UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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.
Registrant's telephone number, including area code: (212) 449-4742
Date of fiscal year end: 12/31/07
Date of reporting period: 01/01/07 - 06/30/07
Item 1 - Report to Stockholders
Dow 30(SM) Premium &
Dividend Income Fund Inc.
Semi-Annual Report
(Unaudited)
June 30, 2007
[LOGO] IQ INVESTMENT
ADVISORS [LOGO] NUVEEN
Investments
Dow 30(SM) Premium & Dividend Income Fund Inc.
Proxy Results
During the six-month period ended June 30, 2007, the shareholders of Dow 30(SM)
Premium & Dividend Income Fund Inc. voted on the following proposal, which was
approved at an annual shareholders' meeting on April 27, 2007. A description of
the proposal and number of shares voted are as follows:
- ------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ------------------------------------------------------------------------------------------------------
To elect the Fund's Board of Directors: Paul Glasserman 10,711,004 135,035
Steven W. Kohlhagen 10,712,804 133,235
William J. Rainer 10,715,588 130,451
- ------------------------------------------------------------------------------------------------------
Directors and Officers
William J. Rainer, Director and Chairman of the Board
Paul Glasserman, Director and Chairman of the Audit Committee
Steven W. Kohlhagen, Director and Chairman of the Nominating and Corporate
Governance Committee
Donald C. Burke, Vice President and Secretary
Martin G. Byrne, Chief Legal Officer
Mitchell M. Cox, President
Justin C. Ferri, Vice President
Jay M. Fife, Vice President
James E. Hillman, Vice President and Treasurer
Catherine A. Johnston, Chief Compliance Officer
Colleen R. Rusch, Vice President
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 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. JUNE 30, 2007
Portfolio Information
As of June 30, 2007
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
International Business Machines Corp. .................................. 6.4%
Boeing Co. ............................................................. 5.8
3M Co. ................................................................. 5.3
Exxon Mobil Corp. ...................................................... 5.1
Caterpillar, Inc. ...................................................... 4.8
United Technologies Corp. .............................................. 4.3
Altria Group, Inc. ..................................................... 4.3
American International Group, Inc. ..................................... 4.2
Johnson & Johnson ...................................................... 3.7
The Procter & Gamble Co. ............................................... 3.7
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Aerospace & Defense .................................................... 13.6%
Computers & Peripherals ................................................ 9.1
Pharmaceuticals ........................................................ 8.3
Industrial Conglomerates ............................................... 7.6
Diversified Financial Services ......................................... 6.0
- --------------------------------------------------------------------------------
Percent of
Sector Representation Long-Term Investments
- --------------------------------------------------------------------------------
Industrials ............................................................ 25.9%
Consumer Staples ....................................................... 14.1
Financials ............................................................. 14.0
Information Technology ................................................. 12.3
Consumer Discretionary ................................................. 9.8
Health Care ............................................................ 8.3
Materials .............................................................. 5.5
Energy ................................................................. 5.1
Telecommunication Services ............................................. 5.0
- --------------------------------------------------------------------------------
For Fund portfolio compliance purposes, the Fund's industry and sector
classifications refer to any one or more of the industry and sector
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 for this report, which may combine
industry and sector sub-classifications for reporting ease.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 3
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 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 six-month period?
For the six-month period ended June 30, 2007, the Common Stock of the Fund had a
total investment return of +7.45%, based on a change in per share net asset
value from $20.14 to $20.71 and assuming reinvestment of all distributions paid
during the period ($.90). For comparative purposes, the unmanaged Dow Jones
Industrial Average(SM) ("DJIA(SM)") returned +8.76% (including dividend
reinvestment), and the Chicago Board Options Exchange ("CBOE(R)") DJIA
BuyWrite(SM) Index ("BXD(SM) Index") returned +2.77% during the same period. The
BXD Index consists of a long position indexed to the DJIA with a succession of
one-month, at-the-money covered call options sold on the DJIA. During the
period, 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 or a yield of 8.69% on June 30,
2007 relative to the Fund's net asset value.
In accordance with the Fund's investment strategy, the underlying stock
portfolio closely tracked the DJIA during the period. The option overlay
portfolio performed as expected, generating cash flow used in support of the
Fund's distribution policy.
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.
How did you manage the portfolio during the six-month 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.
The recent increase in market volatility should offer the Fund the opportunity
to write fewer options, options with longer maturities and/or options that are
further out of the money. If volatility levels remain somewhat elevated to the
recent past, the Fund may lower the percentage of the overwrite by several
points, allowing the Fund to participate more fully in any type of market
appreciation.
How would you characterize the Fund's position at the close of the six-month
period?
The Fund is positioned to continue to meet its stated objectives. The portfolio
of stocks is fully invested consistent with DJIA weightings. If volatility
remains somewhat elevated relative to the recent past, the Fund may be able to
overwrite less than 50% of the Fund's assets while meeting its dividend
objectives. As a result, lower overwrites may translate into greater capital
appreciation potential in a rising market environment.
