted cash flow analysis;
non-market based methods used to determine fair value)
Observable inputs are those based upon market data obtained from independent
sources, and unobservable inputs reflect the Fund's own assumptions based on
the best information available. The various input levels are not an indication
of the risk associated with investing in those securities.
20 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS continued
The following table represents the Fund's investments carried on the Statement
of Assets and Liabilities by caption and by level within the fair value
hierarchy as of October 31, 2009:
QUOTED PRICES IN SIGNIFICANT
ACTIVE MARKETS FOR SIGNIFICANT OTHER UNOBSERVABLE
IDENTICAL ASSETS OBSERVABLE INPUTS INPUTS
(VALUE IN $000s) (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
- ----------------------------------------------------------------------------------------
Assets:
Convertible Bonds $ -- $ 88,967 $ -- $ 88,967
Convertible
Preferred Stocks:
Agriculture 1,148 -- -- 1,148
Banks 4,411 -- -- 4,411
Electric 1,919 1,462 -- 3,381
Food Products -- 1,824 -- 1,824
Healthcare--Services 1,922 -- -- 1,922
Insurance 2,226 684 -- 2,910
Mining 4,325 -- -- 4,325
Oil & Gas 1,460 -- -- 1,460
Pharmaceuticals 2,817 -- -- 2,817
Pipelines -- 1,442 -- 1,442
REITS 885 -- -- 885
Telecommunications -- 2,475 -- 2,475
Transportation -- 950 -- 950
Common Stocks 12,464 -- -- 12,464
Corporate Bonds -- 10,760 -- 10,760
Exchange-Traded Funds 1,769 -- -- 1,769
Options Purchased 895 -- -- 895
Foreign Exchange
Currency Contracts -- 2 -- 2
- ----------------------------------------------------------------------------------------
Total $ 36,241 $ 108,566 $ -- $ 144,807
- ----------------------------------------------------------------------------------------
Liabilities:
Options Written $ 174 $ -- $ -- $ 174
Foreign Exchange
Currency Contracts -- 20 -- 20
- ----------------------------------------------------------------------------------------
Total $ 174 $ 20 $ -- $ 194
- ----------------------------------------------------------------------------------------
(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 on the ex-dividend date and interest income is recorded on
an accrual basis. Discounts or premiums on corporate debt securities purchased
are accreted or amortized to interest income over the lives of the respective
securities using the effective interest method.
(C) 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 respective exchange
rates on the last day of the period. Purchases and sales of investments and
income and expenses denominated in foreign currencies are translated at the
exchange rate on the date of the transaction.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Annual Report | October 31, 2009 | 21
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS continued
Foreign exchange realized gain or loss resulting from holding of a foreign
currency, expiration of a currency exchange contract, difference in 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 the Fund's accounting records on the date of receipt is shown
as net realized gains or losses on foreign currency transactions in the Fund's
Statement of Operations.
Foreign exchange unrealized gain or loss on assets and liabilities, other than
investments, is shown as unrealized appreciation (depreciation) on foreign
currency translation in the Fund's Statement of Operations.
(D) COVERED CALL OPTIONS
The Fund intends to pursue its primary objective by employing an option
strategy of writing (selling) covered call options on at least 50% of the
securities held in the portfolio of the Fund. The Fund seeks to produce a high
level of current income and gains generated from option writing premiums and,
to a lesser extent, from dividends.
When an option is written, the premium received is recorded as an asset with an
equal liability and is subsequently marked to market to reflect the current
market value of the option written. These liabilities are reflected as options
written in the Statement of Assets and Liabilities. Premiums received from
writing options which expire unexercised are recorded on the expiration date as
a realized gain. The difference between the premium received and the amount
paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium is less than
the amount paid for the closing purchase transactions, as a realized loss. If a
call option is exercised, the premium is added to the proceeds from the sale of
the underlying security in determining whether there has been a realized gain
or loss.
(E) 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 and/or credit risk or to
generate income. The swaps are valued daily at current market value and any
unrealized gain or loss is included in the Statement of Assets and Liabilities.
Gain or loss is realized upon periodic payments and the ultimate termination of
the swap and is equal to the difference between the Fund's basis in the swap
and the proceeds of the closing transaction, including any fees. 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. Upon termination
of a swap agreement, a payable to or receivable from swap counterparty is
established on the Statement of Assets and Liabilities to reflect the net
gain/loss, including interest income/expense, on terminated swap positions, of
such amounts with the counterparty upon settlement according to the terms of
the swap agreement.
Realized gain (loss) upon termination of swap contracts is recorded on the
Statement of Operations. Fluctuations in the value of swap contracts are
recorded as a component of net change in unrealized appreciation (depreciation)
of swap contracts. Net periodic payments received by the Fund are included as
part of realized gains (losses) and, in the case of accruals for periodic
payments, are included as part of unrealized appreciation (depreciation) on the
Statement of Operations. There were no open swap agreements at October 31,
2009.
(F) FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to the change in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchases and sales commitments
denominated in foreign currencies and for investment purposes. Fluctuations in
the value of open forward exchange currency contracts are recorded for
financial reporting purposes as unrealized appreciation and depreciation by the
Fund.
Forward exchange currency contracts involve elements of both market and credit
risk in excess of the amounts reflected on the Statement of Assets and
Liabilities.
(G) CONCENTRATION OF RISK
It is the Fund's policy to invest a significant portion of its assets in
convertible securities. Although convertible securities do derive part of their
value from that of the securities into which they are convertible, they are not
considered derivative financial instruments. However, certain of the Fund's
investments include features which render them more sensitive to price changes
in their underlying securities. Consequently, this exposes the Fund to greater
downside risk than traditional convertible securities, but still less than that
of the underlying common stock.
(H) DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays quarterly dividends to common shareholders. These
dividends consist of investment company taxable income, which generally
includes qualified dividend income, ordinary income and short-term capital
gains. Any net realized long-term gains are distributed annually to common
shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The amount
and timing of distributions are determined in accordance with federal income
tax regulations, which may differ from U.S. generally accepted accounting
principles.
22 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS continued
Note 3 -- INVESTMENT ADVISORY AGREEMENT, INVESTMENT MANAGEMENT AGREEMENT AND
OTHER AGREEMENTS:
Pursuant to an Investment Advisory Agreement (the "Agreement") between Claymore
Advisors, LLC (the "Adviser") and the Fund, the Adviser furnishes offices,
necessary facilities and equipment, provides administrative services to the
Fund, oversees the activities of Advent Capital Management, LLC (the
"Investment Manager"), provides personnel and pays the compensation of all
Trustees and Officers of the Fund who are its affiliates. As compensation for
these services, the Fund pays the Adviser an annual fee, payable monthly in
arrears, at an annual rate equal to 0.49% of the average Managed Assets during
such month. Managed Assets means the total assets of the Fund (including any
assets attributable to any preferred shares or otherwise attributable to the
use of financial leverage, if any) less the sum of accrued liabilities.
