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 811-21708
Name of Fund: Dow 30(SM) Premium & Dividend Income Fund Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Mitchell M. Cox, Chief Executive Officer,
Dow 30(SM) Premium & Dividend Income Fund Inc., 4 World Financial Center,
6th Floor, New York, New York 10080. Mailing address: P.O. Box 9011,
Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (212) 449-8118
Date of fiscal year end: 12/31/06
Date of reporting period: 01/01/06 - 12/31/06
Item 1 - Report to Stockholders
Dow 30(SM) Premium &
Dividend Income Fund Inc.
- --------------------------------------------------------------------------------
Annual Report
December 31, 2006
[LOGO] IQ INVESTMENT [LOGO]
ADVISORS NUVEEN
Investments
Dow 30(SM) Premium & Dividend Income Fund Inc.
Portfolio Information as of December 31, 2006
Percent of
Ten Largest Equity Holdings Net Assets
================================================================================
International Business Machines Corp. ..................... 6.3%
Boeing Co. ................................................ 5.8
Altria Group, Inc. ........................................ 5.6
3M Co. .................................................... 5.1
Exxon Mobil Corp. ......................................... 5.0
American International Group, Inc. ........................ 4.7
Johnson & Johnson ......................................... 4.3
The Procter & Gamble Co. .................................. 4.2
United Technologies Corp. ................................. 4.1
Caterpillar, Inc. ......................................... 4.0
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
================================================================================
Aerospace & Defense ....................................... 12.8%
Computers & Peripherals ................................... 9.0
Pharmaceuticals ........................................... 8.8
Industrial Conglomerates .................................. 7.5
Diversified Financial Services ............................ 6.8
- --------------------------------------------------------------------------------
Percent of
Sector Representation Total Investments
================================================================================
Industrials ............................................... 24.2%
Consumer Staples .......................................... 15.9
Financials ................................................ 15.4
Information Technology .................................... 12.2
Consumer Discretionary .................................... 9.7
Health Care ............................................... 8.8
Materials ................................................. 5.1
Energy .................................................... 5.0
Telecommunication Services ................................ 4.7
Other* .................................................... (1.0)
- --------------------------------------------------------------------------------
* Includes portfolio holdings in options written.
For Fund compliance purposes, the Fund's sector and industry
classifications refer to any one or more of the sector and industry
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Fund management. This
definition may not apply for purposes of this report, which may combine
sector and industry sub-classifications for reporting ease.
Dow Jones Industrial Average, DJIA, Dow 30, Dow Industrials and The Dow are
service marks of Dow Jones & Company, Inc. and have been licensed for use for
certain purposes by IQ Investment Advisors LLC. The Fund is not sponsored,
endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation
regarding the advisability of investing in the Fund.
2 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
A Discussion With Your Fund's Portfolio Manager
We are pleased to provide you with this shareholder report for Dow 30(SM)
Premium & Dividend Income Fund Inc. While the Fund is advised by IQ Investment
Advisors LLC, the following discussion is provided to you by Nuveen Asset
Management, the Fund's subadviser.
The investment objective of Dow 30(SM) Premium & Dividend Income Fund Inc. (the
"Fund") is to provide shareholders with a high level of current income, with a
secondary objective of capital appreciation.
How did the Fund perform during the fiscal year?
For the 12-month period ended December 31, 2006, the Common Stock of the Fund
had a total investment return of +15.54%, based on a change in per share net
asset value from $19.13 to $20.14, and assuming reinvestment of all
distributions paid during the period. For comparative purposes, during the same
period, the unmanaged Dow Jones Industrial Average(SM) ("DJIA(SM)") returned
+19.05% (including reinvestment of any dividends) and the Chicago Board Options
Exchange DJIA BuyWrite Index ("BXD(SM) Index") returned +12.69%. During the
fiscal year, the Fund paid monthly distributions of $.15 per share. These
distributions equate to an annualized distribution yield of 9.0% relative to the
Fund's initial offering price of $20 per share. For further comparison, as of
December 31, 2006, the DJIA had an annualized dividend yield of 2.15%.
For more detail with regard to the Fund's total investment return based on a
change in per share market value of the Fund's Common Stock (as measured by the
trading price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or a discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
Describe the market environment during the fiscal year.
After a strong start to 2006, during which the U.S. Gross Domestic Product
("GDP") grew by 5.6% in the first quarter and 2.6% in the second quarter,
economic growth slowed in the second half of the year. Third quarter GDP growth
was 2.0% and projections for the fourth quarter ranged from 2.0% to 2.5%. The
slowing economy is an indicator that the Federal Reserve Board (the "Fed") may
have successfully engineered an economic soft landing and has thus ended its
two-year interest rate tightening policy.
Equity markets reacted positively to the possibility of an economic soft
landing, rallying strongly during the third and fourth quarters, when it became
apparent that the Fed ended its interest rate tightening, and the economy, while
slowing, continued growing at respectable long-term rates. For the year, the
broad market, as represented by the Standard & Poor's 500(R) Index ("S&P 500(R)
Index"), was up 15.79%. Of that 15.79%, 12.74% came during the second half of
the year as stocks reacted positively to the potential for a soft landing.
Commodity prices, particularly energy, were an important driver of returns
during the year. From December 31, 2005 to July 31, 2006, crude oil prices rose
$13.36 per barrel as strong global economic growth and concerns about Middle
Eastern supply tightened the global supply. While tensions continued in the
Middle East through the fourth quarter, supply concerns eased, resulting in a
reduction of crude oil prices by $13.35 per barrel, providing a net increase of
$0.01 per barrel for the year. This volatility acted as a headwind during the
first half of the year and a strong tailwind during the second half.
How did you manage the portfolio during the period?
The Fund invests in the 30 stocks in the DJIA and then writes options on
approximately 50% of each individual stock to generate cash-flow, effectively
monetizing a portion of each stock's potential for capital appreciation. During
the first quarter, the Fund sold a series of one-month call options struck 1%
out-of-the-money on 45% to 50% of each individual stock in the DJIA. The
out-of-the-money call options and low overwrite percentage (below 50%), allowed
the Fund to participate in a portion of the appreciation of the DJIA. During the
second and third quarters, the Fund moved to a staggered option expiration
structure with one-month, two-month and three-month options each overwriting 18%
to 20% of the Fund's holding of each individual stock in the DJIA. The staggered
option positions and higher cumulative overwrite percentage were designed to
take advantage of higher levels of implied volatility, reduced expectations for
BXD is a service mark of the Chicago Board Options Exchange.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 3
A Discussion With Your Fund's Portfolio Manager (concluded)
global growth, and the simultaneous slowing of the U.S. equity markets.
As the summer unfolded, it became evident that the U.S. economy was slowing.
However, the negative impact of the slowing U.S. economy was more than offset by
the apparent end of the Fed's interest rate tightening campaign. Equity markets
responded to the new paradigm (slower growth without anticipated rate hikes) by
rallying strongly during the second half of the year. In order to more fully
participate in the resumption of favorable equity markets, the Fund moved back
to one-month out-of-the-money call options on approximately 45% of its equity
holdings.