Rob A. Guttschow
Portfolio Manager
July 13, 2007
CBOE is a registered trademark and BXD is a service mark of the Chicago Board
Options Exchange.
4 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Schedule of Investments as of June 30, 2007 (Unaudited)
Shares
Industry Common Stocks Held Value
====================================================================================================
Aerospace & Defense -- 13.6%
Boeing Co. 145,223 $ 13,964,644
Honeywell International, Inc. 145,223 8,173,151
United Technologies Corp. 145,223 10,300,667
------------
32,438,462
- ----------------------------------------------------------------------------------------------------
Automobiles -- 2.3%
General Motors Corp. 145,223 5,489,429
- ----------------------------------------------------------------------------------------------------
Beverages -- 3.2%
The Coca-Cola Co. 145,223 7,596,615
- ----------------------------------------------------------------------------------------------------
Chemicals -- 3.1%
E.I. du Pont de Nemours & Co. 145,223 7,383,137
- ----------------------------------------------------------------------------------------------------
Computers & Peripherals -- 9.1%
Hewlett-Packard Co. 145,223 6,479,850
International Business Machines Corp. 145,223 15,284,721
------------
21,764,571
- ----------------------------------------------------------------------------------------------------
Consumer Finance -- 3.7%
American Express Co. 145,223 8,884,743
- ----------------------------------------------------------------------------------------------------
Diversified Financial Services -- 6.0%
Citigroup, Inc. 145,223 7,448,488
JPMorgan Chase & Co. 145,223 7,036,054
------------
14,484,542
- ----------------------------------------------------------------------------------------------------
Diversified Telecommunication Services -- 5.0%
AT&T Inc. 145,223 6,026,754
Verizon Communications, Inc. 145,223 5,978,831
------------
12,005,585
- ----------------------------------------------------------------------------------------------------
Food & Staples Retailing -- 2.9%
Wal-Mart Stores, Inc. 145,223 6,986,679
- ----------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure -- 3.1%
McDonald's Corp. 145,223 7,371,520
- ----------------------------------------------------------------------------------------------------
Household Products -- 3.7%
The Procter & Gamble Co. 145,223 8,886,195
- ----------------------------------------------------------------------------------------------------
Industrial Conglomerates -- 7.6%
3M Co. 145,223 12,603,904
General Electric Co. 145,223 5,559,137
------------
18,163,041
- ----------------------------------------------------------------------------------------------------
Insurance -- 4.2%
American International Group, Inc. 145,223 10,169,967
- ----------------------------------------------------------------------------------------------------
Machinery -- 4.8%
Caterpillar, Inc. 145,223 11,370,961
- ----------------------------------------------------------------------------------------------------
Media -- 2.1%
Citadel Broadcasting Corp. 11,298 72,872
Walt Disney Co. 145,223 4,957,913
------------
5,030,785
- ----------------------------------------------------------------------------------------------------
Metals & Mining -- 2.5%
Alcoa, Inc. 145,223 5,885,888
- ----------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 5.1%
Exxon Mobil Corp. 145,223 12,181,305
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals -- 8.3%
Johnson & Johnson 145,223 8,948,641
Merck & Co., Inc. 145,223 7,232,106
Pfizer, Inc. 145,223 3,713,352
------------
19,894,099
- ----------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment -- 1.4%
Intel Corp. 145,223 3,450,499
- ----------------------------------------------------------------------------------------------------
Software -- 1.8%
Microsoft Corp. 145,223 4,279,722
- ----------------------------------------------------------------------------------------------------
Specialty Retail -- 2.4%
Home Depot, Inc. 145,223 5,714,525
- ----------------------------------------------------------------------------------------------------
Tobacco -- 4.3%
Altria Group, Inc. 145,223 10,185,941
- ----------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost -- $184,868,256) -- 100.2% 239,618,211
====================================================================================================
Face
Short-Term Securities Amount
====================================================================================================