Pursuant to an Investment Management Agreement between the Investment Manager
and the Fund, the Fund has agreed to pay the Investment Manager an annual fee,
payable monthly in arrears, at an annual rate equal to 0.51% of the average
Managed Assets during such month for the services and facilities provided by
the Investment Manager to the Fund. These services include the day-to-day
management of the Fund's portfolio of securities, which includes buying and
selling securities for the Fund and investment research. The Investment Manager
also provides personnel to the Fund and pays the compensation of all Trustees
and Officers of the Fund who are its affiliates.
On July 17, 2009, Claymore Group Inc., the parent of the Adviser, entered into
an Agreement and Plan of Merger between and among Claymore Group Inc., Claymore
Holdings, LLC and GuggClay Acquisition, Inc. (with the latter two entities
being wholly-owned, indirect subsidiaries of Guggenheim Partners, LLC
("Guggenheim")), whereby GuggClay Acquisition, Inc. merged into Claymore Group
Inc., which is the surviving entity. This transaction was completed on October
14, 2009 (the "Effective Date") and resulted in a change-of-control whereby
Claymore Group Inc. and its subsidiaries, including the Adviser, became
indirect, wholly-owned subsidiaries of Guggenheim. The transaction is not
expected to affect the daily operations of the Fund or the investment
management activities of the Adviser.
Under the 1940 Act, the consummation of this transaction resulted in the
automatic termination of the Advisory Agreement. Accordingly, on September 29,
2009, the Board of Trustees approved an interim investment advisory agreement
between the Fund and the Adviser (the "Interim Advisory Agreement"). The
Interim Advisory Agreement took effect as of the Effective Date and will
terminate upon the earlier of: (a) 150 calendar days after the Effective Date
or (b) the approval of a new investment advisory agreement by the shareholders
of the Fund. In addition, the advisory fees earned by the Adviser pursuant to
the Interim Advisory Agreement will be held in an interest-bearing escrow
account with the Fund's custodian during the term of the Interim Advisory
Agreement. If the Fund's shareholders approve a new advisory agreement with the
Adviser prior to the expiration of the term of the Interim Advisory Agreement,
the amount in the escrow account (including any interest earned) with respect
to the Fund shall be paid to the Adviser. If the Fund's shareholders do not
approve a new advisory agreement with the Adviser prior to the expiration of
the term of the Interim Advisory Agreement, the Adviser shall be paid, out of
the escrow account with respect to the Fund, the lesser of (i) the Adviser's
costs incurred in providing the services under the Interim Advisory Agreement
(including any interest earned on that amount while in escrow) with respect to
the Fund; or (ii) the total amount in the escrow account (including any
interest earned) with respect to the Fund. Other than the effective dates and
the provisions set forth above regarding the advisory fees' placement into an
escrow account, the terms and conditions of the Interim Advisory Agreement are
substantively identical to those of the Advisory Agreement.
On September 29, 2009, the Board of Trustees approved a new investment advisory
agreement between the Fund and the Adviser (the "New Advisory Agreement") and
recommended that the New Advisory Agreement be submitted to the shareholders of
the Fund for their approval. The New Advisory Agreement will take effect with
respect to the Fund upon its approval by the shareholders of the Fund and will
have an initial term of one year. Thereafter, the New Advisory Agreement will
continue in effect only if its continuance is approved by the Board of
Trustees. Other than effective dates, there are no material differences between
the terms of the New Advisory Agreement and those of the Advisory Agreement.
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting
and transfer agent. As custodian, BNY is responsible for the custody of the
Fund's assets. As transfer agent, BNY is responsible for performing transfer
agency services for the Fund. As accounting agent, BNY is responsible for
maintaining the books and records of the Fund's securities and cash.
Claymore Advisors, LLC provides fund administration services to the Fund. As
compensation for its services performed under the Administration Agreement,
Claymore Advisors, LLC receives an administration fee payable monthly at the
annual rate set forth below as a percentage of the average daily managed assets
of the Fund:
NET ASSETS RATE
- ---------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
- ---------------------------------------------------
Certain Officers and Trustees of the Fund are also Officers and Directors of
the Adviser or Investment Manager. The Fund does not compensate its Officers or
Trustees who are Officers of the aforementioned firms.
Annual Report | October 31, 2009 | 23
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS continued
Note 4 -- FEDERAL INCOME TAXES:
The Fund intends to continue 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
can avoid a 4% federal excise tax that is assessed on the amount of the under
distribution.
In order to present paid-in-capital in excess of par, undistributed net
investment income and accumulated realized gains or losses on the Statement of
Assets and Liabilities that more closely represent their tax character, certain
adjustments have been made to undistributed net investment income and
accumulated realized gains or losses on investments. A permanent book to tax
difference relating to the distributions received from royalty trusts and trust
preferred securities totaling $3,127,431 was reclassified from accumulated
realized gain to accumulated undistributed net investment income. A permanent
book and tax difference relating to gains on foreign currency transactions in
the amount of $7,092 were reclassified from net realized gain to net investment
income. Finally, a permanent book to tax difference relating to prior year
distributions paid and the characterization of distributions received from real
estate investment trusts totaling $2,311 was reclassified from accumulated
undistributed net investment income to capital.
Subsequent to the October 31, 2008, reporting period, it was determined that a
reclassification of $2,322 was required between ordinary income and capital
gain, resulting in a recharacterization between distributions paid from
ordinary income and distributions paid from return of capital. This
reclassification related to real estate investment trusts and partnerships held
by the Fund and was the result of information becoming available on the
investments after the prior year-end.
At October 31, 2009, the cost and related gross unrealized appreciation and
depreciation on investments for tax purposes, excluding written options and
foreign currency translations are as follows:
UNDISTRIBUTED UNDISTRIBUTED
COST OF NET TAX NET TAX UNREALIZED ORDINARY LONG-TERM
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED APPRECIATION INCOME/ GAINS/
FOR TAX UNREALIZED UNREALIZED APPRECIATION ON DERIVATIVES AND (ACCUMULATED (ACCUMULATED
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS FOREIGN CURRENCY ORDINARY LOSS) CAPITAL LOSS)
- ------------------------------------------------------------------------------------------------------
$133,757,769 $14,398,363 $(3,351,292) $11,047,071 $196,352 -- $(95,101,353)
- ------------------------------------------------------------------------------------------------------
The differences between book basis and tax basis unrealized
appreciation/(depreciation) are attributable to the tax deferral of losses on
wash sales and additional income accrued for tax purposes on certain
convertible securities.
At October 31, 2009, for federal income tax purposes, the Fund had a capital
loss carryforward of $95,101,353 available to offset possible future capital
gains. Of the capital loss carryforward $42,681,592 is set to expire on October
31, 2016, and $52,419,761 is set to expire on October 31, 2017.
