UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21455
Dreman/Claymore Dividend & Income Fund
(Exact name of registrant as specified in charter)
210 North Hale Street
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
Nicholas Dalmaso, Chief Legal and Executive Officer
Dreman/Claymore Dividend & Income Fund
210 North Hale Street
Wheaton, IL 60187
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 315-2036
Date of fiscal year end: October 31, 2004
Date of reporting period: April 30, 2004
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. (S) 3507.
Item 1. Reports to Stockholders.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
SemiAnnual
Report
April 30, 2004
Unaudited
Dreman / Claymore |
| DCS
Dividend & Income Fund |
[GRAPHIC]
DREMAN [LOGO]
VALUE MANAGEMENT, LLC CLAYMORE(R)
www.dremanclaymore.com
... your path to the LATEST,
most up-to-date INFORMATION about the
Dreman/Claymore Dividend & Income Fund
[GRAPHIC]
The shareholder report you are reading right now is just the beginning of
the story. Online at dremanclaymore.com, you will find:
. Daily, weekly and monthly data on share prices, distributions,
dividends and more
. Monthly portfolio overviews and performance analyses
. Announcements, press releases and special notices
. Fund and advisor contact information
Dreman Value Management and Claymore Securities are constantly updating and
expanding shareholder information services on the Fund's website, in an
ongoing effort to provide you with the most current information about how
your Fund's assets are managed, and the results of our efforts. It is just
one more small way we are working to keep you better informed about your
investment in the Fund.
2 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Dear Shareholder
[PHOTO]
David N. Dreman
We are pleased to welcome you to the Dreman/Claymore Dividend & Income Fund.
This semi-annual financial report covers the period since the Fund's inception
on January 27, 2004 through April 30, 2004. Dreman Value Management, LLC, was
founded in 1997 and is the Fund's investment manager. The predecessor investment
firms bearing my name date back to 1977. As of April 30, 2004, we managed over
$10.5 billion in assets, primarily across institutional accounts and as a
sub-advisor to various investment companies.
We are independently owned, and are pioneers in the Low P/E contrarian value
investment philosophy that places its primary emphasis on common stocks with
growing dividends, while avoiding concept stocks without justifiable valuations.
Numerous studies, both our own, and by leading financial academics, show that
out-of-favor stocks with low price-to-earnings ratios (Low P/E) consistently
outperform the broader market over time. Furthermore, our extensive studies in
the field of Behavioral Finance and the psychology of investment
decision-making, help us to exploit market overreactions and take advantage of
fear to buy good companies, temporarily out-of-favor, at attractive prices. We
have been dedicated to this investing philosophy for over 26 years and I have
shared my thoughts on the subject with the public by authoring four books and
through numerous articles published by Forbes magazine for more than two and
half decades.
The Fund focuses its investments on dividend-paying or other income producing
securities that are trading below what we perceive to be their true market
value. Securities selected for the Fund will be screened across parameters that
include: below-market price-to-earnings ratios, financial strength, value
metrics, and historical earnings growth. Under normal market conditions, the
Fund will invest at least 80% of its total assets in dividend-paying or other
income-producing securities, and at least 65% of the Fund's total assets will
consist of investments in dividend-paying common and preferred stocks. The Fund
may invest up to 15% of its total assets in U.S. dollar-denominated securities
of foreign issuers. There is no minimum credit rating for preferred stocks and
debt securities in which the Fund may invest, although the Fund will not invest
more than 10% of its total assets in non-convertible fixed income securities of
below investment grade quality.
In May, the Fund declared its initial quarterly dividend, representing $0.325
per common share. This rate represents an annualized 6.50% distribution based
upon the initial $20 common share price. You have the opportunity to reinvest
these dividends through the Dividend Reinvestment Plan ("DRIP") that is
described in detail on page 16 of this report.
SemiAnnual Report | April 30, 2004 | 1
Dreman/Claymore Dividend & Income Fund | Dear Shareholder continued
When shares trade at a discount to the net asset value ("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 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 can not be more than 5%
below the market price per share. The DRIP provides a low cost means to
accumulate additional shares and to enjoy the benefits of compounded returns
over time.
For more specific information on the positioning of the portfolio and our market
outlook, please refer to the portfolio management question and answer portion of
the report. We appreciate your investment with us and would like to thank you
for giving us the opportunity to serve you as the investment manager for the
Fund. For further information on the Fund, please call 1-800-345-7999 or visit
the Fund's website at www.dremanclaymore.com.
Sincerely,
/s/ David N. Dreman
- ------------------------------
David N. Dreman
Founder, Chairman and Chief Investment Officer of Dreman Value Management, LLC
and Trustee of Dreman/Claymore Dividend & Income Fund
June 15, 2004
2 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Questions & Answers |
- --------------------------------------------------------------------------------
How have the equity markets performed during the period and what do you foresee
for value stocks going forward?
The six months ending April 30, 2004 saw a great divergence in equity market
sentiment. The end of 2003 was the conclusion of a notable yearlong rebound for
equities following three consecutive down years. However, the start of 2004 saw
a decided turn in market sentiment, as investor worries over rising energy
costs, the ongoing conflict in Iraq and the possibility of higher interest rates
combined to temper equity returns. The somewhat lackluster performance that
arrived with the New Year is not overly surprising after the impressive returns
seen in the market over the final nine months of 2003.
We believe that stocks are positioned to perform reasonably well considering the
potential for rising inflation and the perceived looming increase in interest
rates. Historically speaking, the effects of rising rates have their most
pronounced effect on stocks at the beginning of a cycle of increasing rates.
Generally, as rates rise, stocks go up as well, though maybe not at the same
pace. In the past, stocks have outperformed when interest rate increases have
slowed down. During the period of 1977 - 1981, inflation increased at around 10%
per year and stocks increased at about an 8% rate per year. In 1982, when
inflation retreated, stocks returned 22%, making up for the previous years'
underperformance. However, there is no guarantee that this historical trend will
be repeated in future markets.
We are of the opinion that value stocks, particularly those with above-market
dividend yields, will be able to shake the negative headwinds created by
investor nervousness over the potential for rising interest rates. We would
anticipate that in a rising rate environment, growth stocks without consistent
and established earnings streams would be far more vulnerable.
- --------------------------------------------------------------------------------
How have the Fund's net asset value ("NAV") and market share price performed
since inception through April 30, 2004?