Time Deposits -- 0.6%
State Street Bank & Trust Co.,
4.25% due 7/02/2007 $1,527,072 1,527,072
- ----------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $1,527,072) -- 0.6% 1,527,072
====================================================================================================
Total Investments
(Cost -- $186,395,328) -- 100.8% 241,145,283
====================================================================================================
Number of
Options Written Contracts
====================================================================================================
Call Options Written
3M Co., expiring July 2007
at USD 86.153,
Broker Deutsche Bank AG 670 (109,773)
AT&T Inc., expiring July 2007
at USD 40.38,
Broker Deutsche Bank AG 670 (86,410)
Alcoa, Inc., expiring July 2007
at USD 40.157,
Broker Deutsche Bank AG 670 (103,287)
Altria Group, Inc., expiring July 2007 at
USD 70.963, Broker HSBC Securities 670 (53,600)
American Express Co., expiring July 2007
at USD 63.88, Broker BNP Paribas 670 (4,690)
American International Group, Inc.,
expiring July 2007 at USD 72.891,
Broker HSBC Securities 670 (3,350)
Boeing Co., expiring July 2007 at
USD 98.68, Broker BNP Paribas 670 (23,450)
Caterpillar, Inc., expiring July 2007 at
USD 79.466, Broker HSBC Securities 670 (56,950)
Citigroup, Inc., expiring July 2007 at
USD 53.671, Broker HSBC Securities 670 (6,030)
The Coca-Cola Co., expiring July 2007
at USD 52.15, Broker BNP Paribas 670 (48,910)
E.I. du Pont de Nemours & Co.,
expiring July 2007 at USD 51.06,
Broker BNP Paribas 670 (34,840)
Exxon Mobil Corp., expiring July 2007
at USD 84.184, Broker BNP Paribas 670 (91,120)
General Electric Co., expiring July 2007
at USD 37.662, Broker HSBC Securities 670 (58,960)
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 5
Schedule of Investments (concluded)
Number of
Options Written Contracts Value
====================================================================================================
Call Options Written (continued)
General Motors Corp., expiring
July 2007 at USD 30.03,
Broker Deutsche Bank AG 670 $ (523,906)
Hewlett-Packard Co., expiring July 2007
at USD 46.35, Broker BNP Paribas 670 (5,360)
Home Depot, Inc., expiring
July 2007 at USD 38.087,
Broker Deutsche Bank AG 670 (100,641)
Honeywell International, Inc.,
expiring July 2007 at USD 57.59,
Broker Deutsche Bank AG 670 (28,622)
Intel Corp., expiring July 2007
at USD 22.149,
Broker Deutsche Bank AG 670 (113,686)
International Business Machines Corp.,
expiring July 2007 at USD 104.25,
Broker Deutsche Bank AG 670 (139,561)
JPMorgan Chase & Co., expiring
July 2007 at USD 50.93,
Broker BNP Paribas 670 (4,020)
Johnson & Johnson, expiring July 2007
at USD 62.89, Broker BNP Paribas 670 (13,400)
McDonald's Corp., expiring July 2007
at USD 51.76, Broker BNP Paribas 670 (21,440)
Merck & Co., Inc., expiring July 2007
at USD 51.177, Broker HSBC Securities 670 (32,830)
Microsoft Corp., expiring July 2007 at
USD 30.694, Broker HSBC Securities 670 (8,040)
Pfizer, Inc., expiring July 2007 at
USD 26.614, Broker BNP Paribas 670 (6,030)
The Procter & Gamble Co., expiring
July 2007 at USD 62.994,
Broker HSBC Securities 670 (17,420)
United Technologies Corp., expiring
July 2007 at USD 71.437,
Broker BNP Paribas 670 (71,020)
Verizon Communications, Inc., expiring
July 2007 at USD 43.329,
Broker HSBC Securities 670 (4,690)
Wal-Mart Stores, Inc., expiring
July 2007 at USD 49.995,
Broker Deutsche Bank AG 670 (10,553)
Walt Disney Co., expiring July 2007
at USD 35.256, Broker BNP Paribas 670 (32,160)
- ----------------------------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $2,103,421) -- (0.8%) (1,814,749)
====================================================================================================
Total Investments, Net of Options Written
(Cost -- $184,291,907*) -- 100.0% 239,330,534
Liabilities in Excess of Other Assets -- (0.0%) (80,379)
------------
Net Assets -- 100.0% $239,250,155
============
* The cost and unrealized appreciation (depreciation) of investments, net of
options written, as of June 30, 2007, as computed for federal income tax
purposes, were as follows:
Aggregate cost ....................................... $ 184,295,640
=============
Gross unrealized appreciation ........................ $ 56,997,895
Gross unrealized depreciation ........................ (1,963,001)
-------------
Net unrealized appreciation .......................... $ 55,034,894
=============
o For Fund portfolio 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.
See Notes to Financial Statements.
