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 811-21504
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Advent/Claymore Enhanced Growth & Income Fund
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(Exact name of registrant as specified in charter)
1065 Avenue of the Americas, New York, NY 10018
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(Address of principal executive offices) (Zip code)
Robert White, Treasurer
1065 Avenue of the Americas, New York, NY 10018
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 479-0675
Date of fiscal year end: October 31
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Date of reporting period: April 30, 2009
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
SEMIANNUAL |
REPORT ADVENT/CLAYMORE ENHANCED | LCM
April 30, 2009 GROWTH & INCOME FUND |
(Unaudited) |
Picture: Winding Bridge
Logo:
ADVENT Logo:
CAPITAL MANAGEMENT CLAYMORE(SM)
WWW.CLAYMORE.COM/LCM
... YOUR BRIDGE TO THE LATEST,
MOST UP-TO-DATE INFORMATION ABOUT THE
ADVENT/CLAYMORE ENHANCED GROWTH & INCOME FUND
LCM | ADVENT/CLAYMORE
LISTED | ENHANCED GROWTH
NYSE(R)| & INCOME FUND
Graphic: Winding Road
Logo:
ADVENT Logo:
CAPITAL MANAGEMENT CLAYMORE(SM)
There can be no assurence the fund will achive its investment objective.
The value of the fund will fluctuate with the value of the underlying securites.
Historically, closed-end funds ofen trade at a discount to their net
asset value.
NOT FDIC-INSURED o NOT BANK-GUARANTEED o MAY LOSE VALUE
The shareholder report you are reading right now is just the beginning of the
story. Online at WWW.CLAYMORE.COM/LCM, you will find:
o Daily, weekly and monthly data on share prices,
net asset values, distributions, and more
o Portfolio overviews and performance analyses
o Announcements, press releases and special notices
o Fund and adviser contact information
Advent Capital Management and Claymore are continually updating and expanding
shareholder information services on the Fund's website, in an ongoing effort to
provide you with the most current information about how your Fund's assets are
managed, and the results of our efforts. It is just one more small way we are
working to keep you better informed about your investment in the Fund.
2 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund
Dear SHAREHOLDER |
Photo of: Tracy V. Maitland
TRACY V. MAITLAND
PRESIDENT AND CHIEF EXECUTIVE OFFICER
We thank you for your investment in the Advent/Claymore Enhanced Growth & Income
Fund (the "Fund"). This report covers the Fund's performance for the semiannual
period ended April 30, 2009.
The Fund's primary investment objective is to seek current income and current
gains from trading in securities, with a secondary objective of long term
capital appreciation. Under normal market conditions, the Fund invests at least
70% of its managed assets in a diversified portfolio of equity securities and
convertible securities of U.S. and non-U.S. issuers and up to 30% of its managed
assets in non-convertible high yield securities. Additionally, the Fund intends
to engage in a strategy of writing (selling) covered call options on at least
50% of the securities held in the portfolio of the Fund, thus generating option
writing premiums. Due to recent market volatility, the Fund may not be invested
at these levels at all times. We seek international investment opportunities in
each asset class, with an emphasis on large multinational companies.
Appreciation potential is provided by investments in convertibles and common
stock, while the allocation to high-yield securities is primarily a source of
income. The balance between convertible securities, equities and high-yield
securities and the degree to which the Fund engages in a covered call strategy
will vary from time to time based on security valuations, interest rates, equity
market volatility and other economic and market factors. This flexibility to
move among the three asset classes is quite beneficial to the Fund's ability to
balance return and risk.
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six-month period
ended April 30, 2009, the Fund generated a total return based on market price of
2.75% and a return of 1.78% based on NAV. As of April 30, 2009, the Fund's
market price of $8.47 represented a discount of 18.87% to NAV of $10.44. As of
October 31, 2008, the Fund's market price of $8.97 represented a discount of
17.78% to NAV of $10.91.
The Fund paid a quarterly distribution of $0.35 per share in November 2008 and
$0.264 per share in February 2009. The Fund's distribution was reduced in an
effort to provide greater balance between the Fund's primary investment
objective to seek current income and current gains from trading in securities
and its secondary investment objective of long-term capital appreciation, along
with seeking to enhance the Fund's earning power over time. We believe that
maintaining and potentially growing the Fund's net asset value could benefit the
Fund's shareholders over time. There is no guarantee of any future distributions
or that the current returns and distribution rate will be maintained.
We encourage shareholders to consider the opportunity to reinvest their
distributions from the Fund through the Dividend Reinvestment Plan ("DRIP"),
which is described in detail on page 28 of the Fund's semiannual report. When
shares trade at a discount to NAV, the DRIP takes advantage of the discount by
reinvesting the quarterly dividend distribution in common shares of the Fund
purchased in the market at a price less than NAV. Conversely, when the market
price of the Fund's common shares is at a premium above NAV, the DRIP reinvests
participants' distribution in newly-issued common shares at NAV, subject to an
IRS limitation that the purchase price cannot be more than 5% below the market
price per share. The DRIP provides a cost-effective means to accumulate
additional shares and enjoy the benefits of
SemiAnnual Report | April 30, 2009 | 3
LCM | Advent/Claymore Enhanced Growth & Income Fund | DEAR SHAREHOLDER continued
compounding returns over time. The DRIP effectively provides an income averaging
technique, which causes shareholders to accumulate a larger number of Fund
shares when the market price is depressed than when the price is higher.
The Fund is managed by a team of experienced and seasoned professionals led by
myself in my capacity as Chief Investment Officer (as well as President and
Founder) of Advent Capital Management, LLC. We encourage you to read the
following Questions & Answers section, which provides more information about the
factors that impacted the Fund's performance.
We thank you for your investment in the Fund and we are honored that you have
chosen the Advent/Claymore Enhanced Growth & Income Fund as part of your
investment portfolio. For the most up-to-date information on your investment,
please visit the Fund's website at www. claymore.com/lcm.
Sincerely,
/s/ Tracy V. Maitland
Tracy V. Maitland
President and Chief Executive Officer of the Advent/Claymore Enhanced Growth &
Income Fund
June 2, 2009
4 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund
QUESTIONS & ANSWERS |
Advent/Claymore Enhanced Growth & Income Fund (the "Fund") is managed by a team
of seasoned professionals at Advent Capital Management, LLC, led by Tracy V.
Maitland, Advent's President and Chief Investment Officer. In the following
interview, the management team discusses the equity, convertible securities and
high-yield markets and the performance of the Fund during the six-month period
ended April 30, 2009.
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WILL YOU REMIND US OF THIS FUND'S OBJECTIVES AND HOW YOU SEEK TO ACHIEVE THEM?
The Fund's primary investment objective is to provide current income and current
gains from trading in securities, with a secondary objective of long-term
capital appreciation. Under normal market conditions, the Fund invests at least
70% of its managed assets in a diversified portfolio of equity securities and
convertible securities of U.S. and non-U.S. issuers and up to 30% of its managed
assets in non-convertible high yield securities. Additionally, the Fund intends
to engage in a strategy of writing (selling) covered call options on at least
50% of the securities held in the portfolio of the Fund, thus generating option
writing premiums. Due to recent market volatility, the Fund may not be invested
at these levels at all times. We seek international investment opportunities in
each asset class, with an emphasis on large multinational companies.
Appreciation potential is provided by investments in convertibles and common
stock, while the allocation to high-yield securities is primarily a source of
income.
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PLEASE TELL US ABOUT THE ECONOMIC AND MARKET ENVIRONMENT OVER THE LAST SIX
MONTHS.
In the last annual report for this Fund, published six months ago, we described
a financial crisis that originated with the end of a housing boom fueled by
excessively easy credit. In early December 2008, the National Bureau of Economic
Research (NBER) officially declared that the U.S. economy had fallen into a
recession that began in December 2007. The U.S. economy continued to contract in
subsequent months, with drops in real Gross Domestic Product, a broad measure of
economic activity, at annual rates of more than 6% in the fourth quarter of 2008
and the first quarter of 2009.
After the September failure of Lehman Brothers Holdings Inc., credit markets
froze, with investors becoming intolerant of risk. As fearful investors sought
the protection of U.S. Treasury securities, spreads between Treasury securities
and bonds with any degree of credit risk widened dramatically, reducing market
values of risky bonds. Selling from hedge funds, the majority investor in
convertibles, on account of forced delevering, exacerbated the decline. In
September 2008, return of the Merrill Lynch All U.S. Convertibles Index was
-14.57%, and in October the return was -17.99%. These negative monthly returns
rival the biggest annual losses for convertibles since 1953, the earliest year
for which records of returns on the Merrill Lynch All U.S. Convertibles Index
are available.
The extreme market dislocation presented uncommon opportunities. For example, in
October 2008 a convertible bond of Transocean, Inc., the largest offshore
drilling contractor in the world, with a 1.5% coupon dropped to a price that
provided a yield to the first put date in 2010 of 7.5%. (Transocean, Inc. Ser.
C, represented 0.7% of long-term investments as of April 30, 2009.) At the same
time, 5.25% coupon straight bonds of the same company, with the same seniority
in the credit structure, were selling at a price that provided a yield of 6.65%.
(Transocean 5.25% coupon straight bonds are provided as an example and are not
held in the portfolio.) This means that investors could purchase bonds that are
convertible to common stock and could receive more income than they would
receive from straight bonds with no conversion feature. Typically the yield on
convertible bonds is lower than the yield on regular not-convertible bonds
because the convertible has the potential of converting to common equity. There
are two ways for investors in convertible bonds to make money, from the coupon
and from participating in appreciation in the price of the common stock, if any.
Not surprisingly, this extraordinary market situation attracted new investors.
Sometime in November, the hedge fund forced selling dissipated, and there was
considerable buying by managers of equity and bond funds, many of which can use
convertibles, since they are debt instruments that convert into equities. As
investors quickly tired of near-zero yields in the Treasury markets, they began
to seek risk again, buying new securities and solving a major market concern
about refinancing of upcoming maturing issues. From mid-November through the
first few months of 2009, there was a significant rebound in convertibles, so
that return of the Merrill Lynch All U.S. Convertibles Index for the six-month
period ended April 30, 2009 was 11.50%.
Equity and bond markets began to recover at about the same time, though markets
have remained quite volatile, and returns for many indices were negative for the
six months ended April 2009. Despite gains in March and April, the Standard &
Poor's 500 Index returned -8.53% for the six-month period ended April 30, 2009.
For the same six-month period returns of the MSCI World Index, which measures
performance of world equity markets, was -5.25%. Most European markets were down
for the period, but equity markets in some developing countries were quite
strong.
SemiAnnual Report | April 30, 2009 | 5
LCM | Advent/Claymore Enhanced Growth & Income Fund
| QUESTIONS & ANSWERS continued
At the beginning of this period, spreads between yields of corporate bonds and
U.S. Treasury securities, which are considered not to carry credit risk, were
far wider than what we consider normal. As investors regained confidence and
became more comfortable with risk, bonds with more credit risk generally
performed better than less risky bonds over the last six months. The Barclays
Capital US Aggregate Bond Index, which measures return of the high-quality U.S.
bond market as a whole, returned 7.74% for the six months ended April 30, 2009,
but the return of the Merrill Lynch High Yield Master II Index, which measures
performance of the high-yield bond market, was 15.20%. The Barclays Capital
10-20 Year U.S. Treasury Index was also quite strong, with a return of 11.40%.
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HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
All Fund returns cited--whether based on net asset value ("NAV") or market
price--assume the reinvestment of all distributions. For the six-month period
ended April 30, 2009, the Fund generated a total return based on market price of
2.75% and a return of 1.78% based on NAV. As of April 30, 2009, the Fund's
market price of $8.47 represented a discount of 18.87% to NAV of $10.44. As of
October 31, 2008, the Fund's market price of $8.97 represented a discount of
17.78% to NAV of $10.91.
For comparison, The CBOE S&P 500 2% OTM BuyWrite Index (BXY), an index that
measures performance of out-of-the-money S&P 500 Index call options, returned
-6.86% over the same period; the Fund's higher return than this index
illustrates the value of the Fund's strategy during this period, emphasizing
convertible securities over equities.
The market value of the Fund's shares fluctuates from time to time, and it may
be higher or lower than the Fund's NAV. The current discount to NAV may provide
an opportunity for suitable investors to purchase shares of the Fund below the
market value of the securities in the underlying portfolio. We believe that,
over the long term, the progress of the NAV will be reflected in the market
price return to shareholders, although there can be no guarantee.
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HOW DID YOU ALLOCATE THE FUND AMONG ASSET CLASSES OVER THE LAST SIX MONTHS?
The Fund was designed to be diversified among asset classes but to also have the
flexibility to reallocate assets as necessary. Investments are allocated
globally among stocks, convertible securities and high-yield bonds. There was a
time when equities represented 40% to 45% of the Fund's portfolio, and a year
ago approximately half of the Fund's convertible allocation was in convertible
preferred stocks. Responding to market conditions, we have restructured the
Fund's portfolio considerably. The extreme weakness in the convertible and high
yield bond markets in the fall of 2008 provided some unusual opportunities for
the Fund. We were able to invest in convertible bonds of high quality companies
at very attractive prices, simultaneously increasing income and improving the
portfolio's credit quality, while also positioning the Fund to participate in an
improving equity market.
