Claymore Securities, Inc.
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PERFORMANCE PARTNERS ABOUT CLAYMORE CEFs LITERATURE
DCS
Claymore Dividend & Income Fund

COMMON SHARES

DAILY DATA   as of 11/6/09
Closing Share Price  $14.75 
Closing NAV  $15.34 
Premium/(Discount)  (3.85%) 
Current Distribution Rate1  2.71% 
Quarterly Dividend Per Share 2  $0.10000 
52-Week Average Premium/Discount  (18.82%) 
Tax-Advantaged Distribution Rate3  3.72% 
Daily Volume  43,923 
Ex-Dividend Date  11/10/09 
Payable Date  11/30/09 
52 Week High/Low Share Price4  $15.23/$4.95 
52 Week High/Low NAV4  $18.15/$7.05 
Intraday Trading Information  NYSE 

Data subject to change on a daily basis.

 

WEEKLY DATA   as of 10/30/09
Closing Share Price  $14.25 
Closing NAV  $14.86 
Closing Volume  72,815 
Premium/(Discount)  (4.10%) 
Distribution Rate  2.81% 
Total Managed Assets  $194,927,076 
Shares Outstanding  9,079,884 
Percent Leveraged8  30.78% 

Data subject to change on a daily basis.

 

SEMI-ANNUAL DATA   as of 4/30/09
Fiscal Year-End  10/31 
Expense Ratio (Total Fund)5  1.46% 
Expense Ratio (Common Shares)5  2.75% 
Portfolio Turnover Rate6  65% 
Portfolio Manager  Manning & Napier Advisors, Inc.10 
Investment Adviser  Claymore Advisors 

Data subject to change on a daily basis.

FUND INFORMATION

Common Shares
Inception Date January 27, 2004
NYSE Symbol DCS
NAV Symbol XDCSX
The Wall Street Journal  Listing ClayDivIncoFd
CUSIP 18385J105
Inception Share Price7 $100.00
Inception NAV7 $95.50

FINANCIAL LEVERAGE   as of 10/30/09
Leverage Outstanding8 $60,000,000
1940 Act Asset Coverage Ratio9 325%

QUARTERLY TOTAL RETURNS
as of 9/30/09

MARKET PRICE
NAV
2009 YTD 55.76 % 21.38 %
1 Year -42.01 % -52.60 %
3 Year -44.28 % -46.17 %
5 Year -26.07 % -26.08 %
Since Inception -24.07 % -23.30 %

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Since Inception returns assume a purchase of common shares at the initial offering price of $100.00 per share for market price returns or initial net asset value (NAV) of $95.50 per share for NAV returns. Returns for periods of less than one year are not annualized. All distributions are assumed to be reinvested either in accordance with the dividend reinvestment plan (DRIP) for market price returns or NAV for NAV returns. Until the DRIP price is available from the Plan Agent, the market price returns reflect the reinvestment at the closing market price on the last business day of the month. Once the DRIP is available around mid-month, the market price returns are updated to reflect reinvestment at the DRIP price.

Historical data has been adjusted to reflect a 1-for-5 reverse stock split as of the close of business on June 4, 2009. Also at this time the CUSIP changed from 26153R100 to 26153R704.

If new tax legislation is not enacted, the taxation rates on qualifying dividend income and long-term capital gains will revert to the pre-2003 Tax Act rates in 2011. Taxation rates on taxable bond interest income, non-qualifying dividend income and short-term capital gains are scheduled to revert to the pre-2001 rates in 2011. Please consult your tax advisor for further information as it pertains to the potential tax advantages and implications of this Fund.

1 Latest declared quarterly dividend per share annualized and divided by the current share price. To the extent any portion of the current distribution is estimated to be sourced from something other than income, such as return of capital, the source would be disclosed on a Section 19a-1 letter located under the “Fund News” section of the “News & Literature” section of the Fund’s website. The distribution rate may include net investment income, capital gains and/or return of capital. The distribution rate alone is not indicative of Fund performance.

2 Dividend per share is subject to change on the ex-dividend date. The distribution amount may include net investment income, capital gains and/or return of capital. The distribution amount alone is not indicative of Fund performance.

3 “Tax-Advantaged Distribution Rate” is calculated based upon the 35% federal income tax bracket and assumes the 2008 tax characterization of dividends whereby 64.11% of distributions are ordinary income (of which 90.90% are qualified dividend income generally taxed at the maximum 15% long-term capital gains rate) and 0.81% are long-term capital gains.There can be no assurance that this characterization is indicative of future allocations nor that this distribution rate will be achieved in the future.