For the years ended October 31, 2009 and October 31, 2008, the tax character of
distributions paid of $9,090,807 and $10,938,810 was ordinary income, $0 and
$1,324,194 was long-term capital gain, and $6,443,848 and $9,501,836 was return
of capital, respectively.
For all open tax years and all major jurisdictions, management of the Fund has
concluded that there are no significant uncertain tax positions that would
require recognition in the financial statements. Open tax years are those that
are open for examination by taxing authorities (i.e. generally the last four
tax year ends and the interim tax period since then). Furthermore, management
of the Fund is also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will significantly
change in the next twelve months.
Note 5 -- INVESTMENTS IN SECURITIES:
For the year ended October 31, 2009, purchases and sales of investments,
excluding options and short-term securities, were $316,057,449 and
$324,143,338, respectively.
Note 6 -- DERIVATIVES:
(A) COVERED CALL OPTIONS
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 the 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).
24 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS continued
The Fund will follow a strategy of writing covered call options, which is a
strategy designed to produce income from option premiums and offset a portion
of a market decline in the underlying security. This strategy will be the
Fund's principal investment strategy in seeking to pursue its primary
investment objective. The Fund will only "sell" or "write" options on
securities held in the Fund's portfolio. It may not sell "naked" call options,
i.e., options on securities that are not held by the Fund or on more shares of
a security than are held in the Fund's portfolio. The Fund will consider a call
option written with respect to a security underlying a convertible security to
be covered so long as (i) the convertible security, pursuant to its terms,
grants to the holders of such security the right to convert the convertible
security into the underlying security and (ii) the convertible security, upon
conversion, will convert into enough shares of the underlying security to cover
the call option written by the Fund.
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. The writer of an option has no control over the
time when it may be required to fulfill 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.
The Fund entered into written option contracts for the year ended October 31,
2009.
Details of the transactions were as follows:
NUMBER OF CONTRACTS PREMIUMS RECEIVED
- -------------------------------------------------------------------------------------
Options outstanding, beginning of year 11,845 $ 1,077,416
Options written during the year 59,176 5,707,515
Options expired during the year (20,050) (1,645,047)
Options closed during the year (37,938) (3,924,628)
Options assigned during the year (9,060) (924,692)
- -------------------------------------------------------------------------------------
Options outstanding, end of year 3,973 $ 290,564
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
(B) SWAPS
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest. Total return
swap agreements involve commitments to receive (and pay) interest over a
floating rate (LIBOR) based on a notional amount. To the extent the total
return of the security (price changes, interest paid/received, rebate earned on
collateral posted by the Fund) is positive, the Fund will receive a payment
from the counterparty (or if negative, make a payment to the counterparty).
Credit default swap transactions involve the Fund's agreement to exchange the
credit risk of an issuer. A buyer of a credit default swap is said to buy
protection by paying periodic fees in return for a contingent payment from the
seller if the issuer has a credit event such as bankruptcy, a failure to pay
outstanding obligations or deteriorating credit while the swap is outstanding.
A seller of a credit default swap is said to sell protection and thus collects
the periodic fees and profits if the credit of the issuer remains stable or
improves while the swap is outstanding but the seller in a credit default swap
contract would be required to pay an agreed-upon amount, which approximates the
notional amount of the swap, to the buyer in the event of an adverse credit
event of the issuer.
(C) FORWARD EXCHANGE CURRENCY CONTRACTS
A forward exchange currency contract is a commitment to purchase or sell a
foreign currency on a future date at a negotiated forward rate. The gain or
loss arising from the difference between the original contracts and the closing
of such contracts would be included in net realized gain or loss on foreign
currency transactions.
Risk may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Fund has in that particular currency
contract.
At October 31, 2009, the following forward exchange currency contracts were
outstanding:
UNREALIZED
SHORT CONTRACTS CURRENT VALUE APPRECIATION/DEPRECIATION
- -------------------------------------------------------------------------------------
EURO, 759,500 expiring 11/02/09 $1,120,605 $ 2,012
Japanese Yen, 290,000,000 expiring 12/16/09 3,204,534 (20,171)
- -------------------------------------------------------------------------------------
$ (18,159)
- -------------------------------------------------------------------------------------
UNREALIZED
LONG CONTRACTS CURRENT VALUE APPRECIATION/DEPRECIATION
- -------------------------------------------------------------------------------------
Hong Kong Dollar, 2,014,500 expiring 11/02/09 $ 259,927 $ (8)
- -------------------------------------------------------------------------------------
Total Unrealized Appreciation/Depreciation
on forward exchange currency contracts $ (18,167)
- -------------------------------------------------------------------------------------
Annual Report | October 31, 2009 | 25
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS continued
(D) ACCOUNTING PRONOUNCEMENT FOR DERIVATIVES:
The Fund is required by GAAP to disclose: 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.
Derivative Notional amounts and values as of October 31, 2009 are indicative of
the volume of the Fund's derivatives activities over the reporting period,
other than swaps.
The Fund decreased the volume of activity in swaps during the period ended
October 31, 2009, with an average notional balance of approximately $3,019,231
during the period ended October 31, 2009 and an ending notional balance of $0.
The following table presents the types of derivatives in the Fund by location
as presented on the Statement of Assets and Liabilities as of October 31,
2009:
Statement of Assets & Liabilities Presentation of Fair Values of Derivative Instruments:
- ------------------------------------------------------------------------------------------------------------------------------------
(amounts in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Derivatives Liability Derivatives
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives not accounted for as Statement of Assets and Fair Value Statement of Assets and Fair Value
hedging instruments Liabilities Location Liabilities Location
- ------------------------------------------------------------------------------------------------------------------------------------
Equity contracts Investments in securities $895 Options written, at value $174
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign exchange currency Unrealized appreciation on 2 Unrealized depreciation on 20
contracts currency contracts currency contracts
- ------------------------------------------------------------------------------------------------------------------------------------
Total $897 $194
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The following table presents the effect of Derivative Instruments on the
Statement of Operations for the year ended October 31, 2009:
(amounts in thousands) Amount of Realized Gain/(Loss) on Derivatives
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives not accounted for as Foreign Currency
hedging instruments Options Swaps Transactions Total
- ------------------------------------------------------------------------------------------------------------------------------------
Equity contracts $2,274 $ -- $ -- $2,274
- ------------------------------------------------------------------------------------------------------------------------------------
Credit default contracts -- (629) -- (629)
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign exchange currency contracts -- -- 7 7
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,274 $(629) $ 7 $1,652
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation on Derivatives
- ------------------------------------------------------------------------------------------------------------------------------------
Derivatives not accounted for as Foreign Currency
hedging instruments Options Swaps Transactions Total
- ------------------------------------------------------------------------------------------------------------------------------------
Equity contracts $1,048 $ -- $ -- $1,048
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign exchange currency contracts -- -- 63 63
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,048 $ -- $63 $1,111
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Note 7 -- CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.001 par value, authorized
and 13,603,025 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue shares during the year ended October
31, 2009 or the year ended October 31, 2008.