The Dreman/Claymore Dividend & Income Fund (DCS) completed the initial public
offering of its common shares on January 27th of this year and began trading on
the New York Stock Exchange on January 28th. The Fund was initially priced at
$20 per share and closed the period with a share price of $17.30, a decline of
13.5%. The Fund's NAV held up much better during this period with a decline of
3.3% for the same period. Much of the decline in the Fund's NAV can be
attributed to a sharp rise in 30-year treasury bonds and the corresponding
effect on the fixed-income components of the Fund coupled with the decline of
several major equity holdings, which we continue to believe have excellent
long-term outlooks.
The concern over the economy and rising interest rates had a particularly
pronounced effect on closed end funds; especially those funds that are focused
on dividend and interest income. Even though the Fund has a fixed-income
component, it is focused more on dividend-paying stocks which have historically
performed better in rising-rate environments than pure fixed-income investments.
Additionally, the Fund sold US Treasury futures contracts in an effort to hedge
the interest rate exposure for a portion of the fixed-income component of its
portfolio.
DCS, like many closed-end funds, utilizes leverage as part of its investment
strategy. In executing this strategy, the Fund issued Auction Market Preferred
Shares (AMPS), currently representing about 33.8% of the Fund's managed assets
(net assets plus leverage). As a result of this strategy, leveraged funds are
typically more vulnerable to rising interest rates. Rising short-term interest
rates increase a fund's cost of leverage while rising long-term interest rates
generally place pressure on the valuation of a fund's long-term, fixed income
holdings. Even though leverage can be used to enhance gains in a rising market,
it can also magnify potential losses in a declining market.
Given the current cost of the Fund's AMPS, the Fund is realizing significant
benefit due to the spread between the return generated by the Fund's portfolio
and the short-term interest rates paid to the preferred holders. Even with a 50
basis point increase in short term rates, leverage is extremely profitable to
the Fund. Additionally, the Fund has recently sold LIBOR futures contracts in an
effort to mitigate a portion of the near-term exposure to short-term interest
rates associated
SemiAnnual Report | April 30, 2004 | 3
Dreman/Claymore Dividend & Income Fund | Questions & Answers continued
with its AMPS and continues to evaluate the possibility of locking-in the
short-term rates on the AMPS for longer periods of time.
Are there any specific sectors that you have avoided or over-weighted?
As of April 30, Financials, Consumer Staples and Utilities represented the top
sectors in the Fund. These three sectors comprise a large majority of the Fund's
equity exposure (nearly 80% of the total investments). Each of these three
sectors has experienced some weakness recently, which has hindered the overall
performance of the Fund in the short term, but we are confident that these
sectors will provide excellent value over the long term.
We believe that the financials in the portfolio will still do well even with the
possibility of increasing interest rates. Financials do not necessarily
underperform as a group in an environment of rising interest rates for a couple
of reasons. First, banks are more protected from rising interest rates today
than in the past. This is especially true for the large universal banks that we
hold in the portfolio, where fee income represents a significant portion of
revenues. Also, the large money center banks have a much better ability to hedge
their potential losses incurred from a rise in rates. These banks also enjoy the
comfort of a more diversified revenue stream than some of their smaller
brethren. Additionally, rising interest rates allow the banks to charge higher
rates to their customers, thereby helping to offset any potential loss of
business.
Two of the Fund's largest weightings in the financial sector are Freddie Mac
("Freddie") and Fannie Mae ("Fannie"); each has experienced some negative
headline news in the past six months. We believe that the negative press that
has haunted these two names recently is greatly exaggerated. The news that
Freddie had recently understated earnings was treated very harshly in the press.
It is important to note that earnings were understated, which is a far cry from
the gross overstatement of earnings that plagued such names as WorldCom and
Global Crossing. We are confident in Freddie and Fannie's ability to effectively
manage any exposure to rising interest rates. In fact, because of their
aggressive management of interest-rate risk, Freddie and Fannie have about half
the negative correlation to interest rates than traditional banks. In a
rising-rate environment, Fannie and Freddie often have opportunities to
profitably increase their mortgage portfolio holdings, where as traditional
banks, with less sophisticated hedging programs, sell down their holdings of
mortgages. Trading at only 9 to10 times 2004 earnings and with a growth rate of
almost 15%, we feel that both Freddie and Fannie are still compelling
investments.
Our holdings in the Consumer Staples sector are currently comprised of tobacco
stocks. Altria Group and RJ Reynolds are the two largest positions. These names
have been significant holdings of many of our portfolios for some time, and thus
we are well versed in the legal issues surrounding these stocks. We continue to
wait for the resolution of the Department of Justice lawsuit, which is scheduled
for trial in the Fall of 2004. If the case resolves according to our
expectations, tobacco valuations, especially Altria, could rise significantly.
As a group, these stocks yield approximately 5%, which is significantly greater
than the dividend yields offered by the overall market and very generous
compared to most fixed-income alternatives. Given their strong yield, we are
content to hold these stocks as we wait for full valuations based on their
fundamentals. We feel that these stocks in particular will remain a viable
source of dividend income for the foreseeable future.
Utilities are another large component of the Fund. Utilities are often looked
upon in the same light as fixed-income securities and as such are subject to the
same problems as other fixed-income investments in a rising-rate environment.
That being said, we are still confident in their continued ability to remain a
stable and growing source of qualified dividend income for the Fund and its
shareholders.
Is the fund susceptible to the mutual fund trading abuses that have been in the
news?
No. Unlike open-end funds (which have been in the news recently), shares of the
Fund trade on the New York Stock Exchange (ticker: DCS). As a result, there is
no potential for market timing or late trading.
4 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Fund Summary | (unaudited)
2004 Share Price Performance
[GRAPHIC]
Portfolio Composition* (as of 4/30/04)
[PIE CHART APPEARS HERE]
Asset Class
- -----------
Common Stocks 77.5%
Preferred Securities 17.4%
Short-Term Investments 2.5%
Investment Companies 1.6%
Corporate Bonds 1.0%
*As a percentage of total investments.
Top 10 Issuers* (as of 4/30/04)
- ------------------------------
Altria Group, Inc. 8.4%
R.J. Reynolds Tobacco Holdings, Inc. 8.0%
Freddie Mac 5.2%
Fannie Mae 4.2%
US Tobacco, Inc. 4.2%
Washington Mutual, Inc. 4.0%
SBC Communications, Inc. 3.1%
Bristol-Myers Squibb Co. 3.0%
Ameren Corp. 2.6%
Prudential PLC 2.4%
*As a percentage of long-term investments.
