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. (DPD)
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: (877) 449-4742
Date of fiscal year end: 12/31/2007
Date of reporting period: 01/01/2007 - 12/31/2007
Item 1 - Report to Stockholders
Dow 30(SM) Premium & Dividend Income Fund Inc.
Annual Report
December 31, 2007
[LOGO] IQ INVESTMENT [LOGO] NUVEEN
ADVISORS HYDEPARK
Dow 30(SM) Premium & Dividend Income Fund Inc.
Portfolio Information as of December 31, 2007
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
International Business Machines Corp. .............................. 6.6%
Exxon Mobil Corp. .................................................. 5.7
Boeing Co. ......................................................... 5.3
3M Co. ............................................................. 5.1
United Technologies Corp. .......................................... 4.7
Altria Group, Inc. ................................................. 4.6
The Procter & Gamble Co. ........................................... 4.5
Caterpillar, Inc. .................................................. 4.4
Johnson & Johnson .................................................. 4.1
Honeywell International, Inc. ...................................... 3.8
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Aerospace & Defense ................................................ 13.7%
Computers & Peripherals ............................................ 9.7
Pharmaceuticals .................................................... 9.0
Industrial Conglomerates ........................................... 7.4
Oil, Gas & Consumable Fuels ........................................ 5.7
- --------------------------------------------------------------------------------
Percent of
Sector Representation Long-Term Investments
- --------------------------------------------------------------------------------
Industrials ........................................................ 25.7%
Consumer Staples ................................................... 15.8
Information Technology ............................................. 13.5
Financials ......................................................... 11.3
Health Care ........................................................ 9.1
Consumer Discretionary ............................................. 8.8
Energy ............................................................. 5.7
Telecommunication Services ......................................... 5.2
Materials .......................................................... 4.9
- --------------------------------------------------------------------------------
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 of this report, which may combine
industry and sector sub-classifications for reporting ease.
Proxy Results
During the six-month period ended December 31, 2007, Dow 30(SM) Premium &
Dividend Income Fund Inc.`s shareholders voted on the following proposal. On
November 13, 2007 and December 21, 2007, special meetings of shareholders were
adjourned with respect to the proposal until January 10, 2008, at which time it
was approved. A description of the proposal and number of shares voted are as
follows:
- --------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------------------------
To approve a new investment subadvisory agreement
with Nuveen HydePark Group, LLC 5,596,220 121,534 206,968
- --------------------------------------------------------------------------------------------------
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, 2007
A Summary From 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 is provided by Nuveen HydePark Group LLC, the Fund's
subadviser.
The investment objectives of Dow 30(SM) Premium & Dividend Income Fund Inc. (the
"Fund") are to provide shareholders with a high level of current income, with a
secondary objective of capital appreciation. The Fund pursues its investment
objectives principally through a two-part strategy. First, the Fund will invest,
under normal circumstances, substantially all of its net assets (including the
proceeds of any borrowings for investment purposes) in the thirty stocks
included in the Dow Jones Industrial Average(SM) ("DJIA") (the "Stocks") in
approximately the amounts such Stocks are weighted in the DJIA and/or in other
securities or financial instruments that are intended to correlate with the DJIA
(the "Other Instruments"). Second, the Fund will write (sell) covered call
options on some or all of the Stocks or Other Instruments. There can be no
assurance that the Fund will achieve its investment objectives.
For the annual period ended December 31, 2007, the Fund had a total investment
return as set forth in the table below, based on the change per share in net
asset value of $20.14 to $19.95. For the same period, the Fund's unmanaged
reference index, the DJIA, had a total return as shown below. All of the Fund
and index information presented includes the reinvestment of any dividends or
distributions. Distribution information may be found in the Notes to Financial
Statements, Note 5.
- --------------------------------------------------------------------------------
Period Fund* DJIA** Difference
- --------------------------------------------------------------------------------
Fiscal year ended
December 31, 2007 8.42% 8.88% (0.46%)
- --------------------------------------------------------------------------------
Since inception
(April 29, 2005) 32.62% 38.52% (5.90%)
- --------------------------------------------------------------------------------
* Fund performance information is net of expenses.
** The reference index has no expenses associated with performance.
For more detail with regard to the Fund's total investment return based on a
change in the 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), 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 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.