Note 8 -- 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 involve
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 9 -- SUBSEQUENT EVENT:
On November 2, 2009, the Board of Trustees declared a quarterly dividend of
$0.264 per common share. This dividend was payable on November 30, 2009 to
shareholders of record on November 13, 2009.
The Fund has performed an evaluation of subsequent events through December 24,
2009, which is the date the financial statements were issued, and determined
that no additional events have occurred that require disclosure.
26 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Report of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM|
To the Board of Trustees and Shareholders of
Advent/Claymore Enhanced Growth & Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Advent/Claymore Enhanced
Growth & Income Fund (the "Fund") at October 31, 2009, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2009, by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
December 24, 2009
Annual Report l October 31, 2009 l 27
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | SUPPLEMENTAL INFORMATION
Supplemental INFORMATION |(unaudited)
FEDERAL INCOME TAX INFORMATION
Qualified dividend income of as much as $1,639,612 was received by the Fund
through October 31, 2009. The Fund intends to designate the maximum amount of
dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth
Tax Relief Reconciliation Act of 2003.
For corporate shareholders $1,509,766 of investment income (dividend income
plus short-term gains, if any) qualified for the dividends-received deduction.
In January 2010, 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 2009.
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on September 29, 2009.
At this meeting, shareholders voted on the election of trustees.
With regard to the election of the following Class II Trustees by common
shareholders of the Fund:
# OF SHARES
- ------------------------------------------------------------
IN FAVOR AGAINST WITHHELD
- ------------------------------------------------------------
Tracy V. Maitland 11,415,887 236,426 337,272
Ronald A. Nyberg 11,440,670 219,697 329,188
TRUSTEES
The Trustees of the Advent/Claymore Enhanced Growth & Income Fund and their
principal occupations during the past five years:
NAME, ADDRESS, YEAR OF TERM OF OFFICE* PRINCIPAL OCCUPATIONS DURING NUMBER OF FUNDS
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel Black+ Since 2005 Partner, the Wicks Group of Cos., LLC 3 Director of Penn Foster
Year of birth: 1960 (2003-present).Formerly, Managing Director Education Group, Inc.
Trustee and Co-head of the Merchant Banking Group
at BNY Capital Markets, a division of
The Bank of New York Co., Inc. (1998-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes++ Since 2005 Private Investor (2001-present), Formerly, 44 None.
Year of birth: 1951 Senior Vice President, Treasurer, PepsiCo,
Trustee Inc. (1993-1997), President, Pizza Hut
International (1991-1993) and Senior Vice
President, Strategic Planning and New
Business Development (1987-1990) of PepsiCo,
Inc. (1987-1997).
- ------------------------------------------------------------------------------------------------------------------------------------
Derek Medina+ Since 2004 Senior Vice President, Business Affairs 3 Director of Young Scholar's
Year of birth: 1966 at ABC News(2008-present). Vice President, Institute.
Trustee Business Affairs and News Planning at ABC
News (2003-2008). Formerly, Executive
Director, Office of the President at ABC
News (2000-2003). Former Associate at Cleary
Gottlieb Steen & Hamilton (law firm)(1995-1998).
Former associate in Corporate Finance at
J.P. Morgan/Morgan Guaranty (1988-1990).
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg++ Since 2004 Partner of Nyberg & Cassioppi, LLC, a 47 None.
Year of birth: 1953 law firm specializing in corporate law,
Trustee estate planning and business transactions
(2000-present). Formerly, Executive Vice President,
General Counsel and Corporate Secretary of
Van Kampen Investments (1982-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald L. Seizert, CFP+ Since 2004 Chief Executive Officer of Seizert Capital 3 Former Director of Loomis
Year of birth: 1952 Partners, LLC, where he directs the equity Sayles and Co., L.P.
Trustee disciplines of the firm and serves as a
co-manager of the firm's hedge fund, Proper
Associates, LLC (2000-present). Formerly,
Co-Chief Executive (1998-1999) and a
Managing Partner and Chief Investment
Officer-Equities of Munder Capital Management,
LLC (1995-1999). Former Vice President and
Portfolio Manager ofLoomis, Sayles & Co.,
L.P. (asset manager) (1984-1995). Former
Vice President and Portfolio Manager at First
of America Bank (1978-1984).
- ------------------------------------------------------------------------------------------------------------------------------------
Michael A. Smart+ Since 2004 Managing Partner, Cordova, Smart & 3 Director, Country Pure Foods.
Year of birth: 1960 Williams LLC, Advisor to First Atlantic Chairman, Board of Directors,
Trustee Capital Ltd., (2001-present). Formerly, Berkshire Blanket, Inc.,
a Managing Director in Investment President and Chairman, Board
Banking-The Private Equity Group (1995-2001) of Directors,Sqwincher
and a Vice President in Investment Holdings. Board of Directors,
Banking-Corporate Finance (1992-1995) at Sprint Industrial Holdings.
Merrill Lynch & Co. Founding Partner of Co-chair of theBoard of H20
The Carpediem Group, a private placement plus.
firm (1991-1992). Former Associate at
Dillon,Read and Co. (investment bank)
(1988-1990).
- ------------------------------------------------------------------------------------------------------------------------------------
28 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
NAME, ADDRESS, YEAR OF TERM OF OFFICE* PRINCIPAL OCCUPATIONS DURING NUMBER OF FUNDS
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Tracy V. Maitland+(0) Since 2004 President of Advent Capital Management, 3 None.
Year of birth: 1960 LLC, which he founded in 1995. Prior to
Trustee, President and June 2001, President of Advent Capital
Chief Executive Officer Management, a division of Utendahl Capital.
- ------------------------------------------------------------------------------------------------------------------------------------
+ Address for all Trustees noted: 1065 Avenue of the Americas, 31st Floor,
New York, NY 10018
++ Address for all Trustees 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. Seizert, Medina and Barnes, as Class III Trustees, are expected to
stand for re-election at the Fund's 2010 annual meeting of shareholders.
- --- Messrs. Smart and Black, as Class I Trustees, are expected to stand for
re-election at the Fund's 2011 annual meeting of shareholders.
- --- Messrs. Maitland and Nyberg, as a Class II Trustees, are expected to stand
for re-election at the Fund's 2012 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.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
0 Mr. Maitland 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 Advent
Capital Management, LLC, the Fund's Investment Manager.
Nicholas Dalmaso served as a Trustee of the Fund. Mr. Dalmaso did not stand for
re-election at the Fund's annual meeting of shareholders on September 29,
2009 (the"Annual Meeting"). Based on a recommendation from the Nominating
and Governance Committee of the Board and pursuant to authority granted to
it under reduce its size from eight to seven Trustees upon the expiration
of Mr. the Fund's Agreement and Declaration of Trust, the Board decided to
Dalmaso's term at the Annual Meeting.