6 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Statement of Assets, Liabilities and Capital
As of June 30, 2007 (Unaudited)
===============================================================================================================================
Assets
- -------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $186,395,328) $241,145,283
Receivables:
Dividends .................................................................... $ 259,876
Interest ..................................................................... 180 260,056
------------
Prepaid expenses .................................................................. 11,645
------------
Total assets ...................................................................... 241,416,984
------------
===============================================================================================================================
Liabilities
- -------------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received -- $2,103,421) ....................... 1,814,749
Investment adviser payable ........................................................ 166,320
Accrued expenses .................................................................. 185,760
------------
Total liabilities ................................................................. 2,166,829
------------
===============================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................................ $239,250,155
============
===============================================================================================================================
Capital
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001, 100,000,000 shares authorized ...................... $ 11,554
Paid-in capital in excess of par .................................................. 196,106,597
Accumulated distributions in excess of investment income -- net ................... $ (9,042,760)
Accumulated realized capital losses -- net ........................................ (2,863,863)
Unrealized appreciation -- net .................................................... 55,038,627
------------
Total accumulated earnings -- net ................................................. 43,132,004
------------
Total capital -- Equivalent to $20.71 per share based on 11,554,133 shares of
Common Stock outstanding (market price -- $21.00) ............................... $239,250,155
============
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 7
Statement of Operations
For the Six Months Ended June 30, 2007 (Unaudited)
===============================================================================================================================
Investment Income
- -------------------------------------------------------------------------------------------------------------------------------
Dividends ......................................................................... $ 2,542,248
Interest .......................................................................... 21,344
------------
Total income ...................................................................... 2,563,592
------------
===============================================================================================================================
Expenses
- -------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .......................................................... $ 1,049,462
Professional fees ................................................................. 41,823
Licensing fees .................................................................... 30,298
Transfer agent fees ............................................................... 26,090
Accounting services ............................................................... 25,911
Directors' fees and expenses ...................................................... 24,591
Printing and shareholder reports .................................................. 17,560
Listing fees ...................................................................... 11,713
Custodian fees .................................................................... 8,015
Other ............................................................................. 13,953
------------
Total expenses .................................................................... 1,249,416
------------
Investment income -- net .......................................................... 1,314,176
------------
===============================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- -------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ........................................................... 2,754,252
Options written -- net ....................................................... (2,336,116) 418,136
------------
Change in unrealized appreciation/depreciation on:
Investments -- net ........................................................... 14,602,329
Options written -- net ....................................................... 598,491 15,200,820
----------------------------
Total realized and unrealized gain -- net ......................................... 15,618,956
------------
Net Increase in Net Assets Resulting from Operations .............................. $ 16,933,132
============
See Notes to Financial Statements.
8 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Statements of Changes in Net Assets
For the Six
Months Ended For the
June 30, Year Ended
2007 December 31,
Increase (Decrease) in Net Assets: (Unaudited) 2006
===============================================================================================================================
Operations
- -------------------------------------------------------------------------------------------------------------------------------
Investment income -- net .......................................................... $ 1,314,176 $ 2,870,169
Realized gain (loss) -- net ....................................................... 418,136 (1,238,773)
Change in unrealized appreciation/depreciation -- net ............................. 15,200,820 30,358,043
----------------------------
Net increase in net assets resulting from operations .............................. 16,933,132 31,989,439
----------------------------
===============================================================================================================================
Dividends & Distributions to Shareholders
- -------------------------------------------------------------------------------------------------------------------------------
Investment income -- net .......................................................... (10,356,936)+ (2,865,327)
Tax return of capital ............................................................. -- (17,641,705)
----------------------------
Net decrease in net assets resulting from dividends and distributions ............. (10,356,936) (20,507,032)
----------------------------
===============================================================================================================================
Common Stock Transactions
- -------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to shareholders in reinvestment of dividends ............... 1,666,502 2,007,623
Offering costs, including adjustments, resulting from the issuance of Common Stock -- (27,610)
----------------------------
Net increase in net assets resulting from Common Stock transactions ............... 1,666,502 1,980,013
----------------------------
===============================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ...................................................... 8,242,698 13,462,420
Beginning of period ............................................................... 231,007,457 217,545,037
----------------------------
End of period* .................................................................... $239,250,155 $231,007,457
============================
* Accumulated distributions in excess of investment income .................... $ (9,042,760) --
============================
+ A portion of the dividends from net investment income may be deemed a tax
return of capital or net realized gain at fiscal year end.
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 9
For the Six For the Period
Months Ended For the April 29,
June 30, Year Ended 2005+ to
The following per share data and ratios have been derived 2007 December 31, December 31,
from information provided in the financial statements. (Unaudited) 2006 2005
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................. $ 20.14 $ 19.13 $ 19.10
-------------------------------------------------
Investment income -- net** ........................................ .11 .25 .19
Realized and unrealized gain -- net ............................... 1.36 2.56 .94
-------------------------------------------------
Total from investment operations .................................. 1.47 2.81 1.13
-------------------------------------------------
Less dividends and distributions from:
Investment income -- net ..................................... (.90)(d) (.25) (.18)
Realized gain -- net ......................................... -- -- (.28)
Tax return of capital ........................................ -- (1.55) (.60)
-------------------------------------------------
Total dividends and distributions ................................. (.90) (1.80) (1.06)
-------------------------------------------------
Offering costs, including adjustments, resulting from the issuance
of Common Stock ................................................ -- --* (.04)
-------------------------------------------------
Net asset value, end of period .................................... $ 20.71 $ 20.14 $ 19.13
=================================================
Market price per share, end of period ............................. $ 21.00 $ 20.96 $ 18.15
=================================================
====================================================================================================================================
Total Investment Return++
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................................ 7.45%(a) 15.54% 5.86%(a)(b)
=================================================
Based on market price per share ................................... 4.69%(a) 26.74% (4.08%)(a)
=================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses .......................................................... 1.07%(c) 1.10% 1.12%(c)
=================================================
Investment income -- net .......................................... 1.13%(c) 1.30% 1.44%(c)
=================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .......................... $239,250 $231,007 $217,545
=================================================
Portfolio turnover ................................................ .00%*** .00%*** 17.95%
=================================================
* Amount is less than $(.01) per share.