Rob A. Guttschow, CFA
Portfolio Manager
January 15, 2008
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 3
Schedule of Investments as of December 31, 2007
Shares
Industry Common Stocks Held Value
=========================================================================================
Aerospace & Defense -- 13.7%
Boeing Co. 140,523 $ 12,290,142
Honeywell International, Inc. 140,523 8,652,001
United Technologies Corp. 140,523 10,755,630
------------
31,697,773
- -----------------------------------------------------------------------------------------
Automobiles -- 1.5%
General Motors Corp. 140,523 3,497,617
- -----------------------------------------------------------------------------------------
Beverages -- 3.7%
The Coca-Cola Co. 140,523 8,623,897
- -----------------------------------------------------------------------------------------
Chemicals -- 2.7%
E.I. du Pont de Nemours & Co. 140,523 6,195,659
- -----------------------------------------------------------------------------------------
Computers & Peripherals -- 9.7%
Hewlett-Packard Co. 140,523 7,093,601
International Business Machines Corp. 140,523 15,190,536
------------
22,284,137
- -----------------------------------------------------------------------------------------
Consumer Finance -- 3.2%
American Express Co. 140,523 7,310,006
- -----------------------------------------------------------------------------------------
Diversified Financial Services -- 4.5%
Citigroup, Inc. 140,523 4,136,997
JPMorgan Chase & Co. 140,523 6,133,829
------------
10,270,826
- -----------------------------------------------------------------------------------------
Diversified Telecommunication Services -- 5.2%
AT&T Inc. 140,523 5,840,136
Verizon Communications, Inc. 140,523 6,139,450
------------
11,979,586
- -----------------------------------------------------------------------------------------
Food & Staples Retailing -- 2.9%
Wal-Mart Stores, Inc. 140,523 6,679,058
- -----------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure -- 3.6%
McDonald's Corp. 140,523 8,278,210
- -----------------------------------------------------------------------------------------
Household Products -- 4.5%
The Procter & Gamble Co. 140,523 10,317,199
- -----------------------------------------------------------------------------------------
Industrial Conglomerates -- 7.4%
3M Co. 140,523 11,848,899
General Electric Co. 140,523 5,209,188
------------
17,058,087
- -----------------------------------------------------------------------------------------
Insurance -- 3.6%
American International Group, Inc. 140,523 8,192,491
- -----------------------------------------------------------------------------------------
Machinery -- 4.4%
Caterpillar, Inc. 140,523 10,196,349
- -----------------------------------------------------------------------------------------
Media -- 2.0%
Walt Disney Co. 140,523 4,536,082
- -----------------------------------------------------------------------------------------
Metals & Mining -- 2.2%
Alcoa, Inc. 140,523 5,136,116
- -----------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 5.7%
Exxon Mobil Corp. 140,523 13,165,600
- -----------------------------------------------------------------------------------------
Pharmaceuticals -- 9.0%
Johnson & Johnson 140,523 9,372,884
Merck & Co., Inc. 140,523 8,165,792
Pfizer, Inc. 140,523 3,194,088
------------
20,732,764
- -----------------------------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment -- 1.6%
Intel Corp. 140,523 3,746,343
- -----------------------------------------------------------------------------------------
Software -- 2.2%
Microsoft Corp. 140,523 5,002,619
- -----------------------------------------------------------------------------------------
Specialty Retail -- 1.6%
Home Depot, Inc. 140,523 3,785,690
- -----------------------------------------------------------------------------------------
Tobacco -- 4.6%
Altria Group, Inc. 140,523 10,620,728
- -----------------------------------------------------------------------------------------
Total Common Stocks
(Cost -- $178,861,815) -- 99.5% 229,306,837
=========================================================================================
=========================================================================================
Face
Short-Term Securities Amount
=========================================================================================
Government National Bills -- 0.9%
U.S. Treasury Bills, 4.01%
due 1/10/2008 $2,000,000 1,997,973
- -----------------------------------------------------------------------------------------
Time Deposits -- 0.9%
State Street Bank & Trust Co.,
3.25% due 1/02/2008 2,207,053 2,207,053
- -----------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- 4,205,026) -- 1.8% 4,205,026
=========================================================================================
Total Investments Before Options Written
(Cost -- $183,066,841*) -- 101.3% 233,511,863
=========================================================================================
=========================================================================================
Number of
Options Written Contracts
=========================================================================================
Call Options Written
3M Co., expiring January 2008
at USD 80.45,
Broker UBS Warburg 610 (270,169)
AT&T Inc., expiring January 2008
at USD 37.88,
Broker UBS Warburg 610 (219,356)
Alcoa, Inc., expiring January 2008
at USD 36.996,
Broker BNP Paribas 610 (56,730)
Altria Group, Inc., expiring January 2008
at USD 74.83,
Broker UBS Warburg 610 (111,996)
American Express Co.,
expiring January 2008 at USD 59.751,
Broker Deutsche Bank AG 610 (305)
American International Group, Inc.,
expiring January 2008 at USD 59.771,
Broker HSBC Securities 610 (48,190)
Boeing Co., expiring January 2008
at USD 94.637,
Broker Banc of America 610 (3,185)
Caterpillar, Inc., expiring January 2008
at USD 71.781,
Broker JPMorgan Chase 610 (111,630)
Citigroup, Inc., expiring January 2008
at USD 36.259,
Broker HSBC Securities 610 (1)
4 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Schedule of Investments (concluded)
Number of
Options Written Contracts Value
=========================================================================================
Call Options Written (continued)
The Coca-Cola Co., expiring January 2008
at USD 62.57,
Broker JPMorgan Chase 610 $ (25,010)
E.I. du Pont de Nemours & Co.,
expiring January 2008 at USD 46.093,
Broker Deutsche Bank AG 610 (5,685)
Exxon Mobil Corp., expiring January 2008
at USD 88.80,
Broker UBS Warburg 610 (358,802)
General Electric Co., expiring January 2008
at USD 39.602,
Broker BNP Paribas 610 (1,830)
General Motors Corp., expiring
January 2008 at USD 31.936,
Broker BNP Paribas 610 (610)
Hewlett-Packard Co., expiring
January 2008 at USD 49.39,
Broker UBS Warburg 610 (117,059)
Home Depot, Inc., expiring January 2008
at USD 29.269,
Broker Deutsche Bank AG 610 (6,856)
Honeywell International, Inc.,
expiring January 2008 at USD 56.09,
Broker UBS Warburg 610 (345,443)
Intel Corp., expiring January 2008
at USD 25.74,
Broker UBS Warburg 610 (82,350)
International Business Machines Corp.,
expiring January 2008 at USD 104.64,
Broker UBS Warburg 610 (305,793)
JPMorgan Chase, expiring January 2008
at USD 43.562,
Broker Deutsche Bank AG 610 (68,595)
Johnson & Johnson, expiring
January 2008 at USD 67.548,
Broker HSBC Securities 610 (25,620)
McDonald's Corp., expiring
January 2008 at USD 57.75,
Broker JPMorgan Chase 610 (111,630)
Merck & Co., Inc., expiring January 2008
at USD 60.559,
Broker HSBC Securities 610 (32,330)
Microsoft Corp., expiring January 2008
at USD 34.04,
Broker UBS Warburg 610 (122,488)
Pfizer, Inc., expiring January 2008
at USD 23.67,
Broker UBS Warburg 610 (11,346)