OFFICERS
The Officers of the Advent/Claymore Enhanced Growth & Income Fund and their
principal occupations during the past five years:
NAME, ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS AND
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED OTHER AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
- ------------------------------------------------------------------------------------------------------------------------------------
F. Barry Nelson Since 2005 Co-Portfolio Manager at Advent Capital Management, LLC (2001-present).
Year of birth: 1943 Prior to 2001, Mr. Nelson held the same position at AdventCapital
Vice President Management, a division of Utendahl Capital.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert White Since 2005 Chief Financial Officer, Advent Capital Management, LLC (2005-present).
Year of birth: 1965 Previously, Vice President, Client Service Manager, Goldman Sachs Prime
Treasurer and Brokerage (1997-2005).
Chief Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Rodd Baxter
Year of birth: 1950
Secretary and Chief General Counsel, Advent Capital Management, LLC (2002-present);
Compliance Officer Since 2005 Formerly, Director and Senior Counsel, SG Cowen Securities Corp.
(1998-2002).
- ------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers unless otherwise noted: 1065 Avenue of the
Americas, 31st Floor, New York, NY 10018
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
Annual Report | October 31, 2009 | 29
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Dividend Reinvestment PLAN |(unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting The Bank of New York Mellon (the "Plan Administrator"), all
dividends declared on common shares of the Fund will be automatically
reinvested by the Plan Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such
termination or resumption will be effective with respect to any subsequently
declared dividend or other distribution. Some brokers may automatically elect
to receive cash on your behalf and may re-invest that cash in additional common
shares of the Fund for you. If you wish for all dividends declared on your
common shares of the Fund to be automatically reinvested pursuant to the Plan,
please contact your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below,
either (i) through receipt of additional unissued but authorized common shares
from the Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding
common shares on the open market ("Open-Market Purchases") on the New York
Stock Exchange or elsewhere. If, on the payment date for any Dividend, the
closing market price plus estimated brokerage commission per common share is
equal to or greater than the net asset value per common share, the Plan
Administrator will invest the Dividend amount in Newly Issued Common Shares on
behalf of the participants. The number of Newly Issued Common Shares to be
credited to each participant's account will be determined by dividing the
dollar amount of the Dividend by the net asset value per common share on the
payment date; provided that, if the net asset value is less than or equal to
95% of the closing market value on the payment date, the dollar amount of the
Dividend will be divided by 95% of the closing market price per common share on
the payment date. If, on the payment date for any Dividend, the net asset value
per common share is greater than the closing market value plus estimated
brokerage commission, the Plan Administrator will invest the Dividend amount in
common shares acquired on behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition
of fewer common shares than if the Dividend had been paid in Newly Issued
Common Shares on the Dividend payment date. Because of the foregoing difficulty
with respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the
account of each Plan participant will be held by the Plan Administrator on
behalf of the Plan participant, and each shareholder proxy will include those
shares purchased or received pursuant to the Plan. The Plan Administrator will
forward all proxy solicitation materials to participants and vote proxies for
shares held under the Plan in accordance with the instruction of the
participants.
There will be no brokerage charges with respect to common shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commission incurred in connection with Open-Market Purchases. The
automatic reinvestment of Dividends will not relieve participants of any
Federal, state or local income tax that may be payable (or required to be
withheld) on such Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, BNY Mellon Shareholder Services, Attention: Stock Transfer
Department, P.O. Box 358015, Pittsburg, PA 15252; Phone Number: (866) 488-3559.
30 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Interim Advisory Agreement and
NEW ADVISORY AGREEMENT |
The Board, including the Independent Trustees, approved each of the Interim
Advisory Agreement and the New Advisory Agreement. The Board reviewed materials
received from Claymore, Guggenheim and independent legal counsel. The Board
members also had previously received, throughout the year, Board meeting
information regarding Claymore's services for the Fund. Earlier in 2009,
Claymore informed the Board that it was in discussions with Guggenheim
concerning a strategic transaction, including a potential sale of a controlling
interest in Claymore. Claymore provided periodic reports to representatives of
the Board as to the status and nature of such discussions with Guggenheim and
Claymore's operating and financial results. In the spring of 2009, Claymore
informed the Board that Guggenheim had arranged up to $20 million of
subordinated loans to Claymore as interim financing for working capital and for
inventory purchases in connection with its business of creating, distributing
and supervising unit investment trusts and other investment products. Following
the execution of the merger agreement that governs the Strategic Transaction
(the "Merger Agreement"), a telephonic meeting was held on July 28, 2009, and
attended by certain members of the Board, the chief executive officer of
Claymore and the chief executive officer of Guggenheim. Such executive officers
summarized the principal terms of the Merger Agreement, and described the
Strategic Transaction, the business plans for Claymore following the
consummation of the Strategic Transaction and answered such questions as were
raised at the meeting. Representatives of the Board requested additional
information regarding the Strategic Transaction, Guggenheim and the impact of
the Strategic Transaction on the shareholders of the Fund.
During the third quarter of 2009, the Board received reports on the progress of
the Strategic Transaction, including debt financing and additional equity
financing arranged by Guggenheim. As part of its review process, the
Independent Trustees of the Fund were represented by independent legal counsel.
The Board reviewed materials received from Claymore, Guggenheim and independent
legal counsel. Claymore and Guggenheim provided, among other information,
information regarding the terms of the Strategic Transaction and potential
benefits to Claymore from the Strategic Transaction. The information provided
regarding Guggenheim included (i) financial information, (ii) information
regarding senior executives of the firm, (iii) information regarding other
Guggenheim affiliated investment managers, (iv) information regarding
litigation and regulatory matters and (v) potential conflicts of interest.
Claymore and Guggenheim also provided information regarding Guggenheim's and
Claymore's intentions for the business, operations and personnel of Claymore
following the closing of the Strategic Transaction.
The Independent Trustees discussed the Strategic Transaction and the Interim
Investment Advisory Agreement between Claymore and the Fund and the New
Advisory Agreement between Claymore and the Fund at the meeting. Additional
supplemental information regarding the Strategic Transaction and Guggenheim was
provided by Claymore and Guggenheim and reviewed by the Board.