Sector Allocation* (as of 4/30/04)
[PIE CHART APPEARS HERE]
Sector
- ------
Financials 40.3%
Consumer Staples 24.1%
Utilities 14.7%
Energy 9.2%
Telecommunications 4.6%
Healthcare 4.3%
Other 2.8%
*As a percentage of long-term investments.
Industry Allocation* (as of 4/30/04)
[PIE CHART APPEARS HERE]
Industry
- --------
Tobacco 23.8%
Commercial banks 14.8%
Thrifts & Mortgage Finance 13.6%
Electric Utilities 11.2%
Oil & Gas 9.2%
Real Estate 6.3%
Pharmaceuticals 4.1%
Diversified Telecommunications Services 3.9%
Other 13.1%
*As a percentage of long-term investments.
SemiAnnual Report | April 30, 2004 | 5
Dreman/Claymore Dividend & Income Fund
Portfolio of Investments April 30, 2004 (unaudited)
Number of Shares Value
- --------------------------------------------------------------------------------
Common Stocks - 116.2%
Consumer Staples - 34.8%
1,840,400 Altria Group, Inc. $101,921,352
972,800 Loews Corp.- Carolina Group 25,526,272
1,508,900 R.J. Reynolds Tobacco Holdings, Inc. 97,731,453
166,800 Universal Corp. 8,380,032
1,363,000 US Tobacco, Inc. 50,717,230
385,500 Vector Group Ltd. 6,376,170
- --------------------------------------------------------------------------------
290,652,509
- --------------------------------------------------------------------------------
Energy - 9.6%
189,500 BP Prudhoe Bay Royalty Trust I 5,364,745
265,300 ChevronTexaco Corp. 24,274,950
343,100 ConocoPhillips 24,463,030
149,900 Devon Energy Corp. 9,173,880
50,900 Enerplus Resources Fund 1,285,225
180,000 Kerr-McGee Corp. 8,807,400
100,000 Pengrowth Energy Trust 1,318,000
130,700 San Juan Basin Royalty Trust 2,637,526
233,400 Williams Coal Seam Gas Royalty Trust 3,185,910
- --------------------------------------------------------------------------------
80,510,666
- --------------------------------------------------------------------------------
Financials - 37.1%
225,000 American Home Mortgage Investment Corp. 5,339,250
180,900 American International Group, Inc. 12,961,485
270,000 Bank of America Corp. 21,732,300
742,900 Fannie Mae 51,052,088
1,087,200 Freddie Mac 63,492,480
670,000 Impac Mortgage Holding, Inc. 12,602,700
724,800 KeyCorp 21,526,560
794,100 Luminent Mortgage Capital, Inc. 10,172,421
1,163,300 MFA Mortgage Investments, Inc. 10,365,003
181,700 Newcastle Investment Corp. 4,855,024
246,100 Novastar Financial, Inc. 7,988,406
233,600 PNC Financial Services Group 12,404,160
448,600 U.S. Bancorp 11,502,104
415,000 Union Planters Corp. 11,537,000
65,000 Wachovia Corp. 2,973,750
1,232,800 Washington Mutual, Inc. 48,559,992
- --------------------------------------------------------------------------------
309,064,723
- --------------------------------------------------------------------------------
Healthcare - 6.3%
1,465,000 Bristol-Myers Squibb Co. 36,771,500
80,700 Medco Health Solutions, Inc.(c) 2,856,780
50,000 Merck & Co., Inc. 2,350,000
300,000 Pfizer, Inc. 10,728,000
52,706,280
- --------------------------------------------------------------------------------
Number of Shares Value
- --------------------------------------------------------------------------------
Information Technology - 1.3%
587,300 Electronic Data Systems Corp. $ 10,741,717
- --------------------------------------------------------------------------------
Telecommunications - 5.8%
1,495,000 SBC Communications, Inc. 37,225,500
290,000 Verizon Communications, Inc. 10,944,600
- --------------------------------------------------------------------------------
48,170,100
- --------------------------------------------------------------------------------
Utilities - 21.3%
735,600 Ameren Corp. 32,160,432
659,700 Consolidated Edison, Inc. 27,186,237
354,200 DTE Energy Co. 13,820,884
361,900 Empire District Electric Co. 7,531,139
327,200 Great Plains Energy, Inc. 10,211,912
110,700 Hawaiian Electric Industries, Inc. 5,508,432
155,200 KeySpan Corp. 5,610,480
108,300 Nicor, Inc. 3,681,117
525,000 OGE Energy Corp. 12,626,250
374,700 Peoples Energy Corp. 15,662,460
385,100 Pepco Holdings, Inc. 7,293,794
433,800 Progress Energy, Inc. 18,553,626
311,300 Public Service Enterprise Group, Inc. 13,354,770
190,200 Star Gas Partners, L.P. 4,275,696
- --------------------------------------------------------------------------------
177,477,229
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $1,009,433,368) 969,323,224
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
Corporate Bonds - 1.5%
Financials - 0.6%
$5,000,000 BF Saul REIT 7.5%, B+, (a) 7.500%, 3/1/14 $ 5,037,500
Telecommunications Equipment - 0.9%
7,500,000 SBA Communications Corp., CCC-
10.250%, 02/01/09 7,537,500
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $12,605,598) 12,575,000
- --------------------------------------------------------------------------------
See notes to financial statements.