The Procter & Gamble Co., expiring
January 2008 at USD 74.65,
Broker UBS Warburg 610 (49,349)
United Technologies Corp., expiring
January 2008 at USD 76.61,
Broker UBS Warburg 610 (119,072)
Verizon Communications, Inc., expiring
January 2008 at USD 42.834,
Broker HSBC Securities 610 (83,570)
Wal-Mart Stores, Inc., expiring
January 2008 at USD 47.70,
Broker UBS Warburg 610 (69,662)
Walt Disney Co., expiring January 2008
at USD 33.34,
Broker UBS Warburg 610 (8,113)
- -----------------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $4,127,969) -- (1.2%) (2,772,775)
=========================================================================================
Total Investments, Net of Options Written
(Cost -- $178,938,872) -- 100.1% 230,739,088
Liabilities in Excess of Other Assets -- (0.1%) (275,157)
------------
Net Assets -- 100.0% $230,463,931
============
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 183,070,574
=============
Gross unrealized appreciation .......................... $ 56,087,113
Gross unrealized depreciation .......................... (5,645,824)
-------------
Net unrealized appreciation ............................ $ 50,441,289
=============
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. These industry classifications are unaudited.
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 5
Statement of Assets, Liabilities and Capital
As of December 31, 2007
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $183,066,841) . $ 233,511,863
Receivables:
Dividends ...................................................................... $ 293,693
Interest ....................................................................... 199 293,892
-------------------------------
Total assets ....................................................................... 233,805,755
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received -- $4,127,969) ........................ 2,772,775
Payables:
Dividends and distributions to shareholders .................................... 246,529
Investment adviser ............................................................. 178,019 424,548
-------------
Accrued expenses ................................................................... 144,501
-------------
Total liabilities .................................................................. 3,341,824
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ......................................................................... $ 230,463,931
=============
===================================================================================================================================
Capital
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001, 100,000,000 shares authorized ....................... $ 11,554
Paid-in capital in excess of par ................................................... 178,655,894
Accumulated realized capital losses -- net ......................................... $ (3,733)
Unrealized appreciation -- net ..................................................... 51,800,216
-------------
Total accumulated earnings -- net .................................................. 51,796,483
-------------
Total capital -- Equivalent to $19.95 per share based on 11,554,133 shares of
Common Stock outstanding (market price -- $17.91) ................................ $ 230,463,931
=============
See Notes to Financial Statements.
6 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Statement of Operations
For the Year Ended December 31, 2007
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends .......................................................................... $ 5,352,695
Interest ........................................................................... 81,135
-------------
Total income ....................................................................... 5,433,830
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ........................................................... $ 2,130,512
Professional fees .................................................................. 69,585
Licensing fees ..................................................................... 63,475
Directors' fees and expenses ....................................................... 59,391
Accounting services ................................................................ 53,882
Transfer agent fees ................................................................ 47,788
Printing and shareholder reports ................................................... 32,827
Listing fees ....................................................................... 23,750
Custodian fees ..................................................................... 16,814
Other .............................................................................. 30,969
-------------
Total expenses ..................................................................... 2,528,993
-------------
Investment income -- net ........................................................... 2,904,837
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ............................................................. 4,873,350
Options written -- net ......................................................... (1,194,968) 3,678,382
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................................. 10,297,396
Options written -- net ......................................................... 1,665,013 11,962,409
-------------------------------
Total realized and unrealized gain -- net .......................................... 15,640,791
-------------
Net Increase in Net Assets Resulting from Operations ............................... $ 18,545,628
=============
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 7
Statements of Changes in Net Assets
For the Year Ended
December 31,
-------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................... $ 2,904,837 $ 2,870,169
Realized gain (loss) -- net ........................................................ 3,678,382 (1,238,773)
Change in unrealized appreciation/depreciation -- net .............................. 11,962,409 30,358,043
-------------------------------
Net increase in net assets resulting from operations ............................... 18,545,628 31,989,439
-------------------------------
===================================================================================================================================
Dividends & Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................... (5,456,114) (2,865,327)
Realized gain -- net ............................................................... (400,116) --
Tax return of capital .............................................................. (14,899,426) (17,641,705)
-------------------------------
Net decrease in net assets resulting from dividends and distributions
to shareholders .................................................................. (20,755,656) (20,507,032)
-------------------------------
===================================================================================================================================
Common Stock Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to shareholders in reinvestment of dividends
and distributions ................................................................ 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 (decrease) in net assets ............................................ (543,526) 13,462,420
Beginning of year .................................................................. 231,007,457 217,545,037
-------------------------------
End of year ........................................................................ $ 230,463,931 $ 231,007,457
===============================
See Notes to Financial Statements.