In connection with the Board's consideration of the Interim Advisory Agreement
and the New Advisory Agreement, the Trustees considered, among other
information, the following factors:
o within the last year, the Board had engaged in a thorough review of the
various factors, including fees and scope and quality of services, that are
part of the decision whether to continue the prior advisory agreement
between Claymore and the Fund (the "Prior Advisory Agreement");
o Board approval of New and Interim Advisory Agreements was a condition to
the closing of the Strategic Transaction;
o Claymore's statement to the Board that the manner in which the Fund's
assets are managed will not change as a result of the Strategic
Transaction;
o the aggregate advisory fee rate payable by the Fund will not change under
the Fund's Interim Advisory Agreement or New Advisory Agreement;
o there are no material differences between the terms of the Fund's Interim
Advisory Agreement and New Advisory Agreement and the terms of the Fund's
Prior Advisory Agreement, except for those provisions in the Interim
Advisory Agreement which are necessary to comply with Rule 15a-4 under the
1940 Act;
o the capabilities of Claymore's personnel who will provide management and
admin- istrative services to the Fund are not expected to change, and the
key personnel who currently provide management and administrative services
to the Fund are expected to continue to do so after the Strategic
Transaction;
o the assurance from Claymore and Guggenheim that following the Strategic
Transaction there will not be any diminution in the nature, quality and
extent of services provided to the Fund;
o Claymore's current financial condition;
o the impact of the Strategic Transaction on Claymore's day-to-day
operations;
o the reputation, capabilities, experience, organizational structure and
financial resources of Guggenheim;
o the long-term business goals of Guggenheim and Claymore with regard to the
busi- ness and operations of Claymore;
o that shareholders of the Fund will not bear any costs in connection with
the Strategic Transaction, inasmuch as Claymore will bear the costs, fees
and expenses incurred by the Fund in connection with proxy materials and
any other costs of the Fund associated with the Strategic Transaction; and
o that Claymore and two newly formed, wholly-owned subsidiaries of
Guggenheim, GuggClay Acquisition, Inc. and an intermediate holding company
have agreed to refrain from imposing or seeking to impose, for a period of
two years after the closing of the Strategic Transaction, any"unfair
burden"(within the meaning of Section 15(f) of 1940 Act) on the Fund.
Nature, Extent and Quality of Services Provided by Claymore. The Board noted
that key management personnel servicing the Fund are expected to remain with
Claymore following the Strategic Transaction and that the services provided to
the Fund by Claymore are not expected to change. The Board also considered
Claymore's and Guggenheim's representations to the Board that Guggenheim
intends for Claymore to continue to operate following the closing of the
Strategic Transaction in much the same manner as it operates today, and that
the impact of the Strategic Transaction on the day-to-day operations of
Claymore would be neutral or positive. The Board also considered Guggenheim's
statement that Claymore's compliance policies and procedures, disaster recovery
plans, information security controls and insurance program would not change
materially following consummation of the Strategic Transaction. Based on this
review, the Board concluded that the range and quality of services provided by
Claymore to the Fund were expected to continue under the Interim Advisory
Agreement and the New Advisor Agreement at the same or improved levels.
Advisory Fees. The Board also considered the fact that the fee rates payable to
Claymore would be the same under the Interim Advisory Agreement and New
Advisory Agreement as they are under the Fund's Prior Advisory Agreement, which
had within the last year been determined to be reasonable. The Board concluded
that these factors supported approval of the Interim Advisory Agreement and New
Advisory Agreement.
Annual Report | October 31, 2009 | 31
<page>
DCS | Claymore Dividend & Income Fund | INTERIM ADVISORY AGREEMENT AND NEW
ADVISORY AGREEMENT continued
Performance. With respect to the performance of the Fund, the Board considered
that Claymore has delegated responsibility for the management of the Fund's
portfolios to Advent, which would continue to manage the portfolios following
the closing of the Strategic Transaction. The Board is aware that the Advent
portfolio management personnel currently responsible for the day-to-day
management of the portfolios would continue to manage the portfolios following
the closing of the Strategic Transaction. The Board concluded that these
factors supported approval of the Interim Advisory Agreement and New Advisory
Agreement.
Profitability. The Board noted that it was too early to predict how the
Strategic Transaction may affect Claymore's future profitability from its
relationship with the Fund, but concluded that this matter would be given
further consideration on an annual basis going forward. The Board also noted
that Claymore's fee rates under the Interim Advisory Agreement and New Advisory
Agreement are the same as those assessed under the Fund's Prior Advisory
Agreement.
Economies of Scale. The Board considered any potential economies of scale that
may result from the Strategic Transaction. The Board further noted Guggenheim's
statement that such economies of scale could not be predicted in advance of the
closing of the Strategic Transaction.
Other Benefits. The Board noted its prior determination that the fees under the
Prior Advisory Agreement was reasonable, taking into consideration other
benefits to Claymore. The Board also considered other benefits to Claymore,
Guggenheim and their affiliates expected to be derived from their relationships
with the Fund as a result of the Strategic Transaction and noted that no
additional benefits were reported by Claymore or Guggenheim as a result of the
Strategic Transaction. Therefore, the Board concluded that the fees payable to
Claymore continued to be reasonable, taking into consideration other benefits.
In reaching this conclusion for the Fund, no single factor was determinative in
the Board's analysis, but rather the Board considered a variety of factors,
including, but not limited to, the aforemented factors.
32 | Annual Report | October 31, 2009
<page>
LCM | Advent/Claymore Enhanced Growth & Income Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Randall C. Barnes
Daniel Black
TracyV. Maitland*
Chairman
Derek Medina
Ronald A. Nyberg
Gerald L. Seizert
Michael A. Smart
* Trustee is an "interested person" of The Fund as defined
in the Investment Company Act of 1940, as amended.
OFFICERS
Tracy V. Maitland
President and Chief Executive Officer
F. Barry Nelson
Vice President and Assistant Secretary
Robert White
Treasurer and Chief Financial Officer
Rodd Baxter
Secretary and Chief Compliance Officer
INVESTMENT MANAGER
Advent Capital Management, LLC
New York, New York
INVESTMENT ADVISER AND
ADMINISTRATOR
Claymore Advisors LLC
Lisle, Illinois
CUSTODIAN AND TRANSFER AGENT
The Bank of NewYork Mellon
New York, New York
LEGAL COUNSEL
Skadden,Arps, Slate, Meagher &
Flom LLP
New York, New York
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
New York, New York
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding their non-public personal information. The following information
is provided to help you understand what personal information the Fund collects,
how the Fund protects that information and why, in certain cases, the Fund may
share information with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not
disclose any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third
party administrator).
The Fund restricts access to non-public personal information about its
shareholders to employees of the Fund's investment adviser and its affiliates
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 ADVENT/CLAYMORE ENHANCED GROWTH & 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 11E, New York, NY 10286; (866)
488-3559.
This report is sent to shareholders of Advent/Claymore Enhanced Growth & Income
Fund for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (866) 274-2227.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (866)
274-2227 or by accessing the Fund's Form N-PX on the U.S. Securities & Exchange
Commission's ("SEC") 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 November 2009, 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 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.
NOTICE TO SHAREHOLDERS
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may purchase at market prices
from time to time shares of its common stock in the open market.
Annual Report | October 31, 2009 | 35
<page>
ADVENT CAPITAL MANAGEMENT, LLC
Advent Capital Management, LLC ("Advent") is a registered investment adviser,
based in New York, which specializes in convertible and high-yield securities
for institutional and individual investors. The firm was established by Tracy
V. Maitland, a former Director in the Convertible Securities sales and trading
division of Merrill Lynch. Advent's investment discipline emphasizes capital
structure research, encompassing equity fundamentals as well as credit
research, with a focus on cash flow and asset values while seeking to maximize
total return.