** Based on average shares outstanding.
*** 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 date at the time of acquisition were one year or less, and
therefore, the portfolio turnover is zero.
+ 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.
(a) Aggregate total investment return.
(b) 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.
(c) Annualized.
(d) A portion of the dividends from net investment income may be deemed a tax
return of capital or net realized gain at fiscal year end.
See Notes to Financial Statements.
10 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Notes to Financial Statements (Unaudited)
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. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. 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. The counterparty for certain
instruments may pledge cash or securities as collateral.
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
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 11
Notes to Financial Statements (continued)
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
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. For
the current period ended June 30, 2007, Fund management believes it is likely
total dividends and distributions may exceed net investment income and
accumulated realized capital gains, resulting in a portion of the total
distribution treated as a tax return of capital. Portions of the distributions
paid by the Fund during the year ended December 31, 2006 were characterized as a
tax return 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 -- Effective June 29, 2007, the Fund
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109" ("FIN 48"). 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 investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Fund, and has determined that the adoption of FIN 48 does not have a
material impact on the Fund's financial statements. The Fund files U.S. and
various state tax returns. No income tax returns are currently under
examination.
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. At this time, management is evaluating the implications of FAS 157
and its impact on the Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. At this time, management is evaluating
the implications of FAS 159 and its impact on the Fund's financial statements,
if any, has not been determined.
12 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Notes to Financial Statements (continued)
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 annual rate equal to .39% of the average daily value of the
Fund's net assets plus borrowings for leverage and other investment purposes.
There is no increase in the aggregate fees paid by the Fund for these services.
IQ has entered into an Administration 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 average daily value of the Fund's net assets plus
borrowings for leverage and other investment purposes 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, Inc. ML & Co. is a
principal owner of BlackRock, Inc.
Certain officers of the Fund are officers of IQ, ML & Co., BlackRock, Inc. or
its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 2007 were $0 and $11,752,936, respectively.
Transactions in options written for the six months ended June 30, 2007 were as
follows:
- --------------------------------------------------------------------------------
Number of Premiums
Contracts Received
- --------------------------------------------------------------------------------
Outstanding call options written,
at beginning of period ................. 21,000 $ 1,956,661
Options written .......................... 102,300 10,167,398
Options expired .......................... (46,450) (4,227,847)
Options closed ........................... (56,750) (5,792,791)
-------------------------------
Outstanding call options written,
at end of period ....................... 20,100 $ 2,103,421
===============================
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 six months ended June 30, 2007
increased by 81,657 from dividend reinvestments. Shares issued and outstanding
during the year ended December 31, 2006 increased by 103,006 from dividend
reinvestments.
5. Capital Loss Carryforward:
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.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 13
Notes to Financial Statements (concluded)
6. Subsequent Event:
On June 20, 2007, Nuveen Investments Inc. ("Nuveen Investments"), the parent
company of Nuveen, the Fund's subadviser, announced that it had entered into a
definitive Agreement and Plan of Merger (the "Merger Agreement") to be acquired
by an investor group majority-led by Madison Dearborn Partners, LLC. Madison
Dearborn Partners, LLC is a private equity investment firm based in Chicago,
Illinois. The investor group's financial advisors and investors include ML & Co.
and Merrill Lynch Global Private Equity (both affiliates of IQ), Wachovia and
Wachovia Capital Partners, LLC, Citi, Deutsche Bank and Deutsche Bank Investment
Partners and Morgan Stanley.
The merger is expected to be completed by the end of the year, subject to
customary conditions, including obtaining the approval of Nuveen Investments'
stockholders, obtaining necessary fund and client consents sufficient to satisfy
the terms of the Merger Agreement and the expiration of certain regulatory
waiting periods. There can be no assurance that the merger will be consummated
as contemplated or that necessary shareholder approvals will be obtained.
Nuveen does not anticipate any change to the portfolio management team or other
key personnel of Nuveen that currently provide services to the Fund as a result
of the merger.
The consummation of the merger will be deemed to be an "assignment" (as defined
in the Investment Company Act of 1940) of the current investment subadvisory
agreement (the"Subadvisory Agreement") between IQ and Nuveen. Under the terms of
the Subadvisory Agreement, an assignment will result in its automatic
termination. It is anticipated that the Board of Directors of the Fund will
consider a new investment subadvisory agreement between IQ and Nuveen prior to
the consummation of the merger. The new subadvisory agreement is expected to be
substantially the same as the Subadvisory Agreement, including providing for the
same subadvisory fee. If approved by the Board, the new agreement would be
presented to the Fund's shareholders for approval, and, if so approved by
shareholders, would take effect upon consummation of the merger. If the merger
is not consummated, then Nuveen will continue to operate in its current form. If
the merger is consummated prior to the shareholder vote, the Fund may rely on
Rule 15a-4 under the Investment Company Act of 1940 to operate under an interim
subadvisory agreement for up to 150 days pending shareholder approval of the new
subadvisory agreement.