The Fund cannot assure investors as to what percentage of the dividends paid on the common shares, if any, will consist of qualified dividend income or long-term capital gains, both of which are taxed at lower rates for individuals than are ordinary income and short-term capital gains. It is important to note that common shareholders must meet the holding period requirements, as it pertains to qualified dividend income, as set forth by the Jobs and Growth Tax Relief Reconciliation Act of 2003, to be consistent with the tax-advantaged distribution rate shown herein.

4 Figures are based on market close.

5 Annualized.

6 Not Annualized

7 Historical data has been adjusted to reflect a 1-for-5 reverse stock split as of the close of business on June 4, 2009.

8 The Fund currently utilizes a blended form of leverage that consists of AMPS and a credit facility. For more information regarding the Fund’s multiple redemptions of AMPS, please view the Fund’s “News + Literature” section.

9 The Fund is required to maintain, with respect to the AMPS, as of the last business day of each month in which any AMPS are outstanding, asset coverage of at least 200% with respect to senior securities which are beneficial interests in the Fund.

10 Manning & Napier Advisors, Inc. has entered into an interim investment sub-advisory agreement with Claymore and the Fund. For further information, please click here.

INVESTMENT OBJECTIVE

The Fund's primary investment objective is to provide a high level of current income, with a secondary objective of capital appreciation. The Fund will pursue its investment objectives by investing its assets primarily in dividend-paying common and preferred stocks. There can be no assurance that the Fund will achieve its investment objectives.

Under normal market conditions, the Fund will invest at least 80% of its total assets in dividend-paying or other income-producing securities, and at least 65% of the Fund's total assets will consist of investments in dividend-paying common and preferred stocks. Currently, the Fund may invest up to 20% of its total assets in U.S. dollar-denominated securities of foreign issuers. Such investments in securities of foreign issuers may include investments in American Depositary Receipts, or "ADRs." The Board approved a change to a non-fundamental investment policy at a meeting on June 17, 2009 that will allow the Fund to invest up to 40% of its total assets in U.S. dollar-denominated securities of foreign issuers. Such investments in securities of foreign issuers may include investments in American Depositary Receipts, or "ADRs." Pursuant to a 60-day notice provision in the Prospectus, this change will go into effect no earlier than August 17, 2009. There is no minimum credit rating for preferred stocks and debt securities in which the Fund may invest, although the Fund will not invest more than 10% of its total assets in non-convertible fixed-income securities of below investment-grade quality, which are commonly referred to as "junk bonds."

For periodic shareholder reports and recent fund-specific filings, please visit the U.S. Securities and Exchange Commission (“SEC”) website via the following link, click here.

FREQUENTLY ASKED QUESTIONS

Why did the Fund reduce its quarterly dividend in May 2009?

Describe the differences between closed-end and open-end funds? Why a Leveraged Fund? What does the "Ex-Div" or the "Ex-Dividend" date refer to? What is the DRIP and how does it work?

DCS FUND MANAGER

Manning & Napier Advisors, Inc. has been a registered investment advisor since 1970. For more than 35 years, Manning & Napier has focused on managing clients' investments through a variety of market conditions, including five bear markets. The firm manages assets for individuals, corporations, defined benefit pension plans, 401(k) choice plans, Taft-Hartley accounts, endowments, foundations and municipal retirement plans. It remains an employee-owned firm, with 100% of the firm owned by full-time employees.
Manning & Napier Advisors, Inc. has entered into an interim investment sub-advisory agreement with Claymore and the Fund. For further information, please click here.

INVESTMENT TEAM

Portfolio Management

Christian Andreach | Managing Director - Consumer Group

Christian, an employee-owner, is responsible for analyzing investment opportunities within the Consumer sector. Prior to joining Manning & Napier in 1999, he worked as a financial analyst for Proctor & Gamble Co. Christian earned his BBA from St. Bonaventure University, received his MBA from the University of Rochester and holds the distinction of Chartered Financial Analyst.

Jack W. Bauer | Managing Director - Fixed Income Group

Jack, an employee-owner, is responsible for the oversight of the Firm’s Fixed Income Group. Prior to joining Manning & Napier in 1990, he worked as a Fixed Income Portfolio Manager at Chase Manhattan Bank and as an Industry Economist with the Federal Government’s Department of Energy. Jack earned his BS in Mathematics from St. John Fisher College, his MA in Economics from Georgetown University and his MBA from the University of Rochester.