We also increased the exposure to high yield bonds, which represented 12.5% of
the portfolio as of April 30, 2009. Rigorous credit research is especially
important in the selection of high-yield bonds for this Fund, and Advent's
proprietary credit research emphasizes cash flow and balance sheets. We focus on
the higher-quality segment of the high-yield bond market, also known as "junk"
bonds, avoiding those bonds that we feel are more likely to default.
At the beginning of the Fund's fiscal year, on November 1, 2008, convertible
bonds represented 30.6% of the portfolio, and convertible preferred stocks
represented 22.2%, so that the total exposure to convertibles was 52.8%. In the
ensuing months, we shifted more of the Fund's assets into convertible bonds,
reducing the exposure to convertible preferred stock and common stock. As of
April 30, 2009, 81.8% of the Fund's assets are in convertibles; of this, 64.5%
is in convertible bonds and 17.3% in convertible preferreds. The equity position
has been reduced significantly to 4.4% of assets, down from 29.0% at the
beginning of the period.
In terms of sector representation, we have emphasized one of the most defensive
industry groups - health care - and one that has traditionally been a major
source of income but has recently been extremely volatile, financial services.
As of April 30, 2009, 27.8% of the Fund's assets are invested in health care and
21.1% in financials.
We reduced the position in foreign securities before the beginning of this
period, and we have kept foreign exposure fairly low in recent months because we
believe that there is greater risk in foreign securities than in the U.S. at
this time. Most world markets followed the U.S. into recession, and we believe
they will lag the U.S. in recovery. Also, few governments or central banks are
taking the aggressive approach of the U.S. to attempt to calm markets and
stimulate growth. As of April 30, 2009, 27.6% of the
6 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
portfolio was in securities of companies headquartered outside the U.S.
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WHICH INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S PERFORMANCE?
Among the top performing positions were two generic pharmaceutical companies,
convertible bonds issued by Teva Pharmaceutical Finance Co. BV and Teva
Pharmaceutical Finance LLC (2.2% of long-term investments), special purpose
finance subsidiaries of Teva Pharmaceutical Industries, and a preferred issue of
Mylan, Inc. (2.0% of long-term investments), the third-largest generic
pharmaceutical company in the world. Mylan is a highly leveraged company in
which we began investing about two years ago, believing that investors were
exhibiting excessive concern about competition from larger integrated
pharmaceutical companies. The stock has more than doubled over the last six
months, and the convertible bonds have also moved up sharply, while also
providing an attractive level of income. Teva provides an example of the
benefits of convertibles, as the bonds moved up much more than the stock over
the past six months; this is a solid company with sound credit and good growth
potential.
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What is a covered call?
A call is an option (or contract) that gives its holder the right, but not the
obligation, to buy shares of the underlying security at a specified price on or
before a pre-determined expiration date.After this predetermined date, the
option and its corresponding rights expire.A covered call is when the seller of
the call option also owns the security on which the call is written.
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Also positive was a position in a preferred issue of Johnson Controls, Inc.
(1.5% of long-term investments), a provider of products that optimize energy
usage in buildings and vehicles. This company issued new equity as well as new
convertible bonds in March 2009; both the stock and the bonds moved following
the March announcement of a restructuring designed to reduce costs.
The writing of covered call options also contributed to the Fund's performance
during this six-month period. The Fund's covered call options were particularly
valuable in the first four months of the period, when the equity market was
extremely weak. During this period we achieved high returns on nearly every
option written, since falling prices of securities meant the Fund kept the call
premiums. During the last two months of the period, the equity markets rallied,
and during this time, covered call options were a negative contributor to the
total return. While the percentage of the portfolio invested in equities is less
than in previous periods, the Fund wrote more options against equities
underlying convertible holdings. The Fund's intent is to write covered call
options on at least 50% of the securities held in the portfolio; as of April 30,
2009, we have options written against approximately 54% of the total securities
in the Fund, and calls were written against some of the shares in all of the
Fund's equity positions.
We manage our covered call overlay primarily to help us meet distribution goals
and, to a lesser extent, to help maintain the Fund's NAV. Option premiums,
dividends, interest and capital appreciation are all part of the total return.
Most of our covered call writing centers on our U.S. equity and convertible
exposure, given that the U.S. has a broad and deep options market, while many
international companies that we find attractive do not have options.
Although we have the ability to write calls on the entire portfolio, covered
calls are generally written on no more than 60-65% of the total portfolio. We
usually write calls on just a portion of a position so that if the price of the
security rises substantially and the call is exercised, we still maintain a
portion of the position.
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WHICH DECISIONS HURT PERFORMANCE?
Most of the losses occurred early in the period, before the equity, high yield
and convertibles markets began to recover in early 2009.
One of the worst performing positions was a preferred issue of SLM Corp. (0.6%
of long-term investments), which we had considered reasonably secure because the
majority of its assets were in government-guaranteed student loans. However,
legislation recently has been proposed to effectively nationalize the student
loan business, thereby bypassing much of SLM's business was not anticipated, and
the preferred stock lost significant value.
Other negatives were positions in convertible preferred issues of Citigroup,
Inc. (1.1% of long-term investments) and KeyCorp (0.5% of long-term
investments), two bank holding companies that have experienced a series of
write-downs and have had to raise additional capital. An equity position in
Micron Technology (not held in portfolio at period end), a provider of memory
semiconductors, performed poorly on poor economic demand.
SemiAnnual Report | April 30, 2009 | 7
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
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WHAT IS YOUR CURRENT OUTLOOK FOR THE MARKETS AND THE FUND?
This Fund has the advantage of the ability to invest in multiple asset classes,
adjusting the asset mix according to the opportunities available in various
markets around the world. In the early part of this period, we found
unprecedented opportunities in the market for convertible bonds and raised our
allocation to this asset class seeing better risk/reward in this asset class
than alternatives.
The convertible market has improved dramatically over the past few months, and
our outlook for the U.S. convertible market is very positive for the months
ahead. Rising prices of debt instruments such as high yield bonds and bank loans
are positive, since these securities are the underpinning of convertible
securities. Experience from past recessions indicates that the economy and the
stock market recover after credit markets begin to improve. An improving economy
will mean more new issues of bonds and convertibles, as companies seek to fund
their growth.
We continue to write covered call options on a meaningful portion of the
portfolio, taking advantage of high premiums in a volatile market.
We believe that, over the long term, our careful security selection and asset
allocation will help the Fund's performance by providing favorable returns in
rising markets and a level of income that can provide some protection for
overall return against down markets.
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INDEX DEFINITIONS
Indices are unmanaged and it is not possible to invest directly in an index.
The Merrill Lynch All U.S. Convertibles Index (VXA0) is comprised of
approximately 500 issues of convertible bonds and preferred stock of all
qualities.
S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is
designed to measure performance of the broad domestic economy through changes in
the aggregate market value of 500 stocks representing all major industries.
MSCI World Index is a free float-adjusted market capitalization index that
measures global developed market equity performance of the developed market
country indices of Europe, Australasia, the Far East, the U.S. and Canada.
The Barclays Capital US Aggregate Bond Index covers the U.S. dollar-denominated,
investment-grade, fixed rate, taxable bond market of SEC-registered securities.
The Index includes bonds from the Treasury, government-related, corporate,
mortgage-backed securities (agency fixed-rate and hybrid ARM passthroughs),
asset-backed securities and collateralized mortgage-backed securities sectors.
U.S. Agency Hybrid Adjustable Rate Mortgage (ARM) securities were added to the
U.S. Aggregate Index on April 1, 2007, but are not eligible for the Global
Aggregate Index.
Merrill Lynch High Yield Master II Index is a commonly used benchmark index for
high yield corporate bonds. It is a measure of the broad high yield market.
The Barclays Capital 10-20 Year U.S. Treasury Index is comprised of securities
in the Treasury Index (i.e., public obligations of the U.S. Treasury) with a
maturity from 10 up to (but not including) 20 years.
The CBOE S&P 500 2% OTM BuyWrite Index (BXY) uses the same methodology as the
widely accepted CBOE S&P 500 BuyWrite Index (BXM), but the BXY Index is
calculated using out-of-the-money S&P 500 Index (SPX) call options, rather than
at-the-money SPX call options. The BXY strategy diversifies the buy-write
opportunities currently provided by the BXM. The BXY Index yields lower monthly
premiums in return for a greater participation in the upside moves of the S&P
500.
8 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | QUESTIONS & ANSWERS
continued
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LCM ADDITIONAL RISKS AND DISCLOSURE
The views expressed in this report reflect those of the Portfolio Managers and
Claymore only through the report period as stated on the cover. These views are
subject to change at any time, based on market and other conditions and should
not be construed as a recommendation of any kind. The material may also contain
forward-looking statements that involve risk and uncertainty, and there is no
guarantee they will come to pass. 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. The Fund is subject to investment risk,
including the possible loss of the entire amount that you invest. Past
performance does not guarantee future results.
CONVERTIBLE SECURITIES. The Fund is not limited in the percentage of its assets
that may be invested in convertible securities. Convertible securities generally
offer lower interest or dividend yields than non-convertible securities of
similar quality. The market values of convertible securities tend to decline as
interest rates increase and, conversely, to increase as interest rates decline.
However, the convertible security's market value tends to reflect the market
price of the common stock of the issuing company when that stock price is
greater than the convertible's "conversion price," which is the predetermined
price at which the convertible security could be exchanged for the associated
stock.
SYNTHETIC CONVERTIBLE SECURITIES. The value of a synthetic convertible security
will respond differently to market fluctuations than a convertible security
because a synthetic convertible security is composed of two or more separate
securities, each with its own market value. In addition, if the value of the
underlying common stock or the level of the index involved in the convertible
component falls below the exercise price of the warrant or option, the warrant
or option may lose all value.
EQUITY SECURITIES 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.
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES. There are significant differences
between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events. As
the writer of a covered call option, the Fund forgoes, during the option's life,
the opportunity to profit from increases in the market value of the security
covering the call option above the sum of the premium and the strike price of
the call, but has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying security at the exercise price.
LOWER GRADE SECURITIES. The Fund may invest an unlimited amount in lower grade
securities. Investing in lower grade securities (commonly known as "junk bonds")
involves additional risks, including credit risk. Credit risk is the risk that
one or more securities in the Fund's portfolio will decline in price, or fail to
pay interest or principal when due, because the issuer of the security
experiences a decline in its financial status.
FOREIGN SECURITIES AND EMERGING MARKETS RISK. Investing in non-U.S. issuers may
involve unique risks, such as currency, political, economic and market risk. In
addition, investing in emerging markets entails additional risk including, but
not limited to (1) news and events unique to a country or region (2) smaller
market size, resulting in lack of liquidity and price volatility (3) certain
national policies which may restrict the Fund's investment opportunities.
ILLIQUID INVESTMENTS. The Fund may invest without limit in illiquid securities.
The Fund may also invest without limit in Rule 144A Securities. Although many of
the Rule 144A Securities in which the Fund invests may be, in the view of the
Investment Manager, liquid, if qualified institutional buyers are unwilling to
purchase these Rule 144A Securities, they may become illiquid. Illiquid
securities may be difficult to dispose of at a fair price at the times when the
Fund believes it is desirable to do so. The market price of illiquid securities
generally is more volatile than that of more liquid securities, which may
adversely affect the price that the Fund pays for or recovers upon the sale of
illiquid securities.
In addition to the risks described above, the Fund is also subject to: Interest
Rate Risk, Credit Risk, Call Risk, Currency Risks, Management Risk, Strategic
Transactions, Anti-Takeover Provisions, and Market Disruption Risk. Please see
www.claymore.com/lcm for a more detailed discussion about Fund risks and
considerations.
SemiAnnual Report | April 30, 2009 | 9
LCM | Advent/Claymore Enhanced Growth & Income Fund
Fund SUMMARY | AS OF APRIL 30, 2009 (unaudited)
FUND STATISTICS
-------------------------------------------------------
Share Price $ 8.47
Common Share Net Asset Value $10.44
Premium/Discount to NAV -18.87%
Net Assets ($000) $142,013
-------------------------------------------------------
TOTAL RETURNS
-------------------------------------------------------
(INCEPTION 1/31/05) MARKET NAV
-------------------------------------------------------
Six-Month non-annualized 2.75% 1.78%
One Year -35.57% -31.21%
Three Year - average annual -12.70% -11.19%
Since Inception - average annual -10.07% -5.52%
-------------------------------------------------------
% OF LONG TERM
TOP TEN INDUSTRIES INVESTMENTS
-------------------------------------------------------
Pharmaceuticals 12.1%
Diversified Financial Services 7.6%
Telecommunications 6.7%
REITS 6.6%
Banks 6.4%
Biotechnology 4.8%
Mining 4.8%
Oil and Gas Services 4.8%
Miscellaneous Manufacturing 4.7%
Chemicals 4.5%
-------------------------------------------------------
% OF LONG TERM
TOP TEN ISSUERS INVESTMENTS
-------------------------------------------------------
Bank of America Corp. 2.6%
Ingersoll Rand-Co. Ltd. 2.6%
Teva Pharmaceutical Industries Ltd. 2.2%
Alliant Techsystems, Inc. 2.2%
Freeport-McMoRan Copper & Gold, Inc. 2.1%
Transocean, Inc. 2.1%
Mylan, Inc. 2.0%
Newell Rubbermaid, Inc. 1.9%
NASDAQ OMX Group, Inc. (The) 1.7%
Newmont Mining Corp. 1.7%
-------------------------------------------------------
Past performance does not guarantee future results. All portfolio data is
subject to change daily. For more current information, please visit
www.claymore.com/lcm. The above summaries are provided for informational
purposes only and should not be viewed as recommendations.