How would you characterize the Fund's position at the close of the period?
The Fund is appropriately positioned for 2007. The portfolio of stocks is fully
invested at DJIA weightings. The option portfolio is overwriting approximately
46% of each underlying stock on a pro-rata basis with a laddered portfolio of
expiration dates sold approximately 1% out of the money. Given this portfolio
structure, we feel confident that the portfolio is well positioned to meet its
investment objectives.
Rob A. Guttschow
Portfolio Manager
January 16, 2007
Standard & Poor's 500 is a registered trademark of the McGraw-Hill Companies.
4 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Schedule of Investments as of December 31, 2006
Shares
Industry Common Stocks Held Value
===================================================================================
Aerospace & Defense--12.8%
Boeing Co. 150,423 $ 13,363,579
Honeywell International, Inc. 150,423 6,805,137
United Technologies Corp. 150,423 9,404,446
------------
29,573,162
- -----------------------------------------------------------------------------------
Automobiles--2.0%
General Motors Corp. 150,423 4,620,995
- -----------------------------------------------------------------------------------
Beverages--3.1%
The Coca-Cola Co. 150,423 7,257,910
- -----------------------------------------------------------------------------------
Chemicals--3.2%
E.I. du Pont de Nemours & Co. 150,423 7,327,104
- -----------------------------------------------------------------------------------
Computers & Peripherals--9.0%
Hewlett-Packard Co. 150,423 6,195,923
International Business Machines Corp. 150,423 14,613,594
------------
20,809,517
- -----------------------------------------------------------------------------------
Consumer Finance--3.9%
American Express Co. 150,423 9,126,163
- -----------------------------------------------------------------------------------
Diversified Financial Services--6.8%
Citigroup, Inc. 150,423 8,378,561
JPMorgan Chase & Co. 150,423 7,265,431
------------
15,643,992
- -----------------------------------------------------------------------------------
Diversified Telecommunication Services--4.8%
AT&T, Inc. 150,423 5,377,622
Verizon Communications, Inc. 150,423 5,601,753
------------
10,979,375
- -----------------------------------------------------------------------------------
Food & Staples Retailing--3.0%
Wal-Mart Stores, Inc. 150,423 6,946,534
- -----------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--2.9%
McDonald's Corp. 150,423 6,668,252
- -----------------------------------------------------------------------------------
Household Products--4.2%
The Procter & Gamble Co. 150,423 9,667,686
- -----------------------------------------------------------------------------------
Industrial Conglomerates--7.5%
3M Co. 150,423 11,722,464
General Electric Co. 150,423 5,597,240
------------
17,319,704
- -----------------------------------------------------------------------------------
Insurance--4.7%
American International Group, Inc. 150,423 10,779,312
- -----------------------------------------------------------------------------------
Machinery--4.0%
Caterpillar, Inc. 150,423 9,225,443
- -----------------------------------------------------------------------------------
Media--2.2%
Walt Disney Co. 150,423 5,154,996
- -----------------------------------------------------------------------------------
Metals & Mining--2.0%
Alcoa, Inc. 150,423 4,514,194
- -----------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels--5.0%
Exxon Mobil Corp. 150,423 11,526,914
- -----------------------------------------------------------------------------------
Pharmaceuticals--8.8%
Johnson & Johnson 150,423 9,930,927
Merck & Co., Inc. 150,423 6,558,443
Pfizer, Inc. 150,423 3,895,956
------------
20,385,326
- -----------------------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment--1.3%
Intel Corp. 150,423 3,046,066
- -----------------------------------------------------------------------------------
Software--1.9%
Microsoft Corp. 150,423 4,491,631
- -----------------------------------------------------------------------------------
Specialty Retail--2.6%
Home Depot, Inc. 150,423 6,040,988
- -----------------------------------------------------------------------------------
Tobacco--5.6%
Altria Group, Inc. 150,423 12,909,302
------------
Total Investments
(Cost--$193,866,940)--101.3% 234,014,566
===================================================================================
Number of
Options Written Contracts
===================================================================================
Call Options Written
3M Co., expiring January 2007 at
USD 80.04, Broker UBS Warburg 700 (31,780)
AT&T, Inc., expiring January 2007 at
USD 35.61, Broker UBS Warburg 700 (43,960)
Alcoa, Inc., expiring January 2007 at
USD 30.502, Broker Banc of America 700 (21,792)
Altria Group, Inc., expiring January
2007 at USD 86.779,
Broker Deutsche Bank AG 700 (55,090)
American Express Co., expiring
January 2007 at USD 59.489,
Broker Banc of America 700 (100,365)
American International Group, Inc.,
expiring January 2007 at USD 70.55,
Broker UBS Warburg 700 (98,350)
Boeing Co., expiring January 2007 at
USD 88.82, Broker UBS Warburg 700 (79,800)
Caterpillar, Inc., expiring January 2007
at USD 62.22, Broker UBS Warburg 700 (24,500)
Citigroup, Inc., expiring January 2007
at USD 50.06,
Broker Deutsche Bank AG 700 (399,854)
The Coca-Cola Co., expiring January
2007 at USD 49.33,
Broker BNP Paribas 700 (7,700)
E.I. du Pont de Nemours & Co., expiring
January 2007 at USD 48.68,
Broker Deutsche Bank AG 700 (34,468)
Exxon Mobil Corp., expiring January
2007 at USD 77.759,
Broker Deutsche Bank AG 700 (77,455)
General Electric Co., expiring January
2007 at USD 35.55,
Broker UBS Warburg 700 (121,380)
General Motors Corp., expiring January
2007 at USD 30.44,
Broker UBS Warburg 700 (59,920)
Hewlett-Packard Co., expiring January
2007 at USD 40.07,
Broker UBS Warburg 700 (101,990)
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 5
Schedule of Investments (concluded)
Number of
Options Written Contracts Value
===================================================================================
Call Options Written (continued)
Home Depot, Inc., expiring January
2007 at USD 39.5,
Broker UBS Warburg 700 $ (77,280)
Honeywell International, Inc., expiring
January 2007 at USD 42.278,
Broker JPMorgan Chase 700 (217,700)
Intel Corp., expiring January 2007 at
USD 20.91, Broker UBS Warburg 700 (14,000)
International Business Machines Corp.,
expiring January 2007 at USD 95.72,
Broker BNP Paribas 700 (187,600)
JPMorgan Chase & Co., expiring
January 2007 at USD 48.08,
Broker BNP Paribas 700 (53,200)
Johnson & Johnson, expiring January
2007 at USD 66.12,
Broker UBS Warburg 700 (47,530)
McDonald's Corp., expiring January
2007 at USD 44.03,
Broker BNP Paribas 700 (54,600)
Merck & Co., Inc., expiring January
2007 at USD 43.945,
Broker Deutsche Bank AG 700 (44,086)
Microsoft Corp., expiring January 2007
at USD 30.289,
Broker Deutsche Bank AG 700 (26,719)
Pfizer, Inc., expiring January 2007 at
USD 26.462, Broker Banc of America 700 (24,505)
The Procter & Gamble Co., expiring
January 2007 at USD 65.044,
Broker Deutsche Bank AG 700 (18,291)
United Technologies Corp., expiring
January 2007 at USD 63.104,
Broker Banc of America 700 (73,556)
Verizon Communications, Inc., expiring
January 2007 at USD 37.03,
Broker UBS Warburg 700 (38,080)
Wal-Mart Stores, Inc., expiring January
2007 at USD 46.55,
Broker Deutsche Bank AG 700 (43,008)
Walt Disney Co, expiring January 2007
at USD 33.22, Broker UBS Warburg 700 (87,921)
- -----------------------------------------------------------------------------------
Total Options Written
(Premiums Received--$1,956,661)--(1.0%) (2,266,480)
===================================================================================
Total Investments, Net of Options Written
(Cost--$191,910,279*)--100.3% 231,748,086
Liabilities in Excess of Other Assets--(0.3%) (740,629)
------------
Net Assets--100.0% $231,007,457
============
- -----------------------------------------------------------------------------------
* The cost and unrealized appreciation (depreciation) of investments, net of
options written, as of December 31, 2006, as computed for federal income
tax purposes, were as follows:
Aggregate cost .............................. $ 191,914,012
=============
Gross unrealized appreciation ............... $ 42,095,992
Gross unrealized depreciation ............... (2,261,918)
-------------
Net unrealized appreciation ................. $ 39,834,074
=============
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine such industry sub-classifications for
reporting ease. Industries are shown as a percent of net assets. These
industry classifications are unaudited.