6 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund | Portfolio of Investments continued
(unaudited)
Number of Shares Value
- ------------------------------------------------------------------------------------
Preferred Stocks - 26.2%
Consumer Discretionary - 0.4%
125,000 Westcoast Hospitality Co., 9.500% $ 3,181,250
- ------------------------------------------------------------------------------------
Consumer Staples - 0.5%
40,000 Dairy Farmers Of America, (a), 7.875% 4,138,752
- ------------------------------------------------------------------------------------
Energy - 3.7%
440,000 EL Paso Tennessee Pipe, 8.250% 20,941,272
385,500 Southern Union Co., 7.550% 10,292,850
- ------------------------------------------------------------------------------------
31,234,122
- ------------------------------------------------------------------------------------
Financials - 21.3%
7,000,000 Abbey Natl Cap Trust I, 8.963% (b) 8,965,376
200,000 ABN AMRO Cap Fund TR VII, 6.080% 4,780,000
200,000 Affordable Residential, 8.250% 4,994,000
18,000 Apartment Investment and Management Co., 10.100% 469,440
80,000 Banco Santander, 6.410%, (a) 1,949,360
10,000,000 Barclays Bank PLC, 8.550% (a)(b) 12,088,570
7,000,000 CA Preferred Fund Trust, 7.000% 7,039,235
109,300 Chevy Chase Bank, 8.000% 3,005,750
1,000 Doral Financial Corp., Series B, 8.350% 26,950
8,660 Doral Financial Corp., Series C, 7.250% 222,129
7,042,000 HSBC Capital Funding LP, 10.176% (a)(b) 10,028,547
12,840,000 HSBC Capital Funding LP, 9.547% (a)(b) 15,933,439
140,500 Lehman Brothers Holdings, 6.500% 3,703,580
2,000,000 Lloyds TSB Bank PLC, 6.900% 2,040,540
80,000 LTC Properties, Inc., 8.000% 2,036,000
13,354,000 Old Mutual Cap Funding, 8.000% 13,395,397
400,000 Omega Healthcare, 8.375% 9,920,000
31,000,000 Prudential PLC, 6.500% 28,852,661
6,400,000 RBS Capital Trust B, 6.800% 6,461,363
12,000,000 Royal Bank Of Scotland, 9.118% 14,716,848
5,750,000 Royal Bank Of Scotland, 7.648% (b) 6,644,407
16,775,000 UBS Pfd Funding Trust I, 8.622% (b) 20,305,399
- ------------------------------------------------------------------------------------
177,578,991
- ------------------------------------------------------------------------------------
Utilities - 0.3%
80,000 Alabama Power Co., 5.300% 1,998,400
- ------------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $224,551,003) 218,131,515
- ------------------------------------------------------------------------------------
Investment Companies - 2.4%
116,000 Cohen & Steers REIT and Preferred
Income Fund $ 2,657,560
296,200 Evergreen Income Advantage Fund 4,277,128
232,600 Hyperion Total Return Fund 2,114,334
240,000 Nuveen Preferred and Convertible Income
Fund II 3,247,200
211,200 Nuveen Quality Preferred Income Fund II 3,037,056
295,200 Pioneer High Income Trust 4,439,808
6,400 Salomon Brothers Worldwide Income Fund, Inc. 89,792
- ------------------------------------------------------------------------------------
Total Investment Companies
(Cost $21,925,956) 19,862,878
- ------------------------------------------------------------------------------------
Total Long-Term Investments
(Cost $1,268,515,925) - 146.3% 1,219,892,617
- ------------------------------------------------------------------------------------
Short-Term Investments
Money Market Fund - 3.7%
31,001,296 JP Morgan Prime Money Market Fund
(Cost $31,001,296) 31,001,296
- ------------------------------------------------------------------------------------
Total Investments
Cost ($1,299,517,221) - 150.0% 1,250,893,913
Other Assets in Excess of Liabilities - 1.0% 8,130,330
Preferred Shares, at Liquidation Value -
(-51.0% of Net Assets Available
to Common Shares or -34.0% of Total
Investments) (425,000,000)
- ------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares
- 100.0% $ 834,024,243
====================================================================================
Ratings shown are per Standard & Poor's, securities classified NR are not rated
by Standard & Poor's.
PLC - Public Limited Company.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April
30, 2004, these securities amounted to $49,176,168 or 5.9% of net assets.
(b) Floating or Variable rate security.
(c) Non-income producing security.
All percentages shown in the Portfolio of Investments are based on net assets
applicable to Common shares unless otherwise noted.
See notes to financial statements.
SemiAnnual Report | April 30, 2004 | 7
Dreman/Claymore Dividend & Income Fund
Statement of Assets and Liabilities | April 30, 2004 (unaudited)
Assets
Investments in securities, at value (cost $1,299,517,221) $1,250,893,913
Cash 1,417,697
Dividends and interest receivable 5,687,520
Broker margin deposit 3,780,000
Other assets 59,490
- -------------------------------------------------------------------------------
Total assets 1,261,838,620
- -------------------------------------------------------------------------------
Liabilities
Variation margin payable 945,000
Advisory fee payable 886,662
Offering costs payable 649,760
Administrative fee payable 37,462
Dividend payable - preferred shares 138,196
Accrued expenses and other liabilities 157,297
- -------------------------------------------------------------------------------
Total liabilities 2,814,377
- -------------------------------------------------------------------------------
Preferred Shares, at redemption value
$.01 par value per share; 17,000
Auction Market Preferred Shares authorized,
issued and outstanding at $25,000
per share liquidation preference 425,000,000
- -------------------------------------------------------------------------------
Net Assets Applicable to Common Shareholders $ 834,024,243
- -------------------------------------------------------------------------------
Composition of Net Assets Applicable to Common Shareholders
Common stock, $.01 par value per share; unlimited number of
shares authorized, 45,155,240 shares issued and
outstanding $ 451,552
Additional paid-in capital 855,457,532
Undistributed net investment income 10,906,953
Net realized gain on investments and futures transactions 136,569
Net unrealized depreciation on investments and futures
transactions (32,928,363)
- -------------------------------------------------------------------------------
Net Assets Applicable to Common Shareholders $ 834,024,243
================================================================================
Net Asset Value Applicable to Common Shareholders
(based on 45,155,240 common shares outstanding) $ 18.47
================================================================================
See notes to financial statements.