Line Chart:
SHARE PRICE & NAV PERFORMANCE
Share Price Nav
10/31/08 8.97 10.93
9 11
9.26 11.35
9.02 11.09
8.6 10.76
8.84 10.9
8.7 10.84
8.5 10.66
7.78 10.01
8.08 10.28
7.9 10.1
7.66 9.93
7.41 9.9
7.01 9.6
6.6 9.19
6.65 9.36
7.05 9.69
7.12 9.78
7.4 9.95
7.36 9.97
6.9 9.59
7.14 9.68
7.24 9.68
7.01 9.55
7 9.6
7.3 9.79
7.13 9.76
7.21 9.82
7.01 9.72
7.03 9.79
6.94 9.74
7.25 9.94
7.24 10.01
7.3 9.98
7.4 10.07
7.4 10
7.5 9.98
7.61 10.01
7.7 10.03
7.75 10.04
7.96 10.14
8.11 10.21
8.44 10.32
8.51 10.41
8.73 10.51
8.63 10.45
8.74 10.47
8.61 10.43
8.61 10.36
8.63 10.39
8.61 10.26
8.56 10.22
8.72 10.26
8.54 10.06
8.71 10.18
8.62 10.12
8.57 10.14
8.55 10.2
8.6 10.25
8.88 10.4
8.59 10.31
8.58 10.22
8.64 10.15
8.74 10.23
8.65 10.23
8.83 10.33
9 10.38
9.02 10.41
8.73 10.26
8.44 10.03
8.34 10.04
8.29 10.03
7.96 9.82
7.98 9.85
7.82 9.83
7.54 9.78
7.08 9.69
7.47 9.78
7.62 9.76
7.6 9.68
7.62 9.6
7.05 9.39
6.97 9.36
7.2 9.44
6.74 9.33
6.67 9.31
6.57 9.28
7.04 9.45
7.17 9.46
7.44 9.56
7.43 9.62
7.43 9.58
7.59 9.63
7.76 9.7
7.65 9.74
7.4 9.71
7.75 9.96
7.63 9.89
7.7 9.92
7.85 10
7.72 9.93
7.53 9.77
7.67 9.87
7.8 9.91
8.03 10.1
8.07 10.1
7.94 10.08
7.77 10.02
7.9 10.09
8.19 10.28
8.24 10.28
8.09 10.24
8.11 10.27
8.32 10.37
8.37 10.35
8.06 10.14
8.16 10.24
8.2 10.21
8 10.27
8.32 10.41
8.29 10.34
8.36 10.3
8.47 10.43
4/30/09 8.47 10.44
Pie Chart:
PORTFOLIO COMPOSITION (% of Total Investments)
Convertible Bonds 64.5%
Convertible Preferred
Stocks 17.3%
Corporate Bonds 12.5%
Common Stocks 4.4%
Exchange-Traded Funds 1.2%
Call Options Purchased 0.1%
% OF LONG TERM
COUNTRY BREAKDOWN INVESTMENTS
-------------------------------------------------------
United States 72.4%
Cayman Islands 8.4%
Bermuda 5.6%
Jersey 3.7%
Canada 2.0%
Luxembourg 1.9%
Netherlands Antilles 1.9%
Netherlands 1.8%
United Kingdom 1.2%
Japan 0.9%
Brazil 0.2%
-------------------------------------------------------
10 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund
Portfolio of INVESTMENTS | APRIL 30, 2009 (unaudited)
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 90.7%
CONVERTIBLE BONDS - 58.6%
AEROSPACE AND DEFENSE - 2.0%
$ 2,750,000 Alliant Techsystems, Inc., BB-
2.75%, 9/15/11 (a) $ 2,801,562
-----------------------------------------------------------------------------------
AGRICULTURE - 1.2%
HKD 12,500,000 Chaoda Modern Agriculture Holdings Ltd.,
Ser. CHAO, BB-
0.00%, 5/8/11 (Cayman Islands) (g) 1,713,757
-----------------------------------------------------------------------------------
AUTO PARTS AND EQUIPMENT - 0.7%
$ 850,000 BorgWarner, Inc., BBB
3.50%, 4/15/12 (a) 981,750
-----------------------------------------------------------------------------------
BANKS - 0.9%
$ 1,349,000 National City Corp., A
4.00%, 2/1/11 1,256,256
-----------------------------------------------------------------------------------
BEVERAGES - 0.7%
$ 950,000 Molson Coors Brewing Co., BBB-
2.50%, 7/30/13 (a) 1,008,188
-----------------------------------------------------------------------------------
BIOTECHNOLOGY - 3.5%
$ 2,130,000 Amgen, Inc., A+
0.125%, 2/1/11 1,983,563
$ 250,000 Amylin Pharmaceuticals, Inc., NR
3.00%, 6/15/14 150,000
$ 1,150,000 Life Technologies Corp., BB+
2.00%, 8/1/23 (a) 1,344,063
$ 1,500,000 United Therapeutics Corp., NR
0.50%, 10/15/11 (a) 1,526,250
-----------------------------------------------------------------------------------
5,003,876
-----------------------------------------------------------------------------------
CHEMICALS - 3.1%
Euro 1,300,000 Bayer Capital Corp. BV, BBB
6.625%, 6/1/09 (Netherlands) 1,738,013
CHF 1,300,000 Lonza Finance Ltd., NR
1.50%, 7/15/09 (Jersey) 1,307,659
HKD 9,250,000 Sinofert Holdings Ltd., NR
0.00%, 8/7/11 (Bermuda) (g) 1,411,344
-----------------------------------------------------------------------------------
4,457,016
-----------------------------------------------------------------------------------
COAL - 0.5%
$ 1,250,000 Massey Energy Co., BB-
3.25%, 8/1/15 (a) 767,188
-----------------------------------------------------------------------------------
COMPUTERS - 0.9%
$ 1,250,000 EMC Corp., A-
1.75%, 12/1/11 (a) 1,304,688
-----------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 3.0%
CHF 900,000 Actelion Finance SCA, NR
0.00%, 11/22/11 (Luxembourg) (g) 877,093
Euro 51,000,000 International Power Jersey Ltd., BB-
3.25%, 7/20/13 (Jersey) 1,078,631
$ 2,800,000 Nasdaq OMX Group, Inc. (The), BB+
2.50%, 8/15/13 (a) 2,229,500
-----------------------------------------------------------------------------------
4,185,224
-----------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.8%
$ 1,200,000 Suntech Power Holdings Co. Ltd., NR
0.25%, 2/15/12 (Cayman Islands) $ 1,075,500
-----------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION - 0.5%
$ 500,000 Fluor Corp., BBB+
1.50%, 2/15/24 (a) 690,625
-----------------------------------------------------------------------------------
HEALTHCARE - PRODUCTS - 2.8%
$ 1,500,000 Apogent Technologies, Inc./Thermo Fisher
Scientific, Inc., A-
0.07%, 12/15/33 (a) (i) 1,799,400
$ 1,200,000 Beckman Coulter, Inc., BBB
2.50%, 12/15/36 (a) 1,210,500
$ 1,000,000 NuVasive, Inc., NR
2.25%, 3/15/13 (a)(e) 1,018,750
-----------------------------------------------------------------------------------
4,028,650
-----------------------------------------------------------------------------------
HEALTHCARE - SERVICES - 1.3%
$ 2,065,000 Laboratory Corp. of America Holdings, BBB-
0.00%, 9/11/21 (a)(g) 1,830,106
-----------------------------------------------------------------------------------
HOUSEWARES - 1.2%
$ 1,146,000 Newell Rubbermaid, Inc., BBB-
5.50%, 3/15/14 (a) 1,677,458
-----------------------------------------------------------------------------------
INSURANCE - 1.3%
$ 1,820,000 Old Republic International Corp., NR
8.00%, 5/15/12 (a) 1,797,250
-----------------------------------------------------------------------------------
INTERNET - 3.4%
$ 865,000 Akamai Technologies, Inc., NR
1.00%, 12/15/33 (a) 1,275,875
$ 1,500,000 HLTH Corp., NR
1.75%, 6/15/23 (a) 1,423,125
$ 2,000,000 Symantec Corp., NR
0.75%, 6/15/11 (a) 2,127,500
-----------------------------------------------------------------------------------
4,826,500
-----------------------------------------------------------------------------------
IRON/STEEL - 2.0%
$ 1,500,000 ArcelorMittal, BBB+
5.00%, 5/15/14 (Luxembourg) 1,554,180
$ 1,200,000 United States Steel Corp., BB
4.00%, 5/15/14 (a) 1,278,000
-----------------------------------------------------------------------------------
2,832,180
-----------------------------------------------------------------------------------
MINING - 2.0%
$ 1,500,000 Newmont Mining Corp., BBB+
1.25%, 7/15/14 (a) 1,680,000
$ 500,000 Newmont Mining Corp., BBB+
1.625%, 7/15/17 (a) 543,750
$ 500,000 Placer Dome, Inc./Barrick Gold Corp., A-
2.75%, 10/15/23 (Canada) 649,375
-----------------------------------------------------------------------------------
2,873,125
-----------------------------------------------------------------------------------
See notes to financial statements.