See Notes to Financial Statements.
6 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Statement of Assets, Liabilities and Capital
As of December 31, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$193,866,940).................................................... $ 234,014,566
Dividends receivable ................................................... 312,504
Prepaid expenses and other assets ...................................... 12,245
-------------
Total assets ........................................................... 234,339,315
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received--$1,956,661) .............. 2,266,480
Bank overdraft ......................................................... 714,232
Payables:
Investment adviser .................................................. $ 158,468
Options written ..................................................... 92,120 250,588
-------------
Accrued expenses ....................................................... 100,558
-------------
Total liabilities ...................................................... 3,331,858
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ............................................................. $ 231,007,457
=============
===================================================================================================================================
Capital
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001, 100,000,000 shares authorized ........... $ 11,473
Paid-in capital in excess of par ....................................... 194,440,176
Accumulated realized capital losses--net ............................... $ (3,281,999)
Unrealized appreciation--net ........................................... 39,837,807
-------------
Total accumulated earnings--net ........................................ 36,555,808
-------------
Total capital--Equivalent to $20.14 per share based on
11,472,476 shares of Common Stock outstanding (market price--$20.96) .. $ 231,007,457
=============
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 7
Statement of Operations
For the Year Ended December 31, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends .............................................................. $ 5,252,232
Interest ............................................................... 29,846
Other .................................................................. 4,842
-------------
Total income ........................................................... 5,286,920
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................... $ 1,984,548
Professional fees ...................................................... 90,887
Licensing fees ......................................................... 68,965
Directors' fees and expenses ........................................... 67,970
Transfer agent fees .................................................... 54,085
Accounting services .................................................... 50,320
Printing and shareholder reports ....................................... 30,152
Custodian fees ......................................................... 18,957
Listing fees ........................................................... 16,572
Pricing services ....................................................... 1,071
Other .................................................................. 33,224
-------------
Total expenses ......................................................... 2,416,751
-------------
Investment income--net ................................................. 2,870,169
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net .................................................... 2,096,514
Options written--net ................................................ (3,335,287) (1,238,773)
-------------
Change in unrealized appreciation/depreciation on:
Investments--net .................................................... 31,997,785
Options written--net ................................................ (1,639,742) 30,358,043
----------------------------------
Total realized and unrealized gain--net ................................ 29,119,270
-------------
Net Increase in Net Assets Resulting from Operations ................... $ 31,989,439
=============
See Notes to Financial Statements.
8 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Statements of Changes in Net Assets
For the Period
For the April 29,
Year Ended 2005+ to
December 31, December 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................................. $ 2,870,169 $ 2,116,710
Realized gain (loss)--net .............................................. (1,238,773) 1,179,428
Unrealized appreciation--net ........................................... 30,358,043 9,479,764
----------------------------------
Net increase in net assets resulting from operations ................... 31,989,439 12,775,902
----------------------------------
===================================================================================================================================
Dividends & Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................................. (2,865,327) (2,024,530)
Realized gain--net ..................................................... -- (3,222,654)
Tax return of capital .................................................. (17,641,705) (6,732,089)
----------------------------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ......................................... (20,507,032) (11,979,273)
----------------------------------
===================================================================================================================================
Common Stock Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net proceeds from issuance of Common Stock ............................. -- 214,875,000
Offering costs, including adjustments, resulting from the
issuance of Common Stock .............................................. (27,610) (422,390)
Value of shares issued to shareholders in reinvestment of dividends .... 2,007,623 2,195,790
----------------------------------
Net increase in net assets resulting from Common Stock transactions .... 1,980,013 216,648,400
----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ........................................... 13,462,420 217,445,029
Beginning of period .................................................... 217,545,037 100,008
----------------------------------
End of period .......................................................... $ 231,007,457 $ 217,545,037
==================================
+ Commencement of operations.
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 9
For the Period
For the April 29,
Year Ended 2005+ to
The following per share data and ratios have been derived December 31, December 31,
from information provided in the financial statements. 2006 2005
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................................. $ 19.13 $ 19.10
----------------------------
Investment income--net** .............................................. .25 .19
Realized and unrealized gain--net ..................................... 2.56 .94
----------------------------
Total from investment operations ...................................... 2.81 1.13
----------------------------
Less dividends and distributions from:
Investment income--net ............................................. (.25) (.18)
Realized gain--net ................................................. -- (.28)
Tax return of capital .............................................. (1.55) (.60)
----------------------------
Total dividends and distributions ..................................... (1.80) (1.06)
----------------------------
Offering costs, including adjustments resulting from the
issuance of Common Stock ............................................. --**** (.04)
----------------------------
Net asset value, end of period ........................................ $ 20.14 $ 19.13
============================
Market price per share, end of period ................................. $ 20.96 $ 18.15
============================
===================================================================================================================================
Total Investment Return++
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................................... 15.54% 5.86%***@
============================
Based on market price per share ....................................... 26.74% (4.08%)@
============================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................................. 1.10% 1.12%*
============================
Investment income--net ................................................ 1.30% 1.44%*
============================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............................. $ 231,007 $ 217,545
============================
Portfolio turnover .................................................... .00%@@ 17.95%
============================
* Annualized.
** Based on average shares outstanding.
*** In 2005, IQ Investment Advisors LLC (an affiliate) reimbursed the Fund as
a result of a trading/administrative error, which had no impact on total
investment return.
**** Amount is less than $(.01) per share.
+ Commencement of operations.