Jeffrey S. Coons | Co-Director of Research, Managing Director - Quantitative Strategies Group, Executive Group Member

Jeff has a broad responsibility for the management of the Firm’s Research Department. He is an employee-owner and has over 20 years of experience at Manning & Napier. Jeff received his BA in Economics from the University of Rochester, earned his PhD in Economics from Temple University and holds the distinction of Chartered Financial Analyst.

Jeffrey Donlon | Managing Director – Technology

Jeff, an employee-owner, is responsible for analyzing investment opportunities within the Technology sector. Prior to joining Manning & Napier in 1998, he worked as an associate with the Industrial Bank of Japan Trust Company. Jeff earned his BS in Finance from Canisius College, received his MBA from Duke University and holds the distinction of Chartered Financial Analyst.

Brian Gambill | Managing Director - Capital Goods and Equipment Group

Brian, an employee-owner, is responsible for analyzing investment opportunities within the Capital Goods & Equipment sectors, with a special emphasis on the Energy sector. Prior to joining Manning & Napier in 1997, he worked as an analyst for the Montana Board of Investments. Brian earned his BS in Finance and Economics from Montana State University and holds the distinction of Chartered Financial Analyst.

R. Keith Harwood | Senior Fixed Income Analyst

Keith is responsible for analyzing investment opportunities within Corporate Fixed Income investments. Keith earned his BA in Economics from St. John Fisher. He joined Manning & Napier in 1997 and has held his current position since 1998.

Jeffrey Herrmann | Co-Director of Research, Managing Director - Themes and Overviews Group, Executive Group Member

Jeff has a broad responsibility for the management of the Firm’s Research Department. Jeff is responsible for monitoring long-term themes, trends and overviews to improve our ability to take advantage of the opportunities offered by the market going forward. He is an employee-owner and has been with the firm for over 20 years. Jeff earned dual BS degrees in Chemistry and Finance from Clarkson University and holds the distinction of Chartered Financial Analyst.

Brian Lester | Managing Director - Life Sciences Group

Brian, an employee-owner, is responsible for analyzing investment opportunities within the Health Care sector. Prior to joining Manning & Napier in 1998 he worked at The Sutherland Group as a research assistant. Brian earned his BS in Agriculture, Resource and Managerial Economics from Cornell University and holds the distinction of Chartered Financial Analyst.

Michael Magiera | Managing Director - Real Estate Group

Mike is responsible for coverage of REITS and Real Estate related investments. Mike is an employee-owner and has 20 years of experience at Manning & Napier. Mike earned his BBA in Finance from St. Bonaventure University, received his MBA from the University of Rochester and holds the distinction of Chartered Financial Analyst.

Christopher Petrosino | Senior Analyst, Quantitative Strategies Group

Christopher joined Manning & Napier in 2001 and is responsible for providing top-down quantitative research to the firm’s global sector group analysts. He earned his BA in Economics and Statistics from the University of Rochester and MS in Statistics from the Rochester Institute of Technology. Christopher also holds the distinction of Chartered Financial Analyst.

Marc D. Tommasi | Managing Director - Global Strategies Group

Marc is responsible for macroeconomic overviews by country on a global basis. Marc is an employee-owner and has over 20 years of experience at Manning & Napier. Marc earned his BA in Economics and Political Science from the University of Rochester.

Virge Trotter | Managing Director - Services Group

Virge, an employee-owner, is responsible for analyzing investment opportunities within the Financial, Utilities and Media sectors. Prior to joining Manning & Napier in 1997, he was Vice President at Thomas White Asset Management in Chicago. Virge earned his BS in Electrical Engineering from Iowa State University, his MBA in Finance from the University of Chicago, and holds the distinction of Chartered Financial Analyst.

 

DCS Investment Manager
Manning & Napier Advisors, Inc.
290 Woodcliff Drive
Fairport NY, 14450

If you would like to view the Investment Manager's website, you may click on the link below. It is important to note that by clicking on the link, you will be leaving this website and any information viewed there is not the property of Claymore Securities, Inc.

www.manningnapieradvisors.com

Manning & Napier Advisors, Inc. has entered into an interim investment sub-advisory agreement with Claymore and the Fund. For further information, please click here.

RISKS AND OTHER CONSIDERATIONS

There can be no assurance that the Fund will achieve its investment objectives. The value of the Fund will fluctuate with the value of the underlying securities. Historically, closed-end funds often trade at a discount to their net asset value. Risk is inherent in all investing, including the loss of your entire principal. Therefore, before investing you should consider the following risks carefully.