INVESTMENT PHILOSOPHY
Advent believes that superior returns can be achieved while reducing risk by
investing in a diversified portfolio of global equity, convertible and
high-yield securities. The Fund Manager seeks securities with attractive
risk/reward characteristics. Advent employs a bottom-up security selection
process across all of the strategies it manages. Securities are chosen from
those that the Fund Manager believes have stable-to-improving fundamentals and
attractive valuations.
INVESTMENT PROCESS
Advent manages securities by using a strict four-step process:
1 Screen the convertible and high-yield markets for securities with
attractive risk/reward characteristics and favorable cash flows;
2 Analyze the quality of issues to help manage downside risk;
3 Analyze fundamentals to identify catalysts for favorable performance; and
4 Continually monitor the portfolio for improving or deteriorating trends in
the financials of each investment.
ADVENT CAPITAL MANAGEMENT, LLC LCM
1065 Avenue of the Americas LISTED
New York, New York 10018 LCM-AR-1009 NYSE
LCM-AR-1009
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions (the "Code
of Ethics").
(b) No information need be disclosed pursuant to this paragraph.
(c) The registrant has not amended its Code of Ethics during the period covered
by the report presented in Item 1 hereto.
(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 six audit
committee financial experts serving on its audit committee (the "Audit
Committee"), each of whom is an "independent" Trustee, as defined in Item 3 of
Form N-CSR: Randall C. Barnes, Daniel Black, Derek Medina, Ronald A. Nyberg,
Gerald L. Seizert and Michael A. Smart.
Mr. Barnes qualifies as an audit committee financial expert by virtue of his
experience obtained as a former Senior Vice President, Treasurer of PepsiCo,
Inc.
Mr. Black qualifies as an audit committee financial expert by virtue of his
experience obtained as a partner of a private equity firm, which includes review
and analysis of audited and unaudited financial statements using GAAP to show
accounting estimates, accruals and reserves.
Mr. Medina qualifies as an audit committee financial expert by virtue of his
experience obtained as a Senior Vice President, Business Affairs of ABC News and
as a former associate in Corporate Finance at J.P. Morgan/Morgan Guaranty, which
includes review and analysis of audited and unaudited financial statements using
GAAP to show accounting estimates, accruals and reserves.
Mr. Nyberg qualifies as an audit committee financial expert by virtue of his
experience obtained as an Executive Vice President, General Counsel and
Secretary of Van Kampen Investments, which included review and analysis of
offering documents and audited and unaudited financial statements using GAAP to
show accounting estimates, accruals and reserves.
Mr. Seizert qualifies as an audit committee financial expert by virtue of his
experience obtained as the chief executive officer and portfolio manager of an
asset management company, which includes review and analysis of audited and
unaudited financial statements using GAAP to show accounting estimates, accruals
and reserves.
Mr. Smart qualifies as an audit committee financial expert by virtue of his
experience obtained as a managing partner of a private equity firm and a former
Vice President at Merrill Lynch & Co, which includes review and analysis of
audited and unaudited 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. The
designation or identification of a person as an audit committee financial expert
pursuant to this Item does not affect the duties, obligations, or liability of
any other member of the Audit Committee or Board of Trustees.)
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees: the aggregate fees billed for professional services rendered by
the principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements were
$86,250 and $91,550 for the fiscal years ended October 31, 2009, and
October 31, 2008, respectively.
(b) Audit-Related Fees: the aggregate fees billed for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are
not reported under paragraph 4(a), were $0 and $0 for the fiscal years
ended October 31, 2009, and October 31, 2008, respectively.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the Audit Committee pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X during the Registrant's last two fiscal years.
(c) Tax Fees: the aggregate fees billed for professional services rendered by
the principal accountant for tax compliance, tax advice and tax planning,
including federal, state and local income tax return preparation and
related advice and determination of taxable income and miscellaneous tax
advice were $14,500 and $14,500 for the fiscal years ended October 31,
2009, and October 31, 2008, respectively.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the Audit Committee pursuant to paragraph (c)(7)(ii)
of Rule 2-01 of Regulation S-X during the Registrant's last two fiscal years.
(d) All Other Fees: the aggregate fees billed for products and services
provided by the principal accountant, other than the services reported in
paragraphs 4(a) through 4(c) were $0 and
$31,300 for the fiscal years ended October 31, 2009, and October 31, 2008,
respectively. The fees for the fiscal year ended October 31, 2008 were
performed for the registrant's change of accounting policy related to
amortization.
The registrant's principal accountant did not bill fees for non-audit services
that required approval by the 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) Audit Committee Pre-Approval Policies and Procedures:
(1) In accordance with Rule 2-01(c)(7), the Audit Committee pre-approves all of
the Audit and Tax Fees of the registrant. All of the services described in
paragraphs 4(b) through 4(d) above were approved by the Audit Committee in
accordance with paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Audit Committee has adopted written policies relating to the pre-approval of
the audit and non-audit services performed by the registrant'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 Audit Committee
reviews and pre-approves the services to be provided by the independent auditors
without having to obtain specific pre-approval from the Audit Committee. The
Audit Committee has delegated pre-approval authority to the Audit Committee
Chairperson. 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 registrant.
AUDIT COMMITTEE PRE-APPROVAL POLICY
OF
ADVENT CLAYMORE ENHANCED GROWTH & INCOME FUND
STATEMENT OF PRINCIPLES
The Audit Committee (the "Audit Committee") of the Board of Trustees (the
"Board") of Advent Claymore Enhanced Growth & Income Fund (the "Trust,") is
required to pre-approve all Covered Services (as defined in the Audit Committee
Charter) in order to assure that the provision of the Covered Services does not
impair the auditors' independence. Unless a type of service to be provided by
the Independent Auditor (as defined in the Audit Committee Charter) is
pre-approved in accordance with the terms of this Audit Committee Pre-Approval
Policy (the "Policy"), it will require specific pre-approval by the Audit
Committee or by any member of the Audit Committee to which pre-approval
authority has been delegated.
This Policy and the appendices to this Policy describe the Audit,
Audit-Related, Tax and All Other services that are Covered Services and that
have been pre-approved under this Policy. The appendices hereto sometimes are
referred to herein as the "Service Pre-Approval Documents". The term of any such
pre-approval is 12 months from the date of pre-approval, unless the Audit
Committee specifically provides for a different period. At its June meeting of
each calendar year, the Audit Committee will review and re-approve this Policy
and approve or re-approve the Service Pre-Approval Documents for that year,
together with any changes deemed
necessary or desirable by the Audit Committee. The Audit Committee may, from
time to time, modify the nature of the services pre-approved, the aggregate
level of fees pre-approved or both. The Audit Committee hereby directs that each
version of this Policy and the Service Pre-Approval Documents approved,
re-approved or amended from time to time be maintained with the books and
records of the Trust.