8 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Financial Highlights
For the Period
For the Year Ended April 29,
December 31, 2005+ to
The following per share data and ratios have been derived ----------------------------- December 31,
from information provided in the financial statements. 2007 2006 2005
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ....................... $ 20.14 $ 19.13 $ 19.10
------------------------------------------------------
Investment income -- net** ................................. .25 .25 .19
Realized and unrealized gain -- net ........................ 1.36 2.56 .94
------------------------------------------------------
Total from investment operations ........................... 1.61 2.81 1.13
------------------------------------------------------
Less dividends and distributions from:
Investment income -- net ............................... (.47) (.25) (.18)
Realized gain -- net ................................... (.04) -- (.28)
Tax return of capital .................................. (1.29) (1.55) (.60)
------------------------------------------------------
Total dividends and distributions .......................... (1.80) (1.80) (1.06)
------------------------------------------------------
Offering costs, including adjustments, resulting
from the issuance of Common Stock ........................ -- --* (.04)
------------------------------------------------------
Net asset value, end of period ............................. $ 19.95 $ 20.14 $ 19.13
======================================================
Market price per share, end of period ...................... $ 17.91 $ 20.96 $ 18.15
======================================================
===================================================================================================================================
Total Investment Return++
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ......................... 8.42% 15.54% 5.86%(a)(b)
======================================================
Based on market price per share ............................ (6.48%) 26.74% (4.08%)(a)
======================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ................................................... 1.07% 1.10% 1.12%(c)
======================================================
Investment income -- net ................................... 1.23% 1.30% 1.44%(c)
======================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ................... $ 230,464 $ 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 was 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 reimbursed the Fund as a result of a
trading/administrative error, which had no impact on total investment
return.
(c) Annualized.
See Notes to Financial Statements.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 9
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.
Effective September 4, 2007, exchange-traded options are valued at the mean
between the last bid and ask prices at the close of the options market in which
the options trade and previously were valued at the last sales price. 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 seek 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 the purchaser with the right to
potentially receive a cash payment
10 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Notes to Financial Statements (continued)
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.
Portions of the distributions paid by the Fund during the years ended December
31, 2007 and 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. All tax years of the Fund are open at this time.
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. The impact on the Fund's financial statement disclosures, if any,
is currently being assessed.
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. The impact on the Fund's financial
statement disclosures, if any, is currently being assessed.
(h) 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, $2,551,277 has been reclassified between paid-in capital in excess of par
and accumulated distributions in excess of net investment income as a result of
a permanent difference attributable to distributions paid in excess of taxable
income.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 11
Notes to Financial Statements (continued)
This reclassification has no effect on net assets or net asset value 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 pays 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. Prior to the Fund's
commencement of operations, IQ entered into a Subadvisory Agreement with Nuveen
Asset Management ("NAM"). Pursuant to the agreement, NAM was responsible for
providing certain investment advisory services to IQ with respect to the Fund.
For such services, IQ pays NAM 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. The Fund does not make any direct payments to NAM
for subadvisory services.
On June 20, 2007, Nuveen Investments Inc. ("Nuveen Investments"), the parent
company of NAM, 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. The investor group's financial
advisors and investors included ML & Co. and Merrill Lynch Global Private Equity
(both affiliates of IQ).
The merger would result in an "assignment" (as defined in the Investment Company
Act of 1940) of the Subadvisory Agreement causing its automatic termination.
At a meeting held on July 24, 2007, the Board of Directors of the Fund approved
a new investment subadvisory agreement for the Fund to be presented to
shareholders for approval. The new subadvisory agreement contains substantially
the same terms as the Subadvisory Agreement, including the same subadvisory fee.
In order to ensure continuity of services to the Fund in the event that the
merger was consummated prior to the shareholder vote (as was the case), the
Fund's Board, in reliance on Rule 15a-4 under the Investment Company Act, also
approved an interim subadvisory agreement for the Fund with a term of up to 150
days pending approval of the new subadvisory agreement by shareholders. The
Board determined that the scope and quality of services to be provided under the
interim subadvisory agreement were equivalent to the existing subadvisory
agreement and that other than the dates, parties and provisions required by Rule
15a-4, there were no material differences between the interim subadvisory
agreement and the existing subadvisory agreement.
The merger was consummated in November 2007. At a shareholder meeting held on
January 10, 2008, the new subadvisory agreement was approved.
Effective September 30, 2007, the Subadvisory Agreement was transferred to NAM's
affiliate, Nuveen HydePark Group, LLC ("Nuveen HydePark"), following an internal
restructuring of NAM and its affiliates. In the course of this restructuring,
NAM contributed the personnel and resources servicing the Fund to Nuveen
HydePark. The transfer of the Subadvisory Agreement was approved by the Fund's
Board of Directors at a meeting held on September 12, 2007. At that meeting, the
Board determined that the transfer of the Subadvisory Agreement would not result
in an assignment of the Subadvisory Agreement within the meaning of the
Investment Company Act of 1940. There was no change in the aggregate fees paid
for services under the agreement.
IQ has entered into an Administration Agreement with Princeton Administrators,
LLC (the "Administrator"). The Administration Agreement provides that IQ pays
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 and/or directors of IQ, ML & Co.,
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2007 were $0 and $19,878,475, respectively.