SemiAnnual Report | April 30, 2009 | 11
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING - 3.2%
$ 2,350,000 Danaher Corp., A+
0.00%, 1/22/21 (a)(g) $ 2,109,125
$ 1,300,000 Ingersoll-Rand Co. Ltd., BBB+
4.50%, 4/15/12 (Bermuda) (a) 1,816,750
$ 550,000 Textron, Inc., Ser. TXT, BBB-
4.50%, 5/1/13 592,504
-----------------------------------------------------------------------------------
4,518,379
-----------------------------------------------------------------------------------
OIL AND GAS - 2.6%
$ 1,000,000 SOCO Finance Jersey Ltd., Ser. SIA, NR
4.50%, 5/16/13 (Jersey) 935,038
$ 2,000,000 Transocean, Inc., Ser. A, BBB+
1.625%, 12/15/37 (Cayman Islands) (a) 1,862,500
$ 1,000,000 Transocean, Inc., Ser. C, BBB+
1.50%, 12/15/37 (Cayman Islands) (a) 855,000
-----------------------------------------------------------------------------------
3,652,538
-----------------------------------------------------------------------------------
OIL AND GAS SERVICES - 3.2%
$ 750,000 Cameron International Corp., BBB+
1.50%, 5/15/24 (a) 1,113,750
$ 1,725,000 Core Laboratories LP, NR
0.25%, 10/31/11 (a) 1,791,844
$ 1,200,000 Schlumberger Ltd., Ser. B, A+
2.125%, 6/1/23 (Netherlands Antilles) (a) 1,662,000
-----------------------------------------------------------------------------------
4,567,594
-----------------------------------------------------------------------------------
PHARMACEUTICALS - 6.2%
$ 1,350,000 Allergan, Inc., NR
1.50%, 4/1/26 1,378,687
$ 1,600,000 Cephalon, Inc., Ser. B, NR
0.00%, 6/15/33 (a)(g) 1,922,000
$ 1,550,000 King Pharmaceuticals, Inc., BB
1.25%, 4/1/26 1,162,500
$ 1,750,000 Shire PLC, Ser. REGs, NR
2.75%, 5/9/14 (Jersey) 1,449,338
$ 700,000 Teva Pharmaceutical Finance Co. BV, Ser. D, BBB+
1.75%, 2/1/26 (Netherlands Antilles) (a) 762,125
$ 2,000,000 Teva Pharmaceutical Finance LLC, Ser. C, BBB+
0.25%, 2/1/26 (a) 2,087,500
-----------------------------------------------------------------------------------
8,762,150
-----------------------------------------------------------------------------------
REITS - 6.0%
$ 1,270,000 Boston Properties LP, A-
3.625%, 2/15/14 (a)(e) 1,006,475
$ 1,299,000 Digital Realty Trust LP, NR
5.50%, 4/15/29 (a)(e) 1,269,772
$ 1,344,000 Hospitality Properties Trust, BBB
3.80%, 3/15/27 1,041,600
$ 1,750,000 Host Hotels & Resorts LP, BB+
3.25%, 4/15/24 (a)(e) 1,682,187
$ 625,000 Macerich Co. (The), NR
3.25%, 3/15/12 (a)(e) 439,844
$ 2,115,000 Reckson Operating Partnership LP/SL Green
Realty Corp., BB+
4.00%, 6/15/25 (a) 1,935,225
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------
REITS (CONTINUED)
$ 775,000 UDR, Inc., BBB
4.00%, 12/15/35 (a) $ 701,375
$ 500,000 Vornado Realty Trust, BBB
3.625%, 11/25/26 (a) 446,250
-----------------------------------------------------------------------------------
8,522,728
-----------------------------------------------------------------------------------
RETAIL - 1.3%
HKD 12,800,000 Golden Eagle Retail Group Ltd., NR
0.00%, 10/23/11 (Cayman Islands) (g) 1,894,187
-----------------------------------------------------------------------------------
SEMICONDUCTORS - 0.6%
$ 973,000 Linear Technology Corp., Ser. A, NR
3.00%, 5/1/27 806,374
-----------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.7%
$ 1,600,000 Inmarsat PLC, Ser. ISAT, NR
1.75%, 11/16/17 (United Kingdom) 1,501,016
$ 1,408,000 Alcatel-Lucent USA, Inc., Ser. A, B+
2.875%, 6/15/23 (a)(h) 1,293,600
$ 800,000 NII Holdings, Inc., NR
3.125%, 6/15/12 (a) 584,000
JPY 138,000,000 Softbank Corp., BB
1.75%, 3/31/14 (Japan) 1,202,169
$ 1,000,000 Virgin Media, Inc., B-
6.50%, 11/15/16 (a)(e) 728,750
-----------------------------------------------------------------------------------
5,309,535
-----------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS - 58.6%
(Cost $78,126,483) 83,144,384
-----------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-----------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 15.7%
ADVERTISING - 1.0%
125,925 Elf Special Financing Ltd./Interpublic Group of
Cos., Inc., B+
1.67%, 2009 (a)(e)(i) 1,479,150
-----------------------------------------------------------------------------------
AGRICULTURE - 1.0%
16,000 Archer-Daniels-Midland Co., 6.25%, 2011 (a) 536,320
2,600 Bunge Ltd., 4.875%, 2049 (Bermuda) (a)(f) 179,075
1,645 Bunge Ltd., 5.125%, 2010 (Bermuda) (a) 777,262
-----------------------------------------------------------------------------------
1,492,657
-----------------------------------------------------------------------------------
AUTO PARTS AND EQUIPMENT - 2.2%
34,000 Autoliv, Inc., 8.00%, 4/30/12 1,222,980
20,000 Johnson Controls, Inc., 11.50%, 3/31/12 (a) 1,903,200
-----------------------------------------------------------------------------------
3,126,180
-----------------------------------------------------------------------------------
BANKS - 3.9%
3,453 Bank of America Corp., Ser. L, 7.25%, 2049 (a)(f) 1,992,381
44,415 Citigroup, Inc., Ser. T, 6.50%, 2049 (f) 1,403,514
10,800 Keycorp, Ser. A, 7.75%, 2049 (f) 707,400
2,301 Wells Fargo & Co., Ser. L, 7.50%, 2049 (f) 1,422,018
-----------------------------------------------------------------------------------
5,525,313
-----------------------------------------------------------------------------------
CHEMICALS - 0.9%
46,300 Celanese Corp., 4.25%, 2049 (a)(f) 1,322,328
-----------------------------------------------------------------------------------
See notes to financial statements.
12 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
NUMBER
OF SHARES VALUE
-----------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 0.6%
2,714 SLM Corp., Ser. C, 7.25%, 2010 $ 801,987
-----------------------------------------------------------------------------------
MINING - 2.8%
30,000 Freeport-McMoRan Copper & Gold, Inc., 6.75%,
2010 (a) 2,017,500
55,450 Vale Capital Ltd., Ser. RIO, 5.50%, 2010
(Cayman Islands) (d) 1,941,304
-----------------------------------------------------------------------------------
3,958,804
-----------------------------------------------------------------------------------
PHARMACEUTICALS - 3.0%
3,020 Mylan, Inc., 6.50%, 2010 (a) 2,573,040
7,850 Schering-Plough Corp., 6.00%, 2010 (a)(c) 1,658,234
-----------------------------------------------------------------------------------
4,231,274
-----------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.3%
1,014 Lucent Technologies Capital Trust I, 7.75%, 2017 411,684
-----------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS - 15.7%
(Cost $20,524,257) 22,349,377
-----------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------
CORPORATE BONDS - 11.3%
BANKS - 1.0%
$ 1,700,000 Bank of America Corp., A
5.65%, 5/1/18 1,383,919
-----------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.4%
$ 2,075,000 American Express Co., BBB+
7.00%, 3/19/18 1,968,052
-----------------------------------------------------------------------------------
FOOD - 0.3%
$ 500,000 Ingles Markets, Inc., BB-
8.875%, 5/15/17 (e) 482,740
-----------------------------------------------------------------------------------
HEALTHCARE-SERVICES - 1.2%
$ 1,250,000 HCA, Inc., BB
8.50%, 4/15/19 (e) 1,257,812
$ 500,000 HCA, Inc., BB-
9.25%, 11/15/16 495,000
-----------------------------------------------------------------------------------
1,752,812
-----------------------------------------------------------------------------------
HOLDING COMPANIES - DIVERSIFIED - 0.6%
$ 1,000,000 Leucadia National Corp., BB+
8.125%, 9/15/15 840,000
-----------------------------------------------------------------------------------
HOUSEWARES - 0.6%
$ 750,000 Newell Rubbermaid, Inc., BBB-
10.60%, 4/15/19 818,885
-----------------------------------------------------------------------------------
LODGING - 0.3%
$ 500,000 Starwood Hotels & Resorts Worldwide, Inc., BB
7.875%, 10/15/14 483,750
-----------------------------------------------------------------------------------
MINING - 0.5%
$ 700,000 Freeport-McMoRan Copper & Gold, Inc., BBB-
8.375%, 4/1/17 686,000
-----------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING - 1.1%
$ 1,430,000 Ingersoll-Rand Global Holding Co. Ltd., BBB+
9.50%, 4/15/14 (Bermuda) 1,495,807
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------
OIL AND GAS SERVICES - 1.1%
$ 3,000,000 CCS, Inc., B-
11.00%, 11/15/15 (Canada) (e) $ 1,620,000
-----------------------------------------------------------------------------------
PHARMACEUTICALS - 1.2%
$ 1,665,000 Axcan Intermediate Holdings, Inc., B
12.75%, 3/1/16 1,631,700
-----------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.0%
$ 1,350,000 CC Holdings GS V LLC/Crown Castle GS III Corp., BB
7.75%, 5/1/17 (e) 1,363,500
$ 1,500,000 Intelsat Jackson Holdings Ltd., CCC+
11.25%, 6/15/16 (Bermuda) 1,533,750
-----------------------------------------------------------------------------------
2,897,250
-----------------------------------------------------------------------------------
TOTAL CORPORATE BONDS - 11.3%
(Cost $17,220,640) 16,060,915
-----------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
-----------------------------------------------------------------------------------
COMMON STOCKS - 4.0%
AGRICULTURE - 1.1%
25,000 Lorillard, Inc. (a) 1,578,250
-----------------------------------------------------------------------------------
BANKS - 0.1%
5,000 Morgan Stanley (a) 118,200
-----------------------------------------------------------------------------------
BIOTECHNOLOGY - 0.9%
2,500 Amgen, Inc. (a)(b) 121,175
20,500 Genzyme Corp. (a)(b) 1,093,265
-----------------------------------------------------------------------------------
1,214,440
-----------------------------------------------------------------------------------
HEALTHCARE - PRODUCTS - 0.4%
40,000 Hologic, Inc. (a)(b) 594,400
-----------------------------------------------------------------------------------
MINING - 0.4%
10,000 Barrick Gold Corp. (Canada) (a) 291,000
20,000 Cia Vale do Rio Doce, ADR (Brazil) (a) 330,200
-----------------------------------------------------------------------------------
621,200
-----------------------------------------------------------------------------------
PHARMACEUTICALS - 0.7%
60,000 Isis Pharmaceuticals, Inc. (a)(b) 940,800
-----------------------------------------------------------------------------------
SEMICONDUCTORS - 0.4%
30,000 ASML Holding NV (Netherlands) (a) 634,500
-----------------------------------------------------------------------------------
TOTAL COMMON STOCKS - 4.0%
(Cost $5,686,507) 5,701,790
-----------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS - 1.1%
17,567 ProShares UltraShort Dow30 939,483
10,665 ProShares Ultra S&P500 679,147
-----------------------------------------------------------------------------------
(Cost $1,712,633) 1,618,630
-----------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 90.7%
(Cost $123,270,520) 128,875,096
-----------------------------------------------------------------------------------
See notes to financial statements.
SemiAnnual Report | April 30, 2009 | 13
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE
PER CONTRACT) OPTIONS PURCHASED(B) DATE PRICE VALUE
-------------------------------------------------------------------------------------------------------------
CALL OPTIONS PURCHASED - 0.0%
150 BP Prudhoe Bay Royalty Trust (a) May 2009 $ 90.00 $ 750
-------------------------------------------------------------------------------------------------------------
PUT OPTIONS PURCHASED - 0.1%
150 BP Prudhoe Bay Royalty Trust May 2009 65.00 27,750
200 DIAMONDS Trust Series I May 2009 81.00 39,000
-------------------------------------------------------------------------------------------------------------
66,750
-------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED - 0.1%
(Cost $95,493) 67,500
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 90.8%
(Cost $123,366,013) 128,942,596
Other assets in excess of liabilities - 9.5% 13,457,713
Total Options Written (Premiums received $298,306) - (0.3%) (387,058)
-------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $142,013,251
=============================================================================================================
ADR - American Depositary Receipt
LLC - Limited Liability Corp.
Ltd. - Limited
PLC - Public Limited Company
(a) All or a portion of this security position represents cover (directly or
through conversion rights) for outstanding options written.
(b) Non-income producing security.
(c) All or a portion of these securities with an aggregate market value of
$1,658,234 have been physically segregated to collateralize written call
options.
(d) Synthetic convertible - A synthetic convertible security is either a bond
or preferred security structured by an investment bank that provides
exposure to a specific company's common stock.
(e) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
2009, these securities amounted to 8.7% of net assets.
(f) Security is convertible until December 31, 2049. (g) Zero-coupon bond.
(h) Security is a "step up" bond where the coupon increases or steps up at a
predetermined date.
(i) Variable rate or floating rate security. The rate shown is as of April 30,
2009.
Ratings shown are per Standard & Poor's. Securities classified as NR are not
rated by Standard & Poors.
See notes to financial statements.
14 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | PORTFOLIO OF INVESTMENTS