Not a Complete Investment Program. The Fund is intended for investors seeking a high level of current income and capital appreciation over the long term. The Fund is not meant to provide a vehicle for those who wish to play short-term swings in the stock market. An investment in the Common Shares of the Fund should not be considered a complete investment program. Each Common Shareholder should take into account the Fund’s investment objectives as well as the Common Shareholder’s other investments when considering an investment in the Fund.

Equity Risk. Substantially all of the Fund’s assets will be invested in common stocks and preferred equity securities, and therefore a principal risk of investing in the Fund is equity risk. Equity risk is the risk that securities held by the Fund will fall due to general market or economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, and the particular circumstances and performance of particular companies whose securities the Fund holds. For example, an adverse event, such as an unfavorable earnings report, may depress the value of equity securities of an issuer held by the Fund; the price of common stock of an issuer may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the common stocks and other equity securities held by the Fund. In addition, common stock of an issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition. Common equity securities in which the Fund will invest are structurally subordinated to preferred stocks, bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore will be subject to greater dividend risk than preferred stocks or debt instruments of such issuers. In addition, while broad market measures of commons stocks have historically generated higher average returns than fixed income securities, common stocks have also experienced significantly more volatility in those returns.

Preferred Securities Risk. There are special risks associated with investing in preferred securities, including: Deferral. Preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If the Fund owns a preferred security that is deferring its distributions, the Fund may be required to report income for tax purposes although it has not yet received such income. Non-Cumulative Dividends. Some preferred stocks are non-cumulative, meaning that the dividends do not accumulate and need not ever be paid. A portion of the portfolio may include investments in non-cumulative preferred securities, whereby the issuer does not have an obligation to make up any arrearages to its shareholders. Should an issuer of a non-cumulative preferred stock held by the Fund determine not to pay dividends on such stock, the amount of dividends the Fund pays may be adversely affected. There is no assurance that dividends or distributions on non-cumulative preferred stocks in which the Fund invests will be declared or otherwise made payable. Subordination. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior debt instruments. Liquidity. Preferred securities may be substantially less liquid than many other securities, such as common stocks or U.S. government securities. Limited Voting Rights. Generally, preferred security holders (such as the Fund) have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may have the right to elect a number of directors to the issuer’s board. Generally, once all the arrearages have been paid, the preferred security holders no longer have voting rights. Special Redemption Rights. In certain varying circumstances, an issuer of preferred securities may redeem the securities prior to a specified date. For instance, for certain types of preferred securities, a redemption may be triggered by a change in federal income tax or securities laws. As with call provisions, a redemption by the issuer may negatively impact the return of the security held by the Fund.

Income Risk. The income Common Shareholders receive from the Fund is based primarily on the dividends and interest it earns from its investments, which can vary widely over the short- and long term. If prevailing market interest rates drop, distribution rates of the Fund’s portfolio holdings of preferred securities and debt securities may decline which then may adversely affect the Fund’s distributions on Common Shares as well. The Fund’s income also would likely be affected adversely when prevailing short-term interest rates increase and the Fund is utilizing Financial Leverage.

"Value Investing" Risk. The Fund focuses its investments on dividend paying or other income producing securities that the Investment Manager believes are undervalued or inexpensive relative to other investments. These types of securities may present risks in addition to the general risks associated with investing in securities. These securities generally are selected on the basis of an issuer’s fundamentals relative to current market price. Such securities are subject to the risk of misestimation of certain fundamental factors. In addition, during certain time periods market dynamics may strongly favor ‘‘growth’’ securities of issuers that do not display strong fundamentals relative to market price based upon positive price momentum and other factors. Disciplined adherence to a ‘‘value’’ investment mandate during such periods can result in significant underperformance relative to overall market indices and other managed investment vehicles that pursue growth style investments and/or flexible style mandates.