12 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Notes to Financial Statements (concluded)
Transactions in options written for the year ended December 31, 2007 were as
follows:
- -------------------------------------------------------------------------------
Number of Premiums
Contracts Received
- -------------------------------------------------------------------------------
Outstanding call options written,
at beginning of year ....................... 21,000 $ 1,956,661
Options written .............................. 176,550 23,172,999
Options expired .............................. (87,160) (10,281,265)
Options closed ............................... (92,090) (10,720,426)
------------------------
Outstanding call options written,
at end of year ............................. 18,300 $ 4,127,969
========================
4. Common Stock Transactions:
The Fund is authorized to issue 100,000,000 shares of capital stock, par value
$.001 per share, all of which were initially classified as Common Stock. 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 increased by 81,657 and 103,006 from dividend and
distribution reinvestments for the years ended December 31, 2007 and December
31, 2006, respectively.
5. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended December
31, 2007 and December 31, 2006 were as follows:
- --------------------------------------------------------------------------------
12/31/2007 12/31/2006
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ................................ $ 5,456,114 $ 2,865,327
Long-term capital gain ......................... 400,116 --
Tax return of capital .......................... 14,899,426 17,641,705
--------------------------
Total distributions .............................. $20,755,656 $20,507,032
==========================
As of December 31, 2007, 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 ...................................... --
Unrealized gains -- net ........................................ $51,796,483*
-----------
Total accumulated earnings -- net .............................. $51,796,483
===========
* The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales.
6. Subsequent Event:
The Fund paid a distribution in the amount of $.15 per share on January 31, 2008
to shareholders of record on January 22, 2008.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 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, 2007, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
respective periods presented. 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, 2007, 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, 2007, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and its financial highlights for
each of the respective periods presented, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, NJ
February 29, 2008
14 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Fund Certification
In May 2007, 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
website at http://www.sec.gov.
Important Tax Information
The following information is provided with respect to the taxable ordinary
income distributions paid by Dow 30(SM) Premium & Dividend Income Fund Inc.
during the fiscal year ended December 31, 2007.
- ------------------------------------------------------------------------------------------------
Qualified Dividend Income for Individuals ......................................... 100.00%
Dividends Qualifying for the Dividends Received Deduction for Corporations ........ 100.00%
Federal Obligation Interest ....................................................... 0.32%*
Interest-Related Dividends for Non-U.S. Residents ................................. 0.79%**
- ------------------------------------------------------------------------------------------------
* The law varies in each state as to whether and what percentage of dividend
income attributable to Federal Obligations is exempt from state income
tax. We recommend that you consult your tax advisor to determine if any
portion of the dividends you received is exempt from state income taxes.
** Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
Additionally, the Fund distributed long-term capital gains of $.034635 per share
to shareholders of record on December 20, 2007.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 15
Approval of New Subadvisory Agreement
On June 20, 2007, Nuveen Investments, Inc. ("Nuveen Investments"), the parent
company of Nuveen Asset Management ("NAM"), announced that it had entered into a
definitive Agreement and Plan of Merger (the "Merger") to be acquired by an
investor group majority-led by Madison Dearborn Partners, LLC. The Merger, when
consummated, has the effect of causing the Fund's Subadvisory Agreement between
IQ Investment Advisors LLC ("IQ" or the "Adviser") and NAM to be terminated
pursuant to the terms of the Subadvisory Agreement. In anticipation of the
consummation of the Merger, the Board of the Fund met in person on July 24, 2007
for purposes of, among other things, considering whether it would be in the best
interests of the Fund and its stockholders to approve a new subadvisory
agreement (the "New Subadvisory Agreement") that would take effect upon the
termination of the existing Subadvisory Agreement. The Board also approved an
interim subadvisory agreement between NAM and the Adviser that would take effect
(and continue for no more than 150 days) if the Merger was consummated prior to
shareholder approval of the New Subadvisory Agreement. The Board considered
substantially the same factors in approving the interim subadvisory agreement as
were considered in approving the New Subadvisory Agreement.
On September 12, 2007, the Board of the Fund met in person to approve the
transfer of NAM's rights and duties under the Fund's then existing Subadvisory
Agreement to Nuveen HydePark Group, LLC ("Nuveen HydePark" or the "Subadviser"),
another wholly-owned subsidiary of Nuveen Investments. The transfer of NAM's
rights and duties under the Fund's then existing Subadvisory Agreement to Nuveen
HydePark was the result of an internal restructuring by Nuveen Investments. The
Board also considered and approved the transfer of the New Subadvisory Agreement
(to be effective upon consummation of the Merger) and the interim subadvisory
agreement (to be effective if the New Subadvisory Agreement was not approved by
shareholders prior to the effectiveness of the Merger).
The Merger was approved by the stockholders of Nuveen Investments on or about
November 13, 2007. At that time, Nuveen Investments ceased to be a publicly
traded company and is now privately held by an investor group that includes
Merrill Lynch, an affiliate of the Adviser. The shareholders of the Fund
approved the New Subadvisory Agreement on January 10, 2008.
The following discussion summarizes the information considered and the
conclusions made by the Board in approving the New Subadvisory Agreement.
In considering approval of the New Subadvisory Agreement between the Adviser and
the Subadviser, the Board received and discussed various materials provided to
it in advance of the meetings which included, among other things, a copy of the
form of New Subadvisory Agreement, the materials the Board had received in
connection with its consideration and approval of the then existing Subadvisory
Agreement, due diligence materials from the Subadviser and a report on the
Merger. In addition, the Board considered materials received at previous
meetings of the Board regarding the Fund.