++ Total investment returns based on market price, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
@ Aggregate total investment return.
@@ For purposes of calculating portfolio turnover of the Fund, the options
written by the Fund have been classified as short-term investments because
the expiration dates at the time of acquisition were one year or less, and
therefore, the portfolio turnover is zero.
See Notes to Financial Statements.
10 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
Dow 30(SM) Premium & Dividend Income Fund Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund determines and makes available for publication the net
asset value of its Common Stock on a daily basis. The Fund's Common Stock shares
are listed on the New York Stock Exchange ("NYSE") under the symbol DPD. The
following is a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Equity securities held by the Fund that are
traded on stock exchanges or the NASDAQ Global Market are valued at the last
sale price or official close price on the exchange, as of the close of business
on the day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available asked price
for short positions. In cases where equity securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Fund.
Long positions traded in the over-the-counter ("OTC") markets, NASDAQ Capital
Market or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Directors of the Fund. Short positions traded in the OTC markets are
valued at the last available asked price. Portfolio securities that are traded
both in the OTC markets and on a stock exchange are valued according to the
broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued based upon quoted fair valuations received daily by the
Fund from a pricing service or counterparty. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their last sale
price as of the close of such exchanges. Obligations with remaining maturities
of 60 days or less are valued at amortized cost unless the Investment Adviser
believes that this method no longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the NYSE.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
will generally be determined as of the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the Fund's
net asset value. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Fund's Board of Directors
or by the investment adviser using a pricing service and/or procedures approved
by the Fund's Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract due to an
unfavorable change in the price of the underlying security, or if the
counterparty does not perform under the contract.
o Options -- The Fund writes covered call options. When the Fund writes an
option, an amount equal to the premium received by the Fund is reflected
as an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the
option written. The Fund provides the purchaser with the right to
potentially receive a cash payment from the Fund equal to any appreciation
in the cash value of the index over the strike price on the expiration
date of the option written. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 11
Notes to Financial Statements (continued)
a gain or loss on the option to the extent of the premiums received (or
gain or loss to the extent the cost of the closing transaction exceeds the
premium received).
Written options are non-income producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(e) Dividends and distributions -- Dividends are declared and paid monthly.
Portions of the dividends paid by the Fund during the year ended December 31,
2006 and the period April 29, 2005 to December 31, 2005 were characterized as
tax returns of capital.
(f) Offering expenses -- Direct expenses relating to the public offering of the
Fund's Common Stock were charged to capital at the time of issuance of the
shares.
(g) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including mutual funds before being measured
and recognized in the financial statements. Adoption of FIN 48 is required for
the last net asset value calculation in the first required financial statement
reporting period for fiscal years beginning after December 15, 2006. The impact
on the Fund's financial statements, if any, is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements," ("FAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the implications of
FAS 157. At this time, its impact on the Fund's financial statements has not
been determined.
(h) Bank Overdraft -- The Fund recorded a bank overdraft which resulted from
management estimates of available cash.
(i) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $4,842 has been reclassified between accumulated distributions in excess
of net investment income and paid-in capital in excess of par as a result of a
permanent difference attributable to a capital infusion. This reclassification
has no effect on net assets or net asset values per share.
2. Investment Advisory and Management Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory and Management Agreement with
IQ Investment Advisors LLC ("IQ"), an indirect subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."). IQ is responsible for the investment advisory,
management and administrative services to the Fund. In addition, IQ provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund will pay a monthly
fee at an annual rate equal to .90% of the average daily value of the Fund's net
assets plus borrowings for leverage and other investment purposes. In addition,
IQ has entered into a Subadvisory Agreement with Nuveen Asset Management
("Nuveen") pursuant to which Nuveen provides certain investment advisory
services to IQ with respect to the Fund. For such services, IQ will pay Nuveen a
monthly fee at an
12 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Notes to Financial Statements (concluded)
annual rate equal to .39% of the average daily value of the Fund's net assets
plus borrowings for investment purposes. There is no increase in the aggregate
fees paid by the Fund for these services.
Nuveen reimbursed the Fund $4,842 as a result of a trading/ administrative
error.
On September 29, 2006, BlackRock, Inc. ("BlackRock") and ML & Co. combined ML &
Co.'s investment management business, Merrill Lynch Investment Managers, L.P.
and its affiliates, with BlackRock to create a new independent company. ML & Co.
owns up to a 49.8% economic interest and up to a 45% voting interest in the
combined company, and The PNC Financial Services Group, Inc., has approximately
a 34% economic and voting interest. The new company operates under the BlackRock
name and is governed by a board of directors with a majority of independent
members. IQ remains an indirect subsidiary of ML & Co.
Effective October 2, 2006, IQ has entered into an Administrative Agreement with
Princeton Administrators, LLC (the "Administrator"). The Administration
Agreement provides that IQ will pay the Administrator a fee from its investment
advisory fee at an annual rate equal to .12% of the Fund's average daily net
assets for the performance of administrative and other services necessary for
the operation of the Fund. There is no increase in the aggregate fees paid by
the Fund for these services. The Administrator is an indirect subsidiary of
BlackRock.
Certain officers of the Fund are officers of IQ and/or ML & Co. Effective
September 29, 2006, certain officers of the Fund are officers of BlackRock or
its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2006 were $0 and $18,861,485, respectively.
Transactions in options written for the year ended December 31, 2006 were as
follows:
- --------------------------------------------------------------------------------
Number of Premiums
Contracts Received
- --------------------------------------------------------------------------------
Outstanding call options written,
beginning of year ...................... 24,000 $ 2,418,367
Options written .......................... 211,700 22,606,298
Options expired .......................... (95,200) (10,074,210)
Options closed ........................... (119,500) (12,993,794)
------------------------------
Outstanding call options written,
end of year ............................ 21,000 $ 1,956,661
==============================
4. Common Stock Transactions:
The Fund is authorized to issue 100,000,000 shares of stock, all of which are
initially classified as Common Stock, par value $.001. The Board of Directors is
authorized, however, to classify and reclassify any unissued shares of Common
Stock without approval of the holders of Common Stock.
Shares issued and outstanding during the year ended December 31, 2006 increased
by 103,006 from dividend reinvestments. Shares issued and outstanding during the
period April 29, 2005 to December 31, 2005 increased by 11,250,000 from shares
sold and 114,234 as a result of dividend reinvestments.
5. Distributions to Shareholders:
The tax character of distributions paid during the year ended December 31, 2006
and the period April 29, 2005 to December 31, 2005 was as follows:
- --------------------------------------------------------------------------------
4/29/2005+ -
12/31/2006 12/31/2005
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ...................... $ 2,865,327 $ 5,247,184
Tax return of capital ................ 17,641,705 6,732,089
-------------------------------
Total distributions .................... $20,507,032 $11,979,273
===============================
+ Commencement of operations.