Interest Rate Risk. Interest rate risk is the risk that fixed income securities such as preferred and debt securities will decline in value because of changes in market interest rates. When market interest rates rise, the market value of such securities generally will fall. The Fund’s investment in such securities means that the net asset value and market price of the Common Shares will tend to decline if market interest rates rise. During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest in lower yielding securities. This is known as call or prepayment risk. Preferred and debt securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity. An issuer may redeem such a security if the issuer can refinance it at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer. During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected principal payments. This may lock in a below market interest rate, increase the security’s duration and reduce the value of the security. This is known as extension risk. In typical interest rate environments, prices of fixed income securities with longer maturities generally fluctuate more in response to changes in interest rates than do the prices of fixed income securities with shorter-term maturities. Because the Fund may invest a portion of its assets in fixed-income securities without regard to their maturities, to the extent the Fund invests in fixed income securities with longer maturities, the net asset value and market price of the Common Shares would fluctuate more in response to changes in interest rates than if the Fund were to invest such portion of its assets in shorter-term fixed income securities. Market interest rates for investment grade fixed income securities in which the Fund may invest have recently declined significantly below the recent historical average rates for such securities. This decline may have increased the risk that these rates will rise in the future (which would cause the value of the Fund’s net assets to decline) and the degree to which asset values may decline in such events.

Inflation Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Common Shares and distributions thereon can decline. In addition, during any periods of rising inflation, the interest or dividend rates payable by the Fund on any Financial Leverage the Fund may have issued would likely increase, which would tend to further reduce returns to holders of Common Shares.

Lower Grade Securities. The Fund may invest up to 10% of its total assets in non-convertible fixed income securities of below investment grade quality. The prices of these lower grade securities are more sensitive to negative developments, such as a decline in the issuer’s revenues or a general economic downturn, than are the prices of higher-grade securities. Securities of below investment grade quality are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal when due and therefore involve a greater risk of default and are commonly referred to as "junk bonds".

Foreign Securities Risk. The Fund may invest in U.S. dollar-denominated securities of foreign issuers, including, but not limited to American Depositary Receipts ("ADRs"). The prices of such U.S. dollar-denominated securities of foreign issuers may be affected by factors not present with securities traded in the U.S. markets, including, political and economic conditions, less stringent regulation and higher volatility. As a result, such securities may be less liquid and more volatile than U.S. securities.

Derivatives Risk. The Fund may participate in certain derivative transactions, such as futures contracts, options or swap transactions. Such transactions entail certain execution, market, liquidity, hedging and tax risks. Participation in these markets involves investment risks and transaction costs to which the Fund would not be subject absent the use of these strategies. If the Investment Manager’s prediction of movements in the direction of the securities and interest rate markets is inaccurate, the consequences to the Fund may leave the Fund in a worse position than if it had not used such strategies.

Illiquid Securities Risk. The Fund may invest in securities for which there is no readily available trading market or that are otherwise illiquid. It may be difficult to sell such securities at a price representing the fair value and, where registration of such securities is required, a considerable period may elapse between a decision to sell the securities and the time when the Fund would be permitted to sell.

Fund Distribution Risk. Pursuant to its distribution policy, the Fund intends to make regular quarterly distributions on its Common Shares. In order to make such distributions, the Fund may have to sell a portion of its investment portfolio at a time when independent investment judgment may not dictate such action. In addition, the Fund’s ability to make distributions more frequently than annually from any net realized capital gains by the Fund is subject to the Fund obtaining exemptive relief from the Securities and Exchange Commission, which cannot be assured. To the extent the total quarterly distributions for a year exceed the Fund’s net investment company income and net realized capital gain for that year, the excess will generally constitute a return of the Fund’s capital to its Common Shareholders. Such return of capital distributions generally are tax-free up to the amount of a Common Shareholder’s tax basis in the Common Shares (generally, the amount paid for the Common Shares). See "Taxation." In addition, such excess distributions will decrease the Fund’s total assets and may increase the Fund’s expense ratio.

Market Discount Risk. Whether investors will realize gains or losses upon the sale of Common Shares of the Fund will depend upon the market price of the Common Shares at the time of sale, which may be less or more than the Fund’s net asset value per Common Share. Since the market price of the Common Shares will be affected by such factors as the relative demand for and supply of the Common Shares in the market, general market and economic conditions and other factors beyond the control of the Fund, the Fund cannot predict whether the Common Shares will trade at, below or above net asset value or at, below or above the public offering price. Shares of closed-end funds often trade at a discount to their net asset values and the Fund’s Common Shares may trade at such a discount. This risk may be greater for investors expecting to sell their Common Shares of the Fund soon after completion of the public offering. The Common Shares of the Fund were designed primarily for long-term investors, and investors in the Common Shares should not view the Fund as a vehicle for trading purposes.

Industry Concentration Risk. The Fund may invest up to 25% of its total assets in the securities of companies principally engaged in a single industry. In the event the Fund makes substantial investments in a single industry, the Fund would become more susceptible to adverse economic or regulatory occurrences affecting that industry.