At the July 24, 2007 Board meeting, representatives of NAM made a presentation
regarding the Merger and responded to questions from the Board. The
non-interested Directors discussed the presentation given at the meeting by
representatives of the Subadviser and the materials distributed in connection
therewith, which provided information about the transaction that would cause the
change in control of the Subadviser and the termination of the then existing
Subadvisory Agreement. The non-interested Directors met privately with their
legal counsel to review the Board's duties in reviewing a subadvisory agreement
and approving the New Subadvisory Agreement. The Board considered all factors it
believed relevant with respect to the Fund, including the following: (a) the
nature, extent and quality of the services to be provided by the Subadviser; (b)
the investment performance of the Fund and the Subadviser; (c) the costs of the
services to be provided and profits to be realized by the Subadviser from its
relationship with the Fund; and (d) the extent to which economies of scale could
be realized as the Fund grows and whether fee levels reflect these economies of
scale for the benefit of Fund investors.
At the September 12, 2007 Board meeting, the Board considered transferring the
New Subadvisory Agreement and the interim subadvisory agreement to Nuveen
HydePark, referring to the same information and factors the Directors considered
at the July 24, 2007 Board meeting. The Board also considered additional
information relating to Nuveen HydePark.
16 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
(a) Nature, Extent and Quality of Services -- In connection with their
consideration of the New Subadvisory Agreement, the Directors considered
representations by the Adviser and the Subadviser that there would be no
diminution in the services to be rendered to the Fund by the Adviser and the
Subadviser, respectively, as a result of the change in control of the Subadviser
and the effectiveness of the New Subadvisory Agreement. The Board noted that
representatives of the Subadviser stated that they did not anticipate any change
in their personnel responsible for providing services to the Fund, and in
particular that the investment and compliance personnel of the Subadviser were
not expected to change as a result of the change in control of the Subadviser.
In reviewing the New Subadvisory Agreement, the Directors focused on the
experience of the Subadviser in managing registered funds. The Board considered
the reputation and investment experience of the Subadviser and its investment
professionals who would continue to serve as portfolio managers after the change
in control. The Board noted the representations of the Subadviser that the
change in control would have no adverse effect on the experience, resources and
strengths of the Subadviser in managing investment companies. The Board then
discussed the Subadviser's anticipated financial condition after the change in
control. The Board noted statements from the Subadviser's representatives that
the financial position of the Subadviser would not be negatively affected by the
Merger. The Board also considered representations from the Subadviser that the
change in control would not have an effect on the Subadviser's compliance
personnel or compliance procedures. The Board then discussed the due diligence
performed by personnel of the Adviser regarding the Subadviser. Based on the
discussions held and the materials presented at these meetings and prior
meetings, the Board determined that the proposed change in control of the
Subadviser would not likely cause an adverse change in the nature, extent and
quality of the services to be provided by the Subadviser under the New
Subadvisory Agreement. In addition, the Board was of the view that the
Subadviser had evidenced a commitment to maintaining a culture of compliance
that would continue after the Merger.
(b) The Investment Performance of the Fund and the Subadviser -- The Directors
reviewed the investment performance of the Fund, and primarily based their
evaluation of the Subadviser on the Fund's performance for the limited period
that the Fund had been in operation. The Directors considered the history,
experience, resources and strengths of the Subadviser in developing and
implementing the investment strategies used by the Fund. The Directors noted
that the Fund uses an innovative investment strategy and that comparisons of the
Fund's investment performance to the performance of other investment companies
was generally not meaningful. The Directors reviewed the Fund's investment
performance and compared such performance to the performance of a relevant
reference index. The Directors discussed the degree to which the Fund was
achieving its investment objective, noting that the Fund had been in operation
for a short period of time. In particular, the Directors noted that the Fund
generally performed as expected relative to its reference index. As a result of
their discussions and review, the Directors concluded that the Fund's
performance was satisfactory. The Board did not specifically consider the
Subadviser's performance with respect to most other accounts it manages, because
these accounts might have investment objectives, policies or restrictions
different from those of the Fund. The Board considered the reputation and
investment experience of the Subadviser and its investment professionals. The
Board discussed the experience, resources and strengths of the Subadviser in
managing or sponsoring investment companies. The Board also considered the
experience of the Fund's portfolio managers and discussions held with the
managers regarding implementation of the Fund's investment programs. Following
their deliberations, the Board concluded that, while past performance is not an
indicator of future performance, the Subadviser should likely be able to
continue to effectively implement the Fund's investment strategy in attempting
to meet the Fund's investment objectives.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 17
Approval of New Subadvisory Agreement (concluded)
(c) Fees and Profitability of the Subadviser -- The Board considered
representations by the Adviser and the Subadviser that there would be no change
in the allocation of the management fees between the Adviser and Subadviser in
relation to the services provided by the Subadviser, as a result of the change
in control of Nuveen and the effectiveness of the New Subadvisory Agreement. In
considering the compensation to be paid to the Subadviser, noting that no
changes to such compensation from that payable under the then existing
Subadvisory Agreement was proposed, the Board referred to the materials
presented and discussions held in connection with their consideration of the
then existing Subadvisory Agreement for the Fund. The Board noted that in
connection with such considerations they had received and reviewed fee
comparison data from Lipper Inc. (which included information regarding the fees
paid by certain investment advisers to subadvisers of peer funds), and concluded
that such information continued to be relevant to their current deliberations.