As of December 31, 2006, the components of accumulated earnings on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income -- net .................... $ --
Undistributed long-term capital gains -- net ............ --
------------
Total undistributed earnings -- net ..................... --
Capital loss carryforward ............................... (2,551,276)*
Unrealized gains -- net ................................. 39,107,084**
------------
Total accumulated earnings -- net ....................... $ 36,555,808
============
* As of December 31, 2006, the Fund had a net capital loss carryforward of
$2,551,276, all of which expires in 2014. This amount will be available to
offset like amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales and the
deferral of post-October capital losses for tax purposes.
6. Subsequent Event:
The Fund paid a dividend in the amount of $.15 per share on January 31, 2007 to
shareholders of record on January 22, 2007.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 13
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Dow 30(SM) Premium & Dividend
Income Fund Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of Dow 30(SM) Premium & Dividend Income
Fund Inc. as of December 31, 2006, and the related statement of operations for
the year then ended and the statements of changes in net assets and the
financial highlights for the year then ended and for the period April 29, 2005
(commencement of operations) through December 31, 2005. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2006, by correspondence with the
custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Dow
30(SM) Premium & Dividend Income Fund Inc. as of December 31, 2006, the results
of its operations for the year then ended, and the changes in its net assets and
its financial highlights for the year then ended and for the period April 29,
2005 through December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, NJ
February 22, 2007
Fund Certification (unaudited)
In May 2006, the Fund filed its Chief Executive Officer Certification for the
prior year with the New York Stock Exchange pursuant to Section 303A.12(a) of
the New York Stock Exchange Corporate Governance Listing Standards.
The Fund's Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Fund's Form N-CSR and are available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
Important Tax Information (unaudited)
The following information is provided with respect to the taxable ordinary
income portion of the monthly distributions paid by Dow 30(SM) Premium &
Dividend Income Fund Inc. during the fiscal year ended December 31, 2006:
- --------------------------------------------------------------------------------
Qualified Dividend Income for Individuals ......................... 100.00%
Dividends Qualifying for the Dividends Received Deduction for
Corporations ..................................................... 100.00%
Interest-Related Dividends for Non-U.S. Residents ................. 0.57%*
- --------------------------------------------------------------------------------
* Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
14 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by The Bank of New York (the
"Plan Agent"). Under the Plan, whenever the Fund declares a dividend,
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund. The Plan Agent will acquire the shares for the participant's
account either (i) through receipt of additional unissued but authorized shares
of the Fund ("newly issued shares") or (ii) by purchase of outstanding shares of
Common Stock on the open market on the New York Stock Exchange or elsewhere. If,
on the dividend payment date, the Fund's net asset value per share is equal to
or less than the market price per share plus estimated brokerage commissions (a
condition often referred to as a "market premium"), the Plan Agent will invest
the dividend amount in newly issued shares. If the Fund's net asset value per
share is greater than the market price per share (a condition often referred to
as a "market discount"), the Plan Agent will invest the dividend amount by
purchasing on the open market additional shares. If the Plan Agent is unable to
invest the full dividend amount in open market purchases, or if the market
discount shifts to a market premium during the purchase period, the Plan Agent
will invest any uninvested portion in newly issued shares. The shares acquired
are credited to each shareholder's account. The amount credited is determined by
dividing the dollar amount of the dividend by either (i) when the shares are
newly issued, the net asset value per share on the date the shares are issued or
(ii) when shares are purchased in the open market, the average purchase price
per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value, participants
in the Plan will receive shares of the Fund for less than they could otherwise
purchase them and with a cash value greater than the value of any cash
distribution they would have received. However, there may not be enough shares
available in the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price on resale
may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. Participation in the Plan generally will not affect the tax-exempt status
of exempt interest dividends paid by the Fund. If, when the Fund's shares are
trading at a market premium, the Fund issues shares pursuant to the Plan that
have a greater fair market value than the amount of cash reinvested, it is
possible that all or a portion of the discount from the market value (which may
not exceed 5% of the fair market value of the Fund's shares) could be viewed as
a taxable distribution. If the discount is viewed as a taxable distribution, it
is also possible that the taxable character of this discount would be allocable
to all the shareholders, including shareholders who do not participate in the
Plan. Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their
allocable share of the discount.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at The Bank of
New York, Church Street Station, P.O. Box 11258, New York, NY 10286-1258,
Telephone: 800-432-8224.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 15
Officers and Directors
Number of IQ
Advisors-
Affiliate
Advised Funds Other Public
Position(s) Length of and Portfolios Directorships
Held with Time Overseen Held by
Name Address & Age Fund Served** Principal Occupation(s) During Past 5 Years By Director Director
====================================================================================================================================
Non-Interested Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
Alan R. P.O. Box 9095 Director & 2005 to Vice-Chairman, Kissinger Associates, Inc., a 7 Hasbro, Inc.;
Batkin Princeton, NJ Chairman of present consulting firm, since 1990. Overseas Ship-
08543-9095 the Board holding Group,
Age: 62 Inc.; Cantel
Medical Corp.;
and Diamond
Offshore
Drilling, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Paul P.O. Box 9095 Director & 2005 to Professor, Columbia University Business School 7 None
Glasserman Princeton, NJ Chairman of present since 1991; Senior Vice Dean since July 2004.
08543-9095 the Audit
Age: 44 Committee
- ------------------------------------------------------------------------------------------------------------------------------------
Steven W. P.O. Box 9095 Director 2005 to Retired since August 2002; Managing Director, 7 Ametek, Inc.
Kohlhagen Princeton, NJ present Wachovia National Bank and its predecessors
08543-9095 (1992 - 2002).
Age: 59
- ------------------------------------------------------------------------------------------------------------------------------------
William J. P.O. Box 9095 Director & 2005 to Retired since November 2004; Chairman and 7 None
Rainer Princeton, NJ Chairman of present Chief Executive Officer, OneChicago, LLC, a
08543-9095 Nominating designated contract market (2001 to November
Age: 60 and 2004); Chairman, U.S. Commodity Futures
Corporate Trading Commission (1999 - 2001).
Governance
Committee
------------------------------------------------------------------------------------------------------------------------
* Each of the Non-Interested Directors is a member of the Audit Committee and the Nominating and Corporate
Governance Committee.
** Each Director will serve for a term of one year and until his successor is elected and qualifies, or his earlier
death, resignation or removal as provided in the Fund's Bylaws, charter or by statute.
16 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchell P.O. Box 9011 President 2005 to IQ Investment Advisors LLC, President since April 2004; MLPF&S, Managing
M. Cox Princeton, NJ present Director, Head of Global Private Client Market Investments & Origination since
08543-9011 2003; MLPF&S, Managing Director, Head of Structured Products Origination and
Age: 41 Sales (2001 - 2003); MLPF&S, Director, Head of Structured Products Origination
(1997 - 2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Treasurer and Secretary since December 2004; Managing
Burke Princeton, NJ President, present Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch
08543-9011 Treasurer Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM")
Age: 46 and (2006); First Vice President of MLIM and FAM (1997 - 2005) and Treasurer thereof
Secretary (1999 - 2006); Vice President of MLIM and FAM (1990 - 1997).