8 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Statement of Operations | For the Period January 27, 2004* through April 30,
2004 (unaudited)
Investment Income
Dividends (net of foreign withholding taxes
of $2,321) $12,602,787
Interest 1,943,628
- --------------------------------------------------------------------------------
Total income $ 14,546,415
- --------------------------------------------------------------------------------
Expenses
Advisory fee 2,345,411
Auction agent fee - preferred shares 96,372
Administrative fee 53,321
Fund accounting 40,471
Transfer agent fee 31,045
Custodian fee 27,289
Trustees' fees and expenses 23,274
Printing expense 13,690
Legal fees 13,690
Audit fee 11,709
Insurance 10,953
NYSE listing fee 9,584
Miscellaneous 6,845
Interest expense on line of credit 450,242
- --------------------------------------------------------------------------------
Total expenses 3,133,896
- --------------------------------------------------------------------------------
Net investment income 11,412,519
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Future Transactions
Net realized gain (loss) on:
Investments 140,597
Futures (4,028)
Net unrealized appreciation (depreciation) on:
Investments (48,623,308)
Futures 15,694,945
- --------------------------------------------------------------------------------
Net loss on investments and futures transactions (32,791,794)
- --------------------------------------------------------------------------------
Distributions to Preferred Shares from
Net investment income (505,566)
- --------------------------------------------------------------------------------
Net Decrease in Net Assets Applicable to Common
Shareholders Resulting from Operations $(21,884,841)
================================================================================
* Commencement of investment operations.
See notes to financial statements.
SemiAnnual Report | April 30, 2004 | 9
Dreman/Claymore Dividend & Income Fund
Statement of Changes in Net Assets Applicable to Common Shareholders
For the Period January 27, 2004* through April 30, 2004 (unaudited)
Increase in Net Assets Applicable to Common Shareholders
Resulting from Operations
Net investment income $ 11,412,519
Net realized gain on investments and futures transactions 136,569
Net unrealized depreciation on investments and futures
transactions (32,928,363)
Distributions to Preferred Shares from
Net investment income (505,566)
- --------------------------------------------------------------------------------
Net decrease in net assets applicable to Common
Shareholders resulting from operations (21,884,841)
- --------------------------------------------------------------------------------
Capital Share Transactions
Net proceeds from the issuance of common shares 858,115,000
Common and preferred share offering expenses charged
to paid-in-capital (2,306,000)
- --------------------------------------------------------------------------------
Net increase from capital share transactions 855,809,000
- --------------------------------------------------------------------------------
Total increase in net assets applicable to common
shareholders 833,924,159
Net Assets
Beginning of period 100,084
- --------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $10,906,953) $834,024,243
================================================================================
* Commencement of investment operations.
See notes to financial statements.
10 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Statements of Cash Flows | For the Period January 27, 2004* through April 30,
2004 (unaudited)
Cash Flows from Operating Activities:
Net decrease in net assets applicable to Common
Shareholders resulting from operations $ (21,884,841)
Adjustments to Reconcile Net Decrease in Net Assets
Applicable to Common Shareholders from Operations to
Net Cash Used in Operating Activities:
Cost of securities purchased (1,348,555,562)
Proceeds from sale of securities 48,778,565
Increase in broker margin deposit (3,780,000)
Increase in dividends and interest receivable (5,687,520)
Increase in other assets (59,490)
Increase in offering costs payable 649,760
Increase in accrued expenses and other liabilities 157,297
Increase in dividend payable - preferred shares 138,196
Increase in advisory fee payable 886,662
Increase in administration fee payable 37,462
Increase in variation margin payable 945,000
Accretion of bond discount and amortization
of bond premium 400,373
Net realized gain on investments (140,597)
Increase in unrealized depreciation 48,623,308
- ------------------------------------------------------------------------------
Net Cash Used in Operating Activities (1,279,491,387)
- ------------------------------------------------------------------------------
Cash Flows Provided by Financing Activities:
Net cash subscriptions received 858,115,000
Common and preferred shares offering expenses charged
to paid-in capital (2,306,000)
Preferred Shares issued 425,000,000
- ------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 1,280,809,000
- ------------------------------------------------------------------------------
Net increase in cash 1,317,613
Cash at Beginning of Period 100,084
- ------------------------------------------------------------------------------
Cash at End of Period $ 1,417,697
==============================================================================
* Commencement of investment operations.
See notes to financial statements.
SemiAnnual Report | April 30, 2004 | 11
Dreman/Claymore Dividend & Income Fund
Financial Highlights | For the Period January 27, 2004* through April 30, 2004
(unaudited)
Per share operating performance for a common share
outstanding throughout the period
Net asset value, beginning of period $ 19.10/(a)/
- ------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.26
Net realized and unrealized loss on investments and
futures transactions (0.83)
Distributions to preferred shares from net investment
income (common share equivalent basis) (0.01)
- ------------------------------------------------------------------------------------------
Total from investment operations (0.58)
- ------------------------------------------------------------------------------------------
Common and preferred shares' offering expenses
charged to paid-in-capital (0.05)
- ------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.47
==========================================================================================
Market value, end of period $ 17.30
==========================================================================================
Total investment return/(b)/
Net asset value (3.30)%
Market value (13.50)%
Ratios and supplemental data
Net assets, applicable to common shareholders, end
of period (thousands) $834,024
Preferred Shares, at liquidation value, ($25,000
per share liquidation preference)(thousands) $425,000
Preferred Share asset coverage per share $ 74,060
Ratios to Average Net Assets applicable to Common Shares:/(c)/
Total expenses, including interest expense 1.50%
Interest expense 0.22%
Net investment income, prior to effect of dividends to preferred shares 5.47%
Net investment income, after effect of dividends to preferred shares 5.23%
Ratios to Average Managed Assets:/(c), (d)/
Total expenses, including interest expense 1.14%
Interest expense 0.16%
Net investment income, prior to effect of dividends to preferred shares 4.14%
Portfolio turnover 0.55%
* Commencement of operations.
/(a)/ Before deduction of offering expenses charged to capital.
/(b)/ 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 or market price per share.
Dividends and distributions are assumed to be reinvested in accordance with
the Fund's dividend reinvestment plan. Total investment return does not
reflect brokerage commissions. A return calculated for a period of less
than one year is not annualized.
/(c)/ Annualized.
/(d)/ Managed assets is equal to net assets applicable to common shareholders
plus outstanding leverage, such as the liquidation value of preferred
shares.
See notes to financial statements.
12 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Notes to Financial Statements | April 30, 2004 (unaudited)
Note 1 - Organization:
Dreman/Claymore Dividend & Income Fund (the "Fund") was organized as a Delaware
statutory trust on October 20, 2003. The Fund is registered as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended.
The Fund's primary investment objective is to provide a high level of current
income, with a secondary object of capital appreciation. The Fund will pursue
its investment objectives by investing its assets primarily in dividend-paying
common and preferred stocks. There can be no assurance that the Fund will
achieve its investment objectives. The Fund's investment objectives are
considered fundamental and may not be changed without shareholder approval.