In reviewing that data, the Board noted that the subadvisory fee with respect to
the Fund was at a level that continued to be reasonable and similar to that of
comparable funds. Taking into account the totality of the information and
materials provided to them at these meetings and at prior meetings, including,
among other things, the fact that the subadvisory fees were negotiated by the
Adviser on an arm's-length basis, the Board concluded that the subadvisory fees
proposed under the New Subadvisory Agreement continued to be reasonable for the
services to be rendered.
(d) Economies of Scale and Whether Fee Levels Reflect these Economies of Scale
- -- The Board also considered whether the Fund would be able to participate in
any economies of scale that the Subadviser may experience given present asset
levels of the Fund. On this point, the Board noted the uncertainty of the asset
levels of the Fund going forward. The Board discussed the renewal requirements
for investment advisory agreements in general, and determined to revisit this
issue from time to time.
The Board's Conclusions About the New Subadvisory Agreement
The Board examined the totality of the information they were provided and did
not identify any single factor discussed previously as controlling. The Board,
including all of the non-interested Directors, concluded that the terms of the
New Subadvisory Agreement were fair and reasonable, that the Subadviser's fees
are reasonable in light of the services to be provided to the Fund, and that the
New Subadvisory Agreement should be approved and recommended to the Fund's
stockholders.
18 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
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
Mellon (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 BNY Mellon
Shareowner Services, P.O. Box 358035, Pittsburgh, PA 15252-8035, Telephone:
877-296-3711.
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 19
Directors and Officers
Number of
IQ Advisors-
Affiliate
Advised Funds Other Public
Position(s) Length of and Portfolios Directorships
Held with Time Overseen By Held by
Name Address & Age Fund Served** Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Non-Interested Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
Paul P.O. Box 9095 Director & 2005 to Professor, Columbia University Business School 11 None
Glasserman Princeton, NJ Chairman of present since 1991; Senior Vice Dean since July 2004.
08543-9095 the Audit
Age: 45 Committee
- ------------------------------------------------------------------------------------------------------------------------------------
Steven W. P.O. Box 9095 Director & 2005 to Retired since August 2002; Managing Director, 11 Ametek, Inc.
Kohlhagen Princeton, NJ Chairman of present Wachovia National Bank and its predecessors
08543-9095 Nominating (1992 - 2002).
Age: 60 & Corporate
Governance
Committee
- ------------------------------------------------------------------------------------------------------------------------------------
William J. P.O. Box 9095 Director & 2005 to Retired since November 2004; Chairman and 11 None
Rainer Princeton, NJ Chairman of present Chief Executive Officer, OneChicago, LLC, a
08543-9095 the Board designated contract market (2001 - 2004);
Age: 61 Chairman, U.S. Commodity Futures
Trading Commission (1999 - 2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Laura S. P.O. Box 9095 Director 2007 to Independent Consultant; Commissioner of the 11 CA, Inc.
Unger Princeton, NJ present Securities and Exchange Commission (1997 - (software) and
08543-9095 2002), including Acting Chairperson of the SEC Ambac Financial
Age: 46 from February to August 2001; Regulatory Expert Group, Inc.
for CNBC (2002 - 2003).
------------------------------------------------------------------------------------------------------------------------
* 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.
20 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
Directors and Officers (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 Investments & Insurance Solutions and Head of Global
08543-9011 Alternative Investments since 2008; MLPF&S, Managing Director, Head of Financial
Age: 42 Products Group since 2007; Head of Global Wealth Management Market Investments &
Origination (2003 - 2007); MLPF&S, FAM Distributors ("FAMD"), Director since
2006; IQ Financial Products LLC, Director since 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
Justin C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President since 2005; MLPF&S, Managing
Ferri Princeton, NJ President present Director, Structured and Alternative Solutions since 2008; MLPF&S, Director,
08543-9011 Structured and Alternative Solutions in 2007; Director, Global Wealth Management
Age: 32 Market Investments & Origination (2005 - 2007); MLPF&S, Vice President, Global
Private Client Market Investments & Origination (2005); 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).
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Secretary and Treasurer (2004 - March 2007);
Burke Princeton, NJ President present BlackRock, Inc., Managing Director since 2006; Merrill Lynch Investment
08543-9011 and Managers, L.P. ("MLIM") and Fund Asset Management ("FAM") Managing Director
Age: 47 Secretary (2006); MLIM and FAM, First Vice President (1997 - 2005) and Treasurer (1999 -
2006); Princeton Services, Inc., Senior Vice President and Treasurer (1999 -
2006).
- ------------------------------------------------------------------------------------------------------------------------------------
James E. P.O. Box 9011 Vice 2007 to IQ Investment Advisors LLC, Treasurer since March 2007; MLPF&S, Director,
Hillman Princeton, NJ President present Structured and Alternative Solutions since 2007; Director, Global Wealth
08543-9011 and Management Market Investments & Origination (September 2006 - 2007); Managed
Age: 50 Treasurer Account Advisors LLC, Vice President and Treasurer since November 2006;
Director, Citigroup Alternative Investments Tax Advantaged Short Term Fund in
2006; Director, Korea Equity Inc. Fund in 2006; Independent Consultant, January
to September 2006; Managing Director, The Bank of New York, Inc. (1999 - 2006).
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine P.O. Box 9011 Chief 2007 to IQ Investment Advisors LLC, Chief Compliance Officer since April 2007; Merrill
A. Princeton, NJ Compliance present Lynch & Co., Inc., Director, Corporate Compliance since September 2007;
Johnston 08543-9011 Officer BlackRock, Inc., Director (2006 - 2007); MLIM, Director (2003 - 2006), Vice
Age: 53 President (1998 - 2003).