- ------------------------------------------------------------------------------------------------------------------------------------
Martin G. P.O. Box 9011 Chief 2006 to IQ Investment Advisors LLC, Chief Legal Officer since June 2006; Merrill Lynch &
Byrne Princeton, NJ Legal present Co., Inc., Office of General Counsel, Managing Director (2006 to present), First
08543-9011 Officer Vice President (2002 - 2006), Director (2000 - 2002).
Age: 44
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Fund Chief 2005 to IQ Investment Advisors LLC, Fund Chief Compliance Officer since 2004; Managing
Hiller Princeton, NJ Compliance present Director of BlackRock, Inc. and Fund Chief Compliance Officer since 2006; Chief
08543-9011 Officer Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Age: 55 Chief Compliance Officer of MLIM (Americas Region) (2004 - 2006); Global Director
of Compliance at Morgan Stanley Investment Management (2000 - 2004); Managing
Director and Global Director of Compliance at Citigroup Asset Management (2000 -
2002); Chief Compliance Officer at Soros Fund Management in 2000; Chief
Compliance Officer at Prudential Financial (1995 - 2000); Senior Counsel in the
Securities and Exchange Commission's Division of Enforcement in Washington, D.C.
(1990 - 1995).
- ------------------------------------------------------------------------------------------------------------------------------------
Justin C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President since 2005; MLPF&S, Director, Global
Ferri Princeton, NJ President present Private Client Market Investments & Origination since 2006; MLPF&S, Vice
08543-9011 President, Global Private Client Market Investments & Origination in 2005;
Age: 31 MLPF&S, Vice President, Head of Global Private Client Rampart Equity Derivatives
(2004 - 2005); MLPF&S, Vice President, Co-Head Global Private Client Domestic
Analytic Development (2002 - 2004); mPower Advisors LLC, Vice President,
Quantitative Development (1999 - 2002).
- ------------------------------------------------------------------------------------------------------------------------------------
Jay M. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President since 2005; BlackRock, Inc., Director
Fife Princeton, NJ President present since 2006; MLIM, Director (2000 - 2006); MLPF&S, Director (2000) and Vice
08543-9011 President (1997 - 2000).
Age: 36
- ------------------------------------------------------------------------------------------------------------------------------------
Colleen R. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President since 2005; MLPF&S, Director, Global
Rusch Princeton, NJ President present Private Client Market Investments & Origination since July 2005; MLIM, Director
08543-9011 from 2005 to July 2005; Vice President of MLIM (1998 - 2004).
Age: 39
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
NYSE Symbol
DPD
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 17
Clarification of Fund Distribution Policy
At a meeting held on March 7, 2006, the Board of Directors of the Fund approved
certain changes to the Fund's distribution policy. The intent of the change was
to clarify and standardize the Fund's distribution policy with the distribution
policies of other registered funds advised by IQ Investment Advisors LLC that
operate in a similar manner. The revised statement of the Fund's distribution
policy is intended to clarify that the Fund attempts to maintain a relatively
stable level of monthly distributions and that the Fund may pay out less than
all of its net investment income or pay out undistributed income or return
capital in addition to current month net investment income. The revised policy
does not reflect any intention on the part of the Fund or IQ Investment Advisors
LLC to manage the Fund in a different manner or to change the current
distribution payment policy of the Fund. The Fund's original statement of its
distribution policy and the revised statement of the policy are both reproduced
below.
Former Distribution Policy
The Fund intends to distribute to its stockholders any investment income earned
by the Fund on a monthly basis. It is anticipated that the premiums earned from
writing the Options and any dividends received from the Stocks will be the
Fund's main source of investment income. The Fund expects to declare its first
distribution approximately 45 days following the Fund's commencement of
investment operations. The Fund expects to pay this initial distribution
approximately 60 days following the Fund's commencement of investment
operations. In addition, the Fund will distribute its realized capital gains, if
any, at least annually. This distribution policy may, under certain
circumstances, have certain adverse consequences to the Fund and its
stockholders because it may result in a return of capital to stockholders, which
would reduce the Fund's net asset value and, over time, potentially increase the
Fund's expense ratio. This dividend policy may be modified by the Board of
Directors from time to time.
Revised Distribution Policy
The Fund intends to make distributions on a monthly basis. The Fund will
distribute net realized capital gains, if any, at least annually. Currently, in
order to maintain a relatively stable level of monthly distributions, the Fund
may pay out less than all of its net investment income or pay out undistributed
income or return capital in addition to current month net investment income. It
is anticipated that the premiums earned from writing the Options and any
dividends received from the Stocks will be the Fund's main source of
distributions. The distributions for any full or partial year might not be made
in equal amounts, and one distribution may be larger than the other. The Fund
will make a monthly distribution only if authorized by the Fund's Board of
Directors and declared by the Fund out of assets legally available for these
distributions. The Fund also may pay a special distribution at the end of each
calendar year, if necessary, to comply with U.S. federal income tax
requirements. This distribution policy may, under certain circumstances, have
certain adverse consequences to the Fund and its stockholders because it may
result in a return of capital to stockholders, which would reduce the Fund's net
asset value and, over time, potentially increase the Fund's expense ratio.
18 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed 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 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
Contact Information
For more information regarding the Fund, please visit www.IQIAFunds.com or
contact us at 1-877-449-4742.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2006 19
[LOGO] IQ
INVESTMENT
ADVISORS www.IQIAFunds.com
Dow 30(SM) Premium & Dividend Income Fund Inc. seeks to provide stockholders
with a high level of current income, with a secondary objective of capital
appreciation.
This report, including the financial information herein, is transmitted to
shareholders of Dow 30(SM) Premium & Dividend Income Fund Inc. for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance.
Statements and other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge at
www.IQIAFunds.com/proxyvoting.asp or upon request by calling toll-free
1-877-449-4742 or through the Securities and Exchange Commission's Web site at
http://www.sec.gov. Information about how the Fund voted proxies relating to
securities held in the Fund's portfolio during the most recent 12-month period
ended June 30 is available (1) at www.IQIAFunds.com/proxyvoting.asp; and (2) on
the Securities and Exchange Commission's Web site at http://www.sec.gov.
Dow 30(SM) Premium & Dividend Income Fund Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
#IQDPD -- 12/06
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer and principal
accounting officer, or persons performing similar functions. A copy of the code
of ethics is available without charge upon request by calling toll-free
1-877-449-4742.
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit committee
financial expert is independent: (1) Alan R. Batkin and (2) Steven W. Kohlhagen.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending December 31, 2006 - $22,200
Fiscal Year Ending December 31, 2005 - $30,000
The nature of the services include fees for professional services
rendered in connection with seed audits.
(b) Audit-Related Fees - Fiscal Year Ending December 31, 2006 - $0
Fiscal Year Ending December 31, 2005 - $7,200
The nature of the services include fees for professional services
rendered in connection with issuance of the letters to the underwriters
in connection with the seed audits.