Note 2 - Accounting Policies:
The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
these estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund.
(a) Valuation of Investments
Readily marketable portfolio securities listed on the New York Stock Exchange
are generally valued at the last sale price at the close of the New York Stock
Exchange. If no sales are reported, the securities are valued at the mean of the
closing bid and asked prices on such day. If no bid or asked prices are quoted
on such day, then the security is valued by such method as the Fund's Board of
Trustees shall determine in good faith to reflect its fair market value. Readily
marketable securities not listed on the New York Stock Exchange but listed on
other domestic or foreign securities exchanges or trading on the National
Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ") National
List are valued in a similar manner. Portfolio securities traded on more than
one securities exchange are valued at the last sale price at the close of the
exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Advisor to be
over-the-counter, but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable source as the Fund's Trustees
deem appropriate to reflect fair market value. However, certain fixed-income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed by the Trustees to reflect the fair market value
of such securities. Where securities are traded on more than one exchange and
also over-the-counter, the securities will generally be valued using the
quotations the Trustees believe reflect most closely the value of such
securities.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost, which approximates market value.
(b) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Dividend
income is recorded net of applicable withholding taxes on the ex-dividend date
and interest income is recorded on an accrual basis. Discounts or premiums on
debt securities purchased are accreted or amortized to interest income over the
lives of the respective securities using the effective interest method.
(c) Futures
A futures contract is an agreement to buy or sell a financial instrument at a
particular price on a stipulated future date. Upon entering into a futures
contract, the Fund is required to make an initial margin deposit established by
the exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the counterparty an amount of cash equal
to the daily fluctuation in the value of the contract. Such receipt or payment
is known as the variation margin and is recorded by the Fund as unrealized
appreciation or depreciation. The Fund bears the market risk that arises from
the change in the value of these financial instruments.
During the period, the Fund sold futures contracts on US Treasury securities in
an effort to hedge a portion of the fixed-income component of its portfolio
against rising interest rates. At April 30, 2004, the following futures
contracts were outstanding:
Short Number of Expiration Original Value at Unrealized
Contracts Contracts Month Value April 30, 2004 Appreciation
- ------------------------------------------------------------------------------
US Treasury
Bonds (CBT) 1,890 Jun-04 $218,102,133 $202,407,188 $15,694,945
- ------------------------------------------------------------------------------
Note 3 - Investment Advisory Agreement, Sub-Advisory Agreement and Other
Agreements:
Pursuant to an Investment Advisory Agreement (the "Agreement") between the Fund
and Claymore Advisors, LLC ("the Advisor"), the Advisor will furnish offices,
necessary facilities and equipment, provide administrative services, oversee the
activities of the Fund's Investment Manager, provide personnel, including
certain officers required for the Fund's administrative management and
compensate all officers and trustees of the Fund who are its affiliates. As
compensation for these services, the Fund will pay the Investment Advisor a fee,
payable monthly, in an amount equal to 0.85% of the Fund's average managed
assets (total assets, including the assets attributable to the proceeds from any
financial leverage, minus liabilities, other than liabilities related to any
financial leverage).
The Advisor has entered into a Sub-Advisory Agreement with Dreman Value
Management, LLC (the "Investment Manager"). Pursuant to the terms of this
agreement, the Investment Manager, under the supervision of the Fund's Board of
Trustees and the Advisor, will provide a continuous investment program for the
Fund's portfolio; provide investment research and make and execute
recommendations for the purchase and sale of securities; and provide certain
facilities and personnel, including officers required for the Fund's
administrative management and compensation of all officers and trustees of the
Fund who are its affiliate.
SemiAnnual Report | April 30, 2004 | 13
Dreman/Claymore Dividend & Income Fund | Notes to Financial Statements
(unaudited) continued
For these services, the Advisor has agreed to pay the Investment Manager an
aggregate amount equal to 60% of the investment advisory fees paid to the
Advisor by the Fund, net of any additional compensation payments to underwriters
of the common share offering.
The Bank of New York ("BNY") acts as the Fund's custodian, administrator and
transfer agent. As custodian, BNY is responsible for the custody of the Fund's
assets. As administrator, BNY is responsible for maintaining the books and
records of the Fund's securities and cash. As transfer agent, BNY is responsible
for performing transfer agency services for the Fund.
Note 4 - Federal Income Taxes:
The Fund intends to comply with the requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies. Accordingly, no
provision for U.S. federal income taxes is required. In addition, by
distributing substantially all of its ordinary income and long-term capital
gains, if any, during each calendar year, the Fund intends not to be subject to
U.S. federal excise tax.
At April 30, 2004, the cost and related gross unrealized appreciation and
depreciation for tax purposes are as follows:
Gross Gross Net Unrealized
Cost of Unrealized Unrealized Depreciation on
Investments Appreciation Depreciation Investments
- --------------------------------------------------------------
$1,299,517,221 $14,984,742 $(63,608,050) $(48,623,308)
- --------------------------------------------------------------
Note 5 - Investments in Securities:
For the period ended April 30, 2004, purchases and sales of investments, other
than short-term securities, were $1,274,423,594 and $5,647,893, respectively.
Note 6 - Capital:
Common Shares
The Fund has an unlimited amount of common shares, $0.01 par value, authorized
and issued 40,500,000 shares of common stock in its initial public offering.
These shares were all issued at $19.10 per share after deducting the sales load
but before a reimbursement of expenses to the underwriters of $0.00667 per
share. In connection with the initial public offering of the Fund's common
shares, the underwriters were granted an option to purchase additional common
shares. On February 12, 2004, and March 16, 2004, the underwriters purchased, at
a price of $19.10 per common share (after deducting the sales load but before
underwriters' expense reimbursement), 2,750,000 and 1,900,000 common shares,
respectively, of the Fund pursuant to the over-allotment option.
Offering costs, estimated at $1,806,000 or $0.04 per share, in connection with
the issuance of the common shares have been borne by the Fund and were charged
to paid-in-capital. The Advisor has agreed to reimburse the Fund's
organizational expenses, which are estimated at $25,000.