- ------------------------------------------------------------------------------------------------------------------------------------
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 since 2006, First Vice
08543-9011 Officer President (2002 - 2006), Director (2000 - 2002); Managed Account Advisors LLC,
Age: 45 Chief Legal Officer since November 2006; FAMD, Director since 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
Jay M. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President (2005 - March 2007); BlackRock, Inc.,
Fife Princeton, NJ President present Managing Director since 2007; BlackRock, Inc., Director in 2006; MLIM, Director
08543-9011 (2000 - 2006); MLPF&S, Director (2000) and Vice President (1997 - 2000).
Age: 37
- ------------------------------------------------------------------------------------------------------------------------------------
Colleen R. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Chief Administrative Officer and Secretary since
Rusch Princeton, NJ President present 2007, Vice President since 2005; MLPF&S, Director, Structured and Alternative
08543-9011 and Solutions since 2007; MLPF&S, Director, Global Wealth Management Market
Age: 40 Assistant Investments & Origination (2005 - 2007); MLIM, Director from January 2005 to
Secretary July 2005; Vice President of MLIM (1998 - 2004).
------------------------------------------------------------------------------------------------------------------------
* 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
BNY Mellon Shareholder Services
480 Washington Boulevard
Jersey City, NJ 07310
NYSE Symbol
DPD
DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007 21
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 website 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 website
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.
22 DOW 30(SM) PREMIUM & DIVIDEND INCOME FUND INC. DECEMBER 31, 2007
[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 website 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 website at http://www.sec.gov.
Dow 30(SM) Premium & Dividend Income Fund Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
#IQDPD -- 12/07
Item 2 - Code of Ethics - The registrant (or the "Fund") 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. During the period covered by this
report, there have been no amendments to or waivers granted under
the code of ethics. 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 (resigned as of February 22, 2007) and (2) Steven W.
Kohlhagen.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees
- ----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Registrant Name End Year End End Year End End Year End End Year End
- ----------------------------------------------------------------------------------------------------------------------------------
Dow 30(SM) $22,200 $22,200 $0 $0 $8,500 $7,500 $0 $0
Premium &
Dividend Income
Fund Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial statements
not included in Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
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) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Registrant Name Year End Year End
--------------------------------------------------------------------
Dow 30(SM) Premium & $2,102,500 $1,968,500
Dividend Income Fund Inc.
--------------------------------------------------------------------
(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 (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by 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) - $0, 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 (resigned as of February 22, 2007)
Steven W. Kohlhagen
Paul Glasserman
William J. Rainer
Laura S. Unger (effective September 12, 2007)
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 - The registrant has delegated the
voting of proxies relating to its voting securities to its
investment sub-adviser, Nuveen HydePark Group, LLC (the
"Sub-adviser" or "HydePark"). The Proxy Voting Policies are attached
as an Exhibit hereto.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of December 31, 2007.
(a)(1) Rob A. Guttschow , CFA is a Managing Director of HydePark and
Nuveen Asset Management ("NAM"). Mr. Guttschow joined NAM in May
2004 to develop and implement a derivative overlay capability. Mr.
Guttschow then joined HydePark in September 2007, while retaining
his Managing Director status with NAM. 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, 2007:
-----------------------------------------------------------------------------------------------------------------------
(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 Other Other
(i) Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
Rob A.
Guttschow, CFA 5 1 1 0 1 0
-----------------------------------------------------------------------------------------------------------------------
$1,551,000,000 $22,000,000 $500,000 $0 $20,000,000 $0
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
Mr. Guttschow's simultaneous management of the Fund and the other
registered investment companies 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 accounts.
The Sub-adviser 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 Sub-adviser has adopted a Code
of Conduct that sets forth policies regarding conflicts of interest.
(a)(3) As of December 31, 2007:
Compensation. Mr. Guttschow's compensation consists of three basic
elements--base salary, cash bonus and long-term incentive
compensation. The Sub-adviser'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 the Portfolio Manager's
investment team, the investment performance of the accounts managed
by the Portfolio Manager's, and the overall performance of Nuveen
Investments, Inc. (the parent company of the Sub-adviser). Although
investment performance is a factor in determining Mr. Guttschow's
compensation, it is not necessarily a decisive factor.
Base salary. Mr. Guttschow is paid a base salary that is set at a
level determined by the Sub-adviser in accordance with its overall
compensation strategy discussed above. The Sub-adviser is not under
any current contractual obligation to increase a Portfolio Manager'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. These reviews
and evaluations often take into account a number of factors,
including the effectiveness of the investment strategies recommended
to the Sub-adviser'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 Sub-adviser'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 two forms of long term incentive compensation. One form is
tied to the successful revenue growth of the HydePark. The second
form of long term compensation is tied to the success of Nuveen
Investments Inc and its ability to grow its business as a private
company.
(a)(4) Beneficial Ownership of Securities. As of December 31, 2007,
Mr. Guttschow did 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 due to no such
purchases during the period covered by this report.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Corporate Governance 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)
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 - 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 (principal executive officer) of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: February 20, 2008
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 (principal executive officer) of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: February 20, 2008
By: /s/ James E. Hillman
---------------------------------
James E. Hillman
Chief Financial Officer (principal financial officer) of
Dow 30(SM) Premium & Dividend Income Fund Inc.
Date: February 20, 2008