(c) Tax Fees - Fiscal Year Ending December 31, 2006 - $6,500
Fiscal Year Ending December 31, 2005 - $6,500
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending December 31, 2006 - $0
Fiscal Year Ending December 31, 2005 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending December 31, 2006 - $1,961,000
Fiscal Year Ending December 31, 2005 - $5,034,771
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,110,000, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Alan R. Batkin
Steven W. Kohlhagen
Paul Glasserman
William J. Rainer
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
Proxy Voting Policies and Procedures
Each Fund's Board of Directors has delegated to IQ Investment Advisors
LLC, and/or any sub-investment adviser approved by the Board of Directors (the
"Investment Adviser") authority to vote all proxies relating to the Fund's
portfolio securities. The Investment Adviser has adopted policies and procedures
("Proxy Voting Procedures") with respect to the voting of proxies related to the
portfolio securities held in the account of one or more of its clients,
including a Fund. Pursuant to these Proxy Voting Procedures, the Investment
Adviser's primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of each Fund and its shareholders, and to
act in a manner that the Investment Adviser believes is most likely to enhance
the economic value of the securities held by the Fund. The Proxy Voting
Procedures are designed to ensure that the Investment Adviser considers the
interests of its clients, including the Funds, and not the interests of the
Investment Adviser, when voting proxies and that real (or perceived) material
conflicts that may arise between the Investment Adviser's interest and those of
the Investment Adviser's clients are properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The Committee is
comprised of the Investment Adviser's Chief Investment Officer (the "CIO"), one
or more other senior investment professionals appointed by the CIO, portfolio
managers and investment analysts appointed by the CIO and any other personnel
the CIO deems appropriate. The Committee will also include two non-voting
representatives from the Investment Adviser's Legal department appointed by the
Investment Adviser's General Counsel. The Committee's membership shall be
limited to full-time employees of the Investment Adviser. No person with any
investment banking, trading, retail brokerage or research responsibilities for
the Investment Adviser's affiliates may serve as a member of the Committee or
participate in its decision making (except to the extent such person is asked by
the Committee to present information to the Committee, on the same basis as
other interested knowledgeable parties not affiliated with the Investment
Adviser might be asked to do so). The Committee determines how to vote the
proxies of all clients, including a Fund, that have delegated proxy voting
authority to the Investment Adviser and seeks to ensure that all votes are
consistent with the best interests of those clients and are free from
unwarranted and inappropriate influences. The Committee establishes general
proxy voting policies for the Investment Adviser and is responsible for
determining how those policies are applied to specific proxy votes, in light of
each issuer's unique structure, management, strategic options and, in certain
circumstances, probable economic and other anticipated consequences of alternate
actions. In so doing, the Committee may determine to vote a particular proxy in
a manner contrary to its generally stated policies. In addition, the Committee
will be responsible for ensuring that all reporting and recordkeeping
requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not to adopt
a specific voting policy applicable to that issue. The Investment Adviser
believes that certain proxy voting issues require investment analysis -- such as
approval of mergers and other significant corporate transactions -- akin to
investment decisions, and are, therefore, not suitable for general guidelines.
The Committee may elect to adopt a common position for the Investment Adviser on
certain proxy votes that are akin to investment decisions, or determine to
permit the portfolio manager to make individual decisions on how best to
maximize economic value for a Fund (similar to normal buy/sell investment
decisions made by such portfolio managers). While it is expected that the
Investment Adviser will generally seek to vote proxies over which the Investment
Adviser exercises voting authority in a uniform manner for all the Investment
Adviser's clients, the Committee, in conjunction with a Fund's portfolio
manager, may determine that the Fund's specific circumstances require that its
proxies be voted differently.
To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). ISS is an independent
adviser that specializes in providing a variety of fiduciary-level proxy-related
services to institutional investment managers, plan sponsors, custodians,
consultants, and other institutional investors. The services provided to the
Investment Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also assist the
Fund in fulfilling its reporting and recordkeeping obligations under the
Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For instance,
under the Proxy Voting Procedures, the Investment Adviser generally will not
seek to vote proxies related to portfolio securities that are on loan, although
it may do so under certain circumstances. In addition, the Investment Adviser
will vote proxies related to securities of foreign issuers only on a best
efforts basis and may elect not to vote at all in certain countries where the
Committee determines that the costs associated with voting generally outweigh
the benefits. The Committee may at any time override these general policies if
it determines that such action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote
proxies in respect of an issuer where an affiliate of the Investment Adviser
(each, an "Affiliate"), or a money management or other client of the Investment
Adviser (each, a "Client") is involved. The Proxy Voting Procedures and the
Investment Adviser's adherence to those procedures are designed to address such
conflicts of interest. The Committee intends to strictly adhere to the Proxy
Voting Procedures in all proxy matters, including matters involving Affiliates
and Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or if
the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary to
advise the Committee on how to vote or to cast votes on behalf of the Investment
Adviser's clients.
In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent fiduciary,
the powers of the Committee shall pass to a subcommittee, appointed by the CIO
(with advice from the Secretary of the Committee), consisting solely of
Committee members selected by the CIO. The CIO shall appoint to the
subcommittee, where appropriate, only persons whose job responsibilities do not
include contact with the Client and whose job evaluations would not be affected
by the Investment Adviser's relationship with the Client (or failure to retain
such relationship). The subcommittee shall determine whether and how to vote all
proxies on behalf of the Investment Adviser's clients or, if the proxy matter
is, in their judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee determines to
alter the Investment Adviser's normal voting guidelines or, on matters where the
Investment Adviser's policy is case-by-case, does not follow the voting
recommendation of any proxy voting service or other independent fiduciary that
may be retained to provide research or advice to the Investment Adviser on that
matter, no proxies relating to the Client may be voted unless the Secretary, or
in the Secretary's absence, the Assistant Secretary of the Committee concurs
that the subcommittee's determination is consistent with the Investment
Adviser's fiduciary duties.
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain recurring proxy
issues that are not expected to involve unusual circumstances. These policies
are guidelines only, and the Investment Adviser may elect to vote differently
from the recommendation set forth in a voting guideline if the Committee
determines that it is in a Fund's best interest to do so. In addition, the
guidelines may be reviewed at any time upon the request of a Committee member
and may be amended or deleted upon the vote of a majority of Committee members
present at a Committee meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
o Proposals related to the composition of the Board of Directors
of issuers other than investment companies. As a general
matter, the Committee believes that a company's Board of
Directors (rather than shareholders) is most likely to have
access to important, nonpublic information regarding a
company's business and prospects, and is therefore
best-positioned to set corporate policy and oversee
management. The Committee, therefore, believes that the
foundation of good corporate governance is the election of
qualified, independent corporate directors who are likely to
diligently represent the interests of shareholders and oversee
management of the corporation in a manner that will seek to
maximize shareholder value over time. In individual cases, the
Committee may look at a nominee's history of representing
shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
o Proposals related to the selection of an issuer's independent
auditors. As a general matter, the Committee believes that
corporate auditors have a responsibility to represent the
interests of shareholders and provide an independent view on
the propriety of financial reporting decisions of corporate
management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the
Committee may look at an auditors' history of representing
shareholder interests as auditor of other companies, to the
extent the Committee deems relevant.