DELEGATION
In the intervals between the scheduled meetings of the Audit Committee, the
Audit Committee delegates pre-approval authority under this Policy to the
Chairman of the Audit Committee (the "Chairman"). The Chairman shall report any
pre-approval decisions under this Policy to the Audit Committee at its next
scheduled meeting. At each scheduled meeting, the Audit Committee will review
with the Independent Auditor the Covered Services pre-approved by the Chairman
pursuant to delegated authority, if any, and the fees related thereto. Based on
these reviews, the Audit Committee can modify, at its discretion, the
pre-approval originally granted by the Chairman pursuant to delegated authority.
This modification can be to the nature of services pre-approved, the aggregate
level of fees approved, or both. The Audit Committee expects pre-approval of
Covered Services by the Chairman pursuant to this delegated authority to be the
exception rather than the rule and may modify or withdraw this delegated
authority at any time the Audit Committee determines that it is appropriate to
do so.
PRE-APPROVED FEE LEVELS
Fee levels for all Covered Services to be provided by the Independent
Auditor and pre-approved under this Policy will be established annually by the
Audit Committee and set forth in the Service Pre-Approval Documents. Any
increase in pre-approved fee levels will require specific pre-approval by the
Audit Committee (or the Chairman pursuant to delegated authority).
AUDIT SERVICES
The terms and fees of the annual Audit services engagement for the Trust
are subject to the specific pre-approval of the Audit Committee. The Audit
Committee will approve, if necessary, any changes in terms, conditions or fees
resulting from changes in audit scope, Trust structure or other matters.
In addition to the annual Audit services engagement
specifically approved by the Audit Committee, any other Audit services for the
Trust not listed in the Service Pre-Approval Document for the respective period
must be specifically pre-approved by the Audit Committee (or the Chairman
pursuant to delegated authority).
AUDIT-RELATED SERVICES
Audit-Related services are assurance and related services that are not
required for the audit, but are reasonably related to the performance of the
audit or review of the financial statements of the Trust and, to the extent they
are Covered Services, the other Covered Entities (as defined in the Audit
Committee Charter) or that are traditionally performed by the Independent
Auditor. Audit-Related services that are Covered Services and are not listed in
the Service Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
TAX SERVICES
The Audit Committee believes that the Independent Auditor can provide Tax
services to the Covered Entities such as tax compliance, tax planning and tax
advice without impairing the auditor's independence. However, the Audit
Committee will not permit the retention of the Independent Auditor in connection
with a transaction initially recommended by the Independent Auditor, the sole
business purpose of which may be tax avoidance and the tax treatment of which
may not be supported in the Internal Revenue Code and related regulations. Tax
services that are Covered Services and are not listed in the Service
Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
ALL OTHER SERVICES
All Other services that are Covered Services and are not listed in the
Service Pre-Approval Document for the respective period must be specifically
pre-approved by the Audit Committee (or the Chairman pursuant to delegated
authority).
PROCEDURES
Requests or applications to provide Covered Services that require approval
by the Audit Committee (or the Chairman pursuant to delegated authority) must be
submitted to the Audit Committee or the Chairman, as the case may be, by both
the Independent Auditor and the Chief Financial Officer of the respective
Covered Entity, and must include a joint statement as to whether, in their view,
(a) the request or application is consistent with the SEC's rules on auditor
independence and (b) the requested service is or is not a non-audit service
prohibited by the SEC. A request or application submitted to the Chairman
between scheduled meetings of the Audit Committee should include a discussion as
to why approval is being sought prior to the next regularly scheduled meeting of
the Audit Committee.
(2) None of the services described in each of Items 4(b) through (d) were
approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant's investment adviser
(not including a sub-adviser whose role is primarily portfolio management
and is sub-contracted with or overseen by another investment adviser)
and/or any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant that directly
related to the operations and financial reporting of the registrant were
$14,500 and $45,800 for the fiscal years ended October 31, 2009, and
October 31, 2008, respectively.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The Audit Committee was 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: Daniel Black, Randall C. Barnes, Derek Medina,
Ronald A. Nyberg, Gerald L. Seizert and Michael A. Smart.
(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 manager, Advent Capital Management, LLC (the
"Manager"). The Manager's Proxy Voting Policies and Procedures are included as
an exhibit hereto.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) Paul Latronica (the "Portfolio Manager") is primarily responsible
for the day-to-day management of the registrant's portfolio. The following
provides information regarding the portfolio managers as of October 31, 2009:
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NAME SINCE PROFESSIONAL EXPERIENCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Paul Latronica 2007 Portfolio Manager at Advent Capital
Management, LLC. He has been associated with
Advent Capital Management for more than
six years.
- --------------------------------------------------------------------------------
(a) (2) (i-iii) Other accounts managed. Mr. Latronica 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 31,
2009:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT OTHER ACCOUNTS
COMPANIES VEHICLES
- ------------------------------------------------------------------------------------------------------------------
# OF TOTAL ASSETS # OF TOTAL ASSETS # OF TOTAL ASSETS
NAME ACCOUNTS ACCOUNTS ACCOUNTS
- ------------------------------------------------------------------------------------------------------------------
Paul Latronica 1 $ 437 million 1 $ 15 48 $ 769
- ------------------------------------------------------------------------------------------------------------------
(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 at
an industry-appropriate amount and generally reviewed annually. In addition, a
100% discretionary bonus may be awarded to the Portfolio Manager, if
appropriate. Bonuses are generally considered on an annual basis and based upon
a variety of factors, including, but not limited to, the overall success
of the firm, an individual's responsibility and his/her performance versus
expectations. The bonus is determined by senior management at Advent Capital
Management, LLC. Compensation is based on the entire employment relationship and
not based on the performance of the registrant or any other single account or
type of account. In addition, all Advent Capital Management, LLC employees are
also eligible to participate in a 401(k) plan.
(a) (4) Securities ownership. The following table discloses the dollar range of
equity securities of the registrant beneficially owned by Mr. Latronica as of
October 31, 2009:
DOLLAR RANGE OF EQUITY SECURITIES
NAME OF PORTFOLIO MANAGER IN FUND
Paul Latronica $1-$10,000
(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.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act) as of a date within 90 days
of this filing and have concluded based on such evaluation, as required by Rule
30a-3(b) under the Investment Company Act, 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) that
occurred during the registrant's second fiscal quarter of the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics for Chief Executive and Senior Financial Officers.
(a) (2) Certification of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) of the Investment Company Act.
(b) Certification of principal executive officer and principal financial
officer pursuant to Rule 30a-2(b) of the Investment Company Act and 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) Advent/Claymore Enhanced Growth & Income Fund
By: /s/ Tracy V. Maitland
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Name: Tracy V. Maitland
Title: President and Chief Executive Officer
Date: January 6, 2010
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/ Tracy V. Maitland
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Name: Tracy V. Maitland
Title: President and Chief Executive Officer
Date: January 6, 2010
By: /s/ Robert White
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Name: Robert White
Title: Treasurer and Chief Financial Officer
Date: January 6, 2010