Other Investment Companies. The Fund may invest up to 10% of the Fund’s total assets in securities of other open- or closed-end investment companies that invest primarily in securities of the types in which the Fund may invest directly. The Fund expects that these investments will be primarily in exchange traded funds. As a stockholder in an investment company, the Fund will bear its ratable share of that investment company’s expenses, and would remain subject to payment of the Fund’s investment management fees with respect to the assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks.

Non-Diversified Status. The Fund is classified as a "non-diversified" investment company under the 1940 Act, which means the Fund is not limited by the 1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. As a non-diversified investment company, the Fund may invest in the securities of individual issuers to a greater degree than a diversified investment company. However, the Fund intends to conduct its operations so as to qualify as a regulated investment company for purposes of the Code, which generally will relieve the Fund of any liability for U.S. federal income tax to the extent its earnings are distributed to shareholders. To so qualify, among other requirements, the Fund must comply with the diversification requirements of the Code applicable to regulated investment companies. See "Taxation." Because the Fund, as a non-diversified investment company, may invest in a smaller number of individual issuers than a diversified investment company, the Fund may be more vulnerable to events affecting a single issuer and therefore, subject to greater volatility than a fund that is more broadly diversified. Accordingly, an investment in the Fund may present greater risk to an investor than an investment in a diversified company.

Financial Leverage. Although the use of Financial Leverage by the Fund may create an opportunity for increased net income and capital appreciation for the Common Shares, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on securities purchased with Financial Leverage proceeds are greater than the cost of Financial Leverage, the Fund’s return will be greater than if Financial Leverage had not been used. Conversely, if the income or gain from the securities purchased with such proceeds does not cover the cost of Financial Leverage, the return to the Fund will be less than if Financial Leverage had not been used. There is no assurance that a leveraging strategy will be successful. Financial Leverage involves risks and special considerations for shareholders including: • the likelihood of greater volatility of net asset value and market price of and dividends on the Common Shares than a comparable portfolio without leverage; • the risk that fluctuations in interest rates on borrowings and short-term debt or in the dividend rates on any Financial Leverage that the Fund must pay will reduce the return to the holders of Common Shares; and • the effect of Financial Leverage in a declining market, which is likely to cause a greater decline in the net asset value of the Common Shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the Common Shares. It is also possible that the Fund will be required to sell assets, possibly at a loss, in order to redeem or meet payment obligations on any leverage. Such a sale would reduce the Fund’s net asset value and also make it difficult for the net asset value to recover. The Fund in its best judgment nevertheless may determine to continue to use Financial Leverage if it expects that the benefits to the Fund’s shareholders of maintaining the leveraged position will out-weigh the current reduced return. The Fund’s use of Financial Leverage may also impair the ability of the Fund to maintain its qualification for federal income tax purposes as a regulated investment company.

Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. The Investment Adviser has not previously served as an investment adviser to an investment company, although an affiliate of the Investment Adviser acts as servicing agent to various investment companies. In addition, the Investment Manager, in acting as investment manager of the Fund’s portfolio securities, will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results.

Current Developments. As a result of the terrorist attacks on the World Trade Center and the Pentagon on September 11, 2001, some of the U.S. securities markets were closed for a four-day period. These terrorist attacks, the war in Iraq and its aftermath and other geopolitical events have led to, and may in the future lead to, increased short-term market volatility and may have long-term effects on U.S. and world economies and markets. Similar events in the future or other disruptions of financial markets could affect interest rates, securities exchanges, auctions, secondary trading, rating, credit risk, inflation and other factors relating to the Common Shares.

Anti-takeover Provisions. The Fund’s Governing Documents include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to an open-end fund.

Risks of Investing in AMPS. There also risks associated with investing in Auction Market Preferred Shares or AMPS. The AMPS are redeemable, in whole or in part, at the option of the Fund on any dividend payment date for the AMPS, and will be subject to mandatory redemption in certain circumstances. The AMPS will not be listed on an exchange. You may only buy or sell AMPS through an order placed at an auction with or through a broker-dealer that has entered into an agreement with the auction agent and the Fund or in a secondary market maintained by certain broker-dealers. These broker-dealers are not required to maintain this market, and it may not provide you with liquidity. Visit Preferred Share Daily Rates for more Fund information and additional risk on investing in AMPS.
Investors should carefully consider the investment objectives and policies, risk considerations, charges and ongoing expenses of any investment product before investing. For more information, please contact a securities representative or Claymore Securities, Inc., 2455 Corporate West Drive, Lisle, Illinois 60532, 800-345-7999.

NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE

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