14 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Renewal of Current Investment Advisory and Management Agreements
The Board of Directors of each Fund, currently consisting solely of Independent
Directors, as defined in Section 2(a)(19) of the Investment Company Act of 1940
(the "Investment Company Act"), has the responsibility under the Investment
Company Act to consider annually the Investment Advisory and Management
Agreement of each Fund (each, a "Management Agreement" and together, the
"Management Agreements") with IQ Investment Advisors LLC ("IQ Advisors").
At a Board meeting held on June 14, 2007, all of the Directors present at the
meeting renewed the Management Agreement for each Fund for an additional
one-year term. Each Management Agreement was considered separately by the
relevant Fund's Directors. In considering whether to approve the Management
Agreements, the Directors reviewed a meeting book and other materials from
counsel to the Funds and from IQ Advisors which: (i) included information
concerning the services rendered to the Funds by IQ Advisors and IQ Advisors'
affiliates; (ii) contained information concerning the revenues and expenses
incurred by IQ Advisors and its affiliates from the operation of the Funds; and
(iii) outlined the legal duties of the Board under the Investment Company Act.
The Board also received information from Lipper, Inc. ("Lipper") comparing each
Fund's fee rate for advisory and administrative services to those of other
closed-end funds chosen by Lipper. In voting to approve the renewal of each
Fund's Management Agreement, the Directors considered in particular the
following factors:
(a) The nature, extent and quality of services provided by IQ Advisors and its
affiliates -- The Directors reviewed the services that IQ Advisors has provided
to the Funds. They considered the size and experience of IQ Advisors' staff, its
use of technology, and the degree to which IQ Advisors exercises supervision
over the actions of each Fund's subadviser. In connection with the investment
advisory services provided, the Directors took into account detailed discussions
they had with officers of IQ Advisors regarding the management of each Fund's
investments in accordance with the Fund's stated investment objective and
policies and the types of transactions entered into on behalf of each Fund.
During these discussions, the Directors asked detailed questions of, and
received answers from, the officers of IQ Advisors regarding the implementation
of each Fund's investment strategy, its efficacy and risks.
In addition to the investment advisory services provided to the Funds, the
Directors considered that IQ Advisors and its affiliates also provide
administrative services, stockholder services, oversight of Fund accounting,
marketing services, assistance in meeting legal and regulatory requirements and
other services necessary for the operation of the Funds. In particular, the
Directors reviewed the compliance and administrative services provided to the
Funds by IQ Advisors, including its oversight of each Fund's day-to-day
operations and its oversight of Fund accounting. The Directors noted that IQ
Advisors has access to administrative, legal and compliance resources that help
ensure a high level of quality in the compliance and administrative services
provided to the Funds. The Directors also considered each Fund's compliance
history. Following their consideration of this information, and based on the
presentations at the meeting and the Directors' experience as Directors of other
investment companies advised by IQ Advisors, the Directors concluded that the
services provided to each Fund by IQ Advisors under the respective Management
Agreement were of a high quality and benefited the Funds.
(b) Investment performance of each Fund and IQ Advisors -- The Directors
considered the history, experience, resources and strengths of IQ Advisors and
its affiliates in developing and implementing the investment strategies used by
each Fund. The Directors also considered the innovative nature of each Fund. The
Directors noted that each Fund uses a unique investment strategy and that
comparisons of a Fund's investment performance to the performance of other
investment companies were generally not meaningful. The Directors reviewed each
Fund's investment performance and where applicable, compared such performance to
the performance of a relevant reference index. The Directors discussed the
degree to which each Fund was achieving its investment objective, noting that
each Fund had been in operation for a relatively short period of time. In
particular, the Directors noted that all of the Funds generally performed as
expected relative to their respective reference index and met their respective
investment objectives. As a result of their discussions and review, the
Directors concluded that each Fund's performance was satisfactory. Based on
these factors, the Directors determined that IQ Advisors continued to be an
appropriate investment adviser for the Funds.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 15
Renewal of Current Investment Advisory and Management Agreements (continued)
(c) Cost of services provided and profits realized by IQ Advisors and its
affiliates from the relationship with each of the Funds -- The Directors
reviewed and considered a memorandum from IQ Advisors regarding the methodology
used by IQ Advisors in allocating its costs regarding the operations of the
Funds and calculating each Fund's profitability (if any) to IQ Advisors and its
affiliates. The Directors noted that IQ Advisors' methodology in calculating
profitability had previously been reviewed by independent consultants. The
Directors also reviewed a report detailing IQ Advisors' profitability. After
considering their discussion with IQ Advisors and reviewing its memorandum and
report, the Directors concluded that there was a reasonable basis for the
allocation of costs and the determination of profitability. The Directors
considered the cost of the services provided by IQ Advisors to each Fund and the
revenue derived by IQ Advisors and its affiliates. The Directors took into
account discussions that they had with representatives of IQ Advisors regarding
its general level of profitability (if any), and the profits derived by its
affiliates, including Merrill Lynch Investment Managers, L.P. ("MLIM") prior to
its merger with BlackRock, Inc. ("BlackRock"), from operating the Funds. The
Directors also considered the direct and indirect benefits derived by other IQ
Advisors affiliates, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), from the establishment of the Funds, including the
underwriting arrangements relating to the initial distribution of Fund shares.