(unaudited) continued
CONTRACTS
(100 SHARES EXPIRATION EXERCISE MARKET
PER CONTRACT) CALL OPTIONS WRITTEN(A) DATE PRICE VALUE
--------------------------------------------------------------------------------
100 Akamai Technologies, Inc. May 2009 $ 22.50 $7,000
6 Alcatel-Lucent USA, Inc. June 2009 2.50 150
50 Alliant Techsystems, Inc. May 2009 80.00 10,000
25 Amgen, Inc. May 2009 50.00 1,900
25 Apogent Technologies, Inc.
/Thermo Fisher
Scientific, Inc. June 2009 40.00 1,125
25 Archer-Daniels-Midland Co. May 2009 27.00 650
100 ASML Holding NV May 2009 20.00 13,000
50 Bank of America Corp. June 2009 12.00 2,800
50 Barrick Gold Corp. May 2009 31.00 2,500
35 Beckman Coulter, Inc. May 2009 55.00 1,575
25 Beckman Coulter, Inc. August 2009 55.00 7,750
50 Beckman Coulter, Inc. August 2009 60.00 7,000
25 BorgWarner, Inc. June 2009 35.00 1,375
30 Boston Properties LP May 2009 50.00 7,800
150 BP Prudhoe Bay Royalty
Trust May 2009 65.00 30,750
25 Bunge Ltd. June 2009 55.00 2,250
100 Cameron International
Corp. May 2009 30.00 1,200
25 Celanese Corp. June 2009 25.00 1,625
50 Cephalon, Inc. June 2009 75.00 4,500
100 Cia Vale do Rio Doce May 2009 17.00 5,400
50 Cia Vale do Rio Doce May 2009 16.00 5,100
50 Core Laboratories LP June 2009 95.00 2,500
50 Danaher Corp. June 2009 65.00 3,500
25 Digital Realty Trust LP May 2009 40.00 2,000
15 Elf Special Financing Ltd.
/Interpublic Group of
Cos., Inc. May 2009 5.00 1,950
100 EMC Corp. May 2009 13.00 2,900
50 Fluor Corp. May 2009 45.00 1,250
100 Freeport-McMoRan Copper &
Gold, Inc. May 2009 46.00 8,400
25 Genzyme Corp. June 2009 60.00 1,875
25 HLTH Corp. July 2009 12.50 625
200 Hologic, Inc. May 2009 15.00 14,800
20 Host Hotels & Resorts LP June 2009 10.00 700
10 Ingersoll-Rand Co. Ltd. June 2009 25.00 650
CONTRACTS
(100 SHARES EXPIRATION EXERCISE MARKET
PER CONTRACT) CALL OPTIONS WRITTEN(A) DATE PRICE VALUE
--------------------------------------------------------------------------------
150 Isis Pharmaceuticals, Inc. May 2009 $ 15.00 $ 18,150
100 Isis Pharmaceuticals, Inc. June 2009 17.50 7,000
5 Johnson Controls, Inc. May 2009 15.00 2,100
50 Laboratory Corp. of
America Holdings May 2009 65.00 5,500
100 Life Technologies Corp. May 2009 30.00 69,000
50 Lorillard, Inc. June 2009 70.00 5,400
10 Macerich Co. (The) June 2009 22.50 800
10 Massey Energy Co. May 2009 15.00 1,550
25 Molson Coors Brewing Co. May 2009 40.00 1,750
50 Morgan Stanley May 2009 23.00 8,750
100 Mylan, Inc. May 2009 15.00 1,500
50 Nasdaq OMX Group, Inc.
(The) May 2009 20.00 4,250
125 Newell Rubbermaid, Inc. May 2009 7.50 36,250
75 Newmont Mining Corp. June 2009 46.00 6,563
25 NII Holdings, Inc. May 2009 20.00 275
50 NuVasive, Inc. June 2009 40.00 11,000
20 Old Republic International
Corp. June 2009 10.00 900
35 Reckson Operating
Partnership LP/SL
Green Realty Corp. May 2009 17.50 7,875
25 Schering-Plough Corp. May 2009 26.00 125
50 Schlumberger Ltd. May 2009 50.00 7,000
20 Symantec Corp. June 2009 20.00 520
25 Teva Pharmaceutical
Industries Ltd. June 2009 47.50 1,125
100 Transocean Ltd. May 2009 75.00 4,000
10 UDR, Inc. May 2009 10.00 700
25 United States Steel Corp. May 2009 30.00 950
35 United Therapeutics Corp. May 2009 70.00 2,625
15 United Therapeutics Corp. June 2009 65.00 5,550
50 Virgin Media, Inc. June 2009 7.50 5,500
100 Vornado Realty Trust June 2009 60.00 13,750
--------------------------------------------------------------------------------
TOTAL VALUE OF CALL OPTIONS WRITTEN
(Premiums received $298,306) $ 387,058
================================================================================
(a) Non-income producing security.
See notes to financial statements.
SemiAnnual Report | April 30, 2009 | l5
LCM | Advent/Claymore Enhanced Growth & Income Fund
Statement of ASSETS AND LIABILITIES | APRIL 30, 2009 (unaudited)
ASSETS
Investments, at value (cost $123,366,013) $ 128,942,596
Receivable for securities sold 10,487,585
Cash 7,099,649
Dividends and interest receivable 1,053,366
Foreign currency, at value (cost $428,731) 449,394
Tax Reclaims receivable 101,853
Net unrealized appreciation on foreign exchange currency contracts 80,035
Other assets 47,477
---------------------------------------------------------------------------------------------------------------------
Total assets 148,261,955
---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 5,486,747
Options written, at value (premiums received of $298,306) 387,058
Net unrealized depreciation on swaps 82,486
Investment Management fee payable 58,167
Investment Advisory fee payable 55,885
Net unrealized depreciation on foreign exchange currency contracts 39,660
Administration fee payable 3,061
Accrued expenses and other liabilities 135,640
---------------------------------------------------------------------------------------------------------------------
Total liabilities 6,248,704
---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 142,013,251
---------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Common stock, $0.001 par value per share; unlimited number of shares authorized,
13,603,025 shares issued and outstanding $ 13,603
Additional paid-in capital 249,757,745
Accumulated net realized loss on investments, options, swaps and foreign currency transactions (107,912,436)
Accumulated net unrealized appreciation on investments, options, swaps and
foreign currency translation 5,456,841
Accumulated Distributions in excess of net investment income (5,302,502)
---------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 142,013,251
---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
(based on 13,603,025 common shares outstanding) $ 10.44
---------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
16 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund
Statement of OPERATIONS | FOR THE YEAR ENDED APRIL 30, 2009 (unaudited)
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $349) $ 1,886,096
Dividends (net of foreign withholding taxes of $25,723) 1,552,745
---------------------------------------------------------------------------------------------------------------------
Total income $ 3,438,841
---------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Management fee 345,348
Investment Advisory fee 331,805
Professional fees 89,811
Trustees' fees and expenses 73,941
Custodian fee 34,023
Printing expense 33,948
Fund accounting 27,833
Administration fee 18,622
Insurance 10,478
Transfer agent fee 9,153
NYSE listing fee 6,760
Miscellaneous 10,101
---------------------------------------------------------------------------------------------------------------------
Total expenses 991,823
---------------------------------------------------------------------------------------------------------------------
Net investment income 2,447,018
---------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS, SWAPS AND FOREIGN
CURRENCY TRANSACTIONS Net realized gain (loss) on:
Investments (63,669,584)
Options 1,625,776
Swaps (502,053)
Foreign currency transactions 201,293
Net change in unrealized appreciation (depreciation) on:
Investments 61,497,877
Options 396,842
Swaps (82,486)
Foreign currency translation 68,131
---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments, options, swaps and foreign currency
transactions (464,204)
---------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,982,814
---------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
SemiAnnual Report | April 30, 2009 | 17
LCM | Advent/Claymore Enhanced Growth & Income Fund
Statement of CHANGES IN NET ASSETS |
FOR THE SIX
MONTHS ENDED FOR THE
APRIL 30, 2009 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2008
---------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,447,018 $ 6,418,113
Net realized loss on investments, options, swaps and foreign
currency transactions (62,344,568) (44,668,243)
Net change in unrealized appreciation (depreciation) on investments, options,
swaps and foreign currency translation 61,880,364 (64,890,514)
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 1,982,814 (103,140,644)
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM
Net investment income (8,352,257) (12,263,004)
Return of Capital - (9,501,836)
-----------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to common shareholders (8,352,257) (21,764,840)
-----------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (6,369,443) (124,905,484)
NET ASSETS
Beginning of year 148,382,694 273,288,178
-----------------------------------------------------------------------------------------------------------------------
End of year (including accumulated distributions in excess of net investment
income and accumulated undistributed net investment income of ($5,302,502)
and $602,737, respectively) $142,013,251 $ 148,382,694
-----------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
18 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund
Financial HIGHLIGHTS |
FOR THE FOR THE
SIX MONTHS FOR THE FOR THE FOR THE PERIOD
ENDED YEAR ENDED YEAR ENDED YEAR ENDED JANUARY 31,
APRIL 30, 2009 OCTOBER OCTOBER OCTOBER 2005* THROUGH
(UNAUDITED) 31, 2008 31, 2007 31, 2006 OCTOBER 31, 2005
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.91 $ 20.09 $ 19.41 $ 18.51 $ 19.10(a)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) 0.18 0.47 0.44 0.58 0.47
Net realized and unrealized gain (loss) on investments,
options, swaps and foreign currency transactions (0.04) (8.05) 1.84 1.92 (0.22)
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.14 (7.58) 2.28 2.50 0.25
------------------------------------------------------------------------------------------------------------------------------------
COMMON SHARES' OFFERING EXPENSES CHARGED TO PAID-IN CAPITAL - - - - (0.04)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
Net investment income (0.61) (0.90) (1.60) (1.60) (0.80)
Return of capital - (0.70) - - -
------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to Common Shareholders (0.61) (1.60) (1.60) (1.60) (0.80)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.44 $ 10.91 $ 20.09 $ 19.41 $ 18.51
------------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF PERIOD $ 8.47 $ 8.97 $ 17.46 $ 18.78 $ 16.83
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (C)
Net asset value 1.78% -40.37% 12.24% 14.11% 1.12%
Market value 2.75% -42.88% 1.08% 22.20% -12.08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (thousands) $ 142,013 $ 148,383 $ 273,288 $ 263,648 $ 251,349
Ratio of net expenses to average net assets 1.46% 1.34% 1.26% 1.29% 1.38%(d)
Ratio of net investment income to average net assets 3.61% 2.91% 2.21% 3.09% 3.37%(d)
Portfolio turnover rate 116% 192% 181% 415% 246%
* Commencement of investment operations.
(a) Before deduction of offering expenses charged to capital.
(b) Based on average shares outstanding during the period.
(c) Total investment return is calculated assuming a purchase of a common share
at the beginning of the period and a sale on the last day of the period
reported either at net asset value ("NAV") or market price per share.
Dividends and distributions are assumed to be reinvested at NAV for NAV
returns or the prices obtained under the Fund's Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
(d) Annualized.
See notes to financial statements.
SemiAnnual Report | April 30, 2009 | 19
LCM | Advent/Claymore Enhanced Growth & Income Fund
Notes to FINANCIAL STATEMENTS | APRIL 30, 2009 (unaudited)
Note 1 - ORGANIZATION:
Advent/Claymore Enhanced Growth & Income Fund (the "Fund") was organized as a
Delaware statutory trust on January 30, 2004. The Fund is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended.
The Fund's primary investment objective is to provide current income and current
gains from trading in securities, with a secondary objective of long-term
capital appreciation. The Fund will pursue its investment objectives by
investing its assets in dividend and interest paying equity securities,
convertible securities and non-convertible high-yield securities. Also, in
pursuit of the Fund's primary investment objective, the Fund intends to engage
in an option strategy of writing (selling) covered call options on at least 50%
of the securities held in the portfolio. There can be no assurance the Fund will
achieve its investment objectives.
Note 2 - ACCOUNTING POLICIES:
The preparation of the financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of significant accounting policies followed by the
Fund.
(a) VALUATION OF INVESTMENTS
Equity securities listed on an exchange are valued at the last reported sale
price on the primary exchange on which they are traded. Equity securities traded
on an exchange for which there are no transactions on a given day are valued at
the mean of the closing bid and asked prices. Securities traded on NASDAQ are
valued at the NASDAQ Official Closing Price. Equity securities not listed on a
securities exchange or NASDAQ are valued at the mean of the closing bid and
asked prices. Debt securities are valued by independent pricing services or
dealers using the closing bid prices for such securities or, if such prices are
not available, at prices for securities of comparable maturity, quality and
type. Futures contracts are valued using the settlement price established each
day on the exchange on which they are traded. Exchange-traded options are valued
at the closing price, if traded that day. If not traded, they are valued at the
mean of the bid and asked prices on the primary exchange on which they are
traded. For those securities where quotations or prices are not available,
valuations are determined in accordance with procedures established in good
faith by the Board of Trustees. Short-term securities with remaining maturities
of 60 days or less are valued at amortized cost, which approximates market
value.
The Fund values synthetic convertible securities based on quotations obtained
from unaffiliated brokers who are the principal market-makers in such
securities. Such valuations are derived by the brokers from proprietary models
which are generally based on readily available market information including
valuations of the common stock underlying the synthetic security, and the
volatility observed in the market on such common stocks. Because of the inherent
uncertainty in the valuation process, it is reasonably possible that the
estimated values may differ from the values that would have been used had a more
active market for the investments existed, and such differences could be
material. As of April 30, 2009, approximately $1,941,304, representing 1.5% of
total fund investments, are invested in these synthetic convertible securities.
In September, 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 157, "Fair Valuation
Measurements" ("FAS 157"). This standard clarifies the definition of fair value
for financial reporting, establishes a framework for measuring fair value and
requires additional disclosures about the use of fair value measurements. FAS
157 establishes three different categories for valuations. Level 1 valuations
are those based upon quoted prices in active markets. Level 2 valuations are
those based upon quoted prices in inactive markets or based upon significant
observable inputs (e.g. yield curves; benchmark interest rates; indices). Level
3 valuations are those based upon unobservable inputs (e.g. discounted cash flow
analysis; non-market based methods used to determine fair valuation). Details of
the valuations as of April 30, 2009 were as follows:
DESCRIPTION
(VALUE IN $000S) SECURITIES DERIVATIVES TOTAL
------------------------------------------------------------------
Assets:
Level 1 $ 29,670 $ 68 $ 29,738
Level 2 99,205 80 99,285
Level 3 - - -
------------------------------------------------------------------
Total $ 128,875 $ 148 $ 129,023
------------------------------------------------------------------
Liabilities:
Level 1 $ - $ 387 $ 387
Level 2 - 122 122
Level 3 - - -
------------------------------------------------------------------
Total $ - $ 509 $ 509
------------------------------------------------------------------
20 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS (unaudited) continued
(b) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are
accounted for on the trade date. Realized gains and losses on investments are
determined on the identified cost basis. Dividend income is recorded on the
ex-dividend date and interest income is recorded on an accrual basis. Discounts
or premiums on corporate debt securities purchased are accreted or amortized to
interest income over the lives of the respective securities using the effective
interest method.