o Proposals related to management compensation and employee
benefits. As a general matter, the Committee favors disclosure
of an issuer's compensation and benefit policies and opposes
excessive compensation, but believes that compensation matters
are normally best determined by an issuer's board of
directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set
arbitrary restrictions on compensation or benefits will,
therefore, generally not be supported.
o Proposals related to requests, principally from management,
for approval of amendments that would alter an issuer's
capital structure. As a general matter, the Committee will
support requests that enhance the rights of common
shareholders and oppose requests that appear to be
unreasonably dilutive.
o Proposals related to requests for approval of amendments to an
issuer's charter or by-laws. As a general matter, the
Committee opposes poison pill provisions.
o Routine proposals related to requests regarding the
formalities of corporate meetings.
o Proposals related to proxy issues associated solely with
holdings of investment company shares. As with other types of
companies, the Committee believes that a fund's Board of
Directors (rather than its shareholders) is best-positioned to
set fund policy and oversee management. However, the Committee
opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective that
the Investment Company Act envisions will be approved directly
by shareholders.
o Proposals related to limiting corporate conduct in some manner
that relates to the shareholder's environmental or social
concerns. The Committee generally believes that annual
shareholder meetings are inappropriate forums for discussion
of larger social issues, and opposes shareholder resolutions
"micromanaging" corporate conduct or requesting release of
information that would not help a shareholder evaluate an
investment in the corporation as an economic matter. While the
Committee is generally supportive of proposals to require
corporate disclosure of matters that seem relevant and
material to the economic interests of shareholders, the
Committee is generally not supportive of proposals to require
disclosure of corporate matters for other purposes.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - as
of December 31, 2006.
(a)(1) Mr. Rob A. Guttschow, CFA is primarily responsible for the
day-to-day management of the registrant's portfolio ("Portfolio
Manager") since 2004. Mr. Guttschow is Managing Director and
Derivatives Overlay Manager of Nuveen Asset Management ("NAM").
He is responsible for developing and implementing
derivatives-based hedging strategies for NAM and NAM's
Alternative Strategies Group. Mr. Guttschow joined NAM in May
2004. Mr. Guttschow was a Managing Director and Senior
Portfolio Manager at Lotsoff Capital Management ("LCM") from
1993 until 2004. While at LCM, Mr. Guttschow managed a variety
of taxable fixed income portfolios and enhanced equity index
products totaling $1.5 billion. Mr. Guttschow is a Chartered
Financial Analyst ("CFA") and a member of the Association for
Investment Management Research. He has served as a member of
the TRIAD group for the Investment Analyst Society of Chicago.
Education: University of Illinois at Urbana/Champaign, B.S.,
M.B.A., CFA.
(a)(2) As of December 31, 2006:
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
Other Other
Registered Other Pooled Registered Other Pooled
(i) Name of Investment Investment Other Investment Investment Other
Portfolio Manager Companies Vehicles Accounts Companies Vehicles Accounts
------------ ------------
Rob A. Guttschow,
CFA 2 0 0 0 1 0
$354,170,000 $ 0 $ 0 $ 0 $ 21,000,000 $ 0
(iv) Potential Material Conflicts of Interest
Mr. Guttschow's simultaneous management of the Fund and the other
registered investment company noted above may present actual or
apparent conflicts of interest with respect to the allocation and
aggregation of securities orders placed on behalf of the Fund and the
other account. The Subadviser, however, believes that such potential
conflicts are mitigated by the fact that this Fund and the one other
fund currently managed by Mr. Guttschow are not actively managed with
respect to the equity securities chosen for each fund's portfolio and
will generally change their core equity portfolio holdings at different
times.
The Subadviser has adopted several policies that address potential
conflicts of interest, including best execution and trade allocation
policies that are designed to ensure (1) that portfolio management is
seeking the best price for portfolio securities under the
circumstances, (2) fair and equitable allocation of investment
opportunities among accounts over time and (3) compliance with
applicable regulatory requirements. All accounts are to be treated in a
non-preferential manner, such that allocations are not based upon
account performance, fee structure or preference of the portfolio
manager. In addition, the Subadviser has adopted a Code of Conduct that
sets forth policies regarding conflicts of interest.
(a)(3) As of December 31, 2006:
Compensation. Mr. Guttschow's compensation consists of three basic
elements--base salary, cash bonus and long-term incentive compensation.
The Subadviser's compensation strategy is to annually compare overall
compensation, including these three elements, to the market in order to
create a compensation structure that is competitive and consistent with
similar financial services companies. As discussed below, several
factors are considered in determining Mr. Guttschow's total
compensation. In any year these factors may include, among others, the
effectiveness of the investment strategies recommended by Mr.
Guttschow's investment team, the investment performance of the accounts
managed by Mr. Guttschow, and the overall performance of Nuveen
Investments, Inc. (the parent company of the Subadviser). Although
investment performance is a factor in determining Mr. Guttschow's
compensation, it is not necessarily a decisive factor. Additionally,
although the Subadviser will use a proprietary benchmark consisting of
a composite of the performance of the DJIASM and a series of
hypothetical call options written on the DIAMONDS Trust (a passively
managed investment trust that seeks investment results that generally
correspond to the price and yield performance of the DJIASM) to
evaluate Mr. Guttschow's performance, it is only one factor used in
deciding upon his compensation.
Base salary. Mr. Guttschow is paid a base salary that is set at a level
determined by the Subadviser in accordance with its overall
compensation strategy discussed above. The Subadviser is not under any
current contractual obligation to increase Mr. Guttschow's base salary.
Cash bonus. Mr. Guttschow is also eligible to receive an annual cash
bonus. The level of this bonus is based upon evaluations and
determinations made by Mr. Guttschow's supervisors, along with reviews
submitted by his peers. These reviews and evaluations often take into
account a number of factors, including the effectiveness of the
investment strategies recommended to the Subadviser's investment team,
the performance of the accounts for which he serves as portfolio
manager relative to any benchmarks established for those accounts, his
effectiveness in communicating investment performance to stockholders
and their representatives, and his contribution to the Subadviser's
investment process and to the execution of investment strategies. The
cash bonus component is also impacted by the overall performance of
Nuveen Investments, Inc. in achieving its business objectives.
Long-term incentive compensation. Mr. Guttschow is eligible to receive
bonus compensation in the form of equity-based awards issued in
securities issued by Nuveen Investments, Inc. The amount of such
compensation is dependent upon the same factors articulated for cash
bonus awards but also factors in his long-term potential with the firm.
(a)(4) Beneficial Ownership of Securities. As of December 31, 2006, Mr.
Guttschow does not beneficially own any stock issued by the Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
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.
Dow 30(SM) Premium & Dividend Income Fund Inc.
By: /s/ Mitchell M. Cox
-------------------------------
Mitchell M. Cox,
Chief Executive Officer of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: February 20, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Mitchell M. Cox
-------------------------------
Mitchell M. Cox,
Chief Executive Officer of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: February 20, 2007
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: February 20, 2007