The Directors considered federal court decisions discussing an investment
adviser's profitability and profitability levels considered to be reasonable in
those decisions. The Directors concluded that any profits made by IQ Advisors
and its affiliates (including MLIM and MLPF&S) are acceptable in relation to the
nature, extent and quality of services provided. The Directors also concluded
that each Fund benefited from such services provided by IQ Advisors' affiliates.
(d) The extent to which economies of scale would be realized as a Fund grows and
whether fee levels would reflect such economies of scale -- The Directors
considered the extent to which economies of scale might be realized if the
assets of the Funds increase and whether there should be changes in the
management fee rate or structure in order to enable a Fund to participate in
these economies of scale. The Directors noted that, because each Fund is a
closed-end fund, any increase in asset levels generally would have to come from
appreciation through investment performance. The Directors also noted that each
Fund, except for Dow 30(SM) Premium & Dividend Income Fund Inc. and S&P 500(R)
Covered Call Fund Inc., is an interval fund that periodically allows
stockholders to tender their shares to the Funds and that such tender offers
reduce the amount of Fund assets. In consideration of these and other factors,
the Directors determined that no changes were currently necessary to each Fund's
fee structure. The Directors also discussed the renewal requirements for
investment advisory agreements, and determined that they would revisit this
issue no later than when they next review the investment advisory fees.
(e) Comparison of services rendered and fees paid to those under other
investment advisory contracts, such as contracts of the same and other
investment advisers or other clients -- The Directors compared both the services
rendered and the fees paid under the Management Agreements to the contracts of
other investment advisers with respect to other closed-end registered investment
companies. In particular, the Directors evaluated each Fund's contractual fee
rate for advisory and administrative services as compared to the contractual fee
rate of other closed-end funds chosen by Lipper. In considering this
information, the Directors took into account the unique nature of the investment
strategies of the Funds and the fact that the relevant peer group of funds
provided by Lipper for comparison have investment strategies and restrictions
different from those of the Funds. The Directors did not consider compensation
paid to IQ Advisors with respect to accounts other than registered investment
companies because IQ Advisors utilizes each Fund's strategy in connection with
only registered funds. In particular, the Directors noted that each Fund's
contractual advisory fee rate at a common asset level was lower than the median
fee rate of its Lipper comparison funds. The Directors concluded that the
advisory fee rates were reasonable in comparison to the data reflected in the
Lipper materials.
(f) Conclusion -- No single factor was determinative to the decision of the
Directors. Based on the foregoing and such other matters as were deemed
relevant, all of the Directors concluded that the advisory fee rate of each Fund
was reasonable in relation to the services provided by IQ Advisors to the Funds,
as well as the costs incurred and benefits gained by IQ Advisors and its
affiliates in providing such services, including the investment advisory and
administrative components. The Directors also found the investment advisory fees
to be reasonable in comparison to the fees charged by advisers to other funds of
a similar size. As a result, the Board of Directors of each Fund approved the
Management Agreement for each Fund. The Directors were represented by
independent legal counsel who assisted them in their deliberations.
16 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
Renewal of Current Investment Subadvisory Agreements
The Board of Directors of each Fund, currently consisting solely of Independent
Directors, at a meeting held on June 14, 2007 considered and approved the
renewal of the Current Investment Subadvisory Agreement of each Fund (each a
"Subadvisory Agreement" and together, the "Subadvisory Agreements"). Each
Subadvisory Agreement was considered separately by the relevant Fund's
Directors. The Directors received, reviewed and evaluated information concerning
the services and personnel of BlackRock Investment Management, LLC
("BlackRock"), as subadviser to each of S&P 500(R) GEARED(SM) Fund Inc. and
Small Cap Premium & Dividend Income Fund Inc.; Oppenheimer Capital LLC
("Oppenheimer"), as subadviser to each of S&P 500(R) Covered Call Fund Inc. and
Enhanced S&P 500(R) Covered Call Fund Inc.; and Nuveen Asset Management
("Nuveen," and together with BlackRock and Oppenheimer, the "Subadvisers"), as
subadviser to Dow 30(SM) Premium & Dividend Income Fund Inc. and Global Income &
Currency Fund Inc.