Preferred Shares
On February 12, 2004, the Fund's Board of Trustees authorized the issuance of
preferred shares, in addition to the existing common shares, as part of the
Fund's leverage strategy. Preferred shares issued by the Fund have seniority
over the common shares. Offering costs associated with the issuance of preferred
shares, estimated at $500,000, have been borne by the common shareholders as a
direct reduction to paid-in-capital
On March 23, 2004, the Fund issued 3,400 shares of Preferred Shares Series
M7,3,400 shares of Preferred Shares Series T28,3,400 shares of Preferred Shares
Series W7,3,400 shares of Preferred Shares Series TH28 and 3,400 shares of
Preferred Shares Series F7 each with a net asset and liquidation value of
$25,000 per share plus accrued dividends. Dividends are accumulated daily at an
annual rate set through auction procedures. Distributions of net realized
capital gains, if any, are paid annually.
For the period ended April 30, 2004, the annualized dividend rates range from:
High Low At April 30, 2004
- ---------------------------------------------
Series M7 1.12% 1.08% 1.11%
- ---------------------------------------------
Series T28 1.15% 1.10% 1.15%
- ---------------------------------------------
Series W7 1.12% 1.08% 1.12%
- ---------------------------------------------
Series TH28 1.10% 1.10% 1.10%
- ---------------------------------------------
Series F7 1.12% 1.05% 1.10%
- ---------------------------------------------
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the Preferred Shares.
Note 7 - Line of Credit:
Effective with the issuance of preferred shares, the line of credit was
discontinued.
Note 8 - Subsequent Event:
The Fund has adopted a policy of paying quarterly distributions on its Common
Shares at a rate that represents a fixed percentage of the initial public
offering price on an annualized basis, and an additional distribution on an
annual basis of any realized income in excess of the of the quarterly
distributions for that year. In May, this quarterly dividend was declared by the
Board of Trustees at a rate of $.325 per common share and was payable on May,
28, 2004 to shareholders of record on May 14, 2004.
14 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Supplemental Information | (unaudited)
Trustees
The trustees of the Dreman/Claymore Dividend & Income Fund and their principal
occupations during the past five years:
Name, Address*, Age Term of Office Principal Occupation during Other Directorships
and Position(s) held and Length of the Past Five Years and Held by
with Registrant Time Served Other Affiliations Trustee
- --------------------------------------------------------------------------------------------------------------------------------
Independent Trustees:
- --------------------------------------------------------------------------------------------------------------------------------
Richard L. Crandall Since 2004 Managing Partner of Aspen Partners, LLC since Director, Novell, Inc., Diebold,
Age: 60 2003, Senior Advisor and Shareholder in BPC Group Inc., Pelstar, LLC, Tacit
Trustee and Bryant Park Capital since 2003, Founding Knowledge Systems, Inc. and
Co-Partner of Arbor Partners, LLC since 2000, and BISNet, Inc.
Chairman of Enterprise Software Roundtable since
1994. Formerly, Director and Special Advisor of
GIGA Information Group (1995-2003) and Chairman of
GIGA Information Group (2002-2003).
- --------------------------------------------------------------------------------------------------------------------------------
Roman Friedrich III Since 2004 Founder of Roman Friedrich & Company, which Director, Strategic Minerals
Age: 57 specializes in the provision of financial advisory Corporation, Brazilian
Trustee services to corporations in the resource Emeralds, Inc. and Strata Gold
sector. Previously, Managing Director at TD Corporation.
Securities.
- --------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg Since 2004 Founding partner of Nyberg & Gustafson, a law firm Trustee, Advent Claymore
Age: 50 specializing in corporate law, Estate Planning and Convertible Securities and
Trustee Business Transactions from 2000-present. Formerly, Income Fund, MBIA Capital/
Executive Vice President, General Counsel and Claymore Managed Duration
Corporate Secretary of Van Kampen Investments Investment Grade Municipal
(1982-1999). Director, Juvenile Diabetes Research Income Fund, Western
Foundation, Chicago Chapter, and Edward Hospital Asset/Claymore U.S. Treasury
Foundation, Naperville, IL. Trustee North Park Inflation Protected Securities
University, Chicago. Fund, Western Asset/ Claymore
U.S. Treasury Inflation
Protected Securities Fund 2, and
TS&W/Claymore Tax-Advantaged
Balanced Fund.
- --------------------------------------------------------------------------------------------------------------------------------
Ronald E. Toupin, Jr. Since 2004 Formerly, Vice President, Manager and Portfolio Trustee, Advent Claymore
Age: 44 Manager of Nuveen Asset Management (1998-1999), Convertible Securities and
Trustee Vice President of Nuveen Investment Advisory Income Fund, MBIA Capital/
Corporation (1992-1999), Vice President and Claymore Managed Duration
Manager of Nuveen Unit Investment Trusts Investment Grade Municipal Fund,
(1991-1999), and Assistant Vice President and Western Asset/ Claymore U.S.
Portfolio Manager of Nuveen Unit Investment Trusts Treasury Inflation Protected
(1988-1999), each of John Nuveen & Company, Securities Fund, Western
Inc.(1982-1999). Asset/Claymore U.S. Treasury
Inflation Protected Securities
Fund 2, and TS&W/ Claymore
Tax-Advantaged Balanced Fund.
- --------------------------------------------------------------------------------------------------------------------------------
Interested Trustees:
- --------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso Since 2004 Senior Managing Director and General Counsel of Trustee, Advent Claymore
Age: 39 Claymore Advisors, LLC and Claymore Securities, Convertible Securities and
Trustee and Chief Legal Inc. (2001-present). Manager, Claymore Fund Income Fund, MBIA
and Executive Officer Management Company, LLC, Vice President Boyar Capital/Claymore Managed
Value Fund. Formerly, Assistant General Counsel, Duration Investment Grade
John Nuveen and Company, Inc. (1999-2000). Former Municipal Fund, Western
Vice President and Associate General Counsel of Asset/Claymore U.S. Treasury
Van Kampen Investments, Inc.(1992-1999). Inflation Protected Securities
Fund, Flaherty & Crumrine/
Claymore Preferred Securities &
Income Fund, Inc., Flaherty &
Crumrine/Claymore Total Return
Fund and Western Asset/Claymore
U.S. Treasury Inflation
Protected Securities Fund 2, and
TS&W/Claymore Tax-Advantaged
Balanced Fund.
- --------------------------------------------------------------------------------------------------------------------------------
David N.Dreman Since 2004 Founder, Chairman and Chief Investment Officer of Trustee, University of Manitoba.