(c) CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the bid and asked price of respective exchange rates
on the last day of the period. Purchases and sales of investments denominated in
foreign currencies are translated at the exchange rate on the date of the
transaction.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Foreign exchange realized gain or loss resulting from holding of a foreign
currency, expiration of a currency exchange contract, difference in exchange
rates between the trade date and settlement date of an investment purchased or
sold, and the difference between dividends actually received compared to the
amount shown in the Fund's accounting records on the date of receipt is shown as
net realized gains or losses on foreign currency transactions in the Fund's
Statement of Operations.
Foreign exchange unrealized gain or loss on assets and liabilities, other than
investments, is shown as unrealized appreciation (depreciation) on foreign
currency translation in the Fund's Statement of Operations.
(d) OPTIONS
The Fund intends to pursue its primary objective by employing an option strategy
of writing (selling) covered call options on at least 50% of the securities held
in the portfolio of the Fund. The Fund seeks to produce a high level of current
income and gains generated from option writing premiums and, to a lesser extent,
from dividends.
An option on a security is a contract that gives the holder of the option, in
return for a premium, the right to buy from (in the case of a call) or sell to
(in the case of a put) the writer of the option the security underlying the
option at a specified exercise or "strike" price. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price (in the case of a call)
or to pay the exercise price upon delivery of the underlying security (in the
case of a put).
There are several risks associated with transactions in options on securities.
As the writer of a covered call option, the Fund forgoes, during the option's
life, the opportunity to profit from increases in the market value of the
security covering the call option above the sum of the premium and the strike
price of the call, but has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as writer of the option.
Once an option writer has received an exercise notice, it cannot effect a
closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price.
When an option is written, the premium received is recorded as an asset with an
equal liability and is subsequently marked to market to reflect the current
market value of the option written. These liabilities are reflected as options
written in the Statement of Assets and Liabilities. Premiums received from
writing options which expire unexercised are recorded on the expiration date as
a realized gain. The difference between the premium received and the amount paid
on effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss.
(e) SWAPS
A swap is an agreement to exchange the return generated by one instrument for
the return generated by another instrument. The Fund may enter into swap
agreements to manage its exposure to interest rates and/or credit risk or to
generate income. Interest rate swap agreements involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest.
Total return swap agreements involve commitments to receive (and pay) interest
over a floating rate (LIBOR) based on a notional amount. To the extent the total
return of the security (price changes, interest paid/received, rebate earned on
collateral posted by the Fund) is positive, the Fund will receive a payment from
the counterparty (or if negative, make a payment to the counterparty). The swaps
are valued daily at current market value and any unrealized gain or loss is
included in the Statement of Assets and Liabilities. Gain or loss is realized on
the termination date of the swap and is equal to the difference between the
Fund's basis in the swap and the proceeds of the closing transaction, including
any fees. During the period that the swap agreement is open, the Fund may be
subject to risk from the potential inability of the counterparty to meet the
terms of the agreement. The swaps involve elements of both market and credit
risk in excess of the amounts reflected on the Statement of Assets and
Liabilities. Upon termination of a swap agreement, a payable to or receivable
from swap counterparty is established on the Statement of Assets and Liabilities
to reflect the net gain/loss, including interest income/expense, on terminated
swap positions. This line item is removed upon settlement according to the terms
of the swap agreement.
SemiAnnual Report | April 30, 2009 | 21
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS (unaudited) continued
Credit default swap transactions involve the Fund's agreement to exchange the
credit risk of an issuer. A buyer of a credit default swap is said to buy
protection by paying periodic fees in return for a contingent payment from the
seller if the issuer has a credit event such as bankruptcy, a failure to pay
outstanding obligations or deteriorating credit while the swap is outstanding. A
seller of a credit default swap is said to sell protection and thus collects the
periodic fees and profits if the credit of the issuer remains stable or improves
while the swap is outstanding but the seller in a credit default swap contract
would be required to pay an agreed-upon amount, which approximates the notional
amount of the swap as disclosed in Note 5, to the buyer in the event of an
adverse credit event of the issuer.
Realized gain (loss) upon termination of swap contracts is recorded on the
Statement of Operations. Fluctuations in the value of swap contracts are
recorded as a component of net change in unrealized appreciation (depreciation)
of swap contracts. Net periodic payments received by the Fund are included as
part of realized gains (losses) and, in the case of accruals for periodic
payments, are included as part of unrealized appreciation (depreciation) on the
Statement of Operations.
(f) FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to the change in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchases and sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss arising
from the difference between the original contracts and the closing of such
contracts would be included in net realized gain or loss on foreign currency
transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Fund.
Risk may arise from the potential inability of counterparty to meet the terms of
a contract and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The face or contract amount, in U.S. dollars,
reflects the total exposure the Fund has in that particular currency contract.
Forward exchange currency contracts involve elements of both market and credit
risk in excess of the amounts reflected on the Statement of Assets and
Liabilities.
(g) DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays quarterly dividends to common shareholders. These
dividends consist of investment company taxable income, which generally includes
qualified dividend income, ordinary income and short-term capital gains. Any net
realized long-term gains are distributed annually to common shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The amount
and timing of distributions are determined in accordance with federal income tax
regulations, which may differ from U.S. generally accepted accounting
principles.
Note 3 - INVESTMENT ADVISORY AGREEMENT, INVESTMENT MANAGEMENT AGREEMENT AND
OTHER AGREEMENTS: Pursuant to an Investment Advisory Agreement (the "Agreement")
between Claymore Advisors, LLC (the "Adviser") and the Fund, the Adviser
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, oversees the activities of Advent Capital Management, LLC
(the "Investment Manager"), provides personnel and pays the compensation of all
Trustees and Officers of the Fund who are its affiliates. As compensation for
these services, the Fund pays the Adviser an annual fee, payable monthly in
arrears, at an annual rate equal to 0.49% of the average Managed Assets during
such month. Managed Assets means the total of assets of the Fund (including any
assets attributable to any preferred shares or otherwise attributable to the use
of financial leverage, if any) less the sum of accrued liabilities.
Pursuant to an Investment Management Agreement between the Investment Manager
and the Fund, the Fund has agreed to pay the Investment Manager an annual fee,
payable monthly in arrears, at an annual rate equal to 0.51% of the average
Managed Assets during such month for the services and facilities provided by the
Investment Manager to the Fund. These services include the day-to-day management
of the Fund's portfolio of securities, which includes buying and selling
securities for the Fund and investment research. The Investment Manager also
provides personnel to the Fund and pays the compensation of all Trustees and
Officers of the Fund who are its affiliates.
The Bank of New York Mellon ("BNY") acts as the Fund's custodian, accounting and
transfer agent. As custodian, BNY is responsible for the custody of the Fund's
assets. As accounting agent, BNY is responsible for maintaining the books and
records of the Fund's securities and cash. As transfer agent, BNY is responsible
for performing transfer agency services for the Fund.
Claymore Advisors, LLC provides Fund Administration services to the Fund. As
compensation for its services performed under the Administration Agreement,
Claymore Advisors, LLC receives an administration fee payable monthly at the
annual rate set forth below as a percentage of the average daily managed assets
of the Fund:
MANAGED ASSETS RATE
------------------------------------------------------------------------------
First $200,000,000 0.0275%
Next $300,000,000 0.0200%
Next $500,000,000 0.0150%
Over $1,000,000,000 0.0100%
------------------------------------------------------------------------------
Certain Officers and Trustees of the Fund are also Officers and Directors of the
Adviser or Investment Manager. The Fund does not compensate its Officers or
Trustees who are Officers of the aforementioned firms.
22 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS (unaudited) continued
Note 4 - FEDERAL INCOME TAXES:
The Fund intends to continue to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies. Accordingly, no provision for U.S. federal income taxes is
required. In addition, by distributing substantially all of its ordinary income
and long-term capital gains, if any, during each calendar year, the Fund can
avoid a 4% federal excise tax that is assessed on the amount of the under
distribution.
At April 30, 2009, the cost and related gross unrealized appreciation and
depreciation on investments for tax purposes, excluding written options and
foreign currency translations are as follows:
NET TAX
COST OF NET TAX UNREALIZED
INVESTMENTS GROSS TAX GROSS TAX UNREALIZED DEPRECIATION ON
FOR TAX UNREALIZED UNREALIZED APPRECIATION DERIVATIVES AND
PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS FOREIGN CURRENCY
--------------------------------------------------------------------------------
$125,595,868 $9,022,907 $(5,676,179) $ 3,346,728 $ (119,554)
--------------------------------------------------------------------------------
The differences between book basis and tax basis unrealized
appreciation/(depreciation) are attributable to the tax deferral of losses on
wash sales and additional income accrued for tax purposes on certain convertible
securities.
As of October 31, 2008, the components of accumulated earnings/(loss) (excluding
paid-in-capital) on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM
INCOME/ GAINS/
(ACCUMULATED (ACCUMULATED
ORDINARY LOSS) CAPITAL LOSS)
-----------------------------------------------------------
$0 $(42,678,271)
-----------------------------------------------------------
At October 31, 2008, for federal income tax purposes, the Fund had a capital
loss carryforward of $42,678,271 available to offset possible future capital
gains. The capital loss carryforward is set to expire on October 31, 2016.
For the years ended October 31, 2008, and October 31, 2007, the tax character of
distributions paid of $10,938,810 and $21,746,612 was ordinary income,
$1,324,194 and $0 was long-term capital gain, and $9,501,836 and $0 was return
of capital, respectively.
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. Management
has evaluated the implications of FIN 48 and has determined it does not have any
impact on the financial statements as of April 30, 2009. There is no tax
liability resulting from unrecognized tax benefits relating to uncertain income
tax positions taken or expected to be taken on the tax return for the fiscal
year-end October 31, 2008. The Funds are also not aware of any tax positions for
which it is reasonably possible that the total amounts of unrecognized tax
benefits will significantly change in twelve months.
FIN 48 requires the Funds to analyze all open tax years. Open tax years are
those years that are open for examination by the relevant income taxing
authority. As of October 31, 2008, open Federal and state income tax years
include the tax years ended October 31, 2005, 2006, 2007 and 2008. The Funds
have no examination in progress.
Note 5 - INVESTMENTS IN SECURITIES AND DERIVATIVES:
For the six months ended April 30, 2009, purchases and sales of investments,
excluding options and short-term securities, were $145,570,768 and $147,490,400,
respectively.
The Fund entered into credit default swap agreements during the six months ended
April 30, 2009, to generate additional income. As of April 30, 2009, the Fund
had swaps with a total notional value of $3,250,000 outstanding. Details of the
swap agreements outstanding as of April 30, 2009, were as follows:
NOTIONAL UNREALIZED
BUY/SELL TERMINATION AMOUNT PAYING APPRECIATION
COUNTERPARTY REFERENCE ENTITY PROTECTION DATE (000) FIXED RATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
Citigroup Burlington Northern Santa Fe Corporation Buy 6/20/2014 $ 500 1.00% $ (6,825)
Credit Suisse
First Boston CSX Corporation Buy 6/20/2014 1,250 1.00% (42,695)
Credit Suisse
First Boston LVMH Moet Hennessy Louis Vuitton Buy 3/20/2014 1,500 1.32% (32,966)
------------------------------------------------------------------------------------------------------------------------------
$ (82,486)
------------------------------------------------------------------------------------------------------------------------------
For each credit default swap noted, the Fund pays a fixed rate. The market value
of the swaps outstanding reflects the current payable for the underlying asset.
SemiAnnual Report | April 30, 2009 | 23
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS (unaudited) continued
The Fund entered into written option contracts for the six months ended April
30, 2009. Details of the transactions were as follows:
NUMBER OF CONTRACTS PREMIUMS RECEIVED
-----------------------------------------------------------------------------------------------------
Options outstanding, beginning of year 11,845 $ 1,077,416
-----------------------------------------------------------------------------------------------------
Options written during the year 39,065 4,032,500
Options expired during the year (14,100) (1,251,249)
Options closed during the year (26,588) (2,840,263)
Options assigned during the year (6,971) (720,098)
-----------------------------------------------------------------------------------------------------
Options outstanding, end of year 3,251 $ 298,306
-----------------------------------------------------------------------------------------------------
At April 30, 2009, the following forward exchange currency contracts were
outstanding:
UNREALIZED
SHORT CONTRACTS CURRENT VALUE APPRECIATION/DEPRECIATION
-----------------------------------------------------------------------------------------------------
Canadian Dollar, 700,000 expiring 6/17/09 $ (589,348) $ (27,730)
EURO, 800,000 expiring 6/17/09 (1,059,870) 18,480
Japanese Yen, 158,000,000 expiring 6/17/09 (1,607,138) 37,594
Swiss Franc, 4,779,053 expiring 5/5/09 to 6/17/09 (4,198,116) 7,421
-----------------------------------------------------------------------------------------------------
$ 35,765
-----------------------------------------------------------------------------------------------------
UNREALIZED
LONG CONTRACTS CURRENT VALUE APPRECIATION/DEPRECIATION
-----------------------------------------------------------------------------------------------------
Canadian Dollar, 700,000 expiring 6/17/09 $ 589,348 $ 16,540
EURO, 800,000 expiring 6/17/09 1,059,870 (7,730)
Japanese Yen, 23,000,000 expiring 6/17/09 233,950 (242)
Swiss Franc, 3,200,000 expiring 6/17/09 2,811,704 (3,958)
-----------------------------------------------------------------------------------------------------
4,610
-----------------------------------------------------------------------------------------------------
Total Unrealized Appreciation/Depreciation on
forward exchange currency contracts $ 40,375
-----------------------------------------------------------------------------------------------------
Note 6 - CAPITAL:
COMMON SHARES
The Fund has an unlimited amount of common shares, $0.001 par value, authorized
and 13,603,025 issued and outstanding. In connection with the Fund's dividend
reinvestment plan, the Fund did not issue shares during the six months ended
April 30, 2009 or the year ended October 31, 2008.