(a) The nature, extent and quality of services provided by each Subadviser --
The Directors reviewed the services that each Subadviser provides to each of
their respective Funds. The Directors considered their detailed discussions with
officers of IQ Advisors and members of each Subadviser's portfolio management
team, the management of each Fund's investments in accordance with the Fund's
stated investment objective and policies and the types of transactions that have
been entered into on behalf of the Funds. The Directors took into account the
annual due diligence investment review conducted by Merrill Lynch Global Private
Client Investment Management, an affiliate of IQ Advisors, of each Subadviser
and its report that concluded that each such Subadviser has thus far executed
its respective Fund's investment strategies in accordance with the Fund's
objectives and general expectations. The Directors noted that, drawing on their
collective industry experience, they had discussed each Fund's investment
strategy with representatives from each Subadviser, including discussions
regarding the premises underlying the Fund's investment strategy, its efficacy
and potential risks. The Directors also considered the favorable history,
reputation and background of each Subadviser and its personnel, and the
substantial experience of such Subadviser's portfolio management teams. The
Directors discussed the compliance program of each Subadviser and the report of
Mrs. Catherine Johnston, the chief compliance officer of the Funds. Following
consideration of this information, and based on management presentations during
the Board meeting and their discussion during an Executive Session, the
Directors concluded that the nature, extent and quality of services provided to
each Fund by the applicable Subadviser under its Subadvisory Agreement were of a
high quality and would continue to benefit the Fund.
(b) Investment performance of each Fund and each Subadviser -- The Directors
received and considered information about each Fund's investment performance in
comparison to the performance of its relative reference index, where applicable,
and also in light of its stated investment objective and made the determinations
discussed above under "Renewal of Current Investment Advisory and Management
Agreements." Based on these factors, the Directors determined that each
Subadviser continued to be appropriate for each of its respective Funds.
(c) Cost of services provided and profits realized by each Subadviser from the
relationship with each respective Fund -- The Directors considered the
profitability to MLIM, prior to its merger with BlackRock, of serving as
investment subadviser to two Funds and from its relationship with IQ Advisors
based on the information discussed above under "Renewal of Current Investment
Advisory and Management Agreements." Based on such information, the Directors
concluded that MLIM's profits were acceptable in relation to the nature, extent
and quality of services provided. The Directors noted that profitability data
was not provided with respect to the unaffiliated Subadvisers of the Funds and
concluded that such data was unnecessary because such subadvisory arrangements
were entered into at "arm's length" between the Subadviser and IQ Advisors. The
Directors then considered the potential direct and indirect benefits to each
Subadviser and its affiliates from their relationship with each of their
respective Funds, including the reputational benefits from managing the Funds.
The Directors of each Fund concluded that the potential benefits to each
Subadviser were consistent with those obtained by other subadvisers in similar
types of arrangements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007 17
Renewal of Current Investment Advisory and Management Agreements (concluded)
(d) The extent to which economies of scale would be realized as a Fund grows and
whether fee levels would reflect such economies of scale -- The Directors
considered the extent to which economies of scale might be realized if the
assets of the Funds increase and whether there should be changes in the
subadvisory fee rate or structure in order to enable a Fund to participate in
these economies of scale. The Directors noted that each Subadviser's fees are
paid by IQ Advisors out of its fees and not directly by the Funds. The Directors
noted that, because each Fund is a closed-end fund, any increase in asset levels
would have to come from appreciation due to investment performance. The
Directors also noted that each Fund, except for Dow 30(SM) Premium & Dividend
Income Fund Inc. and S&P 500(R) Covered Call Fund Inc., is an interval fund that
periodically allows stockholders to tender their shares to the Funds and that
such tender offers reduce the amount of Fund assets. The Directors also
discussed the renewal requirements for subadvisory agreements, and determined
that they would revisit this issue no later than when they next review the
subadvisory fee.
(e) Comparison of services rendered and fees paid to those under other
subadvisory contracts, such as contracts of the same and other investment
advisers or other clients -- The Directors discussed the services rendered by
each Subadviser and determined that such services were consistent with those
provided by subadvisers generally and sufficient for the management of the
Funds. Taking into account the totality of the information and materials
provided to the Directors as noted above, including the fact that the
subadvisory fee for each Fund was negotiated with IQ Advisors and not payable
directly by the Fund, the Directors concluded that the subadvisory fee for each
Fund was reasonable for the services being rendered.
Conclusion -- No single factor was determinative to the decision of the
Directors. Based on the foregoing and such other matters as were deemed
relevant, all of the Directors concluded that the relevant subadvisory fee rate
was reasonable in relation to the services provided by each Subadviser. As a
result, all of the Directors approved the Subadvisory Agreement for each Fund.
The Directors were represented by independent legal counsel who assisted them in
their deliberations.
18 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. JUNE 30, 2007
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. JUNE 30, 2007 19
[LOGO]
IQ
INVESTMENT
ADVISORS www.IQIAFunds.com
Dow 30(SM) Premium & Dividend Income Fund Inc. seeks to provide shareholders
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 -- 6/07
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable to this semi-annual report
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 - The
registrant's Nominating Committee will consider nominees to the
Board recommended by shareholders when a vacancy becomes available.
Shareholders who wish to recommend a nominee should send nominations
which include biographical information and set forth the
qualifications of the proposed nominee to the registrant's
Secretary. There have been no material changes to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected,
or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
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: August 28, 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: August 28, 2007
By: /s/ James E. Hillman
-------------------------------
James E. Hillman,
Chief Financial Officer of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: August 28, 2007