10 Exchange Place Dreman Value Management, LLC. Investment Manager
Jersey City, NJ 07302 for several mutual funds and annuity products
Age: 67 under the Scudder-Dreman name.
Trustee
- --------------------------------------------------------------------------------------------------------------------------------
*Address for all Trustees unless otherwise noted: 210 North Hale Street,
Wheaton, IL 60187
SemiAnnual Report | April 30, 2004 | 15
Dreman/Claymore Dividend & Income Fund
Dividend Reinvestment Plan |
Unless the registered owner of common shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on common shares of
the Fund will be automatically reinvested by the Bank of New York (the "Plan
Administrator"), Administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional common shares of the Fund.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by notice if received and processed by the
Plan Administrator prior to the dividend record date; otherwise such termination
or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive
cash on your behalf and may re-invest that cash in additional common shares of
the Fund for you. If you wish for all dividends declared on your common shares
of the Fund to be automatically reinvested pursuant to the Plan, please contact
your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, The Bank of New York, 101 Barclay Street, New York, New York
10286, Attention: Irina Krylov, Phone Number:(718) 315-4818
16 | SemiAnnual Report | April 30, 2004
Dreman/Claymore Dividend & Income Fund
Fund Information
Board of Trustees Investment Manager
Richard L. Crandall Dreman Value Management, L.L.C.
10 Exchange Place, Suite 2150
Nicholas Dalmaso Jersey City, New Jersey 07302-3913
David N. Dreman Investment Advisor
Claymore Advisors, LLC.
Roman Friedrich III, Chairman Wheaton, Illinois
Ronald A. Nyberg
Administrator, Custodian and
Ronald E. Toupin, Jr. Transfer Agent
The Bank of New York
Officers New York, New York
Nicholas Dalmaso
Chief Executive and Legal Officer
Preferred Stock - Dividend Paying Agent
Steven M. Hill The Bank of New York
Chief Financial Officer and Treasurer New York, New York
Heidemarie Gregoriev Legal Counsel
Secretary Skadden, Arps, Slate, Meagher & Flom LLP
Chicago, Illinois
Lloyd K. Jagai
Vice President Independent Auditors
Ernst & Young LLP
Thomas W. Littauer Chicago, Illinois
Vice President
Nelson P. Woodard
Vice President
Privacy Principles of Dreman/Claymore Dividend & Income Fund for Shareholders
The Fund is committed to maintaining the privacy of shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
we protect that information and why, in certain cases, we may share information
with select other parties.
Generally, the Fund does not receive any nonpublic personal information relating
to its shareholders, although certain nonpublic personal information of its
shareholders may become available to the Fund. The Fund does not disclose any
nonpublic 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 nonpublic personal information about the
shareholders to Claymore Advisors, LLC employees with a legitimate business need
for the information. The Fund maintains physical, electronic and procedural
safeguards designed to protect the nonpublic personal information of its
shareholders.
Questions concerning your shares of Dreman/Claymore Dividend & Income Fund?
.. If your shares are held in a Brokerage Account, contact your Broker.
.. If you have physical possession of your shares in certificate form, contact
the Fund's Administrator, Custodian and Transfer Agent:
The Bank of New York, 101 Barclay Street, New York, New York 10286
1-800-701-8178
This report is sent to shareholders of Dreman/Claymore Dividend & Income Fund
for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at 1-800-245-7999 or on the U.S. Securities and Exchange Commission's
website at http://www.sec.gov
SemiAnnual Report | April 30, 2004 | 17
Dreman/Claymore Dividend & Income Fund
About the Investment Manager
Dreman Value Management, LLC
Dreman Value Management, LLC is an independently-owned investment
management firm that was founded by David N. Dreman in 1997, and its
predecessor firms date back to 1977. As of April 30, 2004, the firm had
over $10.5 billion in assets under management, primarily across
institutional accounts and various investment companies. Independently
owned, the firm is a value-oriented contrarian equity manager and places
its primary emphasis on common stocks with growing dividends, avoiding
concept stocks without justifiable valuations.
Investment Philosophy
Dreman Value Management is one of the pioneers of contrarian value
investing. Our investment philosophy is based on a disciplined, low P/E
approach to stock selection.
. We invest in undervalued companies that exhibit strong fundamentals,
above-market dividend yields and historic earnings growth, which our
analysis indicates will persist.
. Our strategy is to own strong, fundamentally sound companies and to
avoid speculative stocks or potential bankruptcies.
. We believe that the markets are not perfectly efficient and that, in
particular, behavioral finance plays a considerable role in investor
actions and over-reactions and subsequently in stock price movements.
Investment Process
Our research studies, numerous academic papers and our long-term
performance record show that out-of-favor stocks (those with low P/E
ratios) consistently and predictably outperform the market
. Screen for stocks with below market P/E ratios.
. Further refine candidates by applying additional value screens.
. Fundamental analysis is applied to remaining candidates.
. Stocks that pass all the screens and analysis are recommended to the
Investment Committee for approval
Dreman Value Management, L.L.C. [LOGO] DCS
10 Exchange Place, Suite 2150 LISTED
Jersey City, New Jersey 07302-3913 NYSE
Item 2. Code of Ethics.
Not applicable for a semi-annual reporting period.
Item 3. Audit Committee Financial Expert.
Not applicable for a semi-annual reporting period.
Item 4. Principal Accountant Fees and Services.
Not applicable for a semi-annual reporting period.
Item 5. Audit Committee of Listed Registrants.
Not applicable for a semi-annual reporting period.
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.
Not applicable for a semi-annual reporting period.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable until shareholder reports for periods ending after June 15, 2004.
Item 9. 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 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) within 90 days of
this filing and have concluded 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 timely.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's most recent fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
Item 11. Exhibits.
(a) Certification of principal executive officer and principal financial officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b) Certification of principal executive officer and principal financial officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Dreman/Claymore Dividend & Income Fund
By: /s/ Nicholas Dalmaso
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Name: Nicholas Dalmaso
Title: Chief Legal and Executive Officer
Date: 7/01/04
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/ Nicholas Dalmaso
-----------------------------------------------
Name: Nicholas Dalmaso
Title: Chief Legal and executive Officer
Date: 7/01/04
By: /s/ Steven M. Hill
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Name: Steven M. Hill
Title: Treasurer and Chief Financial Officer
Date: 7/01/04