Note 7 - INDEMNIFICATIONS:
In the normal course of business, the Fund enters into contracts that contain a
variety of representations, which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown, as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of loss to be remote.
Note 8 - SUBSEQUENT EVENT:
On May 1, 2009, the Board of Trustees declared a quarterly dividend of $0.264
per common share. This dividend was payable on May 29, 2009 to shareholders of
record on May 15, 2009.
24 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | NOTES TO FINANCIAL
STATEMENTS (unaudited) continued
Note 9 - RECENT ACCOUNTING PRONOUNCEMENTS:
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities." This standard is intended to enhance
financial statement disclosures for derivative instruments and hedging
activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivatives instruments and related hedge fund
items are accounted for, and c) how derivative instruments and related hedge
items affect a fund's financial position, results of operations and cash flows.
SFAS No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. In September 2008, the FASB
issued a Staff Position amending SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This amendment would require disclosures by
sellers of credit derivatives, including credit derivatives embedded in hybrid
instrument. As of October 31, 2008, management does not believe the adoption of
SFAS No. 161 nor amended SFAS No. 133 will impact the financial statement
amounts; however additional footnote disclosures may be required about the use
of derivative instruments and hedging items.
In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly" (FSP 157-4). FSP
157-4 provides guidance on how to determine the fair value of assets and
liabilities when the volume and level of activity for the asset/liability has
significantly decreased. FSP 157-4 also provides guidance on identifying
circumstances that indicate a transaction is not orderly. In addition, FSP 157-4
requires disclosure in interim and annual periods of the inputs and valuation
techniques used to measure fair value and a discussion of changes in valuation
techniques. FSP 157-4 is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of FSP 157-4 is not expected to have a
significant impact on these financial statements.
SemiAnnual Report | April 30, 2009 | 25
LCM | Advent/Claymore Enhanced Growth & Income Fund | SUPPLEMENTAL
INFORMATION (unaudited) continued
Supplemental INFORMATION | (unaudited)
TRUSTEES
The Trustees of the Advent/Claymore Enhanced Growth & Income Fund and their
principal occupations during the past five years:
NAME, ADDRESS, YEAR OF TERM OF OFFICE* PRINCIPAL OCCUPATIONS DURING NUMBER OF FUNDS
BIRTH AND POSITION(S) AND LENGTH OF THE PAST FIVE YEARS AND IN FUND COMPLEX** OTHER DIRECTORSHIPS
HELD WITH REGISTRANT TIME SERVED OTHER AFFILIATIONS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Daniel Black+ Since 2005 Partner, the Wicks Group of Cos., 3 Director of Penn Foster
Director and LLC (2003-present). Formerly, Education Group, Inc.
Year of birth: 1960 Managing Co-head of the Merchant
Trustee Banking Group at BNY Capital Markets,
a division of The Bank of New York
Co., Inc. (1998-2003).
-----------------------------------------------------------------------------------------------------------------------------------
Randall C. Barnes++ Since 2005 Private Investor (2001-present), 44 None.
PepsiCo, Inc. Formerly, Senior Vice President,
Year of birth: 1951 Treasurer, (1993-1997), President,
Trustee Pizza Hut International (1991-1993)
(1987-1997). and Senior Vice President, Strategic
Planning and New Business Development
(1987-1990) of PepsiCo, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
Derek Medina+ Since 2004 Senior Vice President, Business 3 Director of Young
Year of birth: 1966 Affairs at ABC News (2008-present). Scholars' Institute.
Trustee Vice President, Business Affairs and
News Planning at ABC News (2003-2008).
Formerly, Executive Director, Office
of the President at ABC News (2000-2003).
Former Associate at Cleary Gottlieb
Steen & Hamilton (law firm) (1995-1998).
Former associate in Corporate Finance
at J.P. Morgan/Morgan Guaranty
(1988-1990).
------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Nyberg++ Since 2004 Principal of Nyberg & Cassioppi, LLC, 47 None.
Year of birth: 1953 a law firm specializing in corporate law,
Trustee estate planning and business transactions
(2000-present). Formerly, Executive
Vice President, General Counsel and
Corporate Secretary of Van Kampen
Investments (1982-1999).
------------------------------------------------------------------------------------------------------------------------------------
Gerald L. Seizert, CFP+ Since 2004 Chief Executive Officer of Seizert Capital 3 Former Director of Loomis,
Year of birth: 1952 Partners, LLC, where he directs the equity Sayles and Co., L.P.
Trustee disciplines of the firm and serves as a
co-manager of the firmhedge fund, Proper
Associates, LLC (2000-present). Formerly,
Co-Chief Executive (1998-1999) and a
Managing Partner and Chief Investment
Officer-Equities of Munder Capital
Management, LLC (1995-1999). Former Vice
President and Portfolio Manager of Loomis,
Sayles & Co., L.P. (asset manager)
(1984-1995). Former Vice President and
Portfolio Manager at First of America
Bank (1978-1984).
------------------------------------------------------------------------------------------------------------------------------------
Michael A. Smart+ Since 2004 Managing Partner, Cordova, Smart & 3 Director, Country
Year of birth: 1960 Williams LLC, Advisor to First Atlantic Pure Foods. Chairman, Board
Trustee Capital Ltd., (2001-present). Formerly, of Directors, Berkshire
a Managing Director in Investment Blanket, Inc., President and
Banking-The Private Equity Group Chairman, Board of
(1995-2001) and a Vice President in Directors, Sqwincher
Investment Banking-Corporate Finance Holdings. Board of
(1992-1995) at Merrill Lynch & Co. Directors,Sprint Industrial
Founding Partner of The Carpediem Holdings. Co-chair of the
Group, a private placement firm Board of H20 plus.
(1991-1992). Former Associate at Dillon,
Read and Co. (investment bank) (1988-1990).
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
------------------------------------------------------------------------------------------------------------------------------------
Tracy V. Maitland+0 Since 2004 President of Advent Capital Management, 3 None.
Year of birth: 1960 LLC, which he founded in 1995. Prior to
Trustee, President and June 2001, President of Advent Capital
Chief Executive Officer Management, a division of Utendahl
Capital.
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Dalmaso++00 Since 2004 Attorney. Formerly, Senior Managing 46 None.
Year of birth: 1965 Director and Chief Administrative Officer
Trustee (2007-2008) and General Counsel (2001-2007)
of Claymore Advisors, LLC and Claymore
Securities, Inc. Formerly, Assistant
General Counsel, John Nuveen and Company
Inc. (1999-2000). Former Vice President
and Associate General Counsel of Van
Kampen Investments, Inc. (1992-1999).
------------------------------------------------------------------------------------------------------------------------------------
+ Address for all Trustees noted: 1065 Avenue of the Americas, 31st Floor,
New York, NY 10018
++ Address for all Trustees noted: 2455 Corporate West Drive, Lisle, IL 60532
After a Trustee's initial term, each Trustee is expected to serve a
three-year term concurrent with the class of Trustees for which he serves:
--- Messrs. Smart, Nyberg and Black, as Class I Trustees, are expected to
stand for re-election at the Fund's 2011 annual meeting of
shareholders.
--- Messrs. Maitland and Dalmaso, as Class II Trustees, are expected to
stand for re-election at the Fund's 2009 annual meeting of
shareholders.
--- Messrs. Seizert, Medina and Barnes, as Class III Trustees, are
expected to stand for re-election at the Fund's 2010 annual meeting of
shareholders.
** The Claymore Fund Complex consists of U.S. registered investment companies
advised or serviced by Claymore Advisors, LLC or Claymore Securities, Inc.
The Claymore Fund Complex is overseen by multiple Boards of Trustees.
0 Mr. Maitland is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund because of his position as an officer of Advent
Capital Management, LLC, the Fund's Investment Manager.
00 Mr. Dalmaso is an "interested person" (as defined in section 2(a)(19) of
the 1940 Act) of the Fund because of his former position as an officer of,
and his equity ownership in, the Adviser and certain of its affiliates.
26 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund | SUPPLEMENTAL INFORMATION
(unaudited) continued
OFFICERS
The Officers of the Advent/Claymore Enhanced Growth & Income Fund and their
principal occupations during the past five years:
NAME , ADDRESS*, YEAR OF BIRTH AND TERM OF OFFICE** AND PRINCIPAL OCCUPATIONS DURING THE PAST
POSITION(S) HELD WITH REGISTRANT LENGTH OF TIME SERVED FIVE YEARS AND OTHER AFFILIATIONS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
------------------------------------------------------------------------------------------------------------------------------------
F. Barry Nelson Since 2005 Co-Portfolio Manager at Advent Capital Management, LLC
Year of birth: (2001-present). Prior to 2001, Mr. Nelson held the same position at
Vice President Advent 1943 Capital Management, a division of Utendahl Capital.
------------------------------------------------------------------------------------------------------------------------------------
Robert White Since 2005 Chief Financial Officer, Advent Capital Management, LLC
Year of birth: 1965 (2005-present). Previously, Vice President, Client Service Manager,
Treasurer and Goldman Sachs Prime Brokerage (1997-2005).
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------------
Rodd Baxter Since 2005 General Counsel, Advent Capital Management, LLC (2002-present);
Year of birth: 1950 Formerly, Director and Senior Counsel, SG Cowen Securities Corp.
Secretary and Chief (1998-2002).
Compliance Officer
------------------------------------------------------------------------------------------------------------------------------------
Steven M. Hill Since 2005 Senior Managing Director and Chief Financial Officer of Claymore
2455 Corporate West Drive Advisors, LLC and Claymore Securities, Inc. (2005-present).
Lisle, IL 60532 Formerly, Chief Financial Officer (2005-2006) of Claymore Group,
Year of birth: 1964 Inc., Managing Director of Claymore Advisors, LLC and Claymore
Assistant Treasurer Securities, Inc. (2003-2005). Previously, Treasurer of
Henderson Global Funds and Operations Manager for Henderson
Global Investors (North America) Inc., (2002-2003); Managing
Director, FrontPoint Partners LLC (2001-2002); Vice President,
Nuveen Investments (1999-2001); Chief Financial Officer,
Skyline Asset Management LP (1999); Vice President, Van
Kampen Investments and Assistant Treasurer, Van Kampen mutual
funds (1989-1999).
------------------------------------------------------------------------------------------------------------------------------------
* Address for all Officers unless otherwise noted: 1065 Avenue of the
Americas, 31st Floor, New York, NY 10018
** Officers serve at the pleasure of the Board of Trustees and until his or
her successor is appointed and qualified or until his or her earlier
resignation or removal.
SemiAnnual Report | April 30, 2009 | 27
LCM | Advent/Claymore Enhanced Growth & Income Fund
Dividend Reinvestment PLAN |(unaudited)
Unless the registered owner of common shares elects to receive cash by
contacting The Bank of New York Mellon (the "Plan Administrator"), all dividends
declared on common shares of the Fund will be automatically reinvested by the
Plan Administrator for shareholders in the Fund's Dividend Reinvestment Plan
(the "Plan"), in additional common shares of the Fund. Participation in the Plan
is completely voluntary and may be terminated or resumed at any time without
penalty by notice if received and processed by the Plan Administrator prior to
the dividend record date; otherwise such termination or resumption will be
effective with respect to any subsequently declared dividend or other
distribution. Some brokers may automatically elect to receive cash on your
behalf and may re-invest that cash in additional common shares of the Fund for
you. If you wish for all dividends declared on your common shares of the Fund to
be automatically reinvested pursuant to the Plan, please contact your broker.
The Plan Administrator will open an account for each common shareholder under
the Plan in the same name in which such common shareholder's common shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in common
shares. The common shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(i) through receipt of additional unissued but authorized common shares from the
Fund ("Newly Issued Common Shares") or (ii) by purchase of outstanding common
shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commission per common share is equal to or
greater than the net asset value per common share, the Plan Administrator will
invest the Dividend amount in Newly Issued Common Shares on behalf of the
participants. The number of Newly Issued Common Shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market
value on the payment date, the dollar amount of the Dividend will be divided by
95% of the closing market price per common share on the payment date. If, on the
payment date for any Dividend, the net asset value per common share is greater
than the closing market value plus estimated brokerage commission, the Plan
Administrator will invest the Dividend amount in common shares acquired on
behalf of the participants in Open-Market Purchases.
If, before the Plan Administrator has completed its Open-Market Purchases, the
market price per common share exceeds the net asset value per common share, the
average per common share purchase price paid by the Plan Administrator may
exceed the net asset value of the common shares, resulting in the acquisition of
fewer common shares than if the Dividend had been paid in Newly Issued Common
Shares on the Dividend payment date. Because of the foregoing difficulty with
respect to Open-Market Purchases, the Plan provides that if the Plan
Administrator is unable to invest the full Dividend amount in Open-Market
Purchases during the purchase period or if the market discount shifts to a
market premium during the purchase period, the Plan Administrator may cease
making Open-Market Purchases and may invest the uninvested portion of the
Dividend amount in Newly Issued Common Shares at net asset value per common
share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price
per common share; the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will be no brokerage charges with respect to common shares issued directly
by the Fund. However, each participant will pay a pro rata share of brokerage
commission incurred in connection with Open-Market Purchases. The automatic
reinvestment of Dividends will not relieve participants of any Federal, state or
local income tax that may be payable (or required to be withheld) on such
Dividends.
The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants.
All correspondence or questions concerning the Plan should be directed to the
Plan Administrator, BNYMellon Shareholder Services P.O. Box 358015 Pittsburgh,
PA 15252; Phone Number: (866) 488-3559.
28 | SemiAnnual Report | April 30, 2009
LCM | Advent/Claymore Enhanced Growth & Income Fund
Investment Management
AGREEMENT AND INVESTMENT ADVISORY AGREEMENT RE-APPROVAL | (unaudited)
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940 Act")
contemplates that the Board of Trustees (the "Board") of Advent/Claymore
Enhanced Growth & Income Fund (the "Fund"), including a majority of the Trustees
who have no direct or indirect interest in the investment management agreement
and the investment advisory agreement and are not "interested persons" of the
Fund, as defined in the 1940 Act (the "Independent Trustees"), is required to
annually review and re-approve the terms of the Fund's existing investment
management agreement and investment advisory agreement and approve any newly
proposed terms therein. In this regard, the Board reviewed and re-approved,
during the most recent six month period covered by this report, the investment
management agreement (the "Management Agreement") with Advent Capital
Management, LLC ("Advent") and the investment advisory agreement (the "Advisory
Agreement") with Claymore Advisors, LLC ("Claymore"), for the Fund.
More specifically, at a meeting held on March 31, 2009, the Board, including the
Independent Trustees advised by their independent legal counsel, considered the
factors and reached the conclusions described below relating to the re-approval
of the Management Agreement and the Advisory Agreement, respectively.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board received and considered various data and information regarding the
nature, extent and quality of services provided to the Fund by Advent and
Claymore under the Management Agreement and Advisory Agreement. The Board
reviewed and analyzed the responses of Advent and Claymore to a detailed series
of requests submitted by the Independent Trustees' independent legal counsel on
behalf of such Trustees which included, among other things, information about
the background and experience of the senior management and the expertise of, and
amount of attention devoted to the Fund by, personnel of Advent and Claymore. In
this regard, the Board specifically reviewed the qualifications, background and
responsibilities of the officers primarily responsible for day-to-day portfolio
management services for the Fund.
The Board evaluated the ability of Advent and Claymore, including their
resources, reputation and other attributes, to attract and retain highly
qualified investment professionals, including research, advisory and supervisory
personnel. In this connection, the Board considered information regarding the
compensation structures for the personnel of Advent involved in the management
of the Fund and the personnel of Claymore involved in the management of the
Fund.
Based on the above factors, together with those referenced below, the Board
concluded that it was satisfied with the nature, extent and quality of the
investment management and advisory services provided to the Fund by Advent and
Claymore.
FUND PERFORMANCE AND EXPENSES
The Board considered the performance results for the Fund on a market price and
net asset value basis over various time periods. They also considered these
results in comparison to the performance results of a group of other closed-end
funds that was determined to be the most similar to the Fund in terms of
investment strategy ("Peer Group").
The Board received and considered statistical information regarding the Fund's
total expense ratios (based on net assets applicable to common shares) and their
various components. The Board also considered comparisons of these expenses to
the expense information for the Fund's Peer Group.
Based on the above-referenced considerations and other factors, the Board
concluded that the overall performance results and expense comparison supported
the re-approval of the Management Agreement and Advisory Agreement of the Fund.
INVESTMENT MANAGEMENT FEE RATES
The Board reviewed and considered the contractual investment management fee rate
and the investment advisory fee rate for the Fund (collectively, the "Management
Agreement Rates") payable by the Fund to Advent and Claymore for investment
management and advisory services respectively. In addition, the Board reviewed
and considered all fee waiver arrangements applicable to the Management
Agreement Rates and considered the Management Agreement Rates after taking all
applicable waivers into account (the "Net Management Rates").
Additionally, the Board received and considered information comparing the
Management Agreement Rates (on a stand-alone basis exclusive of service
fee/administrative fee rates) with those of the other funds in the relevant Peer
Group. The advisory fees on managed assets for the Fund were at the median of
the Peer Group but expense ratios on common assets were above the median. In
some cases the comparison of fees and expenses was affected by fee waivers or
the unleveraged nature of a peer fund. These comparisons were also affected by
fee waivers by peer funds and potentially by the extent of leverage. The Board
also took note of the fact that the expense ratios of the Peer Group funds may
have increased since the date as of which the information was presented, given
the level of market declines in the fourth quarter of 2008 and the first quarter
of 2009. The Board concluded that the fees were fair and equitable based on
relevant factors, including the Fund's performance results and total expenses
ranking relative to its Peer Group.
PROFITABILITY
The Board received and considered an estimated profitability analysis of Advent
and Claymore based on the Net Management Rates. The Board concluded that, in
light of the costs of providing investment advisory services and investment
management and other services to the Fund, the profits and other ancillary
benefits that Advent and Claymore received with regard to providing these
services to the Fund were not unreasonable.
ECONOMIES OF SCALE
The Board received and considered information regarding whether there have been
economies of scale with respect to the management of the Fund, whether the Fund
has appropriately benefited from any economies of scale, and whether there is
potential for realization of any further economies of scale. The Board concluded
that the opportunity to benefit from economies of scale were diminished in the
context of closed-end funds.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
The Board also received and considered information about the nature, extent and
quality of services and fee rates offered by Advent and Claymore to their other
clients.
After considering the above-described factors and based on the deliberations and
their evaluation of the information provided to them, the Board concluded that
re-approval of the Management Agreement and Advisory Agreement was in the best
interest of the Fund and its shareholders. Accordingly, the Board unanimously
re-approved the Management Agreement and the Advisory Agreement.
SemiAnnual Report | April 30, 2009 | 29
This Page Intentionally Left Blank.
LCM | Advent/Claymore Enhanced Growth & Income Fund
Fund INFORMATION |
BOARD OF TRUSTEES
Randall C. Barnes
Daniel Black
Nicholas Dalmaso*
Tracy V. Maitland**
Chairman
Derek Medina
Ronald A. Nyberg
Gerald L. Seizert
Michael A. Smart
* Trustee is an "interested person" of The Fund as defined in the Investment
Company Act of 1940, as amended, because of his former position as an
officer of, and his equity ownership in, the Adviser and certain of its
affiliates.
** Trustee is an "interested person" of The Fund as defined in the Investment
Company Act of 1940, as amended.
OFFICERS
Tracy V. Maitland
President and Chief Executive Officer
F. Barry Nelson
Vice President and Assistant Secretary
Robert White
Treasurer and Chief Financial Officer
Rodd Baxter
Secretary and Chief Compliance Officer
INVESTMENT MANAGER
Advent Capital Management, LLC
New York, New York
INVESTMENT ADVISER
AND ADMINISTRATOR
Claymore Advisors LLC
Lisle, Illinois
CUSTODIAN AND TRANSFER AGENT
The Bank of New York Mellon
New York, New York
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher &
Flom LLP
New York, New York
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
New York, New York
PRIVACY PRINCIPLES OF THE FUND
The Fund is committed to maintaining the privacy of its shareholders and to
safeguarding their non-public personal information. The following information is
provided to help you understand what personal information the Fund collects, how
the Fund protects that information and why, in certain cases, the Fund may share
information with select other parties.
Generally, the Fund does not receive any non-public personal information
relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Fund restricts access to non-public personal information about its
shareholders to employees of the Fund's investment adviser and its affiliates
with a legitimate business need for the information. The Fund maintains
physical, electronic and procedural safeguards designed to protect the
non-public personal information of its shareholders.
QUESTIONS CONCERNING YOUR SHARES OF ADVENT/CLAYMORE ENHANCED GROWTH & INCOME
FUND?
o If your shares are held in a Brokerage Account, contact your Broker.
o If you have physical possession of your shares in certificate form,
contact the Fund's Custodian and Transfer Agent:
The Bank of New York Mellon, 101 Barclay 11E, New York, NY 10286; (866)
488-3559.
This report is sent to shareholders of Advent/Claymore Enhanced Growth & Income
Fund for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any
securities mentioned in this report.
A description of the Fund's proxy voting policies and procedures related to
portfolio securities is available without charge, upon request, by calling the
Fund at (866) 274-2227.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request by calling the Fund at (866) 274-2227
or by accessing the Fund's Form N-PX on the U.S. Securities & Exchange
Commission's ("SEC") website at www.sec.gov or www.claymore.com.
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is
available on the SEC website at www.sec.gov or www.claymore.com. The Fund's Form
N-Q may also be viewed 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 (800) SEC-0330 or at www.sec.gov.
In October 2008, the Fund submitted a CEO annual certification to the New York
Stock Exchange ("NYSE") in which the Fund's principal executive officer
certified that he was not aware, as of the date of the certification, of any
violation by the Fund of the NYSE's Corporate Governance listing standards. In
addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and
related SEC rules, the Fund's principal executive and principal financial
officers have made quarterly certifications, included in filings with the SEC on
Forms N-CSR and N-Q, relating to, among other things, the Fund's disclosure
controls and procedures and internal control over financial reporting.
NOTICE TO SHAREHOLDERS
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may purchase at market prices
from time to time shares of its common stock in the open market.
SemiAnnual Report | April 30, 2009 | 31
ADVENT CAPITAL MANAGEMENT, LLC
Advent Capital Management, LLC ("Advent") is a registered investment adviser,
based in New York, which specializes in convertible and high-yield securities
for institutional and individual investors. The firm was established by Tracy V.
Maitland, a former Director in the Convertible Securities sales and trading
division of Merrill Lynch. Advent's investment discipline emphasizes capital
structure research, encompassing equity fundamentals as well as credit research,
with a focus on cash flow and asset values while seeking to maximize total
return.
INVESTMENT PHILOSOPHY
Advent believes that superior returns can be achieved while reducing risk by
investing in a diversified portfolio of global equity, convertible and
high-yield securities. The Fund Manager seeks securities with attractive
risk/reward characteristics. Advent employs a bottom-up security selection
process across all of the strategies it manages. Securities are chosen from
those that the Fund Manager believes have stable-to-improving fundamentals and
attractive valuations.
INVESTMENT PROCESS
Advent manages securities by using a strict four-step process:
1 Screen the convertible and high-yield markets for securities with
attractive risk/reward characteristics and favorable cash flows;
2 Analyze the quality of issues to help manage downside risk;
3 Analyze fundamentals to identify catalysts for favorable performance; and
4 Continually monitor the portfolio for improving or deteriorating trends in
the financials of each investment.
ADVENT CAPITAL MANAGEMENT, LLC LCD
1065 Avenue of the Americas LISTED
New York, New York 10018 NYSE(R)
LCM-SAR-0409
ITEM 2. CODE OF ETHICS.
Not applicable for a semi-annual reporting period.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for a semi-annual reporting period.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for a semi-annual reporting period.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for a semi-annual reporting period.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for a semi-annual reporting period.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable for a semi-annual reporting period.
(b) There has been no change, as of the date of this filing, in the Portfolio
Manager identified in response to paragraph (a)(1) of this Item in the
registrant's most recent annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not made any material changes to the procedures by which
shareholders may recommend nominees to the registrant's Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within
90 days of this filing and have concluded based on such evaluation that the
registrant's disclosure controls and procedures were effective, as of that date,
in ensuring that information required to be disclosed by the registrant in this
Form N-CSR was recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's 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.
(a)(1) Not applicable.
(a)(2) Certification of principal executive officer and principal financial
officer pursuant to Rule 30a-2(a) of the Investment Company Act of 1940.
(a)(3) Not Applicable.
(b) Certification of principal executive officer and principal financial officer
pursuant to Rule 30a-2(b) of the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Advent/Claymore Enhanced Growth & Income Fund
By: /s/ Tracy V. Maitland
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Name: Tracy V. Maitland
Title: President and Chief Executive Officer
Date: July 6, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Tracy V. Maitland
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Name: Tracy V. Maitland
Title: President and Chief Executive Officer
Date: July 6, 2009
By: /s/ Robert White
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Name: Robert White
Title: Treasurer and Chief Financial Officer
Date: July